Johnson & Johnson to shed 6%-7% of jobs; confirms 2009 guidance

Following in the path of drug majors such as Pfizer, Bristol-Myers Squibb, GlaxoSmithKline and AstraZeneca, US health care giant Johnson & Johnson is planning global restructuring initiatives designed to strengthen the company's position, which will lead to a reduction in the firm's workforce of 6%-7%, some 7,000-8,000 jobs. The company says it is taking steps to prioritize its innovation efforts around the many growth opportunities in health care and to execute aggressively on bringing key new products to market.

J&J's plans are expected to increase its operational efficiency and generate annualized, pretax cost savings of $1.4-$1.7 billion when fully implemented in 2011, with $800-$900 million expected to be achieved in 2010. The associated savings will provide additional resources to invest in new growth platforms; ensure the successful launch of its many new products and continued growth of its core businesses; and provide flexibility to adjust to the changed and evolving global environment.

'Johnson & Johnson has long adhered to a broad-based operating model and set of sound management principles that have driven our success,' said William Weldon, chairman and chief executive. 'Today, we are announcing a series of actions and plans designed to ensure that our company remains well-positioned and appropriately structured for sustainable, long-term growth in the health care industry,' he added.

Speaking to investors after the announcement, the firm's chief financial officer, Dominic Caruso, said: 'It is our view that the economic recovery will take longer to take hold and will come in fits and starts.' He added: 'We want to capitalize on the products in the pipeline...[with] resources to successfully launch them for the long term, not just for the short term blip,' the UK's Financial Times reported.

Generics eroding sales

J&J has been trying to diversify its business into biotechnology medicines, consumer products and medical devices as it faces generic competition to its epilepsy drug Risperdal (risperidone) and migraine agent Topamax (topiramate). The company reported third-quarter revenue that was lower than analysts had expected, citing generic competition and slowing demand for consumer products. (The Pharma Letter October 14) The firm's prescription drug sales fell more than 14% to $5.25 billion in the third quarter, hurt by generic competition to Topamax and Risperdal. Topamax plunged 76% to $175 million, while Risperdal lost 40% of its revenues to $192 million.