TRENTON, N.J. - Johnson & Johnson said Tuesday it would reduce its global work force by up to 4 percent, or up to 4,820 jobs, to cut costs due to slumping sales of heart stents and its No. 2 drug, plus looming patent expirations.
Excluding the charges, the New Brunswick, N.J.-based maker of contraceptives, contact lenses, prescription drugs and baby products still expects to meet its 2007 profit targets. The company said the moves should generate pretax annual cost savings of $1.3 billion to $1.6 billion next year and similar amounts after.
"The actions we are taking are to ensure we‘ve addressed the short-term pressures on the business," Chief Executive Officer William Weldon told analysts during a conference call. "We believe we actually will be strengthening ourselves coming out of all of this."
Three of the company‘s top drugs, with combined sales of about $8.5 billion, are vulnerable.
During the second quarter, sales of J&J‘s key anemia drug Procrit, formerly the company‘s best-selling drug, slid 6 percent to $758 million amid worries over safety concerns and possible limits on federal reimbursement for all drugs that stimulate red blood cell formation. It had sales of $3.2 billion in 2006.
Earlier this month, J&J said U.S. sales of its Cypher drug-coated stents fell 41 percent in the second quarter.
In a statement late Tuesday, Johnson & Johnson-owned Alza Corp. said it will close its Mountain View, Calif. office and eliminate about 600 jobs. About 200 employees working in Mountain View will be transferred to La Jolla, Calif. and other Johnson & Johnson offices.
Under the restructuring, Johnson & Johnson will cut 3 to 4 percent of the work force, consolidate some pharmaceutical operations and further integrate its Cordis businesses to better serve heart doctors. J&J also will streamline functions such as human resources, information technology, purchasing and finance.
"We think today‘s news is a positive, and the scope and immediacy of the cost cuts should boost confidence in the company‘s ability to achieve double-digit (earnings per share) growth over the next several years," Cowan and Company analyst Sara Michelmore wrote in a research note.
The company last announced a major restructuring in December 1998.
Asked whether further cuts in 2009 are likely, Weldon said, "Our current plans do not include any additional actions or restructuring of this magnitude."
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