* About 7,000-8,000 positions affected
* To take Q4 charge of $1.1 bln-$1.3 bln
* Backs 2009 forecast, ex-items
* Shares down 0.7 pct
(Adds details on earlier job cuts, recent drug deals)
By Ransdell Pierson
NEW YORK, Nov 3 Johnson & Johnson (JNJ.N) plans
to cut up to 7 percent of its workforce in order to generate
cost savings needed to finance increasingly costly drug
research and to weather future challenges, the diversified
healthcare company said on Tuesday.
J&J said the planned restructuring will eliminate 7,000 to
8,000 jobs and generate annualized cost savings of $1.4 billion
to $1.7 billion by 2011, with $800 million to $900 million
expected to be achieved in 2010.
"This is what we need to do to right-size the company to
make sure we have the resources to invest" for long-term
sustainable growth of the company, Chief Executive Officer
William Weldon told analysts on a conference call, referring to
J&J's "rich portfolio" of products in development.
Weldon said the restructuring -- most of it slated to occur
overseas -- is not a response to U.S. healthcare reform and new
generic competition for its Risperdal schizophrenia drug and
Topamax epilepsy treatment.
Instead, it will position J&J to better endure soaring
research costs, possible looming overseas price controls on its
medicines and unforeseen other challenges, he said.
The typical cost of developing a new medicine has now
climbed to between $1.3 billion to $1.5 billion, from a cost of
$800 million only a few years ago, Weldon said. He noted that
J&J and other drugmakers increasingly are partnering with rival
companies in order to share such financial gambles.
During J&J's last major restructuring, in 2007, it cut 3
percent to 4 percent of its workforce, generating annual
savings of $1.3 billion to $1.6 billion. Earlier this year, the
New Brunswick, New Jersey-based company said it would eliminate
900 positions from its Ortho-McNeil-Janssen Pharmaceutical
Cost savings have helped J&J cope with plunging sales of
Risperdal and Topamax and to acquire stakes this year in Irish
drugmaker Elan Corp ELN.I and Dutch vaccine company Crucell
CRCL.AS. In May, J&J agreed to buy cancer drug developer
Cougar Biotechnology for $970 million in cash.
Like rival drugmakers, J&J is struggling to refill its
pipeline with new drugs to offset sales lost to generic
competition and flagging revenue from older products, including
some dogged by safety concerns.
J&J, which also sells medical devices and a vast array of
consumer products, has boasted annual double-digit profit
growth for most of the past century. But it is expected to post
flat earnings this year and single-digit growth in 2010, hurt
by patent expirations and a weak global economy that has
crimped demand for its consumer brands and surgical products.
J&J, which employs about 117,000 people worldwide, said it
will take a charge of $1.1 billion to $1.3 billion against its
fourth-quarter earnings, but did not change its 2009 earnings
forecast excluding one-time items of $4.54 to $4.59 per share.
Chief Financial Officer Dominic Caruso declined to provide
a 2010 profit view. But he advised analysts to stick with their
forecasts for next year, saying they had already considered
J&J's ability to leverage profit growth.
The cost cuts will mainly be achieved by reducing layers of
management and simplifying business structures and processes,
J&J said. But the company, which is known for giving much
autonomy to its hundreds of subsidiaries, said the
restructuring is not a move toward centralization.
J&J joins the growing list of major pharmaceutical
companies to slash jobs as big-selling drugs lose patent
protection. J&J's prescription drug sales fell more than 14
percent to $5.25 billion in the third quarter, hurt by less
costly generic forms of Risperdal and Topamax.
Pfizer Inc (PFE.N), Merck & Co (MRK.N) and Bristol-Myers
Squibb Co (BMY.N) have all announced sweeping job cuts, as have
British drugmakers GlaxoSmithKline Plc (GSK.L) and AstraZeneca
J&J shares slipped 0.7 percent to $59.06 in afternoon
trading on the New York Stock Exchange.
(Reporting by Ransdell Pierson; additional reporting by Lewis
Krauskopf and Toni Clarke; editing by Dave Zimmerman, Maureen
Bavdek and Andre Grenon)