J&J to cut up to 4,820 jobs on drug woes

J&J to cut up to 4,820 jobs on drug woes

	Published : Wed, 01 Aug 2007 00:25 By : Agencies Print this Story

TRENTON, N.J. (AP) - 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 a slump in sales of its heart stents and its No. 2 drug, plus coming patent expirations for key drugs.

The health care giant, which employs about 120,500 people in 57 countries, said the restructuring -- its largest ever -- would bring pretax charges of $550 million to $750 million later this year, as well as other, unspecified steps besides job cuts.

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 that.

Johnson & Johnson shares rose 43 cents to $60.50 in regular trading, then rose 53 cents in after-hours trading.

'The actions we are taking are to ensure we have 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.'

The company is not yet saying which facilities will be affected, but managers began to notify employees about job cuts Wednesday morning. J&J said it plans to use attrition and hiring freezes in some businesses.

Johnson & Johnson, the world's No. 5 drugmaker according to IMS Health, said the restructuring primarily targets Cordis Corp., its Miami-based stent-making unit, and its pharmaceuticals segment, which soon will face generic competition for two top drugs.

Three of the company's top drugs, with combined sales of about $8.5 billion, are vulnerable.

J&J's top seller, anti-psychotic drug Risperdal, loses patent protection next June; Topamax, for epilepsy and other disorders, does so in March 2009. Risperdal had 2006 sales of $3.3 billion; a newer, twice-a-month injected version -- which still will be patent protected -- had sales of $900 million. Topamax had 2006 sales of about $2 billion.

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.

Since last fall, reports have been raising safety questions about drug-coated stents, tiny mesh scaffolds that prop open heart arteries and slowly release a drug to keep them from reclogging. Among other things, research has shown most patients with drug-coated stents face a higher risk of heart attacks and death than patients with bare-metal stents.

Earlier this month, J&J said U.S. sales of its Cypher drug-coated stents fell 41 percent in the second quarter.

Still, Weldon said the company remains committed to the drug-coated stent market, sees 'huge opportunity' there and will keep developing new products.

Despite the problems for the Cordis division that makes stents, balloons for angioplasty and other heart devices, Weldon said the other three Cordis businesses are doing well. Their products include stents for blockages in blood vessels and organs outside the heart, plus heart imaging equipment and devices to treat abnormal rhythms.

'This is what you would expect, this type of retrenchment,' given the safety questions, looming generic competition and other problems facing J&J and rival drugmakers, said analyst Steve Brozak of WBB Securities. 'Woe be it to the company that doesn't realize it sooner rather than later.'

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.

J&J has about 13,000 employees in New Jersey and about 6,000 worldwide within Cordis.

'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.

Johnson & Johnson said it will continue to invest in high-growth technologies and medicines. The company still sees a full-year profit of $4.02 to $4.07 per share, versus the average analyst estimate of $4.06 per share, from a survey by Thomson Financial.

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.'