NEW YORK (Reuters) – Johnson & Johnson said on Tuesday it plans to cut 6 percent to 7 percent of its workforce in a battle to prop up profits in the face of generic competition to its prescription drugs.
The company said the cuts will affect 7,000 to 8,000 jobs, and generate annualized cost savings of $1.4 billion to $1.7 billion in 2011, with $800 million to $900 million expected to be achieved in 2010.
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,
The cuts will mainly be achieved by reducing layers of management and simplifying business structures and processes, the company said in a statement.
J&J is more diversified than some of its rivals. William Weldon, the company’s chief executive officer, said the cuts are designed to ensure its broad-based operating model remains appropriately structured for long-term growth.
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 generic competition to its epilepsy drug Topamax and schizophrenia drug Risperdal.
The company said the job cuts will form only one component of the savings and it will also seek savings at the operating level. The company has a global workforce of 117,000.
Drug companies are struggling to refill their pipelines with new drugs to offset sales lost to generic competition, and although they are acquiring products from biotechnology companies, the new products are not enough.
Pfizer Inc, Merck & Co and Bristol-Myers Squibb Co have all announced sweeping job cuts, as have British drugmakers GlaxoSmithKline Plc and AstraZeneca.
(Reporting by Lewis Krauskopf and Toni Clarke, editing by Dave Zimmerman and Maureen Bavdek)
