J&J to axe 4% of global workforce

Johnson & Johnson (J&J) has revealed initiatives that are expected to generate pre-tax, annual cost savings of between $1.3 and $1.6 billion for 2008, in an effort to improve its overall cost structure and ensure continued profitable growth in the years to come.

The company, which also operates in the consumer, pharmaceutical, and medical devices and diagnostics markets, estimates that position eliminations linked to these cost savings will be in a range of 3-4% of its global workforce. J&J said it plans to minimize the number of employees who are affected by these actions through the use of attrition and hiring freezes in certain areas of the business.

J&J said it plans to accelerate steps to standardize and streamline certain aspects of its enterprise-wide functions, such as human resources, finance and information technology, to support growth across the business, while also leveraging its scale more effectively in areas such as procurement to benefit its operating companies.

“Throughout our history, we have always taken a thoughtful, disciplined approach to address the challenges we face,” said William Weldon, J&J chairman and CEO. “These actions we are taking to improve our cost structure will enable us to continue investing for future growth and profitability.”

The company expects to take associated pre-tax, restructuring charges in the range of $550-$750 million in the second half of the year. It confirmed previous earnings guidance for full-year 2007, which excludes such charges, of between $4.02 and $4.07 per share. The company intends to maintain investments in its R&D to strengthen its portfolio and ensure leadership positions in high-growth areas of health care.

The US-based company said cost savings will be achieved primarily in the pharmaceuticals segment, which faces significant patent expirations over the next few years, and in the Cordis franchise, which competes in the drug-eluting stent market:

J&J said the pharmaceuticals segment will reduce its cost base by consolidating certain operations, while continuing to invest in recently launched products and its late-stage pipeline of new products. The company plans to file applications for seven to 10 new compounds between 2008 and the end of 2010.

J&J said the Cordis franchise is moving to a more integrated business model to address the market changes underway with drug-eluting stents and to better serve the broad spectrum of its patients’ cardiovascular needs, while reducing its cost base.

The company said the savings and charges discussed do not include any impact from the company’s previously disclosed integration plans associated with the acquisition of Pfizer Consumer Healthcare, which continue to be on target to achieve $500 – $600 million in synergies by 2009.