The Philadelphia Inquirer Miriam Hill column: Johnson and Johnson to trim jobs

Nov 04, 2009 (The Philadelphia Inquirer - McClatchy-Tribune Information Services via COMTEX) -- JNJ | Quote | Chart | News | PowerRating -- Johnson & Johnson, the world's largest health-products company, will eliminate about 8,000 jobs globally as the recession continues to squeeze spending on drugs, surgeries, and even basics, such as the company's Band-Aids and baby shampoo.

J&J, based in New Brunswick, N.J., but with thousands of employees in Pennsylvania, said yesterday that it will cut its 117,000-member workforce by 6 percent to 7 percent. The reductions will save as much as $1.7 billion by 2011, the company said.

J&J yesterday would not say where cuts would occur, but in a conference call, chief executive officer Bill Weldon said that "if anything, it may be even more skewed externally, outside the United States."

A company spokesman would not provide a current number for total employees in this region. Its Philadelphia area operations include McNeil Consumer & Specialty Pharmaceuticals in Fort Washington; Centocor Inc. in Horsham and Malvern; and pharmaceutical research and development in Spring House.

In April 2008, The Inquirer reported that J&J employed 5,100 people in this region.

Weldon framed the reductions as necessary to help the company pay for future needs, including marketing key products effectively, possible acquisitions, and research and development.

As regulators have pushed for more data and tests before approving drugs, costs have increased dramatically, Weldon said.

"It's the pressures in the regulatory environment and the cost of bringing new products to market," Weldon said.

The swelling ranks of the jobless also played a major role in the J&J's decision, and company executives offered no hope of change on that front soon.

"Until we get unemployment under control and people feeling safe and comfortable . . . I don't think they're going to be going forward and spending in some of these areas that they've spent previously," Weldon said.

J&J last month reported third-quarter sales below what analysts had expected. Generic competition for two of the company's top-selling drugs, Risperdal and Topamax, ate into revenues.

People also are putting off elective surgery, hurting J&J's medical device-business, Weldon said. People often lose health insurance when they are out of work, dampening drug sales.

The cuts will spur a pretax charge of up to $1.3 billion in the fourth quarter, the company said. Profit excluding costs such as restructuring charges will be between $4.54 and $4.59 per share for 2009, as previously forecast.

Drugmakers have been slashing researchers and sales staff to lower costs over the last two years because of increased generic competition.

Pfizer Inc., the world's biggest drugmaker, plans to terminate 19,000 workers after its acquisition of Wyeth, and it had already cut 10,000 positions since 2007. Some of those cuts could occur at former Wyeth operations in Montgomery County, where 4,500 people work.

London-based AstraZeneca, which has U.S. headquarters in Wilmington, said in January that it planned to cut more than 7,000 jobs, or about 10 percent of its workforce.

Leerink Swan analyst Rick Wise said he expected J&J's growth prospects to improve but warned that "challenges remain with the potential impact of protracted economic weakness and health-care reform."

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Contact staff writer Miriam Hill at 215-854-5520 or hillmb@phillynews.com.

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