J&J slashing workforce

By Ransdell Pierson

NEW YORK (Reuters) - 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 (852.4 million pounds) 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 unit.

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.