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Wed, Aug 01, 2007 - Page 10 News List

Johnson & Johnson to reduce workforce by four percent

GENERIC COMPETITIONAs older medicines lose patent protection, many drugmakers are cutting costs to help them cope with cheaper copies


Johnson & Johnson, the world's largest health-products company, will eliminate about 4 percent of its workforce to save as much as US$1.6 billion next year.

The New Jersey-based company expects the job reductions to result in charges of as much as US$750 million in the second half of this year, it said in a statement yesterday.

The cuts amount to as many as 4,820 workers worldwide.

Lost revenue

Johnson & Johnson chief executive officer William Weldon's cost savings announced yesterday will help the company weather lost revenue when two best-selling drugs, the migraine pill Topamax, with US$2 billion in sales last year, and the schizophrenia treatment Risperdal, with US$4.2 billion in revenue last year, face stiff competition next year because of cheaper generic copies.

Most of the savings will occur in the pharmaceuticals division, "which faces significant patent expirations over the next few years" and in the Cordis division, which makes drug-coated stents, the company said.

Cutting costs

Many drug makers are cutting costs as the result of generic competition to older medicines that are losing patent protection. Last year Merck & Co began eliminating 7,000 jobs and closing plants. In January, Pfizer Inc, the world's largest drug maker, said it would eliminate 10,000 jobs.

On Thursday, London-based AstraZeneca Plc said it would decrease its workforce by 11 percent and Bristol-Myers Squibb Co said it would announce job cuts by the end of the year.

Earnings forecast

Johnson & Johnson reaffirmed its earnings forecast of US$4.02 to US$4.07 a year excluding some items, and said that it will maintain its investments in research and development.

Johnson & Johnson also said it may introduce as many as 10 new medicines by 2011.

On July 17, it lowered its revenue growth forecast for this year, citing reduced prospects for US sales of Cypher stents and the anemia drug Procrit, both linked to heart attacks in studies. The company projected revenue growth this year of 11.5 to 12 percent, down from 11.5 to 12.5 percent.

Sales of the Cypher stent, a tiny mesh tube used to prop open arteries after surgery, fell 41 percent to US$210 million in the US in the second quarter, the company said on July 17.

Sales outside the US fell 30 percent to US$240 million, it said.

Procrit revenue fell 6 percent to US$758 million, spurred by a 15 percent drop in US sales, the company said.

Outside the US, revenue for the drug grew 9 percent to US$309 million. Procrit use slowed after studies showed it may raise the risk of heart attacks, strokes and deaths at high doses.

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