J&J cutting 3,000 medical device workers to focus on higher margins
Johnson & Johnson plans to cut about 3,000 employees, or 1 in 20, from its global medical-device workforce in hopes of saving up to $1 billion in yearly costs. The drug and medical-supply company will use that money to invest in "new growth opportunities," J&J said Tuesday.
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Johnson & Johnson plans to cut about 3,000 employees, or 1 in 20, from its global medical-device workforce in hopes of saving up to $1 billion in yearly costs. The drug and medical-supply company will use that money to invest in "new growth opportunities," J&J said Tuesday.
In a statement to employees, J&J said the cuts would "accelerate its pace of innovation." The company expects a pretax restructuring charge of up to $2.4 billion by 2018, including $600 million later this year. J&J shares closed at $97.50, up 50 cents, on a day that drug giants Glaxo and Pfizer also rose.
The cuts follow an admission by J&J chief financial officer Dominic Caruso in remarks to investors last October that "the medical device business has been challenged recently in growth," even as the company's drug and consumer-medical sales continued to rise.
J&J Medical Devices includes 26 U.S. plants and dozens more in other countries. The group includes the former Synthes, the West Chester-based bone-replacement company that J&J bought for nearly $20 billion in 2012, plus artery, diagnostics, ear, face, heart, hernia, obesity, surgery, and urology treatment products, among others.
Together these devices account for around $12 billion of J&J's $70 billion in yearly sales.
J&J plans to sell or cut low-profit products in competitive markets, such as heart stents, and invest more in building or buying more specialized products with higher price markups, such as robotic surgery instruments and heart assist devices.
The medical-device business got a boost last month when President Obama signed a bill that would delay a medical device tax, which had been designed to help fund Medicaid expansion, for two more years. Philadelphia-area device manufacturers had joined a national lobbying effort to suspend the tax.
Cutting costs could help clear the decks for J&J to buy larger manufacturers. "There is nothing that inhibits us from doing very large acquisitions" for products that promise high returns, Caruso said in his October presentation.
A former executive of Chester County-based Centocor, now part of J&J, Caruso noted the company had spent more than $80 billion since 1995 buying other companies, a spree he said accounted for about half J&J's growth.
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