J&J announced it will shed between 3,615 and 4,820 jobs as part of the cost-cutting programme. That represents 3 to 4 per cent of their 120,500 person global workforce. The job cuts are only one part of the restructuring, however. J&J's chief financial officer, Dominic Caruso, said the company would also be closing more than one production facility, though he declined to say how many and which ones, until after employees had been notified.
The pharma company is not alone in feeling the pinch though - earlier this week , both AstraZeneca and Bristol-Myers Squibb (BMS) announced job cuts and recently Pfizer, Merck & Co., Roche, Bayer and Abbott have also announced cost saving or restructuring exercises.
J&J's head of investor relations, Lesley Fishman, said most of the cost savings will come in the pharmaceuticals segment of J&J, along with its coronary stent business, Cordis.
Alza, a J&J subsidiary company, has announced that it will cut 600 jobs in drug research, development and support and close its office in Mountain View, California. Another J&J company, Scios, share that office space and so will also now have to relocate - although Scios at least won't suffer any job losses.
J&J hopes to save itself between $1.3bn and $1.6bn (€948m to €1.17bn) in 2008, which will offset the damage to the company's bottom line caused by looming patent expiries. The cost of the programme is estimated at between $550m and $750m.
Exactly how much will be saved depends on how long the programme takes to implement - especially the closure of the facilities. The company hopes to finish most of the programme this year but admits that some will inevitably carry over into 2008.
In December of this year, J&J's biggest-selling drug will come off patent in the US (although the company has submitted paediatric data to the US Food and Drug Administration, FDA, in order to extend exclusivity through June 2008).
Risperdal (risperidone) is an anti-psychotic medication that netted the company some $4.2bn last year, which is over 18 per cent of its total pharma sales ($23.2bn in 2006). Factor in the loss of patent protection in 2009 for Topamax (topiramate), which is used to treat epilepsy and migraines, and another $2bn is set to be shaved off revenue.
Although J&J plans to submit applications for three new compounds by the end of 2007, and a further seven to ten between 2008 and 2010, it is clearly concerned that these compounds won't make up for the shortfall in sales, and so has implemented this cost saving programme.
"We recognise that we are facing into some competitive and industry challenges and we plan to navigate these challenges to achieve sustainable, long-term growth," said J&J CEO Bill Weldon.
"We will do this even as we continue to make the substantial investments needed to keep the company growing," he added.
Weldon also said that the company will try and make up as many of the job cuts as possible through attrition and hiring freezes.
The firm is however, remaining tight-lipped about how it plans to account for this huge loss in internal resources. Perhaps, as has been the case with other drug giants who have made similar moves, an increased reliance on outsourcing is on the cards.
J&J currently spends about 21 per cent of its sales revenue on research and development (R&D). This is unusually high in an industry where 15 per cent is a more typical figure. Speaking in a conference call to investors, Caruso admitted that the figure is likely to fall to more 'normal' levels in the coming years.
The news didn't seem to put off investors, with J&J's stock price jumping over $1 from $60.07, before settling back to $60.50.
