J&J cutting costs across supply chain to focus resources on 'newer technologies'

By Melissa Fassbender contact

- Last updated on GMT

(Image: Getty/anyaberkut)
(Image: Getty/anyaberkut)
Johnson & Johnson has reported plans to cut costs across its supply chain as it looks to shifts focus from “older parts” of its portfolio to newer technologies and capabilities, such as in biologics, says CFO.

“Actions we expect to take across J&J Supply Chain over the next four-to-five years are intended to help us realize our strategic goals more quickly and efficiently,”​ a J&J spokesperson told us in a statement.

The spokesperson said it is important to note that “decisions on specific actions have not been finalized, and are subject to all legal obligations and relevant consultations.”

Financial results

J&J reported growth across of three of its sectors with a total of $20bn in sales in the first quarter of 2018. Its pharmaceutical business reported a worldwide sales increase of 19.4%.

The company also increased its sales guidance for 2018 to a range of $81.0 to $81.8bn, which reflects an expected operational growth in the range of 4.0% to 5.0%.

The actions are expected to generate approximately $600 to $800m in annual pretax cost savings delivered “substantially”​ by 2022, J&J CFO Dominic Caruso said on the company’s earnings call.

Caruso said the savings will be “gradual over a period of time.”

Additionally, the company expects pre-tax restructuring charges of approximately $1.9 to $2.3bn over the 4 to 5 years.

Focusing resources

As Caruso explained on the call, the plans to “implement actions”​ across J&J’s supply chain are intended to focus the company’s resources and increase investments in “critical capabilities”​ and technologies.

The actions – not further described – are expected to include the expansion of J&J’s use of strategic collaborations. Caruso noted that the company has a “wide-ranging and complex supply chain.”

Looking to the future, Caruso said the company needs “more of some newer technologies like biologics”​ such as an investment in CAR-T, as an example. In line with this, he added that it needs “less of the technologies”​ related to “older parts”​ of the company’s portfolio.

“We need to advance our manufacturing footprint to have more capacity with new technologies, less capacity with older technologies,”​ he said.

Cost savings as a result of the changes – and changes in US tax legislation – are expected to help the company offset other costs, including a planned $30bn investment in the US.

Related topics: Processing, Regulatory & Safety

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