NEW YORK -- Johnson & Johnson Tuesday announced plans to eliminate 3 percent to 4 percent of its global work force of about 120,500 people as part of an effort to improve its cost structure.
The diversified health care company, whose shares rose nearly 2 percent in premarket trade, said it expected the cost cuts to generate pretax savings of $1.3 billion to $1.6 billion in 2008.
J&J plans to seek savings from its pharmaceuticals division, becoming the latest large drug maker to restructure in response to patent expirations to major products.
The company also will look for savings at its Cordis franchise, where its drug-coated stent business is struggling with safety concerns and competition.
Jeff Jonas, a portfolio manager with Gamco Investors, called the restructuring "very positive," noting it also comes on the back of a $10 billion stock buyback plan announced by the company earlier this month.
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"I don't think it's a sign of desperation at all," Jonas said. "It's really just a matter of responding to the reality that's out there in the marketplace."
J&J expects to take associated pretax restructuring charges of $550 million to $750 million in the second half of the year. It confirmed its prior 2007 earnings outlook of $4.02 to $4.07 per share, which excludes such charges.
"These actions we are taking to improve our cost structure will enable us to continue investing for future growth and profitability," Chief Executive William Weldon said in a statement.
The J&J restructuring announcement follows others from Pfizer Inc. and Merck & Co.
J&J plans to consolidate certain operations in its pharmaceuticals division as it faces patent expirations to big-selling drugs such as its Risperdal schizophrenia treatment and Topamax epilepsy drug.
The company is trying to reduce its cost base while continuing to invest in newly launched products and its late-stage research pipeline. J&J plans to seek approval for seven to 10 new drugs between 2008 and the end of 2010.
At Cordis, the company's drug-coated heart stents have been hit with safety concerns after being initially hailed as revolutionary. Cordis sales fell 20 percent in its most recent quarter.
Johnson & Johnson shares were up $1.18 at $61.25 in early electronic trading from Monday's close of $60.07 on the New York Stock Exchange
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