TRENTON, N.J. — Health care giant Johnson & Johnson plans to cut costs and a "modest" number of jobs by centralizing some functions of its five pharmaceutical companies in a strategy aimed at freeing up money for new product development.
The plan is part of a companywide effort to lower overhead, according to a letter to employees of the five businesses: Ortho-McNeil Pharmaceutical, Ortho Biotech Products, Janssen Pharmaceutica Products and Ortho Oncology & Specialty Therapeutics, all based in New Jersey, and Centocor Inc. of Malvern, Pa.
Johnson & Johnson spokesman Doug Arbesfeld said Wednesday that functions such as human resources, finance and information management from the five companies will be combined into two groups. One will be for the companies producing traditional pharmaceuticals — Ortho-McNeil and Janssen — and the other will handle the other three companies, which make up J&J's biotech operations.
Arbesfeld said the exact number of jobs to be cut has not been determined. "It will be relatively modest," he said.
Unlike most pharmaceutical companies, Johnson & Johnson divides its various businesses into nearly 200 separate operating companies with their own management and considerable autonomy.
Arbesfeld said the letter, written by David Norton, company group chairman for North American pharmaceutical operations, and Joe Scodari, company group chairman for biopharmaceuticals, was meant to explain the new strategy to the approximately 10,000 people who work for the five companies.
"Growth across the industry has slowed significantly, and while our growth remains among the strongest in the industry, it too is slowing," the letter reads. "The aim of this initiative is to accelerate efforts to find funding for new products and new growth opportunities."
The "Funding Our Future" strategy was announced to upper management last month. Besides streamlining some specialized functions, it includes making J&J's sales force more efficient and using its purchasing power to lower supply costs.
Factors behind the strategy include rising costs to develop new drugs, sales lost to generic competition and pressures from government and consumer groups to make prescription medicines more affordable.
Despite the consolidation plan, which should be implemented in the next few months, Norton and Scodari wrote that the company still has a strong commitment to its decentralized business model.
The news comes two weeks after the company said it will close its consumer products manufacturing plant in North Brunswick next year, slash 490 jobs there and shift some work overseas to cut costs.
J&J, a maker of prescription drugs, medical and surgical devices, contact lenses and baby and skin care products, was one of the few major pharmaceutical companies to post strong results for the third quarter. It reported a 20 percent jump in net income and a 15 percent increase in revenues, partly on surging sales for its popular new drug-coated "Cypher" stents for propping open cleared heart arteries.
Johnson & Johnson shares were up 23 cents to $52.17 in afternoon trading on the New York Stock Exchange.
On the Net: www.jnj.com