The actions will result in the elimination of 4 – 6% of the Medical Devices global workforce over the next two years. “These actions recognize the changing needs of the global medical device market and will deliver more value to customers, increasing our competitive advantage and driving growth and profitability for our business”. “That could involve acquisitions, but it will also involve investing in our own internal programs”.
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The consumer medical devices, vision care and diabetes care, part of the same division, would not be affected, J&J said.
“The bold steps we are taking today are to evolve our offerings, structure and footprint and increase our investment in innovation”, said Gary Pruden, worldwide chairman of J&J’s medical devices unit, in a statement.
J&J will also also expects to add between $2 billion and $2.4 billion in pre-tax restructuring charges to its books within the next two years, according to the filing. He said the company will “de-emphasize” other device areas, but declined to identify them.
Analysts said the J&J announcement meant an acquisition was still a possibility for the company given it had close to $37 billion sitting in cash when its third quarter ended in October. The job cuts are expected to bring annualized pre-tax cost savings of $800 million to $1 billion. As of July, the company had already submitted more than half of the 30 major device regulatory filings that it promised to accomplish by the end of 2016.
J&J is “an active acquirer with a focus likely heavily weighted toward its lagging medical devices business” and “It’s clear to us that it’s a matter of when, not if” the company embarks on a deal, Leerink analysts Danielle Antalffy and Puneet Souda said in a note to clients.
New Brunswick, New Jersey-based J&J now employs about 60,000 within its medical devices unit, part of a global workforce of about 127,000.
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The maker of Band-Aids is expecting to report its results from the fourth quarter on January 26. Its shares have fallen more than 6 percent over the past year.
