Johnson & Johnson (NYSE:JNJ) said on Tuesday it would cut about 3,000 jobs within its medical devices unit over the next two years, or about 4 to 6 percent of the struggling division's global workforce, to generate annual cost savings of up to $1 billion and focus on more innovative products. J&J shares were up 0.7 percent at $97.67.
The job cuts relate to J&J's orthopedics, surgery and cardiovascular operations, although there are no immediate plans to pare back or eliminate specific products, said company spokesman Ernie Knewitz.He did not provide specific regions for the cuts.
"The savings will help us grow our (device) business," Knewitz said. "That could involve acquisitions, but it will also involve investing in our own internal programs."
The company's consumer medical devices, vision care and diabetes care will not be affected, J&J said.
J&J's medical device sales reached almost $19 billion in the first nine months of 2015, but fell 10.4 percent, making the wide array of products the company's poorest-performing segment.
By contrast, sales of J&J's prescription drugs fell 3.9 percent and sales of its consumer products fell 6.5 percent in the same period, also hurt by a stronger dollar which lowers sales in overseas markets.
The company said it expected to record pretax restructuring charges of $2.0 billion to $2.4 billion in connection with these plans, of which about $600 million will be recorded in the fourth quarter of 2015.
Leerink analysts said the announcement meant that an acquisition was still in the cards for J&J, given that it had about $37 billion in cash as of the end of the third quarter.
"We continue to believe JNJ is an active acquirer with a focus likely heavily weighted toward it s lagging medical devices business ... it's a matter of when, not if, J&J does a deal", they wrote in a note.
J&J also reiterated its full-year 2015 forecast, and said the restructuring in the devices business would not affect the $10 billion share repurchase program.
The restructuring is expected to produce annualized pretax cost savings of $800 million to $1 billion, J&J said. Most savings are expected by the end of 2018, including about $200 million in 2016.
New Brunswick, New Jersey-based J&J employs about 60,000 within its medical devices unit, part of a global workforce of about 127,000.