J&J Restructuring Projected to Save Up to $1B Per Year by 2018

Johnson & Johnson is restructuring its cardiovascular, orthopedics and surgical businesses, with an eye toward streamlining operations and speeding up the pace of innovation.

Plans call for eliminating 4 percent to 6 percent of the company’s medical device segment’s global workforce over the next two years. J&J expects the restructuring program to save $800 million to $1 billion in annual costs by 2018.

The restructuring should be a positive step towards growing the business and enhancing profitability at J&J. The device business has been one of the weaker performing areas in recent years, says Lawrence Biegelsen, a senior analyst with Wells Fargo Securities.

J&J says the savings will provide added flexibility and resources to fund investment in new growth opportunities. The restructuring does not reduce the likelihood of mergers and acquisitions, adds Biegelsen.

The company’s vision care and diabetes care businesses are not affected by the restructuring. — Jonathon Shacat