JNJ Johnson and Johnson

By Jonathan D. Rockoff and Chelsey Dulaney 

Johnson & Johnson said Tuesday it would cut about 3,000 jobs in its medical-devices division, the company's latest step to revive the struggling business.

The eliminated positions represent 2.5% of the health-care company's 127,000 employees world-wide and as much as 6% of its medical-device segment. J&J expects the cuts will save between $800 million and $1 billion a year before taxes, some of which will be invested in new-product development.

J&J's medical-device business had been the company's largest, and its relatively fast-growing sales of artery-opening stents, knee-replacement parts and other surgical tools once fueled the company's sales growth while its prescription-drugs and consumer-health businesses flagged.

But the overall market has slowed because surgeons have lost much of their buying power as they became salaried employees of health-care systems and the consolidating hospital systems began exerting stronger pressure on prices.

The $320 billion market for medical devices world-wide is growing 4% a year now, down from a double-digit rate in the early 2000s, according to Venkat Rajan, a medical-device industry analyst at research and consulting firm Frost & Sullivan.

J&J's medical-device sales have slowed even more than the overall market's the past few years, growing just 1% operationally in the third quarter, according to Wells Fargo Securities.

In response, J&J has exited from the stents business it had pioneered and has been selling small, slower-growing units. In addition, it has been rejiggering how it sells devices and focusing on high-growth categories like surgical robotics and staplers as well as key markets such as the U.S., Japan and China.

The company has also struck new partnerships, such as a collaboration with International Business Machines Corp. to create virtual coaching services for patients, and another with Google Inc. to develop surgical tools that take advantage of imaging technology advances.

In October, J&J said it planned more than 14 product launches over the next 18 to 24 months. J&J will use some of the savings from the restructuring to accelerate new-product development, Gary Pruden, the J&J executive in charge of medical devices, said in an interview.

The layoffs are "an opportunity to reshape our business to accelerate growth through meaningful innovation," Mr. Pruden said.

As part of the restructuring, J&J said it would book $2 billion to $2.4 billion in charges, starting with a restructuring charge of $600 million in the fourth quarter of 2015.

Excluding those charges and other special items, J&J backed its 2015 forecasts. The company said it also doesn't expect the restructuring to affect its plans to buy back $10 billion in stock or any future acquisitions.

"Be they large or small, we are open to those kinds of opportunities," Mr. Pruden said.

In addition to its medical device business, J&J also has been a stronger dollar, patent expirations and increased competition for many of its prescription drugs, especially its hepatitis C treatment Olysio.

At midday, shares of J&J had gained 0.6% to $97.55 in trading on the New York Stock Exchange.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

January 19, 2016 13:58 ET (18:58 GMT)

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