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Health Care Giant Consolidates

Tue, 09/01/2009 - 5:40am

Linda A. Johnson, AP Business Writer

The company is eliminating its comprehensive care business, one of three business units created in a January 2008 restructuring meant to boost sales, a spokesman said Wednesday. However, comprehensive care sales dropped 8 percent in the first half compared to last year.

The unit, which makes medical devices and tests, aims to sell doctors and their patients with chronic disorders such as diabetes and obesity on every type of J&J product that might help them, from nutrition products to gastric bands for stomach-shrinking surgery. Its operations will move into other parts of the company.

"We remain focused on driving growth in this challenging business and economic environment," explained J&J spokesman Bill Price.

The latest consolidation is aimed at ensuring the company operates "in the most efficient manner," he told The Associated Press. The company did not announce job cuts, but he said J&J regularly assesses staffing needs and will continue to do so.

Just a few months ago, comprehensive care unit head Donald Casey told analysts that his group and the rest of J&J would benefit from health care reform focusing on chronic care and boosting the number of people with health coverage.

But New Brunswick, N.J.-based J&J has seen revenue and net income decline in recent quarters, with consumer product and prescription drugs sales hurt by the global recession and the stronger dollar reducing revenue from overseas.

In addition, recent generic competition to schizophrenia drug Risperdal and Topamax for epilepsy has cut sales, forcing the company to reduce costs and "potentially" bringing job cuts, said analyst Linda Bannister of Edward Jones, which has a long-term "Buy" rating for J&J.

"We think the company is well-positioned because of their strong balance sheet and their diverse business structure (to) successfully navigate these challenges," she said.

But J&J must pull off successful launches of two recently approved drugs and win approval for a couple of others that have run into problems with regulators, said Bannister, who expects more cost cuts across the industry.

Casey was named head of comprehensive care when it was set up, along with the surgical care business group, and was made a member of J&J's executive committee, which includes eight executives.

Comprehensive care comprises businesses making contact lenses, artery-opening stents and related guidewires and catheters, diabetes items and diagnostic tests — each with its own sales and marketing, research, manufacturing and administrative staff. Together, the group had 2008 revenue totaling $10 billion, out of about $64 billion companywide.

"The comprehensive care unit tried to take the view of putting the patient first and how we could serve the entire spectrum of their needs," Price said.

For example, diabetes patients and their health care team could get pitches for One-Touch Ultra Blood sugar monitors and test strips, insulin pumps, artificial sweetener Splenda, low-cholesterol spread Benecol, even products for stomach-reducing surgery.

Price said many of the group's programs will continue.

Casey, who has worked for J&J since 1985, will lead a transition to shift its businesses into the other three groups: pharmaceuticals, consumer health products and surgical care.

Word of the change came in a letter from longtime J&J Chairman and Chief Executive Bill Weldon to employees last Friday.

"There was no announcement about Don's future role," Price said, so it's "premature to say" whether he will remain with Johnson & Johnson.

Price said there will be a series of other "organizational and management announcements in the near future."

Johnson & Johnson is the world's most broadly based health care company, selling everything from baby shampoo and skin care products to hip replacements and biotech drugs. It has more than 250 operating companies and about 117,000 employees, in 57 countries.

In trading Wednesday, Johnson & Johnson shares fell 51 cents to $60.63.

 

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