Johnson & Johnson, the US healthcare giant, is cut up to 8,190 jobs from its worldwide workforce as part of a major restructuring designed to save up to $1.7 billion a year.

The job cuts, representing between six to seven per cent of the company’s 117,000 workforce, will form only one component of a cost cutting exercise. The company said it would also “simplify business structures and processes across its global operations”.

Johnson & Johnson has, like a number of major pharma businesses, seen significant sales declines in the face of growing competition from generic prescription drugs as long-held patents come to an end.

Pfizer is in the process of shedding 19,000 workers following its acquisition of Wyeth, having already cut 10,000 positions since 2007. Johnson & Johnson began firing as many as 4,400 employees in 2007.

Johnson & Johnson recently lost patent protection for two of its blockbuster products, Risperdal, an antipshychotic drug, and Topamax, for migraines, and sales of the two have tumbled in the face of generic competition.

Sales of its anti-anemia treatment Procrit have also declined this year.

Johnson & Johnson said cost savings would help provide additional resources to invest in new growth areas.

Last month, Johnson & Johnson reported a five per cent fall in third quarter revenue, citing generic competition and slowing demand for its vast array of consumer products, which have exposed it to the general downturn in high street spending.

The company has been trying to diversify its business into biotechnology medicines to add new potential new drugs. In May, it agreed to buy Cougar Biotechnology and in July to took a stake in Elan Corp, which specialises in drugs for chronic conditions such as Alzheimer’s and Parkinsons.

In September, Johnson & Johnson paid $442 million for an 18 per cent stake in the biotech company Crucell, based in the Netherlands, to form a joint venture producing a new flu vaccine.

William Weldon, chairman and chief executive of Johnson & Johnson said that the plans were intended “to ensure that our company remains well-positioned and appropriately structured for sustainable, long-term growth in the health care industry.”

He expects the plans to generate cost savings of between $1.4 billion to $1.7 billion when fully implemented in 2011, with $800 million to $900 million achieved in 2010.

Johnson & Johnson said it would take a fourth-quarter restructuring charge of up to $1.3 billion. It restated its 2009 earnings guidance for the full year of $4.54 to $4.59, excluding the impact of special items.

Glen Novarro, an analyst at RBC Capital Markets, said the restructuring would allow the company to invest in top line growth.

"They have a strong pipeline of several news drugs - one of their strongest pipelines ever. But to bring products to the market now costs more than before. They need bigger and longer clinical trials," he said.

New J&J drugs have received Food and Drug Administration approval this year include Simponi, for treating rheumatoid arthritis and psoriasis, Stelara, also for psoriasis, and Nucynta, for pain relief. "Some of the savings they are going to make will go to promoting these products," Mr Novarro said.

Shares rose fell 0.3 per cent in early trading in New York to $59.18. The company has lost 2.7 per cent of its value in the past 12 months.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive