In moves that it said are meant to respond “to a new environment emerging in human health and well being,” healthcare giant Johnson & Johnson (J&J; New Brunswick, New Jersey) yesterday unveiled a series of organizational changes which it said are intended to “sharpen its focus on opportunities outside its traditional areas of interest and in the growing intersections of healthcare.”

The changes, the company said, include the creation of a new strategy and growth organization and two new business operating groups.

The reorganization comes at a time when the company has been compelled to reduce costs in response to a downturn in sales of key products, such as the once wildly successful Cypher drug-eluting stent (DES) — due to safety concerns — and its anemia drug Procrit. Procrit sales have fallen as a result of Medicare and Medicaid program reimbursement cuts, also initially sparked by safety issues.

The moves come a bit more than three months after the company reported plans to reduce its global workforce by 3% to 4%, or up to 4,820 jobs, in a restructuring that it hoped would generate about $1.3 billion to $1.6 billion in savings for 2008 to offset declining sales (Medical Device Daily, Aug. 1, 2007).

That plan primarily impacted the company’s Cordis (Miami Lakes, Florida) unit — maker of the Cypher, the first DES product approved for commercialization in the U.S. — and its pharmaceuticals unit.

In these latest moves, J&J said it would form a new surgical-care group to focus on technology and services to improve patient care and a new comprehensive-care group aimed at treatments for chronic and pervasive conditions.

“We have the know-how across our pharmaceutical, biologics, devices, diagnostics and consumer businesses to bring completely new solutions to market,” CEO William Weldon said in a statement. “And we believe we can accelerate growth through a dedicated focus on the intersection of our existing capabilities, customer needs and emerging trends.”

The company currently has three major business units: pharmaceuticals; medical devices and diagnostics; and consumer. But beginning in January, the device business will be divided into two units: surgical-care and comprehensive-care. The surgical-care group will include its Ethicon (Somerville, New Jersey) unit, which makes suture technology and other surgical products. The comprehensive-care group will include Cordis.

The company named Sherilyn McCoy, current head of Ethicon, as world-wide chairman of the surgical-care group. Donald Casey, current head of J&J’s diabetes franchise that includes LifeScan (Milpitas, California) and Animas (West Chester, Pennsylvania), will become worldwide chairman of comprehensive care.

The current head of the device unit, Nicholas Valeriani, will become head of a newly created office of strategy and growth. This office’s purpose will be to identify new business opportunities outside of those now pursued by the operating units. Valeriani also will be responsible for J&J’s venture capital arm, the office of science and technology, and worldwide operations.

Valeriani has only been in his post as head of the device unit for about nine months. In February he succeeded Michael Dormer, who retired after J&J disclosed to the U.S. government that it believed some foreign units had made, it acknowledged, “improper payments in connection with the sale of medical devices in two small-market countries” (MDD, Feb. 14, 2007).

Weldon told The Wall Street Journal that these pursuits could someday lead to the creation of another major business unit. He said his company competes in only about one-fourth of a $4 trillion healthcare market. In sizing up the remaining three-quarters of the market, Weldon said the new office of strategy will try to answer the question “What is the next huge space we ought to be going after?”

New possibilities, Weldon said, include healthcare products that the company doesn’t currently sell. He also mentioned health information, genetics, biomarkers and medical records.

“These decisions recognize that a new environment is emerging in human health and well-being,” Weldon said. “They reflect our assessment of the best way for us to capture and develop the opportunities associated with those changes and they capitalize on the unique, broadly-based, decentralized approach of Johnson & Johnson.”

Christine Poon will take over the pharmaceuticals unit, and her other corporate responsibilities will be moved elsewhere. She will assume the duties of Joseph Scodari, who will retire in early 2008 as worldwide chairman of pharmaceuticals.

J&J said its consumer businesses are not directly impacted by the changes, adding that under the guidance of consumer group worldwide chairman, Colleen Goggins, the integration of the Pfizer (New York) Consumer Healthcare business, “which continues to track ahead of the original acquisition plan.”

That acquisition cost the company $16.6 billion and was completed last December (MDD, Dec. 22, 2006).

Bear Stearns analyst Rick Wise wrote in a research note that J&J’s moves represent thinking “outside the box,” particularly at a time when the company faces negative growth headwinds from generic pharma competition, weak DES markets and the decline in its Procrit sales.

He said he sees the more streamlined organization moving more aggressively towards focusing on combining in-house pharma and device capabilities to create new and differentiated products. DES devices, he added, “are an example from the past, and going forward, potential products include a contact lens combined with a pharmaceutical.”

Wise said there are currently 80 “combination” product projects under way, though he noted that many of these “are more end-of-decade realities.”

“Much of the change in healthcare reflects the coming together of parts of the system that were at one time separate,” Weldon said, bolstering Wise’s assertions about combination products increasing importance to the company. “The very solutions that the healthcare system most needs — those coming from the convergence of science, technology and services — are the ones we are most capable of providing.”