July 31 (Bloomberg) -- Johnson & Johnson unexpectedly said it will cut as much as 4 percent of its workforce to save $1.3 billion to $1.6 billion next year when two of the company's top- selling drugs may face generic competition.

J&J, the world's largest health-products company, said today that some facilities will close, and that the staff reductions will result in charges of about $750 million this year. As many as 4,820 positions may be eliminated, the most since 1998 when 4,100 jobs were cut.

The savings will help J&J weather lost revenue from cheaper generics, said Chief Executive Officer William Weldon. The schizophrenia treatment Risperdal, J&J's biggest drug with $4.2 billion in 2006 sales, and the migraine pill Topamax, with $2 billion in revenue, may lose patent protection in 2008. Weldon also cited slower-than-anticipated sales of the Procrit anemia drug and Cypher stent as reasons for the cutbacks.

``We now have a much clearer picture of how J&J plans to respond to the patent expirations,'' said Sara Michelmore, an analyst with Cowen & Co. in New York, in a telephone interview today. ``The needed to outline their strategy, given those issues and the more recent problems with Cypher and Procrit.''

Shares Rise

The shares of J&J, based in New Brunswick, New Jersey, rose 43 cents, or less than a percent, to $60.50 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has dropped 8.4 percent in 2007.

The company plans to eliminate 3 percent to 4 percent of jobs worldwide. Most cuts will be made in the pharmaceutical division and the Cordis unit, which sells the drug-coated Cypher stent, the company said.

``As we looked at the challenge of some of the patent expirations over the next couple of years, we felt it was the right time to address all of the issues at once,'' Weldon said during a conference call with investors today. ``We are still very optimistic about the drug-eluting stent market.''

Many drugmakers are cutting costs as the result of generic competition to older medicines that are losing patent protection. Last year Merck & Co. began eliminating 7,000 jobs and closing plants, and in January, Pfizer Inc., the world's largest drugmaker, said it would eliminate 10,000 jobs.

On July 26, London-based AstraZeneca Plc. said it would decrease its workforce by 11 percent and Bristol-Myers Squibb Co. said it would announce job cuts by the end of the year.

`Higher Hurdle'

J&J said in June it planned to introduce as many as 10 medicines in four years, including remedies for schizophrenia, cancer, AIDS, blood clots, diabetes and tuberculosis.

``It's a higher hurdle now to meet regulatory requirements and get reimbursement for new medicines once they are approved,'' J&J's Chief Financial Officer, Dominic Caruso, said today in a telephone interview. ``Companies like ours are looking at the expense of getting the product to market and focusing on products that will be clearly differentiated.''

Earlier this month, the company said it will start a $10 billion share buyback to bolster the stock price until new products reach the market.

The company today reaffirmed its earnings forecast of $4.02 to $4.07 a share for this year, excluding some items and said it will maintain its investments in new product research.

Cordis operations will be consolidated, eliminating a current structure with separate operating units for cardiology, endovascular, neurovascular, electrophysiology and biotechnology products, the company said.

Weldon declined to detail the number or locations of facilities to be closed until after employees are told.

Heart Links

The Cypher heart stent and the company's Procrit anemia drug have been linked to higher risks of heart attacks.

Revenue from Cypher fell 41 percent to $210 million in the U.S. in the second quarter, the company said on July 17. Sales outside the U.S. dropped 30 percent to $240 million.

The company on July 17 lowered its revenue growth forecast for 2007, citing reduced prospects for U.S. sales of Cypher stents and Procrit, the anemia drug. J&J projected 2007 revenue growth of 11.5 to 12 percent, down from 11.5 to 12.5 percent.

Sales of Procrit fell 6 percent to $758 million, spurred by a 15 percent drop in U.S. sales, the company said. Outside the U.S., revenue for the drug grew 9 percent to $309 million. Procrit use slowed after studies showed it may raise the risk of heart attacks, strokes and deaths when given at high doses.

In January, J&J said it would cut as many as 400 jobs this year at a Morris Plains, New Jersey, facility acquired as part of its $16.6 billion purchase of Pfizer Inc.'s consumer-health business. Last year, J&J's Scios Unit said it would cut 150 positions after sales fell for its heart-failure drug Natrecor.

J&J in November 2003 fired 490 workers when it stopped manufacturing Band-Aids in New Brunswick, New Jersey, and shifted production to other facilities in the U.S., Canada and Brazil. Earlier that year, the company cut about 220 jobs at its LifeScan unit that produces monitors for diabetics to check their blood-sugar levels.

To contact the reporter on this story: Lisa Rapaport in New York at Lrapaport1@bloomberg.net

Last Updated: July 31, 2007 18:33 EDT