Nov. 3 (Bloomberg) -- Johnson & Johnson, the world’s largest health-products company, will fire more than 7,000 workers as consumers cut spending on items ranging from drugs to skin care amid the global recession.

J&J will shrink its 117,000-member workforce by 6 percent to 7 percent, the New Brunswick, New Jersey-based company said today in a statement. The cuts will save as much as $1.7 billion by 2011, the company said.

Consumer demand won’t pick up until unemployment eases and people become less cautious on spending, Chief Executive Officer Bill Weldon said today on a conference call. J&J last month reported third-quarter sales that were less than analysts had expected, citing slowing demand for consumer products and generic competition to top-selling medicines, the antipsychotic Risperdal and epilepsy drug Topamax.

“The weak economy is taking its toll on Johnson & Johnson,” said Mike Krensavage, a money manager with Krensavage Partners, which owns J&J shares, in a telephone interview. “The company is hunkering down, bracing for more difficult times.”

J&J declined 56 cents, or less than 1 percent, to $58.93 at 4 p.m. in New York Stock Exchange composite trading. The company’s shares are down 1.5 percent this year.

“The stock market may be balancing the fact that J&J had a very pessimistic tone about its business, versus the fact that it’s doing something about it,” Krensavage said today. “Generally Wall Street likes cost cuts because they boost earnings. In this situation, you have the fact that J&J sounded a very pessimistic tone on the economy.”

Consumer Sales Decline

The company last month reported a 2.7 percent drop in third-quarter consumer-products sales, to $3.99 billion, with all units in the division declining except wound care.

“With unemployment, people just aren’t spending as much as they used to,” Weldon said in a telephone interview today. “Some of it means they trade down from some of our consumer products to private label.”

People also are putting off elective surgery, hurting the medical device-business, and hospitals are being more cautious with capital expenditures, he said. The pharmaceuticals business has been hurt by people losing health insurance as unemployment rises, Weldon said.

The majority of J&J’s job cuts will occur outside the U.S., Weldon said. He did not give specifics on where the cuts will be in the U.S., except to say they will be across all businesses.

Not ‘Roaring Back’

When you look at the total economic environment, “I don’t think anybody is expecting it to come roaring back tomorrow,” Weldon said.

The J&J chief also cited greater expenses to bring drugs to market and higher regulatory hurdles as challenges facing the company.

“We want to make sure we can fully capitalize on investments to drive new products,” Weldon said. J&J lowered its research and development spending in the third quarter, “getting to a more normalized spend level,” he said.

“We’re going to continue to look at internal R&D being the best driver that we have,” Weldon said. J&J will also seek licensing opportunities, acquisitions and partnerships to gain new products, he said.

The cuts will spur a charge of up to $1.3 billion pretax in the fourth quarter, the company said. Profit excluding costs such as restructuring charges will be between $4.54 and $4.59 per share for 2009, affirming a previous forecast.

Two Years of Cuts

Drugmakers have been slashing researchers and sales staff to lower costs over the past two years because of losses from generic competition.

Pfizer Inc., the world’s biggest drugmaker, plans to fire 19,000 workers following its acquisitions of Wyeth and had already cut 10,000 positions since 2007. J&J began firing as many as 4,400 employees from its pharmaceutical and stent divisions in 2007.

J&J agreed to buy Cougar Biotechnology Inc. in May and a stake in Elan Corp. in July for about $1 billion each to add potential new drugs. In September, the company paid $442 million for an 18 percent stake in Crucell NV, based in Leiden, Netherlands, to gain flu shots.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.

Last Updated: November 3, 2009 16:10 EST