Bribery scandal slashes GlaxoSmithKline’s Chinese drug sales

GlaxoSmithKline's drug sales in China slumped 61 per cent in the third quarter, hit by a bribery scandal that damaged its ability to market products in the country and pushed some sales into the hands of rivals.

Chief executive Andrew Witty said GSK's China business had suffered most where other drug options were available – as with its top-selling lung medicine Advair/Seretide, for which AstraZeneca's Symbicort is an alternative treatment.

The fall in Chinese sales, described by Deutsche Bank analysts as "dire", was steeper than investors expected and Witty told reporters it was too early to say when business might recover from the Chinese-government probe into allegations that GSK had bribed doctors to boost drug sales.

GSK could also end up facing hefty fines, although Witty said he believed existing legal provisions were sufficient – and he stressed there was “absolutely no question” of GSK pulling out of China.

“We are totally committed to China,” he told reporters in a conference call yesterday. “This is a very important business to GSK. China is a critically important country of the future.”

Although Britain’s biggest drugmaker generates less than 4 per cent of its sales in China, it has invested heavily in the country, where it employs 7,000 staff and has five factories and a research centre.

Worldwide, GSK’s sales were flat at £6.51 billion in the quarter, generating core earnings per share (EPS) of 28.9 pence, 10 per cent higher than a year ago. Analysts, on average, had forecast sales of £6.65 billion and core EPS, which excludes certain items, of 27.2p, according to Thomson Reuters.

The higher-than-expected earnings number reflected lower costs, including reductions in spending on research and development (R&D) as several expensive late-stage clinical trials reached a conclusion. Witty said the trend of lower R&D costs was likely to continue into 2014. – (Reuters)