Corruption probe hits GSK
pharmafile | October 24, 2013 | News story | Sales and Marketing | China, GSK, Q3, corruption
The fallout from corruption investigations in China has hit GlaxoSmithKline, which announced third quarter sales in the country were down 61% year-on-year.
Chinese police have suggested that GSK knew about the alleged use of travel agencies to handle £320 million of kickbacks to doctors – something the company denies.
In a legal note to its accounts, GSK said: “The People’s Republic of China, acting through various government agencies, continues its investigation into alleged crimes and violations of law by GSK China’s operations.”
It added: “It is not possible at this time to make a reliable estimate of the financial effect, if any, that could result from these matters.”
However, while the scale of the ‘financial effect’ is currently incalculable, it is hard to argue that the corruption allegations have not affected sales – GSK’s turnover in the country had been growing for the first half of the year.
GSK’s pharma and vaccines turnover in emerging markets as a whole declined 9% to £1 billion. China represented less than 4% of GSK’s total sales last year, but the company is banking on emerging markets for future growth and has invested heavily in the country.
GSK chief executive Sir Andrew Witty admitted that the company’s operations “have been disrupted by the ongoing investigation into our business”.
But he reiterated: “We continue to co-operate with the authorities and we remain fully committed to supplying our products to patients in the country.”
GSK’s decline there is stark compared with other western pharma companies: in their own recently-announced third quarter 2013 results, Novartis saw China sales rise 18% year-on-year while those of fellow Swiss manufacturer Roche jumped 23% in the country.
Worldwide, GSK’s turnover for the three months to September was flat at £6.5 billion, with core operating profit of £2 billion.
Sales of Votrient rose 84% to £91 million – including a 38% rise to £36 million in the US – while Tykerb/Tyverb sales fell 7% to £53 million.
Benlysta sales doubled to £39 million although Lovaza fell 12% to £134 million, while generic competition squeezed Lamictal, down 16% to £70 million.
Dermatology sales declined 18% to £40 million and sales at GSK’s HIV specialist ViiV Healthcare were down 5% to £344 million in Q3 – a fall GSK attributes in part to a mature portfolio – with Europe (down 7%) and emerging markets (falling 26%) particularly tough.
Adam Hill
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