[mtwalsh01]

GlaxoSmithKline (GSK) is facing a police investigation in China over allegations that staff spent up to $490 million filtering money to travel agencies in order to facilitate bribes to doctors and officials to encourage use of its medicines. Now many Chinese doctors are refusing to meet GSK representatives and sales in the country have slumped 61% in the third quarter. Although China accounted for less than 4% of total GSK sales, nonetheless they had invested heavily in the country and Chief Executive Andrew Witty this week told reporters that: "This is a very important business to GSK. China is a critically important country of the future." The company had conducted its own internal audits, resulting in the dismissal of dozens of staff; however they remain at the centre of Chinese police investigations of multinational drug companies. They have seen their market share suffer particularly where other drug options are available.

Worldwide, GSK sales remained flat at £6.51 billion in the quarter. This resulted in higher-than predicted core earnings per share of 28.9 pence, 10% higher than a year ago. This higher-than-expected figure reflected the fact that several late-stage GSK clinical trials have come to an end and therefore less is being spent on research and development (R&D), a trend that is expected to continue into next year. Money was also saved on staff post-retirement healthcare benefits.

Despite the damage to its reputation due to the Chinese bribery scandal, GSK have some positive news as they have this year obtained approvals for several new treatments, including for lung disease, cancer and HIV. They have just last week rolled out a new lung drug called Breo in the USA. However, the economic policy emphasis in Europe on austerity is impacting on sales and profits, making it all the more frustrating for the company that their attempts to break into emerging markets like China have suffered this setback.

Sources

http://www.courant.com/business/sns-rt-u...UPDATES%29 [Accessed 24 October 2013].

http://web.orange.co.uk/article/news/cor...hina_sales [Accessed 24 October 2013].

http://www.irishtimes.com/business/secto...-1.1570684 [Accessed 24 October 2013].