Bribery scandal slashes GlaxoSmithKline's Chinese drug sales

Reuters

LONDON, Oct 23 (Reuters) - GlaxoSmithKline's drugsales in China tumbled 61 percent in the third quarter, hit by abribery scandal that has damaged its ability to market medicinesin the country.

Worldwide, GSK's sales were flat at 6.51 billion pounds($10.6 billion), generating core earnings per share (EPS) of28.9 pence, 10 percent higher than a year ago.

Analysts, on average, had forecast sales of 6.65 billionpounds and core EPS, which excludes certain items, of 27.2p,according to Thomson Reuters.

Britain's biggest drugmaker reiterated on Wednesday that itexpected sales growth for the year to be around 1 percent inlocal currency terms, with EPS rising by between 3 and 4percent.

GSK's reputation has been tarnished and its management teamin China left in disarray by Chinese police allegations in Julythat it funnelled up to 3 billion yuan ($490 million) to travelagencies to facilitate bribes to doctors and officials.

Industry insiders and analysts had been expecting that thepolice probe - one of Beijing's biggest into a foreign company -would dent sales significantly in the three months to September.

Other multinational drug companies are also beinginvestigated but GSK has suffered the most damage from thescandal and many Chinese doctors have shunned its salesrepresentatives.

Swiss rivals Roche and Novartis, bycontrast, both saw continued growth in their Chinese drug salesin the third quarter.

Although China accounted for only 3.6 percent of GSK'sglobal drug sales last year, the company sees it as an importantsource of future revenue and has been investing heavily in thecountry. Before the scandal, GSK's China sales rose 14 percentyear-on-year in the three months to end-June.

Emerging markets are an important plank of Chief ExecutiveAndrew Witty's growth strategy as he grapples with slower uptakeof GSK's products in the developed world.

GSK has recently seen some encouraging progress with itspipeline of new drugs - including approvals this year for newtreatments for lung disease, cancer and HIV - but austeritypressures in Europe remain a drag on sales and profits.

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