GSK addresses China scandal in second quarter results

24th Jul 2013 13:40

GlaxoSmithKline's Chief Executive, Andrew Witty, said the bribery scandal in China will inevitably impact the drugmaker's business as he unveiled second quarter results. The company has been accused of bribing doctors and government officials in China in an effort to boost its sales. Witty said he had no knowledge of the alleged corruption which was "totally contrary to our values"."Clearly, we are likely to see some impact to our performance in China as a result of the current investigation, but it is too early to quantify the extent of this," he told reporters on Wednesday, according to Reuters.The group is also being investigated for allegations that it funnelled up to 3.0bn yuan to travel agencies to facilitate the bribes. GSK has confessed that it believes some of its senior staff may have broken the law. Witty said the company plans to change its business model to lower the cost of medicines in China, including adopting a tiered pricing of its products in the nation.In the second quarter, GSK's sales jumped 14% to £212m in China, which is an important market for the firm.Worldwide sales rose a modest 2.0% to £6.62bn and core earnings per share (EPS) climbed 1.0% to 26.3p, with strong growth in respiratory, oncology and vaccines.Core operating profit was down 2.0% due to a challenging European market and the timing of vaccines tender shipments. The company continues to expect core EPS growth in 2013 of 3.0% to 4.0% with turnover growth of around 1.0%. Witty said the firm was implementing measures to improve its cost structure and reallocate resources more effectively. The business has received an offer from Aspen Group of £700m for two anticoagulant products and the related manufacturing site. Its plan to divest in nutritional drinks brands, Lucozade and Ribena, remains on track with an agreement expected at year end. Shares were up 0.48% to 1,680.50p at 14:00 on Wednesday.RD