GlaxoSmithKline’s Chief Executive Officer Andrew Witty is with U.K. Prime Minister David Cameron as part of a trade mission to China as his company faces an investigation in the country.
Glaxo (NYSE: GSK) remains the focus of an anti-corruption probe in China that began in July. Allegations by China’s government that Glaxo bribed hospitals, doctors and officials prompted Witty to dispatch his head of emerging markets, Abbas Hussain, there to oversee the company’s response.
The probe was largely responsible for Glaxo’s sales of pharmaceuticals and vaccines in China plunging 61 percent in the three months through September. The company hasn’t given an outlook on how long the downturn may last.
While China accounts for slightly less than 3.5 percent of Glaxo’s global pharmaceuticals revenue and is less profitable than its Western businesses, the world’s most populous nation presents significant growth opportunities.
Though it’s too early to make judgments on possible fines from the Chinese government, the company has sufficient legal provisions given the information gathered so far, Witty said in October.
A campaign to drive down drug prices may be behind the anti-corruption probe as President Xi Jinping has made affordable health care a key part of the Communist Party’s agenda. Glaxo has already pledged to pass on savings from operational changes made in China in the form of cheaper medicines.
GSK operates its North American headquarters in RTP.
GSK’s China statements
On its website, GSK has posted several statements about China.
“Our China business is currently being investigated by authorities in the country over allegations of fraudulent behavior. We are deeply concerned and disappointed by these allegations,” the company says.
“Such behavior would be a clear breach of our systems, governance procedures, values and standards.We are taking this matter very seriously and are co-operating fully with the Chinese authorities. GSK has zero tolerance for any behaviour of this nature….
“Our commitment to China
“China is an important market for GSK – we sell medicines, vaccines and consumer products in the country.
“We have invested heavily in China, spending more than US$500 million to date, creating more than 7,000 jobs and running a number of factories.We also have a major research and development centre in China, which is the global centre for our research into neurodegenerative diseases such as Alzheimer’s disease.GSK remains committed to China for the long term to serve customers, partners and patients.”
The bribery probe comes on the heels of a settlement last year in the U.S. to pay a record $3 billion fine for illegally marketing medicines. That settlement came with a “Corporate Integrity Agreement” with the U.S. government that requires Glaxo to report any investigation or legal proceedings.
“Ongoing risks include the global regulatory fallout, foremost in the U.S., from any repercussions in China,” Kepler Cheureux’s environmental, social and governance research team said in a report on corruption in the pharmaceutical industry last month.
Anti-corruption investigations may also spill over to other countries such as India, Brazil and Russia, especially during election years, according to Kepler analyst Sudip Hazra.
“They could potentially use these precedents in the U.S. and China to embolden them politically,” Hazra said.
GSK losing exec to Takeda
In other news, Takeda Pharmaceutical, which is Asia’s biggest drugmaker, has named GSK’s Christophe Weber as the leading candidate to become its next chief executive in a bid to capitalize on the Japanese company’s growing global network.
Weber, 47, a 20-year Glaxo veteran and president of its vaccines division in Belgium, will become Takeda’s chief operating officer by April and president in June subject to approval at a shareholders meeting, the Osaka-based drugmaker said in a statement.
Weber would become the first non-Japanese leader in Takeda’s 230-year history. The company, which traces its origins to a medicine wholesale business opened in Osaka in 1781, has been making acquisitions and hiring senior executives from overseas to globalize its business in recent years.
“We considered the rights and wrongs and internal response of appointing a foreigner to head a company that greatly respects tradition,” Chief Executive Officer Yasuchika Hasegawa said in a briefing in Tokyo today. “Weber resonates with our philosophy. He’s dynamic, yet has sensitivity. I’m confident he’ll lead Takeda’s globalization while following its good traditions.”
Hasegawa said Takeda plans to name Weber as CEO in 2015.
A French national with a doctorate in pharmacy and master’s in finance from the University of Lyon, Weber held Glaxo posts in France, the U.K. and the U.S., and as Asia Pacific regional director based in Singapore, before heading the vaccine unit.