GSK sees sales drop £125m on mainland

British drug giant blames bribery probe and price cuts for weaker performance

PUBLISHED : Thursday, 06 February, 2014, 4:24am
UPDATED : Thursday, 06 February, 2014, 4:24am

GlaxoSmithKline yesterday reported a drop of £125 million (HK$1.57 billion) in mainland sales last year, prompting the British drug giant to talk up its investments in India without mentioning expansion plans in China.

Sales of pharmaceuticals and vaccines, which contributed the most to GSK's revenue on the mainland, fell 18 per cent, GSK said in a statement.

The decline was accentuated by a 61 per cent plunge in the third quarter.

The drop was also partly due to price cuts in its Fenbid drugs enforced by Beijing, GSK said.

Beijing's corruption investigation into the company had affected its sales in emerging markets, which grew 1 per cent to £4.7 billion last year, it said. Excluding China, GSK's turnover in emerging markets grew 5 per cent.

"The performance of our China business is starting to stabilise now," chief executive Andrew Witty said at a conference call last night.

Asked when the Chinese government's investigation into GSK would end, Witty said it depended on Beijing.

He also expects more volatility in the company's business in emerging markets as well as government intervention in drug pricing.

Witty did not mention any investment plans for China, but emphasised on investments in India and Scotland.

"We are investing in key markets such as India. Right now, we are building our pharmaceutical base in India," he said.

Last year, GSK paid £588 million to increase its stake in its Indian consumer health-care subsidiary to 72.5 per cent from 43.2 per cent.

The company also announced plans to build manufacturing capacity in India.

"I fully expect to increase our investments in our two factories in Scotland," Witty added.

GSK said it had informed the US Department of Justice, the US Securities and Exchange Commission and Britain's Serious Fraud Office about the investigation in China into alleged bribery involving the company.

With its securities traded in Britain and the US, the company is potentially liable for investigation by the regulatory authorities of both countries under their anti-corruption laws.

GSK posted a 1 per cent increase in revenue to £26.5 billion for the year while earnings per share surged 27 per cent to £1.13.

These results were at the top end of the company's earlier guidance, Witty said.