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GSK warns China scandal will hurt

Wednesday, July 24, 2013 - 02:00

July 24 - British drugmaker, GlaxoSmithKline, marred by bribery allegations in China, is announcing its second quarter results. Joanne Nicholson looks at whether the company will be able to offset damage to GSK’s reputation and help calm the waters for other pharmaceuticals being drawn into the affair

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It expects to see an impact on its performance in China, but it's too early to say. That's the message from GlaxoSmithKline's Chief executive, on the day it published its second quarter results. The cameras weren't allowed in as the UK based company announced its modest 2 percent rise in group sales. It wants to lie low while a bribery investigation is underway in China. Its management team in China is in disarray amid the allegations up to 3 billion yuan was funnelled to travel agencies to facilitate bribes to doctors and officials. With other firms, like the British/Swedish Astrazeneca, and the Belgian UCB being drawn into the affair, many are wondering whether there'll be changes to how business is done in China. Dorman Followwill is from market analysts, Frost and Sullivan. (SOUNDBITE) (English) DORMAN FOLLOWWILL, DIRECTOR, HEALTHCARE AND LIFE SCIENCES, FROST AND SULLIVAN, SAYING: "The Chinese government could do a small slap on the wrist, at which point it's not going to change the operational realities of GSK or any of the other big pharmas that much. If however the Chinese government decides to come back with severe trade restrictions, it could be a different ball game." GSK has admitted some of its senior Chinese executives appear to have broken the law. It also says it will change its business model to lower the cost of medicines in China. With an expanding middle class it's an important growth market for all drugmakers. But it's not just its China business GSK needs to worry about. It's been struggling to grow in recent quarters because it doesn't have new drugs to replace the ones whose patents are due to expire. That means cheaper alternatives can make their way on to the chemists' shelves in an already austerity hit Europe. Business in China will undoubtedly get tougher for the big pharmaceutical firms, especially if Beijing succeeds in driving down the premium prices enjoyed by the Western firms. But the industry will have to wait to see how big an impact it will make to their profits.

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GSK warns China scandal will hurt

Wednesday, July 24, 2013 - 02:00