GSK remains committed to China despite past missteps

GlaxoSmithKline ($GSK), still licking wounds inflicted as China made an example of the British drugmaker in introducing a corruption crackdown, is looking to the world's second-largest market as a key to its salvation.

Hervé Gisserot, whose predecessor Mark Reilly was arrested and charged with crimes over that scandal, has been GSK's new head of operations in the country the past two years. As China needs to remake its image as a drugmaker, so does GSK, he said, and it must be humble about it.

Gisserot told Reuters the task is made all the harder by the failure of many of its competitors to change their business model in the country, which for the old GSK and others included sales incentives for representatives and paying for physician junkets. Gisserot said competitors continuing that practice makes it difficult for GSK in the short term.

He told the Financial Times the mindset of the old GSK was "more, more, more." He has played the humble role for his first two years as China chief and only now has begun giving interviews. "We have to invent a new model," he said.

The year after GSK's 2012 scandal, China revenues fell by half, from $1.5 billion, and remained static last year. Under Gisserot's watch, GSK has trimmed its sales staff there by nearly half and survived other problems not related to the scandal. But he said he expects sales to begin rising again next year, even reaching 10% or more the year after.

GSK counts on launching new products such as its Cervarix vaccine for HPV. That is part of the firm's new, reduced focus to just vaccines and other treatments for hepatitis and respiratory diseases. To help to drive expectations, he is hiring new college graduates to train them fresh with a sales approach that is different from the one current representatives have had to change.

Gisserot's efforts in China are aided in part by a global remake of the company, which suffered revenue declines beyond China's borders. Its only incentives still linked directly to sales are confined to emerging markets. Elsewhere, GSK relies on bonuses to sales representatives based on their knowledge of its products and how many meetings they have with hospitals and physicians.

The new China chief said he was counting on GSK's reputation of being the first to change its business model in the country to help it weather the competition from those not following the same new rules.

Gisserot said GSK rivals who play by the old business model are gambling on employees adhering to more restrictive rules while retaining their old incentive models.

- here's the story from Reuters
and one from the FT