China probes of Glaxo, Sanofi, others put big chill on key growth market

The big chill is on in China--at least, that's how Ipsen CEO Marc de Garidel sees it. The recent, and very public, investigation into bribery allegations against GlaxoSmithKline ($GSK) and others has doctors running scared, making it tough for everyone to sell drugs there.

"In certain cities, in certain areas, there is a toughening of the marketing conditions," Garidel said. According to Bloomberg, his remarks came during his discussion today of first-half earnings for the French company. He said the companies under investigation are not even trying to sell product right now, while other drugmakers are finding it hard to get doctors to meet with them.  

Last month, Chinese authorities accused Glaxo employees of bribing Chinese doctors and officials by shuttling up to $489 million through travel agencies. Since then, Sanofi ($SNY), Eli Lilly ($LLY) and Novartis ($NVS) have been dragged into the fray. Other companies have been visited by authorities for questioning. And it's not just drugmakers in the hot seat. As Bloomberg reports, China said last month it would punish 39 hospital employees for taking illegal kickbacks from drugmakers, a move sure to make docs think twice about being seen having tea with a sales rep. 

Garidel said it all is taking its toll. Ipsen's Chinese sales were off in July and August because of the chilling effect of the probes, even though it is not a party to them. The market turnabout may start showing up in the earnings reports of other drugmakers, which have been counting on sales in that country to help overcome slowing markets elsewhere. GlaxoSmithKline actually reported sales in China up 14% in the last quarter, but most of that would have come before the bribery probe went public. The company cautioned that the Chinese investigation will start chipping away at its sales there. And as Garidel pointed out, there is no way to know how long the probe--and the fallout from it--will linger. "We are monitoring this very closely. We don't know how long it will last," he said.

- read the Bloomberg story

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