GlaxoSmithKline ($GSK) sees the light at the end of the tunnel in China. Amid a high-profile bribery scandal, GSK sales plummeted by 61% for the third quarter. By the time the company reported those numbers, executives were suggesting that the worst might be over. And now, it appears that they were right.
During the third-quarter earnings call, CEO Andrew Witty said the pain in China was most severe in July and August, with an easing up in September. "I don't think you can call that a trend yet," he acknowledged.
Yesterday, CFO Simon Dingemans was ready to go further. "The trend is definitely looking a bit more positive," Dingemans told Bloomberg at the J.P. Morgan Healthcare Conference in San Francisco. "We can see the future opportunities to rebuild the business as and when we get to the other side of the inquiry."
China's allegations against Glaxo kicked off a series of accusations--from whistleblowers in the media and state officials alike. Eli Lilly ($LLY), Sanofi ($SNY), Novartis ($NVS) and Lundbeck found themselves in regulators' sights. Physicians and hospitals have actually barred pharma reps, including those from GSK, as the corruption probe unfolds.
But it's the GSK case that has played out most publicly, with employees rounded up and detained, and some paraded on state television. The accusations against Glaxo are also the most dramatic: Chinese authorities say the company's China unit funneled $490 million in bribes to doctors, using travel agencies as a conduit.
It's no wonder that the company's sales took a dive; Witty himself said that GSK rivals picked up business as Chinese doctors and hospitals looked for alternatives to his company's products. Glaxo executives have been on damage-control duty as the scandal unfolded. Emerging markets chief Abbas Hussain jetted in to apologize to officials and offer compensatory price cuts, and Witty himself visited late last year.
In October, Witty reiterated Glaxo's intent to fight the good fight in China: "We are totally committed to China," he said. Now, Dingemans says GSK plans to work through the accusations and get back to business as usual this year. "We'll be working hard in 2014 to deliver that," he told Bloomberg.
- read the Bloomberg story
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