Glaxo CEO 'deeply disappointed' by China scandal
The chief executive of GlaxoSmithKline (GSK) said the allegations of bribery and corruption in China were "deeply disappointing," as the company reported second-quarter results on Wednesday.
Andrew Witty admitted the ongoing Chinese bribery investigation would have some impact on the company's performance and could lead to discounted drug prices in the region.
"Clearly, we are likely to see some impact to our performance in China as a result of the current investigation, but it is too early to quantify the extent of this. We are co-operating fully with the Chinese authorities in this matter," he said in a statement accompanying the results.
The U.K. pharmaceutical company's sales for the quarter rose by 2 percent, coming in at £6.62 billion ($10.2 billion), versus estimates in a Reuters poll of £6.6 billion. The company also delivered core earnings-per-share growth of 4 percent, and said it expects sales growth for the year to be around 1 percent.
(Read More: GlaxoSmithKline admits execs breached Chinese law)
But all eyes were on Witty's comments about China's investigation into the company over alleged corruption and price fixing.
"From what we have been told by the authorities, it appears to be focused on a number of senior [GSK] managers who have been operating outside of our processes, potentially defrauding GSK and also at the same time allegedly doing some things in the market place which are clearly inappropriate and illegal," he said.
"This is shameful. And personally, it is deeply disappointing."
Witty added that the company was parachuting in advisers for an independent review and had already been in talks with regulators in the U.K. and U.S., where anti-bribery laws are supposed to clamp down on corrupt practices even when oversees.
Given the importance of diplomatic relations between the U.K. and China, he said GSK had decided to take advice from the British Government – though he did not specify whether this was at ministerial level.
"China is at an inflection point and we support the Chinese government's desire that the healthcare system keeps up with evolution of the country," he said.
Witty talked about introducing a "tiered pricing approach" in China as well as evolving the way in which the U.K. listed company marketed its medicines to ensure it was "in step" with Chinese expectations.
"I think there are some unusual features about the Chinese market place which are different to the rest of the world," he said, but stressed he was "highly committed" to the country.
"We support the efforts of the Chinese government to reform the medical sector, and we are open to looking at all ideas to improve affordability of and access to our medicines, including changes in our own business model in China," he said. "We have a long history and a very large footprint in China, and we continue to see the country as a key place for further investment."
He added that it was a matter for GSK's board whether or not he should take his bonus, and also defended his decision not to go to China personally to manage the situation.
"As far as going to China, I am absolutely willing and ready to go to China when it is the right moment," he said. "I take this very seriously but the organisation has to do a lot of things beyond focus on China. "
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