UPDATE 1-GlaxoSmithKline sees hit from China corruption scandal
LONDON, July 24 (Reuters) - Drugmaker GlaxoSmithKline , rocked by charges of corruption in China, reported a modest 2 percent rise in second-quarter group sales on Wednesday but said the bribery scandal would inevitably have an impact.
"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," Chief Executive Andrew Witty said.
Britain's biggest drugmaker has been struggling to grow in recent quarters due to loss of patent protection on some of its medicines and falling prices in austerity-hit Europe.
GSK's worldwide sales in the quarter were 6.62 billion pounds ($10.17 billion), generating core earnings per share (EPS) up 1 percent at 26.3 pence. Analysts, on average, had forecast sales of 6.60 billion pounds and core EPS, which excludes certain items, of 26.2p, according to Thomson Reuters.
The company reiterated that it expected sales growth for the year to be around 1 percent in local currency terms, with EPS rising by between 3 and 4 percent.
It also repeated that it planned to buy back between 1 billion and 2 billion pounds of shares in 2013.
GSK's reputation has been damaged and its management team in China left in disarray by Chinese police allegations that it funnelled up to 3 billion yuan ($489 million) to travel agencies to facilitate bribes to doctors and officials.
The company admitted on Monday that some of its senior Chinese executives appeared to have broken the law and said it planned to change its business model to lower the cost of medicines in the country.
China is an important growth market for GSK and other large drugmakers, which are relying on the middle classes in emerging markets to buy more of their products as sales in Western countries falter due to patent losses and government cutbacks.
The bribery scandal suggests business in the country is going to get tougher, especially if Beijing succeeds in driving down the premium prices enjoyed by Western firms.