Glaxo chief to address claims of corruption in China

GSK chief Sir Andrew Witty. Picture: Reuters
GSK chief Sir Andrew Witty. Picture: Reuters
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SIR Andrew Witty, chief executive of GlaxoSmithKline, is this week expected to outline what action is being taken to deal with allegations of corruption and “sexual bribery” in China.

The FTSE 100 drugs giant is facing a growing crisis following an investigation by the Chinese authorities into reports that GSK staff bribed doctors and government officials to boost sales and increase the price of medicines. Beijing has accused the pharmaceuticals firm of paying up to £320 million over six years in backhanders.

Graham Parry, an analyst at Bank of America Merrill Lynch, said the Chinese probe would be one of the “key ­topics” during the results ­update.

But he added: “Our ­initial view is that the financial impact is likely to be limited.”

Turnover is expected to have risen by a consensus of 2 per cent year-on-year during the three months to 30 June to £6.6 billion, but the figures will be overshadowed by the problem in China.

The Beijing authorities have banned Steve Nechelput – GSK’s head of finance in the country – from leaving and four Chinese employees have been arrested.

On Friday, GSK sent three staff to China, including head of emerging markets Abbas Hussain. Witty stood down on Wednesday as senior independent director at the UK government’s Department for Business, Innovation & Skills, although GSK said the move had been planned and was not related to the Chinese probe.

Even so, the timing of the announcement was seen as an indication of the need to distance the government from the scandal.

The group has hired accountancy firm Ernst & Young to carry out an independent inquiry into its policies.

It is said that Witty has been shocked by the allegations which come five years into his tenure as chief executive and just months after he was knighted. He has received plaudits for tackling GSK’s previous scandals and for helping develop access to medical care in poor regions of the world.

Analysts are also looking for an update from GSK on the disposal of its Lucozade and Ribena drinks brands.

AG Barr, the Cumbernauld-based maker of Irn-Bru, is said to be in talks with private ­equity players Blackstone and Lion Capital to mount a £1bn bid for the brands.

Analysts have said Barr would be unable to buy them on its own because the interest of private equity firms will drive up the price.

Some commentators have suggested Barr will be in the market for an acquisition following the collapse earlier this month of its proposed £1.9bn reverse takeover of Pepsi bottler Britvic, which would have created Europe’s largest soft drinks outfit.

Japanese drinks giant Suntory – which owns whisky distiller Morrison Bowmore and the Auchentoshan, Glen Garioch and McClelland’s malt labels – is seen as the front-runner to buy Lucozade and Ribena.