Bloomberg News

Glaxo Said to Send Executives to China in Response to Probe

July 19, 2013

Glaxo Said to Send Three Executives to China in Probe Response

The allegations are "shameful" and would be a breach of internal systems and values, Glaxo said in a statement. Photographer: Simon Dawson/Bloomberg

GlaxoSmithKline Plc (GSK) sent its head of emerging markets to China to oversee the drugmaker’s response to a government probe of suspected economic crimes, according to person with knowledge of the matter.

Abbas Hussain, the London-based company’s president of Europe, Japan, emerging markets and Asia Pacific, was dispatched by Chief Executive Officer Andrew Witty, said the person, who asked not to be named because he wasn’t authorized to speak about the matter. The global head of internal audit and deputy chief counsel for China are with Hussain, the person said.

Sending a senior executive such as Hussain shows Glaxo wants to be seen as a company that’s doing what’s expected of it, said Fabian Wenner, a health-care analyst with Kepler Capital Markets in Zurich. Four senior executives have been detained in the investigation involving 3 billion yuan ($489 million) of spurious travel and meeting expenses, and trade in sexual favors, China’s Public Security Ministry said July 15.

“Investors are increasingly asking questions about this,” Wenner said yesterday in a phone interview. “They want more visibility.”

Hussain, 48, joined Glaxo in 2008 after 20 years at Eli Lilly & Co. The Indian-born manager is one of the 15 people on the Glaxo Corporate Executive Team that, along with Witty, manages the business.

Shares Decline

Glaxo fell 0.7 percent to 1,715 pence in London yesterday. Witty, who hasn’t spoken publicly about the allegations, will hold briefings on July 24 with reporters and analysts after the company announces second-quarter earnings.

Glaxo said in June it had found “no evidence of corruption or bribery in our China business” after a four-month investigation. The internal probe came in response to a whistle-blower’s allegation that sales people in China were involved in widespread bribery of doctors to prescribe medication.

Chinese police said June 28 that senior Glaxo executives in the country were suspected of economic crimes, and on July 11 China’s Ministry of Public Security said some managers had admitted to corruption. “These allegations are shameful and we regret this has occurred,” Glaxo said in a July 15 statement.

Other Drugmakers

Other foreign companies may also be involved, Gao Feng, head of the economic crimes investigations unit of China’s Public Security Ministry, told reporters at a July 15 briefing.

While authorities haven’t named any other companies, UCB SA (UCB) said yesterday its Chinese operations were visited by local authorities.

All drugmakers are receiving visits, and UCB has “nothing to report,” France Nivelle, a spokeswoman for the Brussels-based company, said in an interview. “It’s business as usual,” Nivelle said. UCB fell 2.3 percent to 42.15 euros.

Novartis AG (NOVN), Europe’s biggest drugmaker by sales, Germany’s Bayer AG (BAYN) and Sanofi (SAN), France’s largest drugmaker, said they haven’t been contacted by authorities in China in connection with any misconduct.

Merck & Co. (MRK:US), the second-biggest U.S. drugmaker, also said it hasn’t been contacted by the Ministry of Public Security. Roche Holding AG (ROG) said it’s not aware of any anti-corruption probes in China against the Basel, Switzerland-based company.

No Contact

Novo Nordisk A/S (NOVOB) hasn’t been contacted by Chinese authorities and “is, to our knowledge, not included in the investigation,” a spokesman for the Bagsvaerd, Denmark-based company said yesterday.

AstraZeneca Plc (AZN), the biggest U.K. drugmaker after Glaxo, said in its 2012 annual report that it is investigating indications of inappropriate conduct in countries that include China. The company has no update yet, Esra Erkal-Paler, a spokeswoman, said in an e-mail.

Mark Reilly, who has led Glaxo’s business in China since 2009, left the country June 27 after his colleagues were detained. Glaxo’s finance chief in China, Steve Nechelput, has been unable to leave the country since the end of June.

Reilly returned to the U.K. on a routine, planned business trip and has been working from Glaxo’s headquarters on the response to the probe, a person with knowledge of the matter said July 15.

Efforts to clean up the nation’s $350 billion health-care industry have gained prominence since police said last month they were investigating Glaxo. On July 17, the China Food and Drug Administration said it will “severely crack down” on fake medications, forged documents and bribery.

To contact the reporters on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net; Albertina Torsoli in Paris at atorsoli@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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