Corruption Probe Hits Glaxo's China Sales

GlaxoSmithKline (LSE: GSK.L - news) (GSK), Britain's biggest drugs company, will say on Wednesday that a probe into corruption at its operations in China has triggered a dramatic slump in sales in the country.

Sky News understands that GSK will use its third-quarter results announcement to inform the City that its revenues in China fell by more than a third during the three months to the end of September.

The decline is broadly in line with the projections of many City analysts following GSK's admission earlier this year that it had become ensnared in one of Beijing's biggest investigations into corruption involving foreign multinationals.

The UK pharmaceuticals group is alleged to have bribed doctors and public officials in China to boost the use of its medicines, leading Sir Andrew Witty, GSK's chief executive, to say in July: "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."

Sources said that GSK would not announce a wholesale withdrawal from China on Wednesday or any financial provision for prospective fines despite speculation that the scandal could cost it hundreds of millions of pounds in penalties.

China counts for only around 4% of GSK's sales, and analysts expect the group to report overall sales to grow despite the problems in the Far East (Kuala Lumpur: 5029.KL - news) .

The company has run into problems despite conducting up to 20 internal audits in China each year, resulting in the dismissal of dozens of staff for misconduct.

Last year, GSK dismissed 312 staff for policy violations worldwide, according to its annual corporate responsibility report, of which 56 were in China.

The company declined to comment on Tuesday.