GSK in China: escaping the shadow of a scandal

Wed Nov 25, 2015 11:35pm EST
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By Adam Jourdan and Ben Hirschler

SHANGHAI (Reuters) - GlaxoSmithKline Plc (GSK.L: Quote) has cut 40 percent of its sales reps in China and axed some units as it eyes a return to growth in 2016, after sales plunged during a bribery scandal that landed it with a record $490 million fine in 2014.

The British firm is gambling on a new, cleaner image to reboot its performance and reputation with doctors and consumers, China head Herve Gisserot told Reuters during a wide-ranging interview at the group's Shanghai headquarters.

It is the first time Gisserot has spoken at length about the firm's progress since the high-profile scandal, which saw his predecessor Mark Reilly charged with bribery and eventually deported to Britain. Reilly has since left the company.

"Obviously GSK is a very well-known name in China and unfortunately not for the right reasons," said Gisserot, who took over as general manager in July 2013 soon after the scandal surfaced. "We are in the process of rebuilding our reputation, and we have to be very humble."

GSK has previously said it would overhaul its business in China, and more globally, to avoid some of the issues that led to the probe, including stopping all sales-based incentives for drug reps and reducing paid junkets for doctors.

The problem is, many of GSK's rivals are not following in step, and adapting to a new model means taking a business hit.

"If you look at the short-term business performance, it's not great," said Gisserot.

GSK's China sales dropped from 759 million pounds ($1.2 billion) in 2012 to 585 million pounds in 2013 and were flat in 2014. This year has been volatile, after the disposal of peripheral operations and disruption to a factory in Tianjin following deadly explosions in the port city in August.   Continued...

The signage for the GlaxoSmithKline building is pictured in Hounslow, west London June 18, 2013. REUTERS/Luke MacGregor