GlaxoSmithKline To Detail Action Plan For Chinese Bribery Allegations On Wednesday

Andrew Witty, chief executive of GlaxoSmithKline (LON:GSK), is to outline the actions the drugmaker is taking in response to allegations of bribery in China on Wednesday, when the company presents its quarterly results.

GSK is under investigation by Chinese authorities for dealings with travel agencies worth up to 3 billion yuan ($489 million) that it allegedly used to facilitate bribes, Reuters reported Sunday.

Although the pharmaceutical company also has an internal investigation still in progress, people familiar with the matter said Witty will discuss the scandal that rocked GSK’s reputation and left its management in China is disarray.

"He will give his perspective on what appears to have gone on and how it can be put right," one of the sources told Reuters.

The UK drug maker has hired Ernst & Young to conduct an independent review of its systems in China and sent three senior executives to lead the response on the ground. It has described the allegations as “shameful.”

The charges from China could expose GSK to prosecution under Britain’s Bribery Act and the U.S. Foreign Corrupt Practices Act. A company spokesman says it is keeping all relevant regulators updated as appropriate.

Despite the scandal, GSK’s shares have held up, as China accounts for only around 3 percent of sales, according to Reuters. Bank of American Merrill Lynch analysts said in a research note that the financial impact of the affair would likely be limited, although the issue would be a “key topic” at the quarterly results update.

GSK is not alone in being under investigation. China is also probing other companies and individuals in the pharmaceutical sector as part of a broad-based drive to root out corruption.

Shanghai police this weekend arrested a British man, Peter Humphrey, who runs an international business risk advisory firm that has worked with drug companies including GSK, two people familiar with the situation told Reuters.

Last week, Chinese authorities visited the Shanghai office of Belgian drugmaker UCB. A UCB spokesman said the visit was part of an investigation that included other drug companies.