Glaxo names New China, Asia business heads two years after probe

[BEIJING] GlaxoSmithKline Plc appointed a new head for its China drug business to succeed Herve Gisserot, who led the company's recovery after a Chinese government probe that ended with a record fine in 2014.

Mr Gisserot will become head of pharmaceuticals for the Asia Pacific region, and Thomas Willemsen, currently head of China pharmaceuticals commercial operations, will become general manager for pharmaceuticals and vaccines in the country, according to Glaxo China.

The London-based drugmaker has reduced the size of its China sales force and cut prices, including that of its hepatitis B drug by about two thirds, to rebuild its presence in what is now the world's second-largest pharma market. In China, "fundamentally we're back into growth. We're seeing improvements across the refocused business," Andrew Witty, Glaxo's chief executive officer, said on its third-quarter earnings call.

Sales numbers for the country suggest that the path to recovery has been slow. In 2015, the company's China pharmaceutical sales were down about 18 percent, primarily due to pricing pressures and the ongoing reshaping of the business, and in the first nine months of this year, its business there fell by 8 percent, according to filings.

Only in the third quarter did China sales jump, rising 24 per cent on what the company described as "the benefit of wholesaler stocking ahead of a systems upgrade." Without that benefit, sales rose a more moderate 4 per cent, in line with general emerging market performance, according to an Oct 26 filing.

While price cuts in China can mean lower margins for foreign companies, it also gives them the opportunity to reach more patients, particularly those using public health insurance. After cutting the price of Viread, its hepatitis B drug, by 67 per cent in a negotiation with the national health authority, Mr Gisserot told a local industry publication y-lp.com that the price reduction would not be a one-off incident and Glaxo is willing to participate in more of such negotiations.

China's fast aging population combined with rising incidence of chronic diseases such as cancer and diabetes has made it the world's second largest pharmaceutical market, with an estimated US$115 billion spent on medicines last year, according to the IMS Institute for Healthcare Informatics.

However, foreign and local pharmaceutical companies still face hurdles from slow drug approval processes, tighter sales regulations and price cutting campaigns by the government, which is trying to rein in rapidly rising costs in the public health system.

Mr Gisserot will continue to report to Abbas Hussain, president of global pharmaceuticals at Glaxo. Mr Gisserot took over from Mark Reilly in 2013 during a government probe into the company's sales practices in China that lasted almost 15 months. China fined Glaxo 3 billion yuan (S$620.4 million) in September 2014.

The company said at the time that Chinese judicial authorities had found it guilty of bribing non-government personnel and it "fully accepts the facts and evidence" of the investigation. Glaxo published an apology to the government at the time and pledged to overhaul its practices. The company has made broad changes to its business globally including the way its sales force is compensated.

BLOOMBERG