GlaxoSmithKline moving forward with Ebola vaccine

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Laura Lorenzetti

GlaxoSmithKline, the UK’s largest drugmaker, reported its third quarter earnings Wednesday and revealed earnings that beat analysts’ estimates even as profits dipped, the company announced. Here’s what else you need to know about.

What you need to know: Glaxo  GSK 2.73%  failed to post a profit gain after facing currency headwinds and slowing sales of its No. 1 drug Advair after it lost patent protection. The asthma medication is the company’s best-selling product, and it has been losing market share in the U.S. faster than the company anticipated. It’s two new respiratory drugs, Breo and Anoro, haven’t caught on as quickly as the company would like in order to replace slipping sales of Advair.

Glaxo said it will explore an initial public offering of ViiV Healthcare, a joint venture with Pfizer  PFE 0.50%  and Shionogi that focuses on HIV drug development. The offering would sell a minority stake in the business, which would help “enhance future strategic flexibility,” the company said.

The big number: Profit, excluding select items, fell 1% to 1.89 billion pounds ($3 billion) or 27.9 pence (45 cents) per share. Analysts had expected the drugmaker’s profits to fall further to 24.1 pence (39 cents), according to Bloomberg data.

U.S. sales of Advair, the drug’s biggest market, were down 25% in the third quarter. Worldwide sales declined 13% in total to 976 million pounds ($1.6 billion).

What you might have missed: Glaxo has a promising Ebola vaccine in development and plans to expedite its testing and production.

“This is still at an early stage, but we are grateful for the support of all our partners, including the WHO, to expedite development of this candidate vaccine,” said Andrew Witty, CEO of Glaxo.

The vaccine is already in safety trials in the U.S., UK and Mali, and the results are expected by the end of the year. Previously, Glaxo said it would need six months to figure out how to produce hundreds of thousands of doses for distribution. Johnson & Johnson  JNJ 0.94%  also has an Ebola vaccine in development that could be ready as soon as early next year. The two companies have discussed collaborating in order to bring any effective vaccine to market in a limited timeframe.

GlaxoSmithKline fined nearly $500 million in China bribery case

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John Kell

GlaxoSmithKline has agreed to pay a nearly $500 million fine to the Chinese government after an investigation found a subsidiary of the British pharmaceutical giant offered bribes to non-government personnel.

As a result of a court ruling in China, the company’s subsidiary, called GSK China Investment Co., will pay a fine of £297 million ($487 million) to the Chinese government. The penalty is the largest ever corporate fine in China, The Wall Street Journal reported, citing official Chinese news agency Xinhua.

“Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK,” said Chief Executive Sir Andrew Witty in a statement. “We have and will continue to learn from this.”

The court found that GlaxoSmithKline’s subsidiary had offered money or property to non-government personnel in order to obtain improper commercial gains, according to the drug maker’s statement, and had been found guilty of bribing individuals in China.

GlaxoSmithKline said as a result of the bribing incident, it has changed its incentive program for its salesforce and expanded processes for review and monitoring of invoicing and payments, among other preventative measures to halt future bribery. The company intends to pay the fine through existing cash resources and claims associated costs and charges will be included in the company’s third-quarter results.

GlaxoSmithKline says China execs may have broken law

GlaxoSmithKline said Monday that some of its senior executives in China appear to have violated the law, the latest development in a high-profile investigation into the company's operations in the country.

The U.K. drugmaker has been accused by China of using a network of more than 700 travel agencies and other firms to channel bribes to hospitals, doctors and government officials since 2007.

The admission was made by Abbas Hussain, an executive GSK dispatched to China last week in an effort to contain fallout from theinvestigation. In a statement issued after a meeting with Chinese officials, Hussain said the company was taking the situation "extremely seriously."

"Certain senior executives of GSK China who know our systems well, appear to have acted outside of our processes and controls which breaches Chinese law," Hussain said. "We have zero tolerance for any behavior of this nature."

Chinese officials said that Hussain apologized during the meeting, according to a statement posted on the Ministry of Public Security's website.

Four senior Chinese executives of GSK (GSK) have been detained in China, and state central television has aired the apparent confession of one of the four.

The CCTV report featured GSK executive Liang Hong explaining how the bribery scheme worked, including the use of fake conferences and travel agencies to create receipts for services that were never performed. The surplus funds were then used to pay bribes.

The circumstances of the interview are difficult to discern and it wasn't clear whether the confession was coerced.

In addition, Steve Nechelput, finance director for GSK China, has been prevented from traveling outside China since the end of June.

How much damage the scandal will do to GlaxoSmithKline's reputation or bottom line remains unclear. But the episode underscores the challenges of doing business in China -- an enormous, rapidly developing market in which bribes and corruption are often deeply ingrained.

Related story: Could China scandal derail Glaxo?

Medical workers are thought to be particularly susceptible to bribery in China because their salaries often lag other fields, even though extensive education is required to enter the profession.

The pharmaceutical industry is also a place where the interests of the government clash with private enterprise.

The state finances medical care for many Chinese, making the government one of the drug companies' biggest customers. As a consequence, regulators often work to keep costs low through the implementation of price ceilings.

Related story: China turns up heat on GlaxoSmithKline

Lower pharmaceutical prices also help keep inflation under control, leaving consumers with a little extra purchasing power -- a key factor as China works to encourage more domestic consumption.

Hussain, the GSK executive, indicated Monday that the company would likely be charging less for its products in the future.

"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients," he said.

China's investigation could expose the company to legal action in the U.K., and possibly the United States, under laws relating to the bribery of foreign public officials.

GlaxoSmithKline said last week it had informed the U.K.'s Serious Fraud Office about the allegations but had not yet been asked to provide any further information. The agency, which investigates and prosecutes corruption cases, said it could neither confirm nor deny an interest in the claims against GSK at this stage.

--CNN's Dayu Zhang and CNNMoney's Mark Thompson contributed to this report.