The shares of GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) dropped 1% to 1,744p during early afternoon trading following reports that some senior executives at the pharmaceuticals giant have become the target of a criminal investigation from Chinese authorities.
In a statement today, the Chinese Ministry of Public Security accused the GSK senior executives of bribing doctors and government officials in an attempt to boost Glaxo’s sales in the country. After being questioned, the unidentified suspects confessed to the charges, according to the report.
In a statement, GlaxoSmithKline responded:
“We continuously monitor our businesses to ensure they meet our strict compliance procedures – we have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided, we will act swiftly on it.”
In addition to these charges, GSK is accused of falsifying VAT receipts and other tax-related violations. According to Chinese authorities, “There are many suspects, the illegal behaviour continued over a long time and its scale is huge”.
With a market cap of over £85bn, GlaxoSmithKline’s shares trade at 15 times expected earnings, and offer a prospective dividend yield of 4.4%.
Of course, whether that valuation, today’s news and the wider prospects for the pharmaceuticals industry all combine to make shares of GSK a ‘buy’ remains your decision.
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> Mark does not own any share mentioned in this article.