Novo Site in China Gets Government Call Amid Pharma Scrutiny

Novo Nordisk A/S (NOVOB) said Chinese authorities visited one of its sites as the government extends its scrutiny of drugmakers’ local practices.

Local administrative officers stopped by a Novo factory in Tianjin, in northern China, on Aug. 1, the company said today.

“We are not aware of this being part of an investigation,” Chief Executive Officer Lars Rebien Soerensen said in a televised interview. Novo is “cooperating” with authorities and hasn’t been accused of any wrongdoing, he said.

The world’s biggest maker of insulin isn’t the only health company under scrutiny. Eli Lilly & Co. (LLY), Sanofi and AstraZeneca Plc also said in past weeks that Chinese regulators had visited some offices. In a report in China’s 21st Century Business Herald today, a whistle-blower alleges that Sanofi gave about 1.69 million yuan ($276,000) in bribes to local doctors. And GlaxoSmithKline Plc (GSK) faces allegations of economic crimes involving 3 billion yuan in spurious travel and meeting expenses as well as trade in sexual favors undertaken to boost sales.

“Drugmakers worldwide are feeling the heat in China,” said Jerome Forneris, who helps manage $8.5 billion at Banque Martin Maurel in Marseille, including Sanofi (SAN) shares. “It’s a difficult country to do business in.”

Checks there aren’t unusual and Bagsvaerd, Denmark-based Novo isn’t revising its local practices there because of the investigation of the pharmaceutical industry, Soerensen said.

“We don’t see a reason for changing the business,” he said. “We have been in China for many years, we stick to the law, we do things the right way.”

Secret Identity

Sanofi said it takes the allegations published by the Business Herald “very seriously.” The Paris-based drugmaker has “established processes in place for reviewing and addressing such issues,” it said in an e-mailed statement.

The bribes were given as “research spending” in the cities of Beijing, Shanghai, Hangzhou and Guangzhou in about November 2007, according to the newspaper report. The whistle-blower used the pseudonym “bacon” and refused to disclose his identity, the paper said.

“At this time, it would be premature to comment on events that may have occurred in 2007,” Sanofi said.

Glaxo’s head of emerging markets, Abbas Hussain, said last month after meeting with government officials in Beijing some employees may have broken China’s laws.

“I wouldn’t be too surprised if there were to be an industrywide investigation,” Novo’s Soerensen said on a conference call with reporters.

Raised Forecast

Novo raised its sales and earnings forecasts today after second-quarter profit rose 26 percent, beating analysts’ estimates. The Danish company now predicts 2013 sales growth excluding currency shifts of 11 percent to 13 percent, compared with an earlier forecast of 9 percent to 11 percent, Novo said in a statement. Operating profit excluding currency fluctuations will probably increase by 12 percent to 15 percent, it said, versus a previous prediction of about 10 percent.

Novo shares rose 0.3 percent to 964 kroner in Copenhagen trading, after jumping as much as 4.2 percent earlier in the day. The stock has returned 6.1 percent including reinvested dividends over the past year, compared with a 19 percent return for the Bloomberg Europe Pharmaceutical Index.

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net Francine Lacqua in London at flacqua@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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