Novartis AG(NVS) - Get Report shares fell sharply in Zurich Thursday after the Swiss pharmaceutical group had the sales of some of its drugs banned in South Korea following a fine from the country's food and drug safety officials.
Reuters reported Thursday that the company had been fined around 200 million Korean won ($175,000) and faced a temporary ban on sales of three of its drugs -- including its Exelon Alzheimer's treatment - after the Ministry of Food and Drug Safety said the company's Korean unit was paying kickbacks to doctors who recommended the drugs to patients. Novartis had around $400 million in sales in Korea last year and the country is one of its top ten markets.
"This relates to the ongoing legal process in South Korea, as part of which we've previously acknowledged and expressed our regret that certain associates in Korea took actions in violation of our policies and inconsistent with our culture and the expectations society has for us and our industry," a Novartis spokesperson told TheStreet in an email.
Novartis shares fell more than 4% in Zurich to change hands at Sfr75.60 each, trimming the thee-month gain to around 10.25%, just shy of the 11.25% return for the Stoxx Europe TMI Pharmaceuticals Index.
However, Novartis shares also began trading without the right to its Sfr2.75 per share dividend Thursday, a factor which will account for a significant portion of the day's decline.
"In September 2016, a criminal trial began concerning the Prosecutor's allegations that Novartis Korea utilized medical journals to provide inappropriate economic benefits to healthcare professionals," Novartis said in its 2016 annual report last month. "In addition, the Ministry of Food and Drug Safety and the Ministry of Health and Welfare are also reviewing the matter and are evaluating administrative sanctions on Novartis Korea."
Thursday's fine is the second sanction Novartis has faced in South Korea after it paid a 2.3 billion won fine in 2011 for offering illegal rebates between 2006 and 2009.