Sigma-Aldrich and Waters both reported weak second quarter sales from some Indian clients as the rupee exchange rate prompted contract research organisations (CROs) to delay spending.
“There's no question that the weakness in the rupee is causing consternation. We think CRO spending is likely to pick up from somewhat restrained levels,” Douglas Berthiaume, CEO of Waters, told investors after reporting a second consecutive quarter of weak sales from India.
Sigma-Aldrich also noted a dip in sales from certain Indian clients in its second quarter results. “I would say the CROs have generally been weak in Asia,” Sigma-Aldrich CEO Rakesh Sachdev said in a discussion of second quarter earnings.
Despite the weakness Sigma-Aldrich still managed to post double-digit sales growth in India but gains came from other segments and by taking market share. In the past growth from CROs in India was “obscene,” Sachdev said, but it has got off to a slow start in the first half of 2012.
Currency and controversy
Tim Evans, an equity analyst at Wells Fargo who follows Sigma-Aldrich and Waters, as well as the leading CROs, agreed the rupee is mostly to blame but also told Outsourcing-Pharma.com fallout from Dateline is having an effect.
The Dateline investigation into practices at two Indian clinical CROs - Lambda and Synchron - reflected badly on pharmaceutical activity across the country and may have hit outsourcing.
“I think it would be extremely difficult for a major pharma to do any business with the two CROs featured in the piece. Also, I would suspect a higher amount of sponsor due diligence on other Indian CROs,” John Lewis, VP of public affairs at ACRO, told this publication.
The big issue
While acknowledging the potential impact of Dateline and other controversies surrounding the Indian CRO industry, Lewis felt there is a “much bigger issue” affecting outsourcing to India.
CROs have now faced a very difficult regulatory environment in India for more than 12 months and this is driving multinational businesses to place trials in other countries. Local Indian CROs lack this option though and it could be that the ongoing delays are affecting their businesses.
Outsourcing-Pharma.com will take a closer look at the Indian clinical trial regulatory environment and the impact it is having on where biopharma and CROs place work in an article next week.