Buyers of chemistry research services demand fast results. When an Indian contract research organization (CRO) loses business to a competitor in Europe or the U.S., it's often a question of speed. The Indian prices may be attractive, and the quality may be fine, but the buyer typically needs results faster than the Indians can deliver them.
The sluggishness of Indian CROs in executing many projects is often a function of the delays they face in obtaining the chemicals their researchers need in the laboratory. Suppliers of lab chemicals, typically European or U.S. firms, are in turn struggling to speed up deliveries to India.
"If we can obtain the chemical in a few days' time, which is feasible depending on what the chemical is, we are definitely able to compete more effectively against CROs based in Western countries," says Ganesh Sambasivam, chief scientific officer of Syngene. Based in Bangalore, Syngene is one of India's largest and oldest chemistry and biology CROs.
Indian CROs are united in their complaints. K. Ranga Raju, managing director of Hyderabad-based Sai Life Sciences, notes that the "availability of lab chemicals for medicinal chemistry is very critical." He says "the delay in obtaining chemicals is a major problem for the larger volumes needed for process development, for which delivery times normally are two to four weeks."
Over the past decade, Indian providers of contract research services have gained a reputation for their synthetic organic chemistry skills, although their medicinal chemistry know-how is somewhat weaker. They are enjoying tremendous growth of 20-30% per year, and the trend shows no sign of slowing down (C&EN, Oct. 31, 2005, page 19). Managers say their business growth would be even more spectacular if they could get materials quickly.
According to Sambasivam, delays vary depending on the supplier and the type of chemicals ordered, but delivery takes two weeks on average. That's an improvement from 10 years ago, he says, when delivery of chemicals took three to four weeks.
Nowadays, the more extreme delays are incurred when Syngene orders from smaller suppliers that are less familiar with shipping to India. Indian regulations do not allow chemicals to be shipped into the country by overnight courier, but it's a typical mistake that a supplier unfamiliar with India makes. When this happens, the chemicals "are stuck in Mumbai forever," Sambasivam says.
"There are many suppliers in the U.S. or Europe that have a good list of chemicals, but I wish these companies could improve their shipping capabilities to India," Sambasivam adds. Syngene mostly sources from two suppliers, one being Sigma-Aldrich.
Based in St. Louis, Sigma is the dominant supplier of lab chemicals worldwide. In India, it is the one that performs best when it comes to delivery time, Sai's Raju says.
Sigma's operations in India are clustered in the southern high-tech hub of Bangalore, where the company has a bonded warehouse. An oligonucleotide facility opened in 2004 is being expanded and will accommodate 40 scientists who will also perform custom synthesis and feed the company's global supply chain. Raja Ram, managing director of Sigma in India, says the company's sales in the country have been growing between 35 and 45% annually for the past five years, although he will not provide dollar figures.
Speeding up deliveries to local customers is one of Ram's top concerns. "There is no question that our customers put us under tremendous pressure, not only the Indian CROs, but also their customers, the multinationals," he says. "They want to know what we're doing."
Over the past few years, Sigma has taken several measures to speed up its deliveries in India, some straightforward and others more involved. Among the more modest ones is that Sigma in India tags orders from CROs as high-priority.
A more significant undertaking is the bonded warehouse, a government-authorized facility where a company can store products without paying import duties until they are shipped to customers. Opened in 1998, it now stores about 25% of Sigma's entire catalog, Ram explains. The chemicals Sigma keeps there are selected by statistical modeling, so that 39% of the products that Indian customers order are locally available in Bangalore.
Having the chemicals on hand in Bangalore helps to fix only some of the delays that customers experience. Government institutes and CROs working for foreign customers are exempt from customs duties. But Sigma must get approvals from three different customs officials before chemicals sold on a duty-free basis can leave the warehouse. Only then can Sigma ship the product to the customer, typically by domestic courier.
The absence of any of the required customs officials can be a source of delays, Ram reports. One way to ensure that the needed officials can always be reached would be for Sigma to pay a special fee to have the required officials assigned to its business. Sigma has made such a request, but customs administrators claim that no staff is available, Ram says. He reckons that headcount in India's customs administration has remained stable in recent years, even though trade has surged.
A possible solution to the customs quagmire would be for lab chemical suppliers, Indian CROs, and the foreign pharmaceutical companies that are their customers to jointly lobby the "senior levels of customs and explain the challenges we face," Ram says. "Something must be done at the policy level."
Deliveries are also delayed when the chemicals that a customer desires are not stocked in Bangalore. In such cases, Sigma flies them in either from Germany or the U.S. Together, the warehouses in Germany and Bangalore store about 93% of what is in Sigma's catalog.
Unfortunately, Indian CROs are often involved in esoteric research projects that require less frequently used chemicals stored only in the U.S. In such cases, customers still have to wait three to four weeks to get their chemicals. In 2001, Ram recalls, it took 40 days for a chemical to arrive in Bangalore from Germany. According to Ram, chemicals stored in the U.S. are shipped through Germany owing to a lack of direct flights between the U.S. and Bangalore.
A straightforward improvement would be for Sigma to store many more chemicals in Bangalore. Ram says that later this year, once an expansion is completed, the Bangalore facility will stock up to 55% of the chemicals Indian customers typically order.
There is, however, a disincentive to stocking a huge number of chemicals locally. Indian law specifies that the chemicals can remain in the bonded warehouse for one year at most. After that, Sigma can either destroy the unsold stock, ship it out and bring it back in, or pay the import duty.
Western CROs are grateful for the challenges that Sigma and other lab chemical suppliers face in pleasing their customers in India. For these competitors, it's wonderful that Indian researchers get their lab chemicals so slowly. But it's likely only a question of time before India removes the administrative obstacles that slow down deliveries.