Encorium delays financial results

24-Nov-2008 - Last updated on 24-Nov-2008 at 11:55 GMT

Clinical research organisation Encorium has postponed the release of its third quarter results but said it still expects the figures to be in line with its most up-to-date guidance.

The CRO has been mounting fighting a rearguard action in recent weeks, trying to shore up its share price by buying up its own stock in the face of relentless declines.

The plummeting share price – hovering around 26 cents at present - is one reason for the delay in publishing the figures, said Encorium. The company said it had been required to perform “an interim goodwill impairment analysis,” to see if it will have to make a non-cash charge against its third-quarter earnings.

The catalyst for the most recent declines was Encorium’s decision to retreat from two major deals. The first was a merger with investment firm Linkcon that was intended to bring in additional CRO acquisitions in India, China and Latin America, while the second was a proposed acquisition of fellow US CRO Prologue Research International.

When results for the third quarter are reported, Encorium expects net revenue of approximately $7.4m, a 3 per cent increase from $7.2m on for the same period of 2007. The company also expects to report a net loss, before any non-cash goodwill impairment charge, of approximately $1.8m.

The net loss includes approximately $850,000 in non-recurring transaction costs relating to the Linkcon and Prologue transactions, said Encorium. As of September 30, the company had approximately $5.4m in cash and an order backlog of $40.6m.

There was better news for the company when it reported $6.5m of new business contracts, primarily consisting of two oncology clinical trials with a US-based biopharmaceutical company to be conducted in Europe. Revenue from the deals should start to be accrued in the fourth quarter.

Dr. David Ginsberg, Encorium’s CEO, said “the fact that we have the capability to conduct all or part of a client's trials in Europe exemplifies how we are able to bring value-added services to our US clients through our transatlantic presence.”

He noted that Encorium has won contracts worth approximately $26m during the last four and a half months, adding that this “clearly reflects both the great trust the pharmaceutical industry has in Encorium and how our increased business development efforts are starting to pay off."