Encorium posts $1.9m op loss

By Nick Taylor

- Last updated on GMT

Related tags Revenue Contract research organization

Encorium has posted a $1.9m (€1.6m) operating loss in the first quarter, with contract cancellations and reduced new business driving net revenues down by almost 34 per cent.

The contract research organisation (CRO) has reorganised operations, divesting its US business and focusing on vaccines, and this has brought some success. Encorium also believes it is now positioned it to prosper when the market improves but this is yet to occur fully.

In the first quarter, operating loss, excluding the discontinued US operations, increased year-on-year from $574,000 to $1.9m. This was underpinned by a drop in revenues from $4.5m to $3m.

Like many CROs during the downturn, Encorium cited cancellations and reduced new business as factors behind the fall in revenue. The CRO also said that it had performed “unexpected out of scope work​” which will not generate revenues until change orders are executed with clients.

It is uncertain when these change orders will be executed or what value they have, added Encorium. Consolidated backlog fell year-on-year from $21.8m to $14.7m.

Going forward

Included in the backlog is $1.1m of the $6.8m of new business awards Encorium recently secured. The bulk of this new business is accounted for by two Phase III studies for a major Asian technology company which is diversifying into the pharma industry.

Encorium targeted increasing business in Asia Pacific as part of its reorganisation plans. Kai Lindevall, CEO of Encorium, believes the deal is “a significant breakthrough​” in the execution of its plans for Asia.

Lindevall added that the overall market appears to be improving, in particular business from small to medium sized biopharm, and Encorium has experienced a significant increase in the number of proposals.

However, Lindevall added that it is likely Encorium will need to secure additional financing. The CRO predicts it can meet its cash requirements until at least the second quarter of 2011, assuming cost cutting measures and new and current contracts proceed as the CRO hopes

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