Troubled US-based contract research organisation (CRO) Encorium Group saw its share price jump by more than 50% after it announced new business awards worth US$6.8 million.
On less encouraging note, the company – which last October scrapped negotiations to sell its European subsidiary and, instead of seeking liquidation, decided to move forward with a strategic focus on vaccines and oncology – announced preliminary results indicating that revenues fell by 34% year on year while net losses ballooned in the first quarter ended 31 March 2010.
The new business awards consist mainly of two Phase III clinical trials for an unnamed “major Asian technology company” that is diversifying into the pharmaceutical sector. Kai Lindevall, Encorium’s chief executive officer, said they were “the most significant break-through to date in our business development efforts in the Asian market”.
The CRO had also witnessed a significant increase in its volume of requests for proposals of late, as well as “signs that the market appears to be regaining some of its pre-recession vibrancy, particularly in the case of small to medium-sized biopharmaceutical companies, which are a key market for the company”, Lindevall noted.
Results for the three months to 31 March are expected to show a drop in net revenues of around US$1.5 million, or 34%, to US$3.0 million. The preliminary net loss for the first quarter is likely to be US$0.57 to US$0.64 per share, compared with a net loss of US$0.08 per share in the same quarter of 2009.
Encorium blamed the reduced revenue and resulting net loss primarily on fewer new business awards, contract cancellations and “the performance of unexpected out-of-scope work for which revenue can not be recognised until corresponding change orders are executed with the client”.
Last month, Encorium reported a net loss from continuing operations of US$558,000 or US$0.18 per diluted share for the fourth quarter of 2009, compared with a net loss of US$12.6 million, or US$4.92 per diluted share, one year previously. Net revenues in the fourth quarter sank by 21.4% year on year to US$4.4 million.
Announcing the fourth-quarter results, the company said it anticipated meeting its cash requirements “at least into March of 2011, assuming we are able to fully implement our current cost-cutting initiatives, we are able to win additional contracts and we are able to maintain our current customer contracts”.
Failing that, Encorium warned, the company would need to secure additional capital from external sources or significantly reduce its operating costs – which might include “the cessation of operations in some countries” – if it were to continue as a going concern.
