Encorium Group, the troubled US-based contract research organisation (CRO) that recently announced letters of intent to sell the assets of its European and US operations, cut its operating losses by 90.8% to US$199,553 in the first quarter of 2009.
The reduced losses reflect Encorium’s efforts to trim its costs and stem its dive into the red as the company’s share price has slumped and its future as a going concern has looked increasingly precarious. Direct expenses for the first quarter were US$4.4 million, or 62.2% of net revenues, compared with US$5.5 million, or 74.0% of revenues in the same period of 2008.
While the lower direct expenses were partly the result of around US$440,000 in favourable exchange rate fluctuations absorbed by Encorium’s European operations during the quarter, they also stemmed from cuts in staff and in subcontractors used on active clinical trials in Europe and the US.
Selling, general and administrative (SG&A) expenses fell by 23.2% to US$2.7 million, or 38.0% of net revenues, from US$3.5 million, or 46.4% of net revenues, in the three months ended 31 March 2008. The decrease in SG&A expenditure was mainly due to staff reductions and lower overheads in the CRO’s US operations, Encorium said.
Net revenues for the opening quarter were US$7.0 million, down by 6.1% year on year, with Encorium citing a drop of US$800,000 in revenues from its European operations, around US$668,000 of which came from unfavourable currency translation.
Net revenues in Encorium’s US operations were US$340,000 higher, reflecting mainly delayed recognition of revenue on a legacy project and additional revenues gained through a significant increase in contract value for an ongoing clinical study signed up during the first quarter.
The CRO had a consolidated backlog of US$31.2 million as of 31 March 2009, which included around US$3.5 million in new business wins during the latest quarter. This compared with backlogs of US$34.4 million at 31 December 2008 and US$40.0 million at 31 March 2008 respectively.
