Beleaguered US contract research organisation (CRO) Encorium Group has moved to boost investor confidence following its recent spate of abandoned deals, announcing a stock repurchase programme and providing an update on its business and financial prospects.

Last month, with its share price languishing at US$0.40 following the CRO’s withdrawal from a deal to globalise its operations through a merger with investment vehicle Linkcon, Encorium sought to perk up investors by announcing US$6.2 million in new business contracts.

Unfortunately, the company also revealed it had agreed with Prologue Research International, the US CRO Encorium was due to acquire on 19 September, to postpone negotiations on this transaction. Instead, the two companies would form a strategic partnership “while leaving open the possibility of restarting negotiations relating to a merger of the two entities at a later date”.

That sent the share price tumbling down to US$0.35. Now, though, the Encorium board has approved a stock buyback worth up to US$250,000, saying it “believes that at current levels, our stock does not reflect the company’s long-term value”.

The company is also “pleased that officers and employees will be able to have the opportunity to purchase shares in the open market as well as to demonstrate our confidence in the Company’s future”, added chief executive officer Dr David Ginsberg.

In conjunction with the stock repurchase programme, Encorium has issued an update forecasting total revenues of around US$7.5 to US$7.8 million and a net loss of US$1.8 to $2.0 million for the quarter ended 30 September 2008. In the second quarter of 2008, the CRO reported total revenues of US$9.6 million (+12.8%) and a net loss of US$1.45 million (US$846,990 in Q2 2007).

The estimated net loss for the latest quarter includes approximately US$850,000 in non-recurring transaction costs relating to the Linkcon and Prologue deals. Encorium is expecting net revenue of US$31-US$33 million for the year ending December 31, 2008, as stated previously.

“We believe Encorium is well positioned for continued growth, as demonstrated by the recent win in the vaccine field,” Ginsberg commented. “Our cost-cutting initiatives are moving ahead and we are on plan to reach our initial cost-savings goal of approximately $1.0 million annually.”

The company continues to review its operating cost structure and is exploring additional cost savings, Ginsberg added. “The steps we are taking to reposition the business should also enable us to take advantage of the high-growth opportunities in the clinical research industry,” he predicted. “We will also continue to review strategic alternatives for the Company as we strive to create value for Encorium shareholders.”

Encorium expects to report results for the third quarter during the week beginning 10 November 2008.