US-based contract research organisation (CRO) Encorium Group has terminated negotiations to sell its wholly owned European subsidiary, Encorium OY, to an unnamed US-based clinical research organisation.
Far from seeking liquidation, though, as was previously planned if the deal went through, Encorium has decided its best bet is “moving forward independently”, buoyed by a US$1.6 million private placement, recent new business awards and a productive strategic focus on vaccines and oncology.
A non-binding letter of intent for the sale of Encorium OY was announced in May. Substantially all of the parent company’s US business assets went to Italian CRO Pierrel the following month, leaving Encorium with no employees or significant operations in its home country.
The CRO did not elaborate on its reasons for ending the European negotiations, saying only that it “will not pursue a sale of the Company or Encorium OY at this time”. Given the new investment and recent successes in repositioning as a leading vaccines franchise, Encorium now believes it is “well positioned to win future contracts in the vaccine and oncology fields”.
The company completed a placement of 3,937,500 shares of common stock with a private investor for an aggregate purchase price of US$1,575,000 or US$0.40 per share. Prior to that, Encorium entered into warrant exchange agreements with two investors, under which the CRO issued an aggregate of 1,864,000 shares of common stock and warrants to purchase an aggregate 874,126 shares of common stock, exercisable for five years at an exercise price of US$0.40 per share.
“We are very pleased that we were able to close this financing to shore up our balance sheet and provide the Company with additional working capital,” commented executive chairman Dr Kai Lindevall.
“Our experience and capabilities in the vaccine field, coupled with the recent new awards in this area, demonstrate the long-term potential we have to grow into a leading vaccine franchise with expertise in preclinical support, regulatory consultancy and strategic trial planning.”
In early September Encorium announced new business contracts worth around US$8.7 million, including selection by a “major pharmaceutical company” to participate in a swine flu vaccine programme.
At the time, Dr Lindevall said he believed Encorium had “developed into one of the strongest medium-sized clinical research organisations with expertise in the field of clinical vaccine development. Our recent success in the vaccine field has been substantial, with revenues from vaccine trials increasing by 150% in 2009 versus 2008.”
With a Core Vaccine Team in place, the longer-term goal was “to grow into the world’s leading vaccine franchise and to create a vertical niche expertise in the field of vaccine research”, he noted.
Encorium’s experience with vaccines is also expected to have crossover benefits in winning oncology contracts, its second largest source of revenues in 2009 to date. According to Dr Lindevall, the CRO will continue to focus not only on prophylactic but on therapeutic vaccines, “which constitute a substantial number of oncology trials and are the fastest growing area within vaccine development”.
