A recently announced US$12.5 million impairment charge pushed operating losses at US-based contract research organisation (CRO) Encorium Group up to US$13.7 million in the fourth quarter of 2008, compared with a US$1.0 million loss in the final quarter of 2007.
Net revenues (excluding reimbursement revenue) for the latest quarter fell by 15.2% to US$7.1 million, reflecting declines of US$800,000 (about US$500,000 of which was currency-related) and US$400,000 respectively in revenues generated by Encorium’s European and US operations.
The CRO had already levied a non-cash charge of US$1.9 million in the third quarter of 2008, following an interim goodwill-impairment analysis. This and the fourth-quarter charge combined weighed heavily on Encorium’s results for the whole of the year, with an operating loss of US$21.3 million compared with a US$3.6 million loss in 2007. Net revenues for the full year dropped by 4.4% to US$30.2 million.
The impairment analysis was prompted by a number of factors, including “the sustained decline in the Company’s stock price during the third quarter of 2008 and the continued deterioration of the underlying comparable companies within the CRO industry as it related to the market-value approach methodology”, Encorium said.
The company had a consolidated backlog of US$34.4 million at the end of 2008, compared with a US$38.7 million backlog one year earlier. It also announced the signing of new business contracts worth around US$2.0 million in the vaccines and oncology fields, for which revenue recognition will begin in the second quarter of 2009.
As of 15 April 2009, Encorium was showing a backlog of about US$31.0 million.
