An impairment charge of US$1.9 million pushed Encorium’s net losses for the third quarter up to US$3.9 million, or US$0.19 per diluted share, from the US$1.8 million loss forecast last month.

That was before the troubled US-based contract research organisation (CRO) conducted an interim goodwill-impairment analysis, partly to reflect the recent slump in its share price after a planned merger and acquisition were, respectively, abandoned and postponed.

Encorium’s third-quarter results announcement was put back to allow for the interim impairment test, which produced a US$0.09 per share non-cash charge related to “the Company’s goodwill and certain of its intangible assets”. The CRO will “complete the final step in its impairment analysis in the fourth quarter of 2008 and, if required, adjust the balances of goodwill and intangibles accordingly”, it added.

The increased losses compared with a net loss of US$1.3 million, or US$0.07 per diluted share, for the third quarter of 2007. Operating losses for the latest quarter were also US$3.9 million, against a US$1.5 million operating loss in the year-before period. Net revenues, which excluded reimbursed expenses, were in line with last month’s projections at US$7.4 million and rose by 3.5% over Q3 2007.

The revenue improvement was mainly down to a US$650,000 boost from Encorium’s European operations, offset by a drop of US$400,000 in revenues from the US, the CRO noted. Foreign currency fluctuations added about US$438,000 to European revenues for the three months ended 30 September 2008, while the fall in US revenues was blamed mostly on a decline in the number of contracts and related contract values for active clinical studies in that market during the quarter.

At US$3.6 million, 12.1% more than in the third quarter of 2007, selling, general and administrative (SG&A) expenses reflected non-recurring transaction costs of US$850,000 attributable to the planned Prologue and Linkcon deals, which were terminated during the reporting period. These costs were offset partly by a US$450,000 reduction in SG&A expenditure due to redundancies and lower overheads, net of unfavourable foreign currency fluctuations (around US$160,000) incurred by Encorium’s European operations.

“We continue to believe we are well positioned to compete and win new business in today’s competitive environment,” commented Encorium’s chief executive officer, Dr David Ginsberg. “Importantly, our European capabilities have been a key differentiator. This type of value-added service was one of the main reasons for our continued new business wins, which amounted to US$16.0 million in the quarter, up from US$4.0 million in [the] prior-year period.”

Encorium has notched up US$31.7 million in announced new business awards for the year to date, up from $22.6 million in the same period of 2007, Ginsberg added. Recent new business wins have included contracts in the oncology category, “which is a recent focus for Encorium, and demonstrates how our increased business development efforts are starting to pay off”, he said.