Troubled US-based contract research organisation (CRO) Encorium Group expects its financial results for the third quarter to be generally in line with the guidance it issued last month.
The results announcement, initially scheduled for the week of 10 November, has been postponed to an unspecified date while Encorium conducts an interim goodwill-impairment analysis, partly to reflect the recent slump in its share price.
Net revenues for the quarter are projected at around US$7.4 million, a 2.8% increase on the same period last year. The forecast given on 6 October was for total revenues of US$7.5 to US$7.8 million. Encorium expects to report a net loss of about US$1.8 million, compared with a net loss of US$1.3 million in the year-before quarter and a previously forecast net loss for Q3 2008 of US$1.8 million to US$2.0 million.
The projected net loss would include approximately US$850,000 in non-recurring transaction costs relating to an abandoned merger with investment vehicle Linkcon and the postponed acquisition of US CRO Prologue Research International, with which Encorium is now forming a strategic partnership. These successive disappointments dragged Encorium’s share price down to US$0.35.
The “sustained decline” in the company’s stock is one reason Encorium was obliged to perform an interim goodwill-impairment analysis “to determine whether a non-cash charge to earnings will need to be reflected on the Company’s consolidated statement of operations and consolidated balance sheet” for the third quarter, it said. The projected net loss for the quarter does not take into account any such charge.
As of 30 September 2008, Encorium had around US$5.4 million in cash and an order backlog of US$40.6 million.
