Encorium Reports 2007 Fourth Quarter and Full Year Financial Results
Encorium Group, Inc. (Nasdaq: ENCO), a full service multinational
clinical research organization (CRO) conducting studies in over 30
countries for many of the world's leading pharmaceutical and
biotechnology companies, today announced its financial results for the
fourth quarter and year ended December 31, 2007. These financial results
include twelve months in 2007 of combined operations following the
November 1, 2006 closing of Encorium’s
business combination with Remedium Oy, a privately owned, full-service
CRO based in Espoo, Finland.
Kai Lindevall, M.D., Ph.D., Chief Executive Officer of Encorium stated, "We
feel we have the management in place and the operational leverage to
make significant strides in our efforts to secure new business. We began
to see the positive results of these changes in the first quarter of
2008 through the recent signing of $2.5 million in new business
contracts. These signings are over a wide array of therapeutic areas and
have included many different services that will be provided to our
clients. We were also pleased to have generated positive cash flow from
operating activities during 2007 since this is an important measure of
our operational success. We have a number of initiatives planned with
the goal of further improvements in our operating margins while
continuing to generate operational cash flow. Our goal in 2008 is to
grow our top line, become consistently profitable and build our
operational capabilities so that we can achieve growth without
significant increases in fixed costs.”
Kenneth M. Borow, M.D., President and Chief Medical and Strategic
Development Officer, stated, "We continue to
evaluate a variety of acquisition possibilities and are focusing on
companies and areas that would enhance Encorium’s
existing geographic footprint and therapeutic area capabilities. We
remain focused on expanding into emerging clinical trial markets outside
North America and Europe as well as broadening our capabilities within
targeted sectors such as oncology, endocrinology, and medical devices.” 2007 Fourth Quarter Financial Results
Net revenue for the fourth quarter of 2007 increased to $8.3 million
from $6.1 million in the comparable prior year period. Net revenues for
the Company’s European operations were $6.1
million, while the Company’s North American
operations reported $2.2 million in net revenues. Higher year-over-year
net revenues for the fourth quarter of 2007 were due to the business
combination with Remedium, which was completed on November 1, 2006.
Direct expenses for the quarter ended December 31, 2007 were $5.4
million, or 65% of net revenues, versus $3.9 million, or 64% of net
revenues, for the comparable prior year period.
Selling, general, and administrative expenses (SG&A) were $3.2 million,
or 38.6% of net revenue, for the three months ended December 31, 2007,
as compared to $2.8 million, or 45.9% of net revenue, for the three
months ended December 31, 2006. This decrease in SG&A expenses as a
percentage of revenue was principally due to the 36.1% increase in
revenues for the fourth quarter of 2007 compared with the comparable
prior year period.
Depreciation and amortization expense increased to $745,000 due to
$500,000 of non-cash amortization expense related to the business
combination with Remedium.
The Company reported a net loss for the fourth quarter of 2007 of
$732,000, or $0.04 per diluted share, based on 20.4 million common
shares outstanding, compared to net loss for the fourth quarter of 2006
of $1.0 million, or $0.07 per diluted share, based on 14.0 million
common shares outstanding.
2007 Year End Financial Results
Net revenue for the twelve months ended December 31, 2007 increased to
$31.7 million versus $15.3 million for the same period in 2006. This
increase in net revenue is due to the business combination with
Remedium. Net revenues for 2007 in North America totaled $11.6 million
and $20.1 million in Europe.
Direct expenses were $20.2 million, or 64% of net revenue, for the
twelve months ended December 31, 2007 versus $9.7 million, or 63% of net
revenue, for the twelve months ended December 31, 2006. SG&A expenses
for the twelve months ended December 31, 2007 were $12.4 million, or 39%
of net revenue, compared to $5.7 million, or 37% of net revenue, for the
prior twelve-month period.
Depreciation and amortization expense increased to $2.6 million due to
$2.0 million of non-cash amortization expense related to the business
combination with Remedium.
The Company reported a net loss for the twelve months ended December 31,
2007 of $2.8 million, or $0.14 per share, based on common shares
outstanding of 19.2 million, versus a net loss of $494 thousand, or
$0.04 per share, based on 14.0 million shares outstanding for the
comparable twelve-month period in 2006.
Financial Position
Encorium’s balance sheet at December 31, 2007
reflected cash and cash equivalents of $9.1 million, compared to $5.5
million at December 31, 2006, and shareholders’
equity of $24.1 million, compared to $17.3 million at December 31, 2006.
Management Outlook
The Company expects full year net revenue for 2008 to be in the range of
$35 to $38 million, an increase of 10% to 20% over 2007 net revenues. In
addition, the earnings charge related to the amortization of intangibles
from the Remedium acquisition will decrease to $834,000 in 2008 versus
$2 million in 2007, or approximately $1.2 million. Backlog for the
period ended December 31, 2007 was approximately $38.7 million versus
approximately $42.5 million as of December 31, 2006, a decrease of $3.8
million, although the Company expects late first quarter and second
quarter new business signings will be significant.
Investor Conference Call
Encorium will hold a conference call on March 26, 2008 at 11:00 AM (ET)
to discuss these results. To participate in the live call by telephone,
please dial (866) 550-5902, or for international callers, please dial
(706) 643-2029. Those interested in listening to the conference call
live via the Internet may do so by visiting the Company’s
Web site at www.encorium.com, or
by clicking the following link: http://investor.shareholder.com/media/eventdetail.cfm?
mediaid=30419&c=ENCO&mediakey=8D0CCC8056BF006AC8E8CDD8B7D1D4A1&e=0.
(Due to its length, this URL may need to be copied/pasted into your
Internet browser's address field. Remove the extra space if one exists.)
Please go to the Web site 15 minutes prior to the scheduled start to
register, download, and install any necessary audio software.
About Encorium Group, Inc.
Encorium Group, Inc. is a global clinical research organization that is
a leader in the design and management of complex clinical trials and
patient registries for the pharmaceutical, biotechnology and medical
device industries. The Company’s mission is
to provide its clients with high quality, full-service support for their
biopharmaceutical and medical device development programs. Encorium
offers therapeutic expertise, experienced team management and advanced
technologies. The Company has drug and biologics development as well as
clinical trial experience across a wide variety of therapeutic areas
such as infectious diseases, cardiovascular, vaccines, oncology,
endocrinology/metabolism, diabetes, gene therapy, immunology, neurology,
gastroenterology, dermatology, hepatology, women’s
health and respiratory medicine. Encorium believes that its leadership
in the design of complex clinical trials, its therapeutic expertise and
commitment to excellence, and its application of innovative
technologies, offer its clients a means to more quickly and cost
effectively move products through the clinical development process.
Encorium is headquartered in Wayne, Pennsylvania with its European base
of operations in Espoo, Finland. The Company has a geographic footprint
that includes over one billion people in North America,
Western/Central/Eastern Europe, Scandinavia, and the Baltics.
This press release contains forward-looking statements identified by
words such as "estimate,” "project,” "expect,” "intend,” "believe,” "anticipate” and
similar expressions. Actual results might differ materially from those
projected in, expressed in or implied by the forward-looking statements.
Potential risks and uncertainties that could affect the Company's future
operating results and financial condition include, without limitation:
(i) our success in attracting new business and retaining existing
clients and projects; (ii) the size, duration, and timing of clinical
trials we are currently managing may change unexpectedly; (iii) the
termination, delay or cancellation of clinical trials we are currently
managing could cause revenues and cash-on-hand to decline unexpectedly;
(iv) the timing difference between our receipt of contract milestone or
scheduled payments and our incurring costs to manage these trials; (v)
outsourcing trends in the pharmaceutical, biotechnology and medical
device industries; (vi) the ability to maintain profit margins in a
competitive marketplace; (vii) our ability to attract and retain
qualified personnel; (viii) the sensitivity of our business to general
economic conditions; (ix) other economic, competitive, governmental and
technological factors affecting our operations, markets, products,
services and prices; (x) announced awards received from existing and
potential customers are not definitive until fully negotiated contracts
are executed by the parties; (xi) our backlog may not be indicative of
future revenues and may not generate the revenues expected; (xii) our
ability to successfully integrate the businesses of Encorium and
Remedium Oy which we acquired on November 1, 2006; and (xiii) ability of
the combined businesses to operate successfully, generate revenue growth
and operating profits. You should not place any undue reliance on these
forward looking statements which speak only as of the date of this press
release. Additional information concerning factors that might affect our
business or stock price which could cause actual results to materially
differ from those in forward-looking statements is contained in Encorium
Group's SEC filings, including its Annual Report on Form 10-K for the
year ended December 31, 2006 and other periodic reports under the
Securities Exchange Act of 1934, as amended, copies of which are
available upon request from Encorium Group's investor relations
department or The Equity Group Inc.
ENCORIUM GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2007
2006
2007
2006
Net revenue
$
8,318,983
$
6,080,124
$
31,650,082
$
15,325,822
Reimbursement revenue
1,603,594
883,928
5,151,483
2,358,691
Total Revenue
9,922,577
6,964,052
36,801,565
17,684,513
Operating Expenses
Direct
5,409,385
3,911,645
20,241,921
9,652,920
Reimbursement out-of-pocket expenses
1,603,594
883,928
5,151,483
2,358,691
Selling, general and administrative
3,212,897
2,796,868
12,366,095
5,731,388
Depreciation and amortization
745,375
437,106
2,610,505
699,286
Total Operating Expenses
10,971,251
8,029,547
40,370,004
18,442,285
Loss from Operations
(1,048,674
)
(1,065,495
)
(3,568,439
)
(757,772
)
Interest Income
83,291
60,909
296,884
293,061
Interest Expense
6,912
(6,482
)
(12,143
)
(10,883
)
Net Interest Income
90,203
54,427
284,741
282,178
Net Loss before Income Taxes
(958,471
)
(1,011,068
)
(3,283,698
)
(475,594
)
Income Tax (Benefit) Provision
(226,308
)
18,817
(532,271
)
18,817
Net Loss
$
(732,163
)
$
(1,029,885
)
$
(2,751,427
)
$
(494,411
)
Net Loss per Common Share Basic
$
(0.04
)
$
(0.07
)
$
(0.14
)
$
(0.04
)
Diluted
$
(0.04
)
$
(0.07
)
$
(0.14
)
$
(0.04
)
Weighted Average Common and Common Equivalent Shares Outstanding Basic
20,355,437
13,990,321
19,167,022
13,990,321
Diluted
20,355,437
13,990,321
19,167,022
13,990,321
ENCORIUM GROUP, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
December 31,
December 31,
2007
2006
Assets Current Assets
Cash and cash equivalents
$
9,109,456
$
5,533,093
Investigator advances
551,697
1,299,682
Accounts receivable, less allowance of $97,000 for December 31,
2007 and 2006, respectively
4,824,795
6,583,393
Prepaid expenses and other
867,651
562,940
Prepaid taxes
4,031
2,375
Costs and estimated earnings in excess of related billings on
uncompleted contracts
994,777
1,430,045
Total Current Assets
16,352,407
15,411,528
Property and Equipment, Net
1,293,616
1,048,219
Intangible Assets
Goodwill
15,388,299
15,372,540
Other intangibles, Net
4,204,825
6,197,584
Other assets
291,148
267,179
Total Assets
$
37,530,295
$
38,297,050
Liabilities and Stockholders' Equity Current Liabilities
Accounts payable
$
1,366,905
$
1,392,260
Accrued expenses
3,696,404
3,111,614
Accrued acquisition costs
0
5,714,780
Deferred taxes
316,675
623,972
Obligations under capital leases
29,688
29,205
Billings in excess of related costs and estimated earnings on
uncompleted contracts
3,329,869
3,673,435
Customer advances
3,244,834
4,774,112
Total Current Liabilities
11,984,375
19,319,378
Long Term Liabilities
Obligations under capital leases
117,723
7,790
Deferred taxes
876,308
1,093,254
Other liabilities
446,253
574,795
Total Long Term Liabilities
1,440,284
1,675,839
Total Liabilities
13,424,659
20,995,217
Stockholders' Equity
Common stock, $.001 par value 35,000,000 shares authorized,
20,834,004 and 17,498,575 shares issued and outstanding
respectively
20,834
17,499
Additional paid-in capital
32,154,227
23,720,213
Additional paid-in capital warrants
905,699
-
Accumulated deficit
(8,663,954
)
(5,912,527
)
Accumulated other comprehensive income
387,054
174,872
Less:
24,803,860
18,000,057
Treasury stock, at cost, 230,864 shares
(698,224
)
(698,224
)
Total Stockholders’ Equity
24,105,636
17,301,833
Total Liabilities and Stockholders’
Equity
$
37,530,295
$
38,297,050
