Encorium Reports 2008 First Quarter 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
first quarter ended March 31, 2008.
Kai Lindevall, M.D., Ph.D., Chief Executive Officer of Encorium stated, "Encorium
is in a strong position to win significant contracts in the coming weeks
and months. Our pipeline of new business currently stands at $35
million, and we feel confident that we can convert a number of these
opportunities into signed contracts. We were hopeful to have a greater
amount of business signed in the first quarter, but certain delays
pushed these decisions into the second quarter of 2008. We look forward
to keeping you apprised of our progress in this regard.”
Mr. Lindevall continued, "As we have noted in
our past releases, our goal has not only been to sign new business and
grow the top-line, but to also properly manage our expenses. As a
result, we recently implemented a number of cost-cutting initiatives,
including re-negotiating certain property leases in North America and
reducing staff by 3%. These actions reflect our commitment to investing
in areas that create shareholder value as well as our effort to
aggressively managing internal efficiencies. Collectively, these actions
are expected to produce annual cost savings of approximately $1 million
beginning in the second quarter of 2008, a portion of which will be
reinvested into our business development organization throughout the
year. In connection with the staff reduction, Encorium expects to take
an immaterial charge in the second quarter of 2008. These were
difficult, but necessary, decisions as we strive to grow our business on
a profitable basis.” 2008 First Quarter Financial Results
Net revenue for the first quarter of 2008 decreased to $7.5 million from
$8.8 million in the comparable prior year period. Net revenues for the
Company’s European operations were $5.4
million, while the Company’s North American
operations reported $2.1 in net revenues. The decline in revenues is
primarily due to a decrease in the number of contacts and related
contract values of active clinical studies being conducted in North
America during the first quarter of 2008 compared to the prior year
period. The Company’s net revenues from
European operations reflected a benefit of $670,000 due to foreign
exchange fluctuations for the first quarter of 2008 compared to the same
prior year period.
Direct expenses for the quarter ended March 31, 2008 were $5.5 million,
or 74% of net revenues, versus $5.0 million, or 57% of net revenues, for
the comparable prior year period. The increase in direct expenses
resulted principally from unfavorable foreign currency fluctuations for
the first quarter of 2008 compared to the same prior year period. In
addition, direct expenses increased as a result of staff additions
needed to meet the resource requirements of active clinical studies
being conducted by the Company’s European
operations during the quarter, partially offset by lower employee
utilization levels in the Company’s North
American operations.
Selling, general, and administrative expenses (SG&A) were $3.5 million,
or 46% of net revenue, for the three months ended March 31, 2008, as
compared to $3.1 million, or 35% of net revenue, for the three months
ended March 31, 2007. The increase in SG&A expense was primarily due to
higher professional fees and marketing expenses incurred, as well as
unfavorable foreign currency fluctuations during the first quarter of
2008, compared to the same prior year period.
Depreciation and amortization expense increased to $645,000 from
$613,000 in the first quarter of 2007, primarily the result of
depreciation expense related to clinical software purchased and placed
into service beginning in the second quarter of 2007. Amortization of
intangibles from the Remedium business combination was $498,000 for the
three months ended March 31, 2008 and 2007, respectively.
The Company reported a net loss for the first quarter of 2008 of $2.0
million, or $0.10 per diluted share, based on 20.6 million common shares
outstanding, compared to net income of 109,000 for the first quarter of
2007, or $0.01 per diluted share, based on 17.8 million common shares
outstanding.
Backlog
Backlog for the period ended March 31, 2008 was approximately $40.4
million versus approximately $38.7 million as of December 31, 2007, an
increase of $1.7 million.
Investor Conference Call
Encorium will hold a conference call on May 15, 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=3041
9&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 business of 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, 2007 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
March 31,
2008
2007
Net revenue
$
7,483,606
$
8,811,346
Reimbursement revenue
1,106,030
1,262,351
Total Revenue
8,589,636
10,073,697
Operating Expenses
Direct
5,539,671
5,008,936
Reimbursement out-of-pocket expenses
1,106,030
1,262,351
Selling, general and administrative
3,472,871
3,093,817
Depreciation and amortization
645,277
612,720
Total Operating Expenses
10,763,849
9,977,824
(Loss) Income from Operations
(2,174,213
)
95,873
Interest Income
54,573
52,848
Interest Expense
(3,103
)
(10,256
)
Net Interest Income
51,470
42,592
Net (Loss) Income before Income Taxes
(2,122,743
)
138,465
Income Tax (Benefit) Expense
(115,363
)
29,732
Net (Loss) Income
$
(2,007,380
)
$
108,733
Net (Loss) Income per Common Share Basic
$
(0.10
)
$
0.01
Diluted
$
(0.10
)
$
0.01
Weighted Average Common and Common Equivalent Shares Outstanding Basic
20,603,140
17,324,898
Diluted
20,603,140
17,806,714
ENCORIUM GROUP, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31,
December 31,
2008
2007
Assets Current Assets
Cash and cash equivalents
$
6,540,185
$
9,109,456
Investigator advances
450,975
551,697
Accounts receivable, less allowance of
$97,000 for March 31, 2008 and
December 31, 2007, respectively
6,701,684
4,824,795
Prepaid expenses and other
1,092,734
867,651
Prepaid taxes
20,201
4,031
Costs and estimated earnings in excess
of related billings on uncompleted
contracts
987,194
994,777
Total Current Assets
15,792,973
16,352,407
Property and Equipment, Net
1,236,808
1,293,616
Intangible Assets
Goodwill
15,388,299
15,388,299
Other intangibles, Net
3,706,636
4,204,825
Other assets
347,772
291,148
Total Assets
$
36,472,488
$
37,530,295
Liabilities and Stockholders' Equity Current Liabilities
Accounts payable
$
1,899,121
$
1,366,905
Accrued expenses
3,622,399
3,696,404
Deferred taxes
165,055
316,675
Obligations under capital leases
30,155
29,688
Billings in excess of related costs and
estimated earnings on uncompleted
contracts
3,694,504
3,329,869
Customer advances
3,234,833
3,244,834
Total Current Liabilities
12,646,067
11,984,375
Long Term Liabilities
Obligations under capital leases
110,797
117,723
Deferred taxes
876,308
876,308
Other liabilities
440,200
446,253
Total Long Term Liabilities
1,427,305
1,440,284
Total Liabilities
14,073,372
13,424,659
Stockholders' Equity
Common stock, $.001 par value
35,000,000 shares authorized,
20,834,004 shares issued and
outstanding
20,834
20,834
Additional paid-in capital
32,225,332
32,154,227
Additional paid-in capital warrants
905,699
905,699
Accumulated deficit
(10,671,334
)
(8,663,954
)
Accumulated other comprehensive income
616,809
387,054
Less:
23,097,340
24,803,860
Treasury stock, at cost, 230,864 shares
(698,224
)
(698,224
)
Total Stockholders’ Equity
22,399,116
24,105,636
Total Liabilities and Stockholders’
Equity
$
36,472,488
$
37,530,295
