Business Highlights
-- Backlog increases to $40.4 million at March 31, 2008 from
$38.7 million at December 31, 2007
-- New business awards of $6.3 million in first quarter of 2008
-- Conference Call at 11:00 AM ET tomorrow
WAYNE, Pa.--(Business Wire)--
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.
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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
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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
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Investor Relations:
The Equity Group Inc.
Adam Prior, 212-836-9606
aprior@equityny.com
www.theequitygroup.com
Copyright Business Wire 2008
