Encorium first announced its intention to buy Prologue, a CRO specialising in oncology, back in June, and earlier this month was still saying the deal was critical to the group’s continued success.
Now, the two companies say they have decided to form a “strategic partnership,” leaving open the possibility of restarting negotiations relating to a merger of the two entities “at a later date”.
Just ahead of the Prologue announcement, Encorium also called a halt to plans to combine its business with Linkcon, an investment company that had been eyeing up CRO acquisitions in India, China and Latin America.
That announcement was followed by the departure of president Dr Kenneth Borow, as well as the replacement of Kai Lindevall as CEO by David Ginsberg, who also took on the role of president. Lindevall moved aside to become executive chairman and two other board members - Scott Jenkins and Christopher Meshginpoosh, resigned.
Shares in the company have been in freefall, hovering around 34 cents as this article is written, just above their year-long low of 28 cents and a fraction of their 2008 peak of over $2.30 back in February.
The news is not all bad, with Encorium just announcing a $6.2m contract to carry out clinical assessments of a vaccine candidate for an unnamed global biopharmaceutical company and several other contracts having come through in recent weeks.
But the firm has decided to play it safe and reduce costs, reducing its US headcount by 18 per cent, and also said it had retained the services of investment bank Mufson Howe Hunter & Co “to investigate possible strategic alternatives to maximise shareholder value.”
Whether this could lead to an outright sale of the business – as was mooted by investors on a recent conference call – remains to be seen. MHH’s website indicates the firm is a specialist in “selling companies, buyouts and in raising debt and equity.”
Commenting on the move, Ginsberg said: “The cost-cutting initiatives which are designed to save approximately $1m annually, demonstrate our focus on achieving profitability and positive cash flow.”
The company could do with tightening its belt. First half earnings saw a decline in net revenue and wider net losses compared to the same period of 2007. But it also pointed to an increase in backlog to more than $40m as evidence that the future of the company is secure.
“We believe we are repositioning the business to take advantage of the high-growth opportunities in the clinical research industry,” said Ginsberg.