Troubled Encorium mounts defense of shares

07-Oct-2008 - Last updated on 08-Oct-2008 at 00:05 GMT

Contract research organisation Encorium has bought $250,000 of its own stock in a bid to stabilise its share price, which has been in steep decline in recent weeks.

The firm’s stock is hovering around the 30 cents mark at present, having been upwards of $2.30 as recently as February.

The catalyst for the most recent declines was Encorium’s seems to have been its decision to back away from two major deals. The first was a merger with investment firm Linkcon that was intended to bring in additional CRO acquisitions in India, China and Latin America, while the second was a proposed acquisition of fellow US CRO Prologue Research International, which has been ‘postponed’, according to Encorium.

Since then Encorium has implemented a programme to reduce costs, reducing its US headcount by 18 per cent, and somewhat ominously also said it had retained the services of investment bank Mufson Howe Hunter & Co “to investigate possible strategic alternatives to maximise shareholder value.”

The company remains defiant in the face what seems to be a loss of investor confidence.

"Our board of directors believes that at current levels, our stock does not reflect the company's long term value," said Encorium’s CEO Dr David Ginsberg.

The firm’s board of directors has also opened up the trading window for directors, officers and employees to purchase shares of Encorium on the open market.

In a statement, Encorium updated its financial guidance in an attempt to restore confidence, noting that it is sitting on a little over $5m in cash and has a business backlog of $38m to $39.6m..

It expects to report total revenue of approximately $7.5m to $7.8m and a net loss of $1.8m to $2.0m for the quarter ended September 30, which will include around $850,000 in costs relating to the Linkcon and Prologue deals.

For the full year, Encorium expects net revenue will be in the $31m to $33mrange, in line with previous forecasts.

"We believe Encorium is well positioned for continued growth, as demonstrated by the recent win in the vaccine field," added Dr. Ginsberg, referring to a $6.2m contract to carry out clinical assessments of a vaccine candidate for an unnamed global biopharmaceutical company.

He said Encorium expects to report results for the third quarter during the week beginning 10 November.