Favourable currency exchange and cost cutting, such as reductions in staff and subcontractors, helped Encorium reduce total operating expenses from $6.6m (€5.1m) to $5.2m. These savings offset declining total revenue, which fell to $4.4m, helping cut operating loss by 39 per cent.
Declining revenue was attributed to lower new business awards, contract cancellations and performance of unexpected, out of scope work which can only be charged for after change orders are executed. Unfavourable currency exchange was also a factor.
Kai Lindevall, CEO of Encorium, said the market “continues to stabilise” and requests for proposal are increasing. Also, acquiring Progenitor has positioned Encorium to better serve clients seeking to perform trials in emerging markets.
“With the acquisition of Progenitor we have expanded our service offerings in key emerging markets, including Latin America, India and Asia Pacific, which was a key step to realizing our goal of becoming the world's leading vaccine CRO”, said Lindevall.
Backlog and 2010 performance
Backlog as of June 30 was $16.6m, compared to $19.6m a year ago. In the first quarter of 2010 backlog was $14.7m. Encorium won $9.1m of new business in the first six months of 2010, up from $4.8m in the corresponding period of last year.
Revenue in the first six months of 2010 totalled $7.9m, down from $10.9m a year ago. Operating expenses also fell, down to $10.6m from $12.8m, but this was insufficient to fully offset the drop in revenue. Consequently, operating loss increased to $2.7m from $1.8m.
As of June 30 Encorium had cash or cash equivalents totalling $176,000, down from $197,000 a year ago. Net cash used in operations in the first six months of 2010 was $853,000.