Things aren’t going so great for Wayne, Pa.-based contract research organization (CRO) Encorium Group (Nasdaq: ENCO).

In April, its CFO/executive vice president/secretary/general counsel for the last four years got hired away by Southborough, Mass.-based CRO Averion International (OTCBB: AVRO). Lawrence Hoffman stepped down May 2, and an interim CFO, Philip Calamia—a partner of the consultancy firm Penn Valley Group—stepped in. Encorium is currently hunting for a permanent financial person.

Losses Continue

Then, on the heels of the executive shuffle, came news that the company had a loss in revenue and income for the first quarter of 2008. On May 15, the firm reported a net loss in income of $2 million for the quarter, compared to net income of $109,000 for the first quarter of 2007—the last time Encorium posted a profit. Net revenue for the quarter decreased to $7.5 million from $8.8 million in the first quarter of 2007.

What’s going on? Delays, said Encorium’s CEO, Kai Lindevall, during a investor call in mid-May.

“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,” he said. Most of the delays, added Lindevall, were from sponsors running late with protocols, or having regulatory or manufacturing issues.

Investor Pressure

But investors on the call pushed Lindevall for more insight into why the company has been stumbling. And they pushed him for what he’s going to do.

“We believe there’s merit in increasing our presence via an M&A [mergers and acquisitions] strategy,” he said. “So we will continue to look at market opportunities there. We will also expand our business development efforts. We are going to have more targeted marketing. We will concentrate also more on the bio-cluster areas ... where you have a lot of biopharmaceutical companies.”

Bright Spot

When asked if any mergers or acquisitions were underway, Lindevall would say only that that’s a high priority.

Any bright spots on Encorium’s balance sheet? One. Encorium’s backlog increased to $40.4 million at the end of the quarter, from $38.7 million at December 31, 2007. “Our hope is to steadily convert a number of these new business opportunities into new contracts,” said Lindevall.

2007 Layoffs

Encorium laid off about nine people last year (3 percent of its work force), a move Lindevall said is expected to save the company $624,000 per year starting in the second quarter of 2008. The company also renegotiated some of its leases in its headquarters of Wayne, Pa. That will save $700,000 over the next 18 months.

Encorium is the result of the Wayne, Pa.-based CRO Covalent Group buying the CRO Remedium Oy of Finland in November 2006. Lindevall was one of the founders of Remedium, and served as its president and CEO in the three years before it was bought. Covalent Group (formerly Nasdaq: CVGR) became Covalent Group in 1996. It was formerly Covalent Research Alliance, founded in 1993 by Bruce LaMont, who previously had been in marketing and clinical development at Merck Research Labs.

Encorium now has 260 full-time employees, most of whom are based outside the U.S. Its European headquarters is in Espoo, Finland. A few new therapeutic areas include oncology, cardiovascular disease, diabetes, immunology, infectious diseases, antivirus, neurology and women’s health.

—by Suz Redfearn