PARIS - Revenues of Paris-based drug discovery company Cerep SA fell to FFr11.3 million (US$2 million) in the fourth quarter of 1998, which represented a 15 percent drop relative to the third quarter (FFr13.3 million) and one of fully 39 percent compared with the fourth quarter of 1997, when its revenues amounted to FFr18.5 million.

The downturn in activity in the fourth quarter followed a steady slowdown in year-on-year revenue growth through the first three quarters of 1998, from 109 percent in the first quarter to 44 percent in the second and 23 percent in the third. For the 12 months of 1998 as a whole, Cerep's turnover rose by 16 percent to FFr56.1 million, from FFr48.4 million in 1997.

According to Cerep's CEO, Thierry Jean, the latest figures should be viewed in the context of an exceptionally buoyant final quarter in 1997, when several large contracts were concluded, in particular with Japanese companies. Since then, he acknowledged, the company has "not achieved the growth it hoped for, especially in Japan." Pointing out Cerep has renewed its 125 existing pharmaceutical partnerships and added 15 new customers last year - with the result that revenues from drug profiling activities have grown - he added that "the challenge now is to increase income per customer."

Although the company will not announce earnings figures for several weeks or months, Jean said the downturn in revenues will have an adverse impact. While insisting that "our service activities remain very profitable," he said the company is investing heavily in its drug discovery activities, adding it "never concealed the fact that we would post losses in 1998 and 1999." In 1997, when Cerep had expected to report a loss of FFr1.4 million, it unexpectedly announced a small profit of FFr900,000, and a comparison could make the outcome in 1998 look worse than it really is.

The company completed an expansion of its drug profiling facilities in Poitiers, southwest of Paris, in the first quarter of 1998, increasing both the speed and volume of its compounds throughput. It is currently installing a new robotic system there, which is due to start up in April, and is doubling the plant's laboratory space.

Cerep signed two strategic agreements in 1998, starting with a licensing agreement with Boulder, Colo.-based Xenometrix in June, which gave Cerep access to the latter's technology in the speedy selection of promising drugs and chemical leads. Then, in November, Cerep signed a collaboration agreement with the French company ExonHit Therapeutics SA, for target identification and validation in neurodegenerative diseases, giving Cerep rights to two genes identified by ExonHit.