The economical environment in 2008 has been particularly unfavourable with a weak dollar, the development of the competition, and the rise of an economical crisis impacting all industrial sectors. In this difficult context, several customers of the Company have temporarily stopped some of their research programs. These decisions have impacted Cerep activity during the second half of the past year.

With its solid international reputation of high-quality service provider, Cerep remains confident in its ability to pursue its development in the coming years by capturing new business shares rising from the growing tendency of pharmaceutical firms to outsource early drug discovery phases as a common strategy of cost reduction. Thus, Cerep has recorded 466 clients in 2008, an increase of 10% compared to 2007.

During the first quarter 2008, Cerep has expanded its facilities in Redmond, Washington, through the lease of an additional 10,200 sqf of laboratories and offices. The new premises were operational starting May 2008, and are used primarily as compound management laboratory. Cerep also duplicates on this site some pharmacological assays that were previously run exclusively in Poitiers, France. The development of Cerep activities in the dollar zone will contribute to decrease the Group’s exposure to the risk linked to fluctuations of this currency.

The Company has achieved the first phase of its “satellite” program with success through the transfer of its know-how in pharmacological screening and profiling from its site of Poitiers, France, to its laboratory of Redmond, WA, USA. This strategy is part of a customer proximity policy aiming at attracting and capturing new businesses as a result of the reduction in logistic and psychological constraints linked to the overseas shipment of compounds. Indeed, Cerep has identified those constraints as potential obstacles to the outsourcing of drug screening and profiling. In reducing or even abolishing this obstacle, Cerep intends to increase its market shares. The second phase of the “satellite” program is the establishment of a drug screening laboratory in Asia, in the region of Shanghai, China. The Group expects a strong increase in the outsourcing of drug discovery and development in Asia, and specifically in China, in the coming years, following the rapid setting up of pharmaceutical firms in this part of the world. As of today, Cerep does not recognize revenue from customers in China and considers that its establishment in Shanghai constitutes an opportunity for a significant growth in the coming years.

Cerep has extended for the year 2008 its major service agreements as well as its strategic collaborations signed in 2002 and 2003 with Pfizer and Eli Lilly & Company respectively. The former aims at further developing BioPrint® and related models. The latter utilizes Cerep’s extensive experience in high throughput compound profiling to enhance the fundamental understanding of the relationships between chemical structure and biological activity.

In early 2008, Cerep announced that it has been selected by Science Applications International Corporation (SAIC) on behalf of the Spinal Muscular Atrophy (SMA) Project through the National Institute of Neurological Disorders and Stroke (NINDS), National Institutes of Health, to provide in vitro pharmacological profiling and ADME-Tox services for a multi-year program. The subcontract was awarded by primary contractor SAIC after an international competitive bidding process and is a testament to Cerep’s expertise in the drug discovery arena.

On April 7, 2008, Cerep and PerkinElmer, Inc. a global leader in Health Sciences and Photonics, have announced the signature of a supply and co-marketing agreement to deliver custom drug discovery services. Under the terms of the agreement, PerkinElmer will exclusively market Cerep’s target screening and profiling services to its customers, and the companies will jointly promote PerkinElmer’s assay technologies and Cerep services to the drug discovery market.

In March 2008, Cerep announced the entry in pre-clinical development of the drug-candidate discovered in its partnership with sanofi-aventis signed in 1997.

License agreements for two drug-candidates discovered by Cerep:
  In December 2008, Cerep has announced the signature of a license agreement for the NPY1 antagonist co-discovered by Cerep and sanofi-aventis as part of their collaboration initiated in 1998. The drug candidate is currently in pre-clinical development for the treatment of type-2 diabetes. The signature of this agreement triggered a milestone payment and the re-imbursement of certain expenses incurred by Cerep. Other payments are associated to the success of the program, including royalties on sales once the drug will reach the market (See press release dated December 10, 2008).
  In December 2008, Cerep has concluded a license agreement with Théa for the development of an LFA-1 antagonist discovered by Cerep as part of its collaboration with Bristol-Myers Squibb. The development of this drug-candidate had been stopped for hepatotoxic effects observed after oral administration. In 2008, Cerep and Théa have identified a potential novel application for this compound in ophthalmology. In these new indications, the compound should be administered topically, thus strongly reducing the risk of hepatotoxic effects. The terms of the contract provide a first payment to be paid by Théa to Cerep upon signature of the agreement as well as milestones payments associated to the success of the program and royalties on sales once the drug will reach the market (See press release dated January 7, 2009).