FDA probe ghost stops haunting MDS Pharma

By Emilie Reymond

- Last updated on GMT

Related tags Generic drug Food and drug administration Fda

It seems that the ghost of the US Food and Drug Administration
(FDA) probe has stopped haunting MDS Pharma as the firm posted
encouraging financial results in the third quarter.

Net revenues were up 4 per cent to $118m (€86m), mainly boosted by sales in the Late-stage segment which increased 12 per cent to $56m in the third quarter of the year, compared to $50m in the same quarter last year.

The Early-stage unit lagged behind though, generating $62m in revenues in the quarter - two per cent less than the comparable quarter in 2006.

The company put this disappointing performance on the back of a "weakness in both early clinical and bioanalytical revenues which more than offset otherwise strong growth in drug safety and discovery/preclinical revenues", the company said.

But MDS was confident things were going in the right direction.

"We have been invited to propose on an increasing number of generic drug studies and as a result, we have seen some strength in new orders in the early-stage businesses this quarter," the company said in its financial report.

In addition, bioanalytical revenues were modestly higher on a quarter-over-quarter basis following three quarters of decline.

"We believe that these are positive signs of stability returning to our early-stage businesses, and an indicator that some of the prior customer uncertainty created by the FDA probe is being resolved," the company said.

Meawhile, the Canadian firm was still in the red but managed to limit the damage by reducing its operating loss to $5m during the period, compared to $16m in last year's third quarter.

This improvement was made possible by reducing the company's cost of revenues by 22 per cent to $82m while saving 3 per cent on selling, general and administration costs.

"We are beginning to realise cost savings from our previously announced restructuring actions and expect to see these savings increase as we complete more of these restructuring initiatives during the fourth quarter," the company explained.

These restructuring initiatives include the resizing of its St Laurent facility and the closeure of the Sittingbourne, UK site which have resulted in a staff reduction of around 200 employees.

MDS said that the loss for the third quarter of 2006 included $5m of costs related to the FDA review of the Montreal-area bioanalytical facilities, which the firm is now moving on from.

The saga started when an inspection of the company's two Canadian plants in 2003 found a range of problems with its pharmacokinetics testing procedures, including failure to identify and fix sources of contamination in bioanalytical tests, which measured drug levels in the blood of patients.

As a result, the FDA began a review in February 2005 of all the bioequivalence tests performed by the pharma services unit of MDS between 2000 and 2004, and in September last year, MDS voluntarily suspended its LC/MS services in order to undertake its own internal review.

In January this year, the FDA gave MDS' clients until June to take one of the three following actions: repeat their bioequivalence studies, re-analyse their original study samples at a different bioanalytical facility, or independently audit original study results.

MDS Pharma said in its financial report that "The FDA imposed a six-month time limit on completing this work in their January letter to sponsors and we therefore believe that substantially all of site audit work for these studies has now been done," adding that "most of our efforst at this time are focused on follow-up questions and supporting the finalisation of our customers' remaining audit reports.

According to the FDA, more than 1,000 brand-name and generic drugs that have been approved or submitted for approval since 2000 may have included MDS data in their applications.

While this will not result in the removal of any drugs from the market, it could delay approval of pending drug applications.

The FDA stressed that the retesting was only a precautionary measure and it also made clear that it did not have any evidence that there were problems with the quality, purity, or potency of the affected drug products.

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