Medtox sees dip in clinical lab services, but profits rise

By Phil Taylor

- Last updated on GMT

Related tags Clinical trial services Revenue

Laboratory services and diagnostics company Medtox Scientific has posted a healthy hike in operating profits for the second quarter, despite a challenging operating environment that pegged back sales growth.

Revenues for the quarter advanced to $21.9m while operating income increased to $3.1m.

The laboratory business - which represents 75 per cent of Medtox' revenues and focuses particularly on toxicology testing - was held back by a reduction in use of its workplace drug-of-abuse testing services and a decline in clinical trial services, but still managed a 4 per cent hike in sales to $15.5m.

"Revenues from clinical trial services can fluctuate from quarter-to-quarter based on the project nature, size, and the actual timing of clinical trials​," noted Medtox, which said prospects were bright as it entered 2008 with signed contracts with the potential for $5.5min future clinical trials services activity.

"There also continues to be a growing number of proposals outstanding​," said the firm. Meanwhile, laboratory expenses were higher by around $0.3m in the quarter as a result of an expansion programme for Medtox' clinical laboratory, which now offers a broad range of services including clinical chemistries, microbiology, pathology, histology and molecular diagnostics.

"These increased expenses negatively affected both earnings and laboratory gross margin, since, to date, we have generated only a small amount of incremental revenue as a result of the expansion​."

Medtox said it expects to see "a more positive contribution​" from the new capacity in the second half of the year.

Diagnostic product sales were solid in the quarter, up 28 per cent to $5.2m, with a useful contribution from Medtox' contract manufacturing services unit. Contract revenues more than doubled to $0.5 million in the quarter of 2008, but Medtox no longer sees this business as strategic and plans to exit the sector over the next few years.

"As the number of firms marketing diagnostic tests has grown, we have experienced increased price competition for certain diagnostic testing devices​," said the firm.

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