MDS posts $17m loss as pharma services revenues drop

14-Jun-2009 - Last updated on 15-Jun-2009 at 10:46 GMT

MDS Pharma Services posted an 18 per cent drop in revenue in its Q2 results, which also contained details of restructuring that will affect 180 people and cost $4m (€2.8m).

The restructuring will occur in Q3 and is part of MDS’ efforts to focus on early stage research, which has also seen the company agree to sell a trial unit to INC Research. MDS believes it will achieve annual savings of $9m by restructuring.

Following the restructuring MDS will be entirely focused on early stage research but this division also struggled in Q2, with revenues in both sectors falling by 18 per cent.

However, looking ahead early stage appears to be stronger, with its backlog increasing by 10 per cent. Despite this boost changes in foreign exchange and declines in late stage resulted in overall backlog decreasing by 11 per cent to $442m.

New business across the pharma services division totaled $114m, a drop of 31 per cent compared to Q2 2008. This decline was attributed to foreign exchange and slower market demand as clients reprioritise R&D.

Having arranged the sale of its Phase II to IV unit MDS is now seeking a buyer for its central labs, which analyses samples from clinical trials to monitor safety and test for physiological impact. The unit has six sites in Europe, North America and Asia.

MDS as a group, which includes the Nordion and analytical technology divisions, recorded a $17m loss compared to a $13m profit in the corresponding quarter of 2008.

MDS vs the Canadian government

In its financial results MDS reiterated its belief that the Atomic Energy of Canada Limited (AECL) and the country’s government was wrong to “unilaterally discontinue” work on the MAPLE reactors.

MDS claims to have invested $350m in the project, which would have provided it with a long term supply of medical isotopes for its Nordion business. The company is now urging the Canadian government to consult with international experts and obtain their help in restarting the MAPLE project.

However, Stephen Harper, the Canadian Prime Minister, has said that he anticipates that eventually Canada will stop producing medical isotopes.

In addition the Canadian National Research Universal (NRU) reactor will shut down for at least three months, which MDS believes will reduce its adjusted EBITDA by approximately $4m for every month it is out of service.