MDS posted a profit of $2m, or $.02 per share, down from $19m, or $.16 per share, a year ago. Despite that decline chief executive Stephen Defalco insisted that the company’s recently-implemented restructuring exercise was gaining momentum and helping to improve operating margins across the business.
There was no update on a possible sale of one or more divisions as part of a review of the group which MDS started last month under pressure from investors who insist its current structure is detrimental to the company’s prospects.
MDS Pharma Services, the group’s CRO division, was one of the main miscreants in the downturn, with a 12 per cent drop in revenues to $124m, which Defalco said was a consequence of “a cautious approach to spending” by its clients.
Late-stage testing services bore the brunt of the declines – down 16 per cent – with early-stage testing faring little better with an 8 per cent drop. Within early stage, growth in Phase I revenue was offset by softness in preclinical and bioanalytical services, said the firm.
As of the end of the first quarter, MDS Pharma Services had implemented the bulk of workforce reductions planned for the unit, and that contributed a 33 per cent hike in earnings to $8m.
MDS Analytical Technologies, culprit
The primary culprit behind the poor performance, however, was instrumentation division MDS Analytical Technologies, however, which makes mass spectrometers and other laboratory equipment. Sales plunged 27 per cent to $85m in the quarter.
MDS’ final pillar – medical isotope supplier MDS Nordion – was the only one to show a positive trend with a 10 per cent hike in sales to $66m, benefitting from a shutdown of a rival’s nuclear facility In Europe during the first quarter.
MDS Nordion is still under the shadow of a legal dispute with Atomic Energy of Canada resulting from the latter’s decision to pull out of the Maple nuclear medicine reactor project in Ontario, which was due to supply radioactive materials for healthcare applications.
The firm said its existing and ageing NRU reactor facility had also been closed because of minor leaks but had still been able top produce enough isotope material to satisfy demand.