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Investment Firm Discloses Stake in MDS, Suggests Spin-Off

NEW YORK (GenomeWeb News) – Investment firm Obrem Capital Management disclosed in a filing with the US Securities and Exchange Commission yesterday that it has purchased roughly 6.2 million shares of MDS’ common stock and now owns a 5.1 percent stake in the company.
Obrem and its affiliates have been accumulating shares in the Mississauga, Ontario-based firm since late February.
In the SEC filing, Obrem said that it intends to recommend MDS take certain actions to increase shareholder value. In particular, Obrem believes that “significant shareholder value could be created through the spin-off or sale of one or several of [MDS’] business units,” and it intends to suggest that MDS hire financial advisors to explore such options. It did not specify in the filing which business unit it believes should be divested.
The New York-based investment firm also said it may choose to seek board representation or make proposals regarding changes to MDS’ capitalization, ownership structure, or operations.
MDS has three business units: MDS Analytical Technologies, MDS Pharma Services, and MDS Nordion. The Analytical Technologies segment includes its mass spectrometry and Molecular Devices businesses, while the Pharma Services unit conducts contract research for pharmaceutical and biotech clients. MDS Nordion manufactures and sells imaging and radiopharmaceutical products.
While the Analytical Technologies unit has continued to deliver strong growth over the past year — thanks in part to MDS’ $615 million acquisition of Molecular Devices during the second quarter of 2007 — the Pharma Services unit has struggled amid a US Food and Drug Administration review over the past few years regarding bioequivalence studies conducted at a couple of its Canadian facilities from 2000 to 2004.
For its fiscal 2008 first quarter, MDS reported that its revenues grew 23 percent year over year to $296 million, due primarily to the Analytical Technologies unit, while Pharma Services revenues dropped 1 percent year over year.
MDS’ shares closed down 2 percent at $20.02 in Wednesday trade on the New York Stock Exchange.

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