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MDS to Cut 210 Jobs in Restructuring

This article has been updated to include comments from MDS.
 
NEW YORK (GenomeWeb News) – MDS said today that it plans to lay off 210 employees in a restructuring effort aimed at improving profitability in its MDS Pharma Services and MDS Analytical Technologies business units.
 
The Toronto-based firm said that it expects to report pre-tax restructuring charges of roughly $18 million, with the majority of those charges coming in its fiscal 2008 third quarter, which ends July 31. An MDS spokesperson told GenomeWeb Daily News that 75 percent of the job cuts would be in the Pharma Services unit and that it would primarily affect jobs in North America and Europe. 
 
MDS said that it also expects to record a pre-tax facility-related asset impairment charge of approximately $10 million related to its MDS Pharma Services Montreal site. The spokesperson said that the charge is related to a building that is "substantially vacant" among its Montreal facilities.
 
Last month, MDS reported second-quarter revenue growth of 24 percent. The Pharma Services unit had 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. However, revenue for that segment grew 11 percent year over year in the second quarter.
 
MDS still conducts early-stage drug studies at its Montreal site along with several others around the world.
 
The Analytical Technologies segment reported second-quarter revenue growth of 53 percent, thanks in large part to MDS’ acquisition last year of Molecular Devices for $615 million.
 
The spokesperson noted that job cuts in the Analytical Technologies segment would primarily affect manufacturing as the firm continues to shift capabilities to Asia.
 
"Our businesses remain healthy and are in attractive markets," she said. "The restructuring we announced today is one of the many actions we’re taking to strengthen the company and improve profitability."

MDS said the charges would reduce its fiscal 2008 net income by approximately $20 million, or $.16 per share.
 
The firm said that it will provide additional comments and discuss the impact of the charges for fiscal 2008 during its third-quarter conference call on Sept. 4.
 
MDS’ other unit, MDS Nordion, which is a supplier of medical isotopes, was not mentioned in MDS’ statement today. That unit may be affected by a decision earlier this year by Atomic Energy of Canada and the Canadian government to discontinue development of nuclear reactors, which were to supply the MDS Nordion business with medical isotopes under a 40-year deal.
 
Last week, the company filed for arbitration proceedings against AEC and is seeking an order to compel AEC to fulfill its contractual obligations under the agreement. Otherwise, MDS is seeking “significant monetary damages,” it said.
 
In addition, MDS filed a court claim for $1.6 billion in damages against AEC, citing negligence and breach of contract, and against the Government of Canada, for inducing breach of contract and for interference with economic relations.
 
In Friday afternoon trade on the New York Stock Exchange, MDS’ shares were up .6 percent at $14.63.
 
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