MDS Pharma profit dips further into the red

MDS has reported a lower first-quarter profit for its Pharma Services unit as a result of a regulatory probe of its operations.

The segment saw its operating income dipping further into the red from a $3m loss in the quarter ending 31 January 2005 to $16m (€12m) in the compared quarter this year.

But the Canadian company said the segment's performance began to show signs of improvement despite being hit by an $8m restructuring charge during the quarter.

Revenue increased 9 per cent in the same period - a growth MDS said was driven by 25 per cent revenue growth in its late-stage businesses.

However, the company said there was continued softness in its bioanalytical and early clinical research services business.

MDS felt the effects of a US Food and Drug Administration (FDA) review of its Montreal-based medical research business, which cost it about $3m in the quarter - a painful addition to the CAD$31m (€20m) hit already taken from the regulator's probe.

Last month, MDS halted operations at its bioanalytical services facility in Blainville, Quebec and St Laurent, Montreal in a bid to boost profitability after FDA inspections of the sites found several problems with testing procedures, including failure to identify and fix sources of contamination in tests, which measured drug levels in the blood of patients.

The FDA urged earlier this year a number of pharmaceutical companies to confirm or repeat some studies done for them by the MDS unit.

The former Quebec operations are now being carried out from the Montreal facility, which had extra capacity to absorb the added workload, MDS Pharma spokesperson Charlene McGrady told Outsourcing-Pharma.com last month.

Since then, MDS has taken further steps to try and improve the overall performance of the business by focusing on improved project selection and pricing, site and process optimisation, and productivity initiatives, the firm said.

During the quarter, the company completed its closure of its Phase I clinic in New Orleans, sold a local Spanish clinical development business and completed negotiations for the sale of an early clinical business in Hamburg last month.

According to analysts, the company may be turning things around, despite its woes in the Pharma Services division, as Goldman Sachs analyst has been reported to point out that the company's first quarter results showed that improvements at the pharma division could continue in the future.