MDS Announces Agreements to Divest MDS Pharma Services' Early Stage Business
February 10 2010 - 7:00AM
PR Newswire (US)
Company Focused on Building MDS Nordion TORONTO, Feb. 10
/PRNewswire-FirstCall/ -- MDS Inc. (TSX: MDS; NYSE: MDZ), a leading
provider of products and services to the global life sciences
markets, today announced that it has signed agreements to divest
its remaining MDS Pharma Services Early Stage business, which
provides Discovery through Phase IIa clinical trial services to
biotechnology and pharmaceutical companies, for $45 million and
certain minority equity interests. The $45 million purchase price
includes a five-year, $25 million note and $20 million in cash that
will be adjusted for working capital and other items; after
currently projected adjustments, the $20 million cash payment is
estimated to result in net cash proceeds of approximately $7
million. Upon the close of the sale, MDS will have completed its
repositioning strategy and will be focused on building its MDS
Nordion business, which has leadership positions in medical imaging
and radiotherapeutics, and sterilization technologies. "The
agreements to divest the MDS Pharma Services business are the last
major milestone in the repositioning of the Company," said Steve
West, Chief Executive Officer of MDS Inc. "While the sale
agreements have been struck in a difficult environment, we believe
we are doing what's necessary to allow us to focus on building MDS
Nordion to create shareholder value over the long term." Under the
terms of the agreements, MDS will divest its Discovery and
Pre-Clinical operations in Bothell, Washington; Lyon, France; and
Taipei, Taiwan, to Ricerca Biosciences LLC, a leading provider of
early-stage contract research organization (CRO) services. "We are
evolving to meet the needs of our clients. This expansion, combined
with our existing infrastructure, puts us on the forefront of
providing comprehensive discovery and preclinical services from
Intellectual Property to Investigational New Drugs to the
biopharmaceutical industry," said Ian Lennox, Chairman and Chief
Executive Officer, Ricerca Biosciences. The Early Stage Development
operations, which consist of Phase I clinics and bioanalytical
labs, and the Company's Development and Regulatory Services
consultancy, will be sold to a new corporation primarily owned by
Bain Capital Ventures and SV Life Sciences, two leading private
investment firms with established holdings in life sciences,
including Ricerca. Bain Capital Ventures and SV Life Sciences both
have long and successful track records of building market-leading
companies in healthcare and the life sciences sector. "We believe
that the new corporation's combination of talented people,
scientific excellence, and world-class facilities provides a strong
foundation for future growth of the business, and we look forward
to continuing to provide our clients with leading early-stage
clinical development services," said Susan Thornton, Ph.D., Chief
Executive Officer of the new corporation. Exclusions from the
Transactions The divestiture of the MDS Pharma Services Early Stage
business does not include the Early Stage Development facility in
Montreal, Canada, which will be closed. The decommissioning,
through which approximately 225 jobs will be eliminated, will take
place in stages over the next 12 months and is expected to be
completed by the end of February 2011. In addition, the sale does
not include MDS Pharma Services headquarters in King of Prussia,
Pennsylvania. While MDS expects the majority of MDS Pharma Services
employees to move to Ricerca or the new corporation, the Company
anticipates that approximately 50 people will not be part of the
deal. Operating costs during the wind-down period are currently
anticipated to be in the range of $7 million to $12 million. The
cost of employee severance is estimated to be in the range of $18
million to $21 million, and MDS has retained pension obligations of
approximately $3 million. Obligations Retained Following the sale,
MDS expects to retain certain liabilities and obligations related
to the MDS Pharma Services Early Stage business, including
litigation claims and other costs associated with the U.S. Food and
Drug Administration's review of the Company's bioanalytical
operations in Montreal, and is subject to other risks and
uncertainties as outlined in the Company's 2009 Annual Information
Form. MDS will also retain lease obligations for the Montreal
facility, the King of Prussia office and for one office building in
Bothell, Washington. The cost of future lease payments is estimated
at $9 million. Under certain circumstances, MDS may be required to
assume additional liabilities that could result in future cash
payments. Cash and Distributions Following the divestiture of the
MDS Pharma Services Early Stage business and the intended $400
million to $450 million share buyback, resulting from the
previously announced sale of MDS Analytical Technologies, MDS
currently expects to initially hold between $85 million and $135
million of cash to support ongoing operations and future
obligations of the Company. Beyond the estimated cash balance of
between $85 million and $135 million, the Company intends to hold
additional cash to fund unpaid transaction and restructuring costs
associated with the sale of MDS Pharma Services and MDS Analytical
Technologies. Additional details on these expected transaction and
restructuring costs are available in MDS's 2009 Management's
Discussion and Analysis (MD&A). MDS's interest in the new
corporation consists solely of the $25 million note and a 15%
equity interest. The interest on the five-year note is 4% per
annum, and the note would be repayable at the end of its five-year
term or upon a future sale of the business. The note is expected to
be secured by certain assets of the new corporation, which would be
subordinated by the new corporation's senior credit facility.
Closing Conditions, Time Lines The transaction is expected to close
within two months, and is subject to customary approvals and
closing conditions, including certain regulatory approvals and
compliance with labor laws related to an operation in France. MDS
Special Committee The Company's Special Committee of the Board of
Directors, which was established in February 2009 to review
strategic alternatives to improve shareholder value, is expected to
be disbanded following the completion of the sale of MDS Pharma
Services. MDS Strategic Repositioning Background materials
pertaining to the new strategic direction for MDS Inc. can be found
on MDS Inc.'s Website at
http://www.mdsinc.com/strategic_repositioning_of_mds/index.asp.
About MDS Pharma Services Early Stage Operations MDS Pharma
Services' Early Stage operations include approximately 1,700
employees at 10 sites - Montreal, Canada; Bothell, Washington;
Neptune, New Jersey; Tempe, Arizona; Lincoln, Nebraska; King of
Prussia, Pennsylvania; Lyon, France; Belfast Northern Ireland;
Zurich, Switzerland; and Taipei, Taiwan. The Early Stage business
is comprised of Discovery & Preclinical services, which include
Pharmacology/Drug Metabolism and Pharmacokinetics (DMPK), Drug
Safety Assessment, and Development & Regulatory Services; and
Early Stage Development services, which consist of Early Clinical
Research (Phase I to IIa), Bioanalytical Services, and Clinical
Pharmacology. About MDS MDS Inc. (TSX: MDS; NYSE: MDZ) is a global
life sciences company that provides market-leading products and
services that customers need for the development of drugs and the
diagnosis and treatment of disease. MDS Inc. is a leading global
provider of innovative technologies for use in medical imaging and
radiotherapeutics, sterilization, and pharmaceutical contract
research. MDS has more than 2,400 highly skilled people in nine
countries. Find out more at http://www.mdsinc.com/ or by calling
1-888-MDS-7222, 24 hours a day. Caution Concerning Forward-Looking
Statements This document contains forward-looking statements. Some
forward-looking statements may be identified by words like
"believes", "estimates", "projects", "expects", "anticipates",
"plans", "intends", "indicates" or similar expressions. The
statements are not a guarantee of future results and are inherently
subject to risks and uncertainties. MDS's actual results could
differ materially from those expressed in the forward-looking
statements due to these risks and a number of other factors,
including, but not limited to, successful completion of the
aforementioned divestitures and their success as ongoing
businesses, risks relating to obligations retained and projected
adjustments, successful implementation of structural changes,
including restructuring plans and acquisitions, technical or
manufacturing or distribution issues, the competitive environment
for MDS's products and services, the degree of market penetration
of its products and services, the ability to secure a reliable
supply of raw materials, the impact of our clients' exercising
rights to delay or cancel certain contracts, the strength of the
global economy, the stability of global equity markets, the
availability and cost of financing, the impact of the movement of
the U.S. dollar relative to other currencies, particularly the
Canadian dollar and the euro, uncertainties associated with
critical accounting assumptions and estimates, and other factors
set forth in reports and other documents filed by MDS with Canadian
and U.S. securities regulatory authorities from time to time,
including MDS's quarterly and annual MD&A, Annual Information
Form, and Annual Report on Form 40-F for the fiscal year ended
October 31, 2009 filed with the U.S. Securities & Exchange
Commission. DATASOURCE: MDS Inc. CONTACT: MEDIA: Janet Ko, (905)
267-4226, ; INVESTORS: Catherine Love, (905) 267-4230,
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