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INC snaps up MDS' late-stage clinical ops

Published on 02/06/09 at 12:13pm

Canadian life sciences company MDS has offloaded part of its pharmaceutical services division to INC Research in a $50 million deal and will now focus on early-stage R&D.

Earlier this year MDS said it was considering the sale of some of its business units - including its contract research division, MDS Pharma Services - as a result of pressure from shareholders.

The company formed a committee to look at possible divestments after investors complained that its diversified structure - spanning analytical instruments, molecular imaging technologies and contract research - was holding back the performance of the overall business.

The first stage of the divestment is for MDS Pharma Services' phase II to IV clinical research unit, which employs 800 staff. Meanwhile, the company says it is still looking for a buyer for its 600-person central laboratory business which processes clinical samples generated in trials.

INC, a US contract research organisation (CRO) based in North Carolina, said the deal adds to its expertise in vaccine testing, cardiovascular and respiratory trials and endocrinology, as well as expanding its presence in emerging markets such as Asia Pacific, Latin America and Africa.

MDS Pharma Services financial performance has been lacklustre of late, with a 12% decline in revenues in the quarter ended January 31, 2009, with late-stage testing faring even worse with a 16% slump. However, a major cost-cutting exercise has allowed the unit to hike profitability by a third in the same period.

The Canadian firm said it would retain the early-stage R&D business, which provides contract services from discovery through to phase IIa testing and has suffered less than the other units from the financial downturn.

"The sale of our phase II-IV operations to INC Research ... will allow MDS Pharma Services to focus on core competencies in drug discovery through phase IIa," commented David Spaight, president of MDS Pharma Services.

Across the board the early-stage CRO sector has suffered more than the late-stage sector in the economic downturn, but the larger early-stage specialists - such as Covance and Charles River - have said there are glimmerings of a recovery, according to a recent commentary on the sector.

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