Company Focused on Building MDS Nordion
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