Continuing the trend of contract research organisations (CROs) feeling the pinch from a tougher economic climate, Canadian life sciences company MDS has lowered its financial guidance for the third time this year, partly due to a write-down of goodwill at its troubled CRO division, MDS Pharma Services.

Based on preliminary information, MDS now expects to report net revenues of US$1,210 million to US$1,220 million and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$148 million to US$154 million for the whole of fiscal 2008. The previous revised guidance, issued at the third-quarter stage in September, was for net revenues of US$1,230-US$1,250 million and for EBITDA of US$160-US$170 million.

The lower forecast is mainly blamed on foreign exchange fluctuations, which include an embedded derivative charge, and soft demand in some segments of the company’s North American customer base. MDS also announced that it would be incurring a non-cash after-tax charge of around US$260 million to write off the net book value of the abandoned MAPLE nuclear reactor project in Ontario, which would have produced medical isotopes for the MDS Nordion division.

On top of this will come an expected non-cash write-down of US$270 million to US$370 million in MDS Pharma Services goodwill, reflecting “the decline in overall contract research organisation stock market valuations, current economic uncertainty and the delay in profit recovery”, MDS explained, adding that the combined charges would “result in a net loss below the Company’s 2008 guidance range”.

The write-downs would have no impact on MDS’ cash position or on day-to-day operations at MDS Nordion and MDS Pharma Services, the company stressed.

MDS is due to report its fourth-quarter results later this week. Recently the company has come under renewed pressure from US-based hedge fund Obrem Capital Management, which owns around 5% of MDS’ stock, to unlock shareholder value by divesting parts of its business including MDS Pharma Services.