MDS Pharma Services, the US-based contract research business whose Phase II-IV and Central Labs operations are being sold off by its Canadian parent company, MDS, has continued to report productivity gains and savings from a series of restructuring initiatives.

In the second quarter ended 30 April 2009, adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) were US$3 million compared with a US$1 million loss in the same quarter of 2008. This was despite an 18.0% decline in net revenues year on year, to US$105 million for the quarter.

Currency translation shaved US$9 million off net revenues during the reporting period, MDS said. Early- and late-stage revenues showed roughly the same rate of decline, with the Early Stage segment down by 17.6% to US$56 million and Late Stage revenues 18.3% lower at US$49 million.

According to MDS, the fall in Early Stage revenues was largely down to a slowdown in bioanalytical services, while Late Stage revenues suffered mainly from lower demand in Central Labs.

New business wins came to US$114 million, an increase of 10% over the first quarter of 2009 but 31% below the second quarter of 2008. MDS attributed the sequential improvement mainly to “solid” orders in Phases II to IV and Early Stage bioanalytical services. The year-on-year decline was blamed largely on the impact of foreign exchange and slower market demand as customers reprioritised their research and development projects.

MDS Pharma Services’ period-end backlog was US$442 million, an 11% contraction from the second quarter of 2008 that the company said was primarily related to currency fluctuations and declines in the Late Stage segment, partially offset by a 10% increase in Early Stage backlog.

The net loss of US$17 million recorded by MDS Inc for the second quarter included a non-cash asset write-down of US$16 million to reflect the current fair value of the Pharma Services unit’s Central Labs fixed assets.

MDS Pharma Services also initiated another batch of restructuring measures, at an estimated cost of around US$4 million, during the quarter. The aim was “to further improve operating performance in a challenging economic environment, to sharpen the Company’s focus on Early Stage, and to reduce overhead associated with the exit from Late Stage”.

These actions were expected to affect some180 staff and to generate annual savings of approximately US$9 million.