TORONTO, July 9 /PRNewswire-FirstCall/ - MDS Inc. (TSX: MDS; NYSE: MDZ), aleading provider of products and services to the global life sciences markets,today announced that it has served Atomic Energy of Canada Limited (AECL) withnotice of arbitration proceedings. MDS will be seeking an order to compel AECLto fulfill its contractual obligations under its 2006 interim and long-termsupply agreement (ILTSA) and if not granted, seeking significant monetarydamages. MDS has concurrently filed a court claim for $1.6 billion in damagesagainst AECL, for negligence and breach of contract, and against theGovernment of Canada, for inducing breach of contract and for interferencewith economic relations.
"We have had to resort to taking these steps to protect the interests ofpatients, the nuclear medicine community, our shareholders and our customers,"said Stephen P. DeFalco, President and CEO, MDS Inc. "We are disappointed thatAECL and the Government decided to abandon the MAPLE project withoutestablishing a clear plan for the long-term supply of critical medicalisotopes."
MDS's primary objective through the legal proceedings is to have AECLhonour its long standing commitment to replace the National Research Universal(NRU) reactor by bringing the MAPLE reactors into service, and provide a40-year supply of medical isotopes, required by patients worldwide for seriousmedical needs.
In 1996, MDS entered into an agreement with AECL for the design,development and construction of two new nuclear reactors and a processingfacility, known as the MAPLE project. The project was intended to replaceAECL's NRU reactor, which produces approximately 50 per cent of the world'smedical isotopes. AECL agreed to provide interim supply of medical isotopesfrom NRU until the MAPLE project was operational. The MAPLE project was to becompleted by the year 2000 at a planned cost to MDS of $145 million.
By 2005, the project was not yet completed and costs had more thandoubled, with MDS's investment exceeding $350 million. To address theseissues, MDS entered mediation with AECL that resulted in a new agreementreached in 2006. The 2006 agreement stipulated that AECL would bring the MAPLEreactors into service commencing October 2008 and provide MDS with a 40-yearsupply of isotopes.
On May 16, 2008, AECL and the Government of Canada announced theirintention to discontinue the MAPLE project without prior notice to orconsultation with MDS. AECL and the Government also made their announcementswithout disclosing any long-term plan for the supply of isotopes beyondextending the license of the NRU.
Prior to their announcement, in regular reviews with AECL to discuss thestatus of the MAPLE project, AECL had consistently maintained that it wouldcomplete the reactor project. AECL has stated that its decision will notimpact current supply of medical isotopes from the NRU, and the Government hasstated that it would like AECL to pursue an extension of the NRU operationbeyond its current license. While MDS supports this decision, it does notadequately address long-term supply.
The Importance of Isotope Supply
Medical isotopes are used to diagnose potentially life-threateningconditions such as heart disease and to treat serious diseases such as cancer.Establishing a reliable supply of medical isotopes is an important issue forpatients worldwide. The NRU is one of only four reactors in the world with thecapacity to produce isotopes for commercial use. It supplies isotopes to MDSNordion who in turn processes them into medical isotopes that are thendistributed to radiopharmaceutical companies. These companies manufactureradiopharmaceuticals and distribute them to hospitals and radiopharmaciesaround the world.
MDS Inc. (TSX: MDS; NYSE: MDZ) is a global life sciences company thatprovides market-leading products and services that our cu