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MDS Reports Third Quarter 2007 Results

Thursday, September 6, 2007 General News J E 4
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TORONTO, Sept. 6 /PRNewswire-FirstCall/ - MDS Inc. (TSX: MDS; NYSE: MDZ),a company providing products and services to the global life sciences markets,today reported its third quarter 2007 results. For the quarter, MDS reportedrevenues of $321 million, net income of $7 million and earnings per share fromcontinuing operations of $0.07. Adjusted EBITDA rose to $56 million, up 167%from prior year, and adjusted earnings per share were $0.14, up from $0.01 inthe prior year. Third quarter results were primarily driven by strongperformance at MDS Analytical Technologies and continued improvement at MDSPharma Services.

"I am pleased with the solid results that we delivered across MDS," saidStephen P. DeFalco, President and Chief Executive Officer of MDS Inc. "The MDSAnalytical Technologies team has been doing a great job of integrating our newbusiness and MDS Pharma Services has improved profitability for the fourthquarter in a row."

For the third quarter, MDS Pharma Services revenue increased 4% on areported basis over the same period last year, and was up 3% organically afteradjusting for foreign exchange impact. Our late-stage businesses continued todeliver strong growth at 12%. This growth was partially offset by a 2% declinein our early-stage business. While our results in early-stage continue to showsome weakness, the return of certain bioanalytical and Phase I customers inthe quarter was very encouraging. We are optimistic that this trend willcontinue in the next several quarters as we rebuild our relationships withthese customers. Our average backlog for the third quarter was $420 million,up 5% from the prior year.

During the quarter, the team at our Montreal site made significantprogress in helping our bioanalytical clients complete generic study auditsrequired by the FDA. We believe substantially all of the site audit work forgeneric submissions has now been completed. Most of our efforts at this timeare focused on follow-up questions and supporting the finalization of ourcustomers' remaining audit reports. We also continue to work with clients tosupport any required review of bioanalytical innovator studies from Montreal.

MDS Pharma Services continues to make progress implementing previouslyannounced restructuring plans. During the third quarter, we completed theconsolidation of our European bioanalytical operations from Sittingbourne, UKto Zurich, Switzerland. We have reduced our workforce while growing ourrevenues by 5% year to date. We have Lean Sigma initiatives and otheractivities underway to optimize our global network, enhance our productivity,and improve our ability to serve our customers.

MDS Pharma Services has recently hired industry experts in Phase II - IV,Information Technology, and Strategy and Corporate Development to enhanceleadership in strategic growth areas. We also hired industry experts tosupport the expansion of our Development and Regulatory Services (DRS)business in Europe. MDS Pharma Services is now able to offer full-service DRSconsulting services to support the development of new drugs andbiopharmaceutical products for clients in Europe. MDS Pharma Services alsocontinues to make strategic investments to support our global growth strategy.These investments include a 300-bed expansion in Phoenix, Arizona for ourPhase I business and several new information systems to enable ourpre-clinical and central lab businesses to serve our customers moreeffectively.

MDS Nordion revenues for the third quarter were $76 million, down 4% on areported and organic basis compared to a strong quarter last year. AdjustedEBITDA was $23 million, down 8% as reported but flat organically, asproductivity initiatives partially offset lower revenue and the impact offoreign currency. MDS Nordion revenue and adjusted EBITDA were up sequentiallyfrom the second quarter 2007 by 9% and 10% respectively.

During the
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