Ottawa-based Nordion (TSX:NDN) is optimistic the recent settlement of a dispute with Atomic Energy of Canada Ltd. will free the life sciences firm to further grow its isotope supply business in the future, company officials said Thursday after releasing third quarter results.
Nordion's Steve West. (Photo supplied)
By Jacob Serebrin
This is the first quarterly results announcement since Nordion announced last month it had reached a deal with AECL over a dispute about nuclear reactors.
Theagreement “provides closure and clarity.” said Steve West, the company’s CEO, in a conference call with investors.
Under the terms of the settlement, AECL will continue to provide isotopes to Nordion until the end of October 2016 and handle radioactive waste disposal until 2026. AECL also agreed to pay Nordion $15 million.
The settlement has “cleared the way for Nordion to have meaningful discussions with credible partners” in order to find new isotope suppliers, said Mr. West.
AECL plans to shut down its reactor by October 2016, so the agreement will help Nordion to find a new supplier before then.
“We have a situation with a finite end-point.”
Mr. West said the company is committed to staying in the medical isotope business after October 2016.
“We have a strong brand, strong recognition and strong capability,” he said. “We intend to maintain our position in the marketplace.
Company officials also said Thursday they decided against returning cash earned during a massively profitable third quarter directly to investors and will instead opt to maintain the money on hand.
The sale of its targeted therapy business, which closed in mid-July, helped the company to a large growth in profits and increase its cash-on-hand.
The sale to BTG plc for US$200.7 million resulted in an after-tax gain of $182 million, the company reported. That led to a GAAP net income of $180.4 million in the third quarter, up $168.1 million from the $12.3 million reported during the same period last year.
Nordion plans to keep that cash on its balance sheet.
“We did look at a variety of options for returning cash to shareholders,” said Peter Dans, the company’s CFO, in the conference call.
But he said the company decided against a dividend or a buy-back due to potential tax implications,
Nordion has “no other plans for the use or allocation of that cash,” said Mr. West.
Revenue from medical isotope sales were up nine per cent, compared to the same period last year, to $24 million. The company attributed the increase to the shutdown of a reactor in Europe.
The company has upwardly revised its forecast for annual revenue from isotope sales, said Mr. Dans. Nordion is now predicting a seven per cent decline compared to 2012, down from a projected 20 per cent decline last quarter.
Revenue from the company’s sterilization unit was also up to $36.5 million. That’s a 14 per cent increase over the same period last year.
But the jump was “more than offset,” by declines in the now-sold therapy business, said Mr. Dans.
Overall revenue increased seven per cent over last year to $71.7 million.
Adjusted net income dropped to $12.6 million, a 19-per cent decline from the year before. Adjusted EPS also dropped from 25 cents a share to 20 cents a share.
Meanwhile the company is continuing its strategic review, which led to the sale of the therapy unit.
But while Mr. West said that Nordion is “looking at all the options,” he refused to say whether the company is considering a sale of the sterilization unit.
The company’s stock was up 41 cents to $8.65 just before market close on Thursday.