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Executives

Ana Raman - Director of Investor Relations

Steve M. West - Chief Executive Officer, President, Director, Member of Technology Committee and Interim Chief Operating Officer of Targeted Therapies

G. Peter Dans - Chief Financial Officer and Senior Vice President

Analysts

Stephanie Price - CIBC World Markets Inc., Research Division

Neil Maruoka - Canaccord Genuity, Research Division

David Krempa - Morningstar Inc., Research Division

Fred Garcia - RBC Capital Markets, LLC, Research Division

Lennox Gibbs - TD Securities Equity Research

Alan Ridgeway - Paradigm Capital, Inc., Research Division

Nordion (NDZ) Q2 2013 Earnings Call June 6, 2013 10:00 AM ET

Operator

Good morning, ladies and gentlemen. Welcome to the Nordion Second Quarter Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Ms. Ana Raman, Investor Relations. Please go ahead, Ms. Raman.

Ana Raman

Thanks, Melanie. Good morning, and welcome to Nordion's Second Quarter Fiscal 2013 Earnings Call and Webcast. On the call this morning are our Chief Executive Officer, Steve West; and our Chief Financial Officer, Peter Dans. The format for our call will be that Steve and Peter will provide their perspectives on the quarter, and then we'll open up the line for questions from analysts. Slides have been posted to accompany this webcast.

As per Slide 2, which contains our caution on forward-looking statements, please note today's comments do contain forward-looking information, so actual results may differ materially from expected results because of various risk factors. These factors are described in Nordion's quarterly and year-end news releases and annual filings, which are available on SEDAR, EDGAR and the company's website. Results have been prepared under U.S. GAAP, and all amounts mentioned are in U.S. dollars, except when otherwise noted.

Turning to Slide 3, we have included certain non-GAAP measures. These include adjusted net income and adjusted earnings per share. These non-GAAP measures exclude certain items and are intended by management to provide investors with a meaningful, consistent comparison of the company's core operating results. This information should be considered as a supplement to, and not a substitute for, the corresponding financial measures prepared in accordance with GAAP.

A reconciliation between the non-GAAP measures and corresponding GAAP financial measures is available in our second quarter news release that was issued yesterday after market close. You can find it on our website at nordion.com. With that, I'll turn it over to Steve.

Steve M. West

Thank you, Ana, and good morning, and thanks to everyone for joining us today. Before I get started on Nordion's second quarter results, I'd like to discuss the agreement we recently signed to divest our Targeted Therapies business to BTG and address some of the key questions we received from the market since the announcement.

Now please turn to Slide 5. In January, Nordion announced it was initiating a strategic review with a view to enhancing shareholder value and assessing future opportunities. The agreement reached to divest the Targeted Therapies business was a result of a thoughtful process. We believe that the proposed transaction will provide value for shareholders and allow Nordion to focus on its core specialty isotopes business. We are pleased with the outcome of this part of the process, and we plan to continue the strategic review using a measured approach to evaluate other opportunities that can further enhance the value of Nordion.

Under the terms of the agreement, BTG will acquire the Targeted Therapies business for $200 million in cash. We estimate net cash proceeds after taxes, deal fees and costs to be approximately $185 million. This represents an implied value of approximately $3 per share for Nordion, and it represents a 4.1x revenue multiple based upon the fiscal 2012 Targeted Therapies results.

Nordion manufactures and commercializes TheraSphere, a targeted liver cancer therapy and the sole product of our Targeted Therapies business. Now under the terms of this transaction agreement, BTG is expected to acquire TheraSphere and Nordion has agreed to manufacture the device on BTG's behalf under a Manufacturing and Support Agreement. This agreement has a contract term of 3 years, plus it has a -- up to a 2-year extension at BTG's option, and it's expected to contribute $12 million of annual sales in each of the first 3 years of the contract.

As with the recent Navidea Biopharmaceuticals agreement, we intend to continue to build a contract manufacturing portfolio utilizing our core competencies to provide customized solutions to efficiently bring products to market. And more than 40 employees and contractors who are currently with the Targeted Therapies business are expected to join BTG following the close of this transaction, which we anticipate to happen by the end of June. The close is subject to customary closing conditions and approval from BTG's shareholders. Subsequent to the announcement, we saw a consent from our credit facility lenders in regards to this transaction.

I believe the sale of TheraSphere is the right decision for Nordion as a company. It allows us to unlock value for shareholders, focus on our core competencies while manufacturing TheraSphere for BTG. And it is expected to assist the market's ability to value our specialty isotopes business. Nordion and BTG are working towards completing and closing the transaction in an expedient manner. Once the transaction has closed, Nordion has agreed to provide transition services to BTG under a Transition Services Agreement for up to 1 year post close and manufacture TheraSphere and provide technical support services under the Manufacturing Support Agreement.

We will also assess the potential uses of cash proceeds from this sale, including returns to shareholders and the requirements of the business going forward. We will be giving this decision careful thought and consideration, and we intend to communicate our plans to the market once we have material news to announce.

Now turning to Slide 6, I would like to discuss our second quarter business results. Nordion's future results were within our expectations for all 3 businesses. Consolidated revenue was $56.1 million, which was up 12% from Q2 of last year while consolidated segment earnings were unchanged from the same period last year at $10.4 million.

Targeted Therapies revenue increased by 6% from the second quarter of 2012. Targeted Therapies year-over-year revenue increase was in line with management expectations and was primarily driven by increased TheraSphere sales to our existing customers.

We plan to continue to effectively manage the Targeted Therapies business during the pre-close period, and this includes supporting our employees and TheraSphere customers through what we expect will be a smooth transition of the business to BTG.

Now moving on to Slide 7 and Sterilization Technologies. Sterilization Technologies revenue increased 36% to $20.2 million. Cobalt revenue of $20.1 million increased by $6.2 million or 45% in the second quarter on a year-over-year basis as a result of strong volume shipped to customers, and this is primarily due to the timing of shipments to our customers. Sterilization other revenue decreased by $0.8 million, which was largely due to reduced production irradiator refurbishments during this period.

We are on track to achieving 2013 revenue expectations for our Sterilization business, which we forecast to be approximately the same as it was last year in 2012. Cobalt revenue is anticipated to be slightly higher than in the previous year due to relatively flat volume but slightly higher pricing.

Now please turn to Slide 8 for our summary on Medical Isotope business. Medical Isotope revenue levels remain unchanged compared with the same period last year. Revenue for the reactor isotopes product line also remained relatively unchanged in Q2 of 2013. As we have previously disclosed, the NRU reactor underwent a planned month-long maintenance shutdown from mid-April to mid-May, resulting in an interruption supply of medical isotopes in both our second and third fiscal quarters. The reactor came back online as scheduled in May, and we resumed production and sales of moly-99, as expected, the week of May 19. Nordion offset some of the loss of revenue from the 1-month maintenance shutdown as we received additional orders resulting from the continued shutdown of a primary reactor in Europe that supplies certain of our competitors. Now according to the June 4 update, the European reactor, which shutdown in November last year, is projected to be operational again around June 11.

Now as a result of the positive impact of this additional revenue, we have updated our annual guidance for Medical Isotopes revenue by lowering the expected year-over-year decline. Fiscal 2013 Medical Isotope revenue, excluding the potential impact of TheraSphere contract manufacturing is now forecasted to be about 10% lower than in 2012 compared with our original annual forecast of a 20% revenue decline from fiscal 2012.

And if you'd please turn to Slide 9. The priorities and strategic positioning of our Sterilization business and Medical Isotope businesses currently remain unchanged. For Sterilization, our plan is to maximize the long-term value of cobalt-60 by looking at and evaluating geographic and new application growth options. For Medical Isotopes, we continue to seek, to optimize the value of the business through securing long-term isotope supply and maintaining customer relationships. Nordion remains an important player in both the sterilization and medical isotope industries.

With a highly respected global brand, we intend to focus on our core competencies while continuing to provide customers with the quality products and services they use every day. We have been in these businesses for decades and have a proven track record. Our businesses are characterized by high barriers to entry due to their nuclear nature and with core competencies, including the management and logistics of nuclear materials, regulatory expertise in the nuclear industry and strong relationships with the industry's regulatory bodies. We believe Nordion is well positioned to generate strong gross margins and create value for its customers and therefore, for our shareholders. Nordion also benefits from its long-standing relationships with customers and suppliers. Some of our major customers have been with us for more than 30 years. And our business model is based on a recurring revenue base with strong margins that generate solid cash flow.

In addition to advancing business objectives, we continue to manage ongoing corporate issues. Arbitration proceedings with AECL related to the MAPLE arbitration costs are scheduled to take place this month, and we expect a decision thereafter. I believe that obtaining clarity on this issue and removing the uncertainty of this item will be positive to Nordion.

The internal investigation concerning potential improper payments and other related financial irregularities is ongoing. We continue to cooperate with the relevant regulators and authorities in the United States and Canada, naturally with a view to resolving this matter as expeditiously as possible. However, we're monitoring developments for similar matters involving other companies. We believe it's -- it is difficult to estimate the time that it will take to resolve these matters. In the meantime, we have undertaken significant efforts with the help of experienced outside advisers to put in place enhanced compliance measures.

Now looking ahead, and as I noted earlier, we plan to continue our strategic review process with the assistance of our financial advisor, Jefferies, using the same thoughtful approach as we did with Targeted Therapies.

Finally, we intend to continue to operate our Sterilization and Medical Isotopes businesses with efficiency and focus. These are important businesses whose products ultimately impact the lives of millions every day. We take pride in delivering such critical products and services with a focus on creating value for all of our stakeholders.

I'd like to now pass the call over to Peter Dans, who will discuss our financial results. Peter?

G. Peter Dans

Thanks, Steve, and good morning, everyone. I'll start with Slide 11. Nordion achieved revenue of $56.1 million in our second fiscal quarter, up 12% compared with revenue of $50 million in the same period last year. GAAP net income was $0.7 million, which decreased by $2.5 million compared with the previous year and translates into earnings of $0.01 per share. On an adjusted basis, we had a net loss of $1.8 million, down from $4.8 million of income in the second quarter of 2012, which equates to a $0.03 loss per share. Significant adjusting items include internal investigation costs of $4.5 million and a settlement loss related to the Dr. Reddy's claim of $1.3 million.

Gross margin percentages this past quarter were strong at 53%, up 2% from Q2 2012. On a consolidated business segment basis, earnings were relatively unchanged at $10.4 million from the prior year. Higher revenue contributed from Sterilization Technologies resulted in stronger segment earnings, but was offset by lower Targeted Therapies earnings due to increased investment in TheraSphere and slightly lower Medical Isotopes earnings as a result of increased general and administrative associated with higher annual incentive cost and pension expense.

Now turning to Slide 12. We had $81.5 million of cash and cash equivalents on our balance sheet as of April 30, a $6 million reduction from Q1 2013. Operating cash inflows were primarily offset by a $17 million cash outflow for the Dr. Reddy's settlement that we announced during our second quarter. The $17 million outflow included $8.3 million that was previously received from an insurer. We may receive an additional $5 million as a result of a claim against another insurer.

Upon the close of the sale of our Targeted Therapies business to BTG, we anticipate adding an additional $185 million to our cash position, which is net of transaction fees, costs and taxes. We do not expect the completion of this transaction to significantly impact Nordion's cost structure in the near term.

As a result of the sale, we expect to utilize approximately $15 million of our deferred tax assets to offset cash taxes on the gain. We may also have to write down an additional portion of our deferred tax assets due to the removal of Targeted Therapies income from our long-term forecast.

As well, we expect the potential writedown to fair value of a $40 million group of fixed assets that were partially used to support the Targeted Therapies business. We plan to continue to manage our cash levels as prudently as possible, considering both the requirements of our business and returns to shareholders.

We had several business considerations in determining Nordion's use of cash, including the potential payment to AECL for arbitration-related costs in the range of $22 million to $46 million, a pension solvency deficit funding requirement currently estimated at approximately $13 million in each of the next 5 years, and we continue to evaluate the long-term outlook of our Medical Isotopes business.

Regarding the internal investigation, we must consider possible outcomes but we currently cannot quantify the potential impact of the investigation.

As Steve described, we have 2 important businesses with strong margins that generate good cash flow. We expect to utilize the cash generated from operations and the cash on our balance sheet to provide value to our businesses and to our shareholders.

This concludes my financial review. Melanie, we can now open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Stephanie Price of CIBC.

Stephanie Price - CIBC World Markets Inc., Research Division

In terms of the strategic review, could you talk a bit about some of the other options you were looking at, at this point?

Steve M. West

No, I can't. Obviously, during the strategic review, any discussions that we will be having or have had are usually under confidentiality agreements and therefore, we're unable to really go into any specific details, Stephanie. I mean, clearly from the announcement we made with BTG, we believe that the first outcome of our strategic review unlocked significant value for Nordion and for our shareholders. And as I said earlier, we continue to undergo a thoughtful and considerable process to consider our other options for enhancing the value of the business.

Stephanie Price - CIBC World Markets Inc., Research Division

Would you consider selling another division such as the Sterilization division at this point, or is it more looking at internal operations?

Steve M. West

At this moment in time, Stephanie, I'm not really prepared to comment or speculate on the outcomes of our strategic review. I will say that we haven't closed the deal yet with BTG. So that continues to remain a focus. And again, in -- as is typical with these kinds of arrangements, noting that we have a manufacturing and services agreement with them, we're going to ensure that we carefully manage those transition activities in the early stages post to closing of the deal. And then, we will -- we'll be evaluating options for what we consider to be 2 very, very strong franchises in our business.

Stephanie Price - CIBC World Markets Inc., Research Division

Okay. And in terms of the Medical Isotopes division, do you have any further clarity from AECL on plans for the NRU post 2016, and can you talk about some of the options you're looking at there?

Steve M. West

Yes, well, I think the 2016 date is pretty well set and we haven't heard as any deviation from AECL's plans. As you know, they will be undergoing some process for, I guess, an RFP for a GoCo model for Chalk River, and so we are interested to see how that pans out. But we are planning currently as far as NRU is concerned that when we get to the end of the license period in 2016 that we will no longer be sourcing HEU-moly from there. As to other options, and I have said this previously, Nordion does continue to explore other options for a sustainable, long-term supply of LEU-based moly. It's hard for me to talk about that because as you can imagine, these, again, are proprietary discussions taking place with potential partners. But we do continue to do that. We believe that there are options that could be available to us. We have a very -- still a very strong franchise, a great brand in Medical Isotopes business and people still count on us. And it's not clear as of yet how the whole supply chain will pan out when NRU comes offline. So we are, as I said, exploring a variety of options, and we'll continue to do that, noting that, obviously, as we get closer to the date of 2016, we need to get some clarity around potential partnerships. So we're actively engaged in that, and we'll continue to do so.

Stephanie Price - CIBC World Markets Inc., Research Division

Okay, and...

Ana Raman

Stephanie, could I ask you to hop back in queue, and you can do a follow-up. Thank you.

Operator

The following question is from Neil Maruoka of Canaccord Genuity.

Neil Maruoka - Canaccord Genuity, Research Division

Just a quick question on the -- just a follow-up question to Stephanie's. Can you provide an update on negotiations with the Russian -- for Russian supply? I know that there's been some changes there, and you had mentioned in the past that you had an opportunity to renegotiate another deal. Is there any update there?

Steve M. West

Nothing specific, Neil. Actually, we haven't started negotiations with RIAR yet. That's an option for us and that would just be one of the options that we'd be exploring.

Neil Maruoka - Canaccord Genuity, Research Division

Okay. And to shift to the Sterilization business, just to give us a better idea of maybe the EBITDA there, can you maybe provide a run rate EBITDA expectation, x pension, and x incentive comp? That wasn't entirely clear in the MD&A.

Steve M. West

I'll ask Peter to handle that.

G. Peter Dans

Yes, so Neil, in terms of the EBITDA of the business, again, if you look at the trends, the revenue, again, we expect to be similar to last year. A slight increase on pricing from the overall business. So really, what we're looking at is a portion of the increased pension expense, which we estimated at about $7 million for the year. So a portion of that's allocated to Sterilization. And then from an incentive compensation perspective, you will have seen year-to-date, we're about $3 million above last year. And again, that gets allocated across the 3 businesses. So the Sterilization would pick up a piece of that.

Neil Maruoka - Canaccord Genuity, Research Division

Can you give us an idea of how much was allocated to Sterilization?

G. Peter Dans

Again, not getting -- but you can look at it sort of 1/3, 1/3, 1/3 as a rough guideline but without getting into specifics.

Neil Maruoka - Canaccord Genuity, Research Division

Okay. And final question. Are there -- do you believe that there's buyers out there for the Sterilization business?

Steve M. West

I'll handle that one. Sterilization business is a very good business. Medical Isotope business, we believe, has value, too, even though we got supply challenges. And I think the whole Nordion brand has a lot of value. Yes, I think, Neil, if one were to think about the potential universe of folks that would be interested in our assets, I think there are -- there would be a variety of potential financial and strategic sponsors. And I wouldn't just characterize it purely for the Sterilization business.

Operator

[Operator Instructions] The following question is from David Krempa of Morningstar.

David Krempa - Morningstar Inc., Research Division

On the internal investigation, it sounds like we should expect that expense to run into 2014. Should we expect something comparable to 2013 or is it going to be starting to wind down and not take all of 2014? Can you give any clearance on that?

G. Peter Dans

So in terms of the internal investigation, the costs on that are difficult to project exactly how they're going to unfold just based on the requirements that may arise from the regulatory perspective. As you'll see from our forecast for the year, we do expect the spending to reduce in the latter part of this year and again, we'd expect that trend going forward based on where we're at. But there is some uncertainty as to how it will actually unfold.

David Krempa - Morningstar Inc., Research Division

Okay. And then just on the Contract Manufacturing with BTG, what kind of margin do you expect on that $12 million a year of revenue?

G. Peter Dans

So again, the margins on that, they're positive margins. Again, they're sort of typical of a transition-type manufacturing agreement. However, they may be a little bit lower than what we've seen with some of our other Contract Manufacturing agreements.

Operator

The following question is from Fred Garcia of RBC Capital Markets.

Fred Garcia - RBC Capital Markets, LLC, Research Division

Just a quick question on the strategic review. Are there any specific events that would change the timing of when you would finish or announce something material?

Steve M. West

Thanks, Fred. As I said, at this time, we have to close a deal. We have to start the transition, and we will continue to be thoughtful and look at all the options for our strategic review with Jefferies, and our board and other possible parties, but it's heard for us to kind of try and give you any sense of timing on that, its activity, and then when we have something material to disclose, then we will.

Fred Garcia - RBC Capital Markets, LLC, Research Division

Okay. I was just wondering if you're waiting for like the arbitration to be settled and those sort of things before. Okay, you got a lot on that plate for that. Okay, then on the Sterilization business, maybe you can discuss some of the outlook for that business, the irradiators, again that's been launched for a while. Maybe you can talk about what that outlook looks like? It's -- you're still not projecting any orders this year, what about next year? Is there any pent-up demand for these sort of services because it isn't -- even the refurbishing services have taken a decline, too?

Steve M. West

Yes, so I mean, so I'll take the question in a couple of components. I mean, the outlook for the business, I think, continues to be characteristic of the Sterilization business, which is low growth but steady over a period of time even though it can be lumpy, as you know, from quarter-to-quarter. But our longer-term outlook here, certainly on cobalt, is that the demand for cobalt remains steady and consistent. And it's a -- we continue to look at parts of that industry potentially expanding in Asia or in particular maybe in Latin America but particularly, we think about China and India. But this is still an industry that's driven by medical devices primarily for gamma sterilization, and that uses a predominant amount of cobalt. And a lot of the use of single medical use devices is frankly driven by the number of procedures that are done and the number of factories in terms of installed base that are set up. So we continue to feel that we are a leader in this space. It's a strong business, good margins, good cash and see no difference there in the outlook. So our strategy is to continue to ensure that there is strong demand for cobalt and a strong value for the product. Clearly, demand -- second -- part 2 of your question is driven by the installed base. So we always -- we have a very good understanding of what's going on around the world in terms of installed base, and we do have a pipeline. We haven't announced yet the GammaFIT insulation but we have a pipeline for GammaFIT, which is a new product in the market. So it's still taking a little time for the market to understand that. Again, it's a global economy, kind of shifts and we see potential opportunities for new installations. We are definitely looking at that part of the business and would expect that at some point, we are going to get some irradiator sales. It's just a matter of time. But certainly, our team is always continuing to have discussions about potential installations. And as I say, we look at perhaps enhancing the value of our offering to the marketplace by looking at other services that we provide in that arena. And in this particular quarter, actually, we didn't have very much refurb business, but we continue to do refurb business on existing installations. And there's quite a large installed base out there, so that refurb business can also be good for us. But it's steady as she goes, the sterilization.

Operator

The following question is from Lennox Gibbs of TD Securities.

Lennox Gibbs - TD Securities Equity Research

So I think quite a bit of what I wanted to cover may have been touched on just in Fred's question. But can you provide a bit more detail again on the irradiators? Can you provide a bit more detail on how end user behavior has changed? Are potential customers keeping old irradiators longer? Are they building fewer plants that require them, or are they looking elsewhere? What really is the market intelligence telling you?

Steve M. West

Yes, so thanks, Lennox, and thanks for that. So we're not seeing any dramatic shift. I mean, first of all, we're not seeing any shift between the uses of gamma and EtO or e-beam or x-ray. We still see that as consistent. I think that as the global economy starts to go through a little bit of a recovery, we do anticipate that folks will make more capital investments and that they might have held back on a little bit. We are seeing -- one of the reasons we don't scan FIT is because we are seeing interest in all this sort of whole phytosanitary disinfestation area, which is predominantly in exporting economies into United States for fruits and vegetables. So they are smaller installations. The really big installations that are driven around medical device manufacturing, we -- they don't -- the industry went through a surge sort of 10, 15 years ago. We don't anticipate that. It's hard for us to compete a little bit in Asia on the irradiator side. It doesn't stop us getting the cobalt. But there are some companies that produce irradiators similar to ours. They don't have any capabilities in terms of providing cobalt. But some of the -- there's a couple of guys in China that certainly provide sort of a leaned down versions of our product. But we are in conversations with our customers around this. There's still an appetite for high-quality irradiators, good logic controls, good software. And I think that we see this still as a very viable business for us, and we continue to look at our business model to make sure that we can be competitive where the value of our offering is well appreciated.

Lennox Gibbs - TD Securities Equity Research

And so just on the established markets, just focusing on the established markets, do you have good reason to expect that either new plant starts, which would require new installations or replacement cycles to improve going forward?

Steve M. West

Yes, we do. Yes, we do.

Lennox Gibbs - TD Securities Equity Research

Why is that?

Steve M. West

Yes, we do -- first of all, we do think there'll be new installations. Our customers need to grow as well. And so that's how they grow is by putting new installations. And certainly, our view of the market and the conversations that we're having with customers that certainly, quite of few of our customers are considering new installations. That's for sure. There are going to be replacements. I mean, it's a way to trade off between kind of a revamp versus a rebuilt. And we do have a business for that. So we do work with our customers in helping them upgrade their existing installations. And the upgrades tend to be around the controls and the logic because the actual installations do have quite a sort of a longevity to them. But no customers are considering that as well as replacing some of their existing installations. So we still see this as a very, very viable market, where our customers, whether they be contract manufacturers or whether they be in-house irradiation facilities, are still very committed to gamma and particularly, as a lot of the medical devices that are being produced are under regulatory approvals for gamma versus gas or e-beam. We still consider this to be a good market with a long-term growth potential. It's just not high-growth potential year-on-year. Thank you, Lennox.

Operator

The following question is from Alan Ridgeway of Paradigm Capital.

Alan Ridgeway - Paradigm Capital, Inc., Research Division

I guess I'm sitting here thinking -- a lot of my questions have been answered, so I'm sitting here thinking that I'd like to focus maybe on the facility in Ottawa post the sale of TheraSphere and maybe looking forward to the NRU going away. What level of fixed costs are carried in those 2 businesses that could potentially be gone at 2016 that would have to flow over into the Sterilization business going forward beyond that?

G. Peter Dans

So, Alan, in terms of that question, there's a couple of aspects to it. One, I alluded to during my comments, was we are looking at the sort of a fixed asset or depreciation cost for the business going forward with the absence of the cash flow from Targeted Therapies. So that may result in a write down and a reduction in our depreciation cost. The other comment I would make is when you look at the Medical Isotope part of the business, the main fixed cost would be around some of our G&A infrastructure costs from -- that aren't as variable, which may have to be restructured in that time frame if we were to stop receiving medical isotopes from a reactor perspective and have not achieved an alternate supply by that point in time.

Alan Ridgeway - Paradigm Capital, Inc., Research Division

Okay. And then maybe as my follow-up, what's the outlook as a long-term CapEx requirement to maintain those facilities? It is a relatively large facility, split up between the Contract Manufacturing on the more pharmaceutical side, as well as then the smaller sales for the moly business and the larger stuff for the Cobalt business. So going forward, what would your CapEx look like at the facility maybe over the next 5 to 10 years? And I'll leave it at that.

G. Peter Dans

Yes, so from our CapEx perspective, again, 5 to 10 years out, it's probably a long horizon to look at. But if you look at our past 3 or 4 years, our CapEx has been consistently below the $10 million mark. The majority of that investment has been focused on Targeted Therapies. So from a maintenance perspective, the numbers are relatively low. Again, the facility has the capacity to support our requirements. We do the ongoing maintenance. We have maintenance in terms of our shipping containers and things of that nature. One of the variabilities is as we potentially bring on new contract manufacturing opportunities, that can drive some CapEx spending to get those projects up and running. Hopefully, that covers your question.

Operator

The following question is from Neil Maruoka of Canaccord Genuity.

Neil Maruoka - Canaccord Genuity, Research Division

Just a question on your dividend policy. Since you suspended the dividend last year, how does the board now assess and prioritize maybe more importantly, the risks when assessing the policy going forward?

G. Peter Dans

Yes, so, Neil, in terms of dividend policy, we currently don't have a plan to reinstate the dividend. From an overall perspective because we're going through our strategic review, we're really looking at capital requirements through that process and would potentially reassess things such as the dividend as we come out of the review.

Neil Maruoka - Canaccord Genuity, Research Division

But the individual risk that the board looks at in assessing that policy, can you provide a little more color on that?

G. Peter Dans

Well, I think as we highlighted when we suspended the dividend, it really related to a number of uncertainties in the business. The AECL arbitration costs being one of them, which again, as Steve mentioned, the current view is that there'll be resolution around that later this month. We still have the ongoing internal investigation, pension funding and the -- really, the outlook around the Medical Isotope business were the key factors that caused us to consider suspending the dividend. And again, a number of those still exist, and we're still working through those and looking for clarity.

Operator

The following question is from Stephanie Price of CIBC.

Stephanie Price - CIBC World Markets Inc., Research Division

I just had one quick question on the cyclotron isotope revenue. You mentioned in the press release it was up 6% year-over-year. Can you quantify that for us and kind of talk about the possibilities there in terms of how big could that get?

G. Peter Dans

Yes, so Stephanie, in terms of cyclotron isotopes, the real change was that we started shipping strontium again in the quarter. So we had been out of production for strontium for a period of time. So we expect to continue to deliver strontium in the following quarter. So we would expect increases, again, relative to prior quarters in that part of the business. Again, there was a period last year where we did ship some strontium. So we need to take that in consideration from a trend perspective.

Stephanie Price - CIBC World Markets Inc., Research Division

Okay. And in terms of the actual revenue from that line of business, can you give us kind of a sense of what that is right now?

G. Peter Dans

So in terms of the cyclotrons, again, the specifics on that -- for the quarter, we are running at $3.8 million. So that part of the business is generally fairly stable. Again, the strontium tends to be the item that has created the fluctuations over the past 1.5 years.

Operator

Thank you. There are no further questions registered at this time. I'd like to turn the meeting back over to Ms. Raman.

Ana Raman

Thanks, Melanie. This brings us to the end of today's second quarter fiscal 2013 earnings call. If you have any additional questions, please feel free to follow up with me. Thank you.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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Source: Nordion Management Discusses Q2 2013 Results - Earnings Call Transcript
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