NORDION INC. $9.02 (Toronto symbol NDN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 62.4 million; Market cap: $562.8 million; Price-to-sales ratio: 2.0; Dividend yield: 4.5%; TSINetwork Rating: Extra Risk; www.nordion.com) supplies medical isotopes for cancer detection and research. It also makes products that sterilize surgical tools and food.
In its 2011 fiscal year, which ended October 31, 2011, Nordion’s revenue rose 23.5%, to $274.0 million from $222.0 million in fiscal 2010 (all amounts except share price and market cap in U.S. dollars).
Revenue at Nordion’s sterilization equipment division (which supplies 40% of its overall revenue) rose 4.9% in 2011, mainly because the company raised the prices of these products and benefited from favourable exchange rates.
The isotope division’s revenue (40% of the total) jumped 79.8%. The gain reflects the restart of the Chalk River nuclear reactor near Ottawa after a 15-month shutdown in August 2010; this reactor supplies most of Nordion’s isotopes.
Nordion gets the remaining 20% of its revenue by selling isotope-based cancer treatments. The company is seeing strong demand for its liver cancer treatment, called TheraSphere, which uses millions of small glass beads that contain radioactive material. TheraSphere is now available in Canada, Europe, South Africa, India and Russia. It will soon begin Phase III clinical trials in the U.S.
However, a disruption in the production of certain isotopes offset the gains from TheraSphere. As a result, the cancer treatment division’s revenue rose just 1.7% in 2011.
Thanks to the increase in its overall sales, Nordion earned $43.5 million, or $0.67 a share, in fiscal 2011. In 2010, it lost $83.8 million, or $0.94 a share. The company spent $5.6 million (or 2.1% of revenue) on research in 2011, up 24.2% from $4.5 million (or 2.0% of revenue) in 2010.
The company bought back $52.4 million of its shares in 2011. Nordion now holds cash of $74.1 million, or $1.19 a share. Its long-term debt of $40.2 million is a low 7% of its market cap.
Nordion’s reliance on the aging Chalk River reactor, which will close in 2016, adds risk. However, the stock trades at a reasonable 12.6 times the $0.70 U.S. a share that it should earn in fiscal 2012. The $0.40 U.S. dividend yields 4.5%.
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