TORONTO (Reuters) - MDS Inc (MDS.TO: Quote, Profile, Research) posted a slightly higher first-quarter profit on Thursday, but the Canadian health sciences company's results failed to meet market expectations.

Its shares dropped more than 1.5 percent to C$16.25 in a down day on the Toronto Stock Exchange, with market concern focused on a declining backlog at its key Pharma Services division.

The company said it earned $17 million, or 14 cents a share, for the quarter ended Jan. 31, up from $16 million, or 11 cents a share, a year earlier.

On an adjusted basis, its EBITDA was $40 million, up from $30 million, while its adjusted earnings per share fell to 5 cents from 7 cents a year earlier.

The company said adjusted earnings per share were hit by an 8 cents a share charge related to its acquisition of Molecular Devices, which was completed in 2007.

Revenue for the quarter was $296 million, up 22.8 percent from $241 million.

Analysts had expected earnings per share of 6 cents and revenue of $316.8 million, according to Reuters Knowledge.

Revenue at MDS's Pharma Services division, which does contract research work for drug companies, were slightly higher at $146 million, up from $144 million for the same period a year earlier.

The company said new orders in that business increased to $177 million and contract cancellations were $37 million, leaving a quarter-ending backlog of $395 million.