In 2012, the global radiopharmaceutical market reached $3.8 billion and is expected to rise to $5.5 billion by 2017. The radiopharmaceutical market consists of diagnostic and therapeutic applications. Over 90% of the diagnostic procedures use the type of isotope derived from molybdenum-99 (MO-99) called Technetium-99 (Tc-99). The problem is most of the world's supply of Mo-99 comes from five aging nuclear reactors, 43 to 52 years old. Two of them are scheduled to shut down -- the Osiris reactor in Saclay France in 2015, and Canada's NRU reactor by 2016. To complicate issues, the processing and distribution of isotopes is complex and time-sensitive, which can be critical when the isotopes concerned are short-lived. Medical isotopes are big business -- annually there are 30 million procedures using Tc-99, with expected growth of 10% annually.
Canada-based Nordion (NDZ), one of the two world's leading providers of medical Isotopes including Mo-99, had a challenging 2012 as its stock fell from of $10.96 to $5.51 overnight after announcing it lost a three-year battle with the Atomic Energy of Canada (AECL) when it mothballed the development of the Maple nuclear reactors which, once completed, could have supplied Nordion enough Mo-99 for the entire globe. The decision threw into question Nordion's future ability to harvest the isotopes, and became a major concern for investors because medical isotope accounted for $77.4 million is sales, or 33% of the company s 2012 revenue. The Maple nuclear reactor was to serve as the source of Nordion's long-term medical isotope supply, as it now gets most of its Mo-99 from the NRU reactor (which, as stated earlier, is scheduled to be shut down). Nordion is actively investigating options around the world for a long-term, secure supply of medical isotopes, but there are not a lot of options at this time.
Though Nordion has its challenges in finding a new isotope source the company is not waving the white flag. It is a diversified company: Last year Nordion brought in $92.4 million, or 47% of its total revenue, from its Gama processing sterilization technology. The company has installed more than half of the world's irradiation sterilizers, and still supplies roughly 70% of the global demand for the irradiation isotope Cobalt-60. The company also produces targeted radiotherapies, and TheraSphere, its Yttrium-90 (Y-90) microsphere treatment for liver cancer, brought in $48.5 million in revenue in 2012.
Targeted radiotherapy, though expanding, is predominantly used to treat oncological diseases, and consists of beta emitters and brachytherapy seeds, including Y-90, and has gained in popularity over conventional cancer treatments, when possible, due to the less invasive nature of targeted therapies, and reduced side effects. TheraSphere, an outpatient therapy, is designed to treat unresectable hepatocellular carcinoma (HCC), the most common form of liver cancer, and can be used as a bridge to surgery or transplantation. It is also indicated for the treatment of HCC patients with portal vein thrombosis. Delivered through a catheter, the seeds flow directly into the liver tumor becoming permanently lodged in the small blood vessels, and kill the cancer from within. There are roughly 30,640 new cases of primary liver cancer and bile duct cancer each year, and roughly 21,670 people die from the disease.
Nordion, a $429 million market cap company, appears to be climbing back from its lows with positive news, for example, TheraSphere sales were up 14% from 2011. Also the first quarter of fiscal 2013 showed improvement as the company reported revenue of $53.7 million, an increase of 1% over the same quarter, 2012. Today, Nordion is priced a lot more attractively as the market appears to have factored in the questionable future in its isotope business. Nordion's stock closed on Thursday, April 4, at $7.01 per share. While I wouldn't count Nordion out, and though I don't see the company as a buy, I do see the stock continuing to edge upward in 2013.
Advanced Medical Isotope Corporation (OTCQB:ADMD), a small company engaged in the production and distribution of medical isotopes and medical isotope technologies, is looking to create a strong presence in the global medical isotope business, and may have taken a giant step forward when the company signed a strategic alliance with GSG International GmbH. GSG is part of the global Swiss company Gamma Services Group that specializes in the development, installation and handling of radionuclide material, including Mo-99 and Tc-99. The alliance with GSG, which has operations in Switzerland, Germany and Russia, grants ADMD the exclusive sales and distribution rights in North and South America, and China of the Mo-99 and related Tc-99 generators and kits manufactured by GSG, with ADMD having the ability to obtain additional rights in other territories. This is big news for ADMD as it allows the company to expand its presence globally and strengthens the company as a leader in developing, manufacturing and selling medical isotopes worldwide.
James C. Katzaroff, Chairman and CEO of ADMD commented on the agreement, and how it can alter the future landscape of the medical isotope field, giving ADMD an advantage in the global isotope business: "This is a particularly opportune time to begin the distribution of Mo-99 because major suppliers of the isotope are experiencing both scheduled and unscheduled downtimes. Additionally, one of the major suppliers of Mo-99 has announced that it will exit the market by 2017 when its reactors reach retirement age."
Katzaroff further explained that the agreement was just the first step in the company's expanded business strategy, and intends to accelerate "revenue-generating activities to support our development of proprietary products. Market development and distribution arrangements generally do not require material capital investment and can provide an expedited path to revenue and profit, while expanding the marketing opportunities for our proprietary products."
Earlier this year ADMD also announced that the company submitted its novel targeted radiotherapy treatment, RadioGel, to the FDA and requested a collaborative meeting, which is the initial step in the FDA's pre-market review process. In a licensing agreement with Battelle, ADMD acquired Radiogel, an injectable radiotherapy, utilizing Y-90 microspheres that targets certain cancer cells. What makes Radiogel so unique compared to other radiotherapy treatments is that it begins as a water-based polymer that is injected directly into the tumor using a needle, not surgically with a catheter. Once injected into the tumor the polymer quickly begins to warm to body temperature and the liquid transforms into a lattice gel encapsulating the Y-90 isotopes on the targeted tumor. High-energy beta particles then irradiate the cancer cells within the targeted mass, with very little of the radiation from the trapped Y-90 able to escape to healthy tissue. This encapsulation of the Y-90 allows for a maximize dose of cancer killing radiation with minimal side effects to nearby healthy tissues.
The versatility of Radiogel is evident as it can it be injected through the skin or during a surgical procedure when a cancer tumor cannot be surgically removed. Radiogel will provide doctors with greater flexibility to safely direct radiation therapy to the interior of tumors, and tumor margins following surgical removal. The company plans to develop the product to treat cancers including breast, liver, kidney and pancreas, and sees the potential to be a blockbuster therapy, with estimated sales reaching between $75 million and $100 million.
ADMD is a very small company with a market capitalization of $9.49 million, but with its alliance with GSG it will develop roots in Europe, Asia, and emerging markets as an international company in the production and distribution of medical isotopes and medical isotope technologies. If either the alliance with GSG or Radiogel proves successful, I would look for ADMD to rise significantly. If both prove successful, this stock might just be this year's breakout performer. ADMD closed on Thursday, April 4, at $0.12 per share. Though any microcap company is considered a risk, I do like the odds of ADMD finding success and I think investors who show patience could be rewarded.
Immunomedics, Inc. (IMMU) is a biopharmaceutical company primarily focused on the development of monoclonal antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases. Clivatuzumab, IMMU's radiotherapy drug labeled with Y-90, is being evaluated as a frontline therapy for patients with advanced, inoperable pancreatic cancer. Clivatuzumab, which has already received Orphan Drug status in both the U.S. and the European Union, along with fast track status in the U.S., is a humanized monoclonal antibody targeting a mucin antigen expressed in most pancreatic cancers. The drug targets the cancer cells that contain the antigen and then delivers the radiation via Y-90 to kill the cancer cells. The Phase IB/II study found the median overall survival for the 38 treated patients was 7.7 months, which compared favorably with other regimens for advanced pancreatic cancer.
Another promising drug candidate, epratuzumab, also utilizes Y-90, and is currently in various phases of tests for both Lupus and non-Hodgkin Lymphoma (NHL). Epratuzumab, is a humanized monoclonal antibody targeting CD22 receptors on B lymphocytes, and in a Phase II study consisting of 227 patients all epratuzumab patients with moderately to severely active systemic lupus erythematosus experienced improvements, with the greatest benefits coming for patients assigned to the 2,400-mg epratuzumab. A larger Phase III trial, to confirm the earlier positive results, has already been initiated, as has fast track status by the FDA. The drug has also been combined with Genentech's (OTCQX:RHHBY) monoclonal antibody-a protein drug Rituxan, and the combination demonstrated activity in non-Hodgkin's lymphoma that has recurred or stopped responding to standard therapies. IMMU has licensed Epratuzumab to the Belgium pharmaceutical company UCB for the exclusive worldwide rights to develop, market and sell the drug for all autoimmune disease indications. UCB will incur all costs related to clinical development and commercialization, and has the rights to select a partner to sublicense its rights for certain territories. IMMU will retain the rights to the drug for the oncology indication, which could be a major revenue source of what is estimated to be an $8.4 billion market by 2019.
IMMU is a $194.5 million market capitalization company. And though its stock plunged in late February when the company announced it was selling 6.1 million shares of common stock at $2.30 per share in an effort to raise $14 million in needed capital, the stock has started to bounce back, rising over 10% in the last 30 days, closing on Thursday, April 4, at $2.59 per share. There is good reason for the stock to bounce back, the company has rebuilt cash reserves to over $35 million, and expects to see an additional $16.7 million in a settlement announced on April 1st with its former broker. The company has also more than doubled its revenues in 2012 with sales of $32.7 million. But what might propel the company to far greater profits is its radiotherapies that are in clinical trials, and its six therapies in the pipeline in early stage I indications. The company's portfolio of intellectual property includes approximately 189 U.S. patents and more than 400 foreign patents protecting its product candidates and technologies. With the company's funding out of the way, and a healthy capital reserve to develop its pipeline, it looks like the worst is behind it. Though there might be a few bumps in the road, this stock looks to rise in 2014.
There is an expanding future in medical isotopes, both for production and medical applications. While I like the chances of all three companies profiled to see their stocks gain this year, I would choose the smallest of the three -- Advance Medical Isotope Corp. -- as the one with the best chance to break out due to its agreement with GSG and its cancer treatment Radiogel, which appears to have the potential for a number of applications. However, all three stocks have been volatile and each carries risks, and you should always do your due diligence before investing.