My day job sometimes takes me to very interesting places around the internet. During a recent request to gather information on the state of the nuclear power industry I came across a rather interesting problem. The world's supply of Molybdenum-99 (Mo-99) is in real trouble. Now, I may be late to this party as the problem has been well-known for years but it looks like the industry in general is as well. The rapidly growing use of nuclear imaging techniques - SPECT scans, for example - use this isotope. It is, at this point, the most important radiochemical in the world and the long term supply of it is both tenuous and needs a tremendous amount of coordination to meet demand.
Four of the five current Mo-99 generating nuclear reactors are nearing the ends of their service life and will be decommissioned or need extensive overhauls in the next 5 years. None of the new reactors being built currently are designed to harness the Mo-99 produced as a by-product of U-235 fission. Unplanned outages can have a disastrous effect on supply and send prices skyrocketing. The joint venture between General Electric (NYSE:GE) and Hitachi had plans to produce Mo-99 at the Clinton Ill, Nuclear Power plant back in 2012 where they produce Co-60 but scuttled it for being economically unfeasible.
The Nuclear Option is Fading
This is nothing new for GE as CEO Jeffrey Immelt plead his case to the media last year citing that continued subsidy of wind and low natural gas and solar prices coupled with increasing regulatory burden for nuclear power in the developed world has destroyed the economics of it. With natural gas (NYSEARCA:UNG) prices in the U.S. firmly back above $4.00 per million BTUs that part of Immelt's complaint may be leaving the scene even if the solar industry continues to struggle under the weight of heavy supply.
There is little doubt that the nuclear industry will have to change to go forward and, in looking at the current state of the technology, it will likely be the so-called Gen-4 reactor types which GE is not heavily invested in that will push the industry forward as more of these ancient Gen-2 reactors are brought offline. The Gen-3 reactors that have been designed to replace them are mostly safety-upgrades over Gen-2 designs which do nothing to address the cost issues. On the other hand, India, for example, is moving forward with 6 liquid-sodium cooled fast breeder reactors rated at 500MW each which are claimed to produce energy at 40% of the current technology.
The U.S. is mostly supplied by Covidien (COV) who bought chemical supplier Mallinckrodt recently. Covidien gets a majority of its Mo-99 from NRG's Petten High Flux Reactor in the Netherlands which has been off-line since mid-November. So, at the present time the medical imaging industry is living with serious supply issues. A quick perusal of Covidien's website gives an idea of how important this is with supply updates being issued monthly.
None of this bodes well for conventional HEU-derived Mo-99 and Tc-99. In the end, nuclear is around 1% of GE's revenue anymore and as such will not be a priority for the firm. The political winds have shifted against that portion of GE's business.
Mo Scans, Mo Money
Mo-99 has a half-life of 66 hours and its radiologically interesting daughter product Technetium-99 (Tc-99) has a half-life of just 6 hours. As a commodity its supply chain has to be as tight as that of milk and dairy when you think about it. In late 2011 the National Nuclear Security Administration (NNSA) announced that it would be looking for ways to improve the supply of Mo-99 that did not require production from Highly Enriched Uranium (HEU) fission reactors.
This is currently an industry - for all medical isotopes - that is somewhere north of $3.8 billion a year. PET and SPECT scans are being performed in increasing numbers. More than 30 million were performed in 2012 and that number is growing 10% a year.
Aging nuclear reactors rapidly go from being an asset to a major liability and right now the supply of Mo-99 is a slave to that aging infrastructure. So, a company like Advanced Medical Isotope Corp. (OTCPK:ADMD) is a perfect example of a firm working to solve an important problem in a way that can take the supply out of the hands of that system. With Nordion (NYSE:NDZ) losing its battle with Atomic Energy of Canada, who will go forward with its shutting down the Maple nuclear reactors that would have continued significant Mo-99 supply, ADMD has a clearer path to marketing its rhodotron-based sub-critical Mo-99 systems which it developed in conjunction with the University of Missouri over the past 4 years.
As a former chemist discovering technology like this invokes so much of my inner 'geek' as it were. And sometimes it's hard to separate the 'cool' from the investable. But, this, to me, is a really elegant solution. While there are any number of ways to skin a cat - to solve the production of Mo-99 from LEU sources without the threat of a core meltdown - it looks like ADMD's solution may be one that has a chance to make it to market in the time frame the industry needs, which is the next 5 years. This recent review of the NNSA's funding projects to solve the Mo-99 supply problem only identifies one other possible solution from Northstar Medical Radioisotopes that looks promising.
ADMD/Univ. of Missouri's solution involves, simply, irradiating a solution of Uranyl Nitrate and D2O to create a localized fission reaction which produces Mo-99. The radioisotope is then collected via column filtration and concentrated. The whole process can be turned on and off with the flick of a switch and is not capable of going critical. I'm sorry, but that's cool and a good deal more interesting then Google (NASDAQ:GOOG) glass.
ADMD's issues, like all micro-caps, is funding and it looks like it may have finally solved those with a deal cut in late March with Switzerland-based The Gamma Service Group (GSG) who markets and distributes wide array of medical isotopes while ADMD produces Fluoride-18 currently - annual revenue in FY 2012 was $247,968, of which F-18 was $241,860. The deal is to develop and commercialize the sub-critical Mo-99 generators that GSG will produce and both will distribute and sell.
Terms are vague at this point and from the press release it sounds like a lot more work needs to be done and money procured. But, with GE Hitachi exiting the scene and the supply outlook poor going forward, ADMD is nicely positioned to attract further partners and investors. Moreover, like Northstar, ADMD has a joint venture with the University of Missouri's Research Reactor to begin supplying the Mo-99 market.
In addition, their Yttrium-90 RadioGel product for treating cancerous tumors via direct injection has begun the process of FDA approval. RadioGel is an interesting bit of polymer chemistry that is comprised of a suspension of Y-90 seeds which polymerizes upon warming to body temperature which holds the radionuclides in place, thus ensuring minimal healthy tissue damage. Y-90 has a very short, 2.7 day, half-life beta emitter. ADMD has the exclusive license to make and distribute RadioGel from Batelle and is going to need the funds to get this product through the FDA approval process.
Shortages in Mo-99 productions like those that occurred in 2009-10 due to unplanned repair of one of the existing facilities are only going to increase as these facilities approach their end-of-life. Between that and the rising prominence of nuclear medicine ADMD looks to be a speculative bet that is capable of rewarding investor's patience handsomely.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am not a nuclear scientist, just like Denise Richards in that Bond movie.