Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Positron to build high energy radiopharmaceutical facility in Indiana, focused on vertical expansion

|Includes:Positron Corp. (POSC)

Positron Corp (OTCBB:POSC) said Friday that it signed an informal agreement with the City of Noblesville, Indiana to develop a new, high energy radiopharmaceutical manufacturing facility, a deal that is expected to significantly expand the company's medical imaging capabilities.

The memorandum of understanding agreement outlines proposed economic incentives for the development of the high energy 70 MeV cyclotron project, which will also see Positron relocate its company headquarters and facilities to Noblesville.

The $55 million facility will be the largest US-based commercial cyclotron, a device used to make radioactive isotopes, which are in turn used to make radiopharmaceuticals, key tracers or imaging agents used in the field of nuclear medicine in the diagnosis and treatment of many diseases, such as those in cardiology and oncology.

The Indianapolis-based molecular imaging company, which specializes in the field of nuclear cardiology, sells Attrius positron emission tomography (PET) systems that guide medical and interventional therapy in individual patients with cardiac disease. These systems and patients require radiopharmaceuticals and the source radioisotopes to work.

Currently, Positron and nuclear cardiology customers rely on the radiopharmaceutical Rubidium, which is derived from strontium, and is produced by the US Department of Energy. This supply of strontium has become limited due to the recent increase in cardiac PET imaging.

As a result, a recent reduction in the availability of rubidium in January hit the industry at the start of the year, recently returning to near pre-slowdown levels. Positron said, however, it is still on track to sell between 25 and 30 Attrius PET systems in 2011.

The new supply created by the manufacturing facility is expected to prevent such delays in the future, as the company has taken steps to ensure it can produce medical isotopes and radiopharmaceuticals on its own for years to come, marking the evolution of Positron into a vertically-integrated business.

The magnitude of energy for the proposed facility will be the highest for commercial isotope production in the US, with facilities of such capacity internationally used for other applications than medical isotopes.

Under the terms of the agreement, the City of Noblesville is expected to provide roughly $6.7 million, with the State of Indiana shelling out another $1.2 million for training, while Positron will retain 100% control of the cyclotron. Federal funding and project financing are in the works, Positron said, having already received interest from several private equity firms and banks.

"The securing of critical components of the supply chain realized from this project will be considerable; we have built a solid foundation in our core cardiac imaging products and continue to vertically expand into medical isotopes and radiopharmaceuticals, allowing us to offer a complete solution for cardiac PET imaging," said CEO Patrick G. Rooney.

If Positron cannot use all the supplies it manufactures at the facility, the company will consider selling them to third parties at a time when prices for radiopharmaceuticals are on the way up, explained Rooney.

“Having isotopes, radiopharmaceuticals and imaging devices is a key advantage for our business," explained Rooney.

Indeed, the radiopharmaceutical market is projected to grow to more than $4 billion by 2015.

The company's development plans, which are anticipated to wrap up in three years, are expected to create more than 80 jobs in Noblesville over the next five years, Positron said, while the city is also set to benefit from the "ripple effects" of the new facility, as additional businesses are anticipated to relocate there in the coming years as a result.

All parties involved are currently working to sign a definitive agreement for the project, which will include a proposed incentive package, subject to approval from the Council in Noblesville.

In addition to Positron's PET products, the company has also developed the new PosiRx, which automates and simplifies the dose preparation and dispensing processes for radiopharmaceutical agents used in molecular imaging.

The new system, launched two months ago, already offers promising potential for the company, with a "great deal of interest" seen, said Rooney.

Stocks: POSC-OLD