Targeted Radiation Looks to Create And Grow Revenue
Advanced Medical Isotope Corp. (ADMD.OB), and although it is an OTC company, and carries more associated risk, it does have great potential in this space. The company has increased in valuation by more than 130% in the last six months, partially as a result of Nordion's failure to find a medical isotope supply when its NRU reactor closes. This affects ADMD because it has a partnership with the only U.S. reactor that can handle demand, the MURR reactor. The company has already said that it aims to control half of the Mo-99 supply in the next few years; and thanks to Canada's unwillingness to repair its nuclear reactors, it looks as though it will. Furthermore, the U.S. has always been resistant to bringing isotope production to the country, but the government has said that it would be willing if able to minimize the use of highly enriched uranium (HEU), which is a very dangerous substance.
ADMD's technology consists of Low Enriched Uranium (LEU), which further adds to the optimism that this small company will benefit from Nordion's collapse in the medical isotope business, which is valued at roughly $70 million per year. Advanced Medical Isotopes has a very experienced team of executives who formed this company on the notion of future regulatory changes, and are placing their bets on the belief that large scale production will be brought to the U.S. in the coming year. However, there is a risk that this does not occur, or perhaps another reactor besides the MURR is chosen for supply. Although unlikely that the U.S. would allow a reactor other than MURR to produce Mo-99, it is a risk that investors must consider.
Aside from production, Advanced Medical Isotope is also developing its own targeted radiation treatment. The company licensed a technology from Battelle to develop a high-dose radiation therapy called "radiogel". The product uses the same isotope as Spectrum and Immunomedics, Y-90, which works by delivering the radiation directly to the tumor in a water-based biodegradable polymer. After injected, the radiogel's liquid polymer is warmed by the patient's body temperature, which then traps the isotope inside the region that is affected. Thus, not only is the cancer effectively targeted, but the gel is unable to escape, resulting in minimal side effects and a more effective therapy. This treatment is believed to work on any cancer that cannot be surgically removed, and will be tested to determine the range of its potential.
In terms of potential revenue, the company has said that sales could reach $5 million to $15 million in 2013, and up to $100 million possible. Right now the company has minimal revenue, producing medical isotopes but not on a large scale. Therefore, its gains have been a result of speculation, not fundamental improvements. However, if radiogel does achieve the targeted sales next year, and its possible revenue, combined with the $70 million from the medical isotope business, this stock has a lot of potential in this sector. Trading with a market cap of just $20 million, it could appreciate to a worth north of $150 million based on two times sales in the next three years. Not to mention, Nordion's most profitable business has often been medical isotopes, which is why Advanced Medical is excited about its opportunity and Nordion is not looking forward to seeing it go.