J. Katzaroff) This is one of the critical issues the U.S. has been dealing over the last few years. HEU (highly enriched uranium) is banned in the US as it is essentially bomb material. However, not every county has made this decision. Russia is changing from HEU to LEU (low enriched uranium) sometime in the near future. One of the differences between HEU and LEU for radioisotope production is that the latter adds cost and time, which some of the countries may not be willing to sacrifice.
(CF) What do you need to accomplish before you can start selling this in U.S.?
(J. Katzaroff) ADMD will obtain samples from the Russian reactors soon for a 3 month testing process. The FDA will test three separate batches which can be done simultaneously. ADMD could possibly have three sets in in the next few weeks to begin processing. This initial testing and validation is required before these products can be sold in the U.S.
(CF) So far we have only focused on the isotope and generator business, what about other products that GSG and ADMD are collaborating on?
(J. Katzaroff) As I mentioned before, this is quite a far-reaching alliance between the two parties where we want to be able to leverage each other’s capabilities. That includes, but is not limited to, joint manufacturing facilities, irradiating medical devices, nuclear waste cleanup, and moving forward on intellectual property pursuits, including our patents on turning nuclear waste into medical isotopes.
(CF) Mr. Katzaroff, I certainly appreciate you taking time out of your busy schedule to answer some questions for shareholders. It appears that Advanced Medical Isotope Corporation is making wise decisions not only for its future profitability, but also for its investors’ interests. I look forward to seeing your company continue to grow and potentially help fill a very real market need for radioisotope production. With shares trading down at the current range of about $0.12, the upside could be promising...
The dollar amount expected to come from Mo-99 sales in Russia this year may be a little over $8 million, with that reactor working only at reduced capacity. As additional reactors in Russia are gearing up to Mo-99 production, redundancy and reliability is critical for global acceptance of Russian Mo-99. The sales are projected to grow 7x over the next two years. Of course, testing and approval for sales here in the U.S. are critical factors. What everybody wants is reliability.
(CF) Nordion Inc. (NYSE:NDZ) and Covidien (NYSE:COV) are generally considered to be the headliners as investment candidates in medical isotopes. Could you give us a projection on isotope sales in the short term and long term associated with ADMD’s GSG agreement?
(J. Katzaroff) Total market in world is 12,000 curies/week of Mo-99, and about half of that is used by the U.S. when it can be obtained. The current pricing of long term contracts appears to be $400-$600 per curie, and with shortages, spikes could be as high as $1700/curie. This translates into $350-$400 million annual revenue. A 10% share of the U.S. isotope market alone would be worth around $18-20 million per year. Not to be left out of the equation, investors should also note that China’s booming growth will likely increase its demand for medical isotopes, likely rivaling that of the U.S. demand in coming years. In all scenarios, a reliable source of isotope supply could easily obtain a significant part of this pie.
(CF) What about transporting from Russia to here with isotopes decaying so rapidly?
(J. Katzaroff) The half life of Mo-99 is about 6 days, which makes it transportable from or to anywhere in the world. This is typically a non-issue regarding source of production.
(CF) With nuclear proliferation being high on the international agenda, what about the potential ban on highly enriched uranium for any medical isotope production? How could that impact the supply?
This recent press release, combined with the company’s low market capitalization prompted me to contact CEO James Katzaroff about the company’s future and what its plans are for 2013 and beyond. He was gracious enough to answer some key questions pertaining to the new alliance that I thought the investment community could find useful when considering the company as an investment. Following are Mr. Katzaroff’s responses:
(CF) What is the value of the GSG alliance for ADMD and for its shareholders? Can you please describe what this agreement is about in a bit more detail?
(J. Katzaroff) Gamma Service Group (GSG) has been around for 20 years and is well known for making high quality equipment for Mo-99 isotope production. The company has access to generator equipment as well as many other items for use in the nuclear medicine field. GSG is also working on manufacturing the generators and Tc-99m disposable kits to go along with the equipment that the company already markets. It also specializes in building customized hot cells and irradiators. The company generates an impressive $45 million in revenue with nine affiliated companies, and ADMD has the right to sell this equipment and related kits in various geographies. We are in discussions with several of these units for major collaborative efforts.
ADMD has secured rights to distribute in China as well as North and South America for all technologies and products related to Mo-99. In addition, ADMD would be able to compete for distribution in the rest of the world. One of the big problems in the U.S. in the past few years have been an uncertain and sometimes diminished supply of Mo-99 which is critical for medical applications for medical diagnostics and therapeutic applications. GSG has outstanding relationships with Mo-99 producers throughout the world, particularly the reactors in Russia which are gearing up to be able to produce on a global scale.
I believe RadioGel is a pioneering technology in the brachytherapy sector because it holds marked clinical advantages over traditional implants. Specifically, RadioGel's list of clinical advantages include but are not limited to the following:
- Yttrium-90 has a half-life of only 2.7 days
- Yttrium-90 has considerably clinical evidence showing efficacy against inoperable liver tumors
- Ytrrium-90 has shown promise in reducing tumors in a variety of cancer types
- Yttrium- 90 is a beta-emitter, making it safer for clinicians and patients alike
- No metal casings to deal with
- Gel is biodegradable and can thus be easily reabsorbed by the body
- Gel forms a solid lattice that holds the Yttrium-90 in place and is thermally reversible
To put this into context, I believe that patients given a choice between a surgically implanted medical casing with a long-lived isotope such as iridium-192 or a gel that dissolves in a few days, the patient is going to choose RadioGel every time. Given that the clinical research thus far is painting a promising picture for yttrium-90 in a diverse array of cancers, I believe RadioGel has a strong chance to become the standard of care in brachytherapy procedures. Unfortunately, I wasn't able to get an estimate on the timeframe for FDA review of RadioGel, but instead was informed by the agency that they cannot currently comment on a device that is "under-review". Based on historical precedence, however, I think RadioGel could be approved before the end of 2013.
Sentiment: Strong Buy
I just wanted you to know of the company Advanced Medical Isotope corporation (ADMD)-- they have just initiated pre-review with the FDA for their product RADIOGEL. Please look into this company because I believe you will make good gains from it!
Sentiment: Strong Buy
Good news that the FDA is now involved in reviewing radio gel. this is the first step in where the company begins process to market and produce radio gel. bravo!
Sentiment: Strong Buy
Wonderfully analyzed and written. I am glad to see the expaned coverage on ADMD.
Sentiment: Strong Buy
After visiting the website and searching on 'ADMD', I found this article, and here is a selection from it:
Advanced Medical Isotope Corporation (OTC:ADMD)
The first thing you need to identify in an OTC company that could appreciate in value is a catalyst. And I am not talking about a catalyst provided by the company. I am talking about an economical catalyst, or a need that the small company could fill. This is where Advanced Medical Isotope Corporation comes into play, because it’s not as though the company is light years ahead of all other OTC companies, but rather had the perfect situation fall into its lap.
Nordion’s (NYSE:NDZ) luck has run out, and once the NRU reactor in Canada closes its doors, the company will have no effective strategy to deliver medical isotopes to the U.S. The company does have reserves, but delivering medical isotopes is a race against time, and Nordion cannot possibly deliver the needed medical isotopes from other countries in Europe or Asia.
Advanced Medical Isotope becomes relevant through a process of elimination. The company has a working relationship with the University of Missouri nuclear reactor, also called “MURR”, which is one of the only reactors in the U.S. that can handle our country’s medical isotope demand.
We, in the U.S., consume most of the world’s Mo-99, which along with its derivative, is the most used medical isotope in the world. We use it in drugs, medical devices, and even in certain appliances. When the NRU reactor closes we will lose most of this supply. Yet because of the relationship that Advanced Medical Isotopes has with the MURR reactor, it is in prime position to control this space, and has publically said that it could control 50% of global Mo-99 demand, pending legislation in the U.S.
Up until recently the U.S. has shown no signs that it wishes to produce its own medical isotopes. But back in June, the U.S. announced steps to ensure the supply of medical isotopes, while minimizing the use of highly enriched uranium (HEU). In the same press release, the U.S. government specifically mentioned Mo-99 and said that it is accelerating commercial projects that produce Mo-99 without the use of HEU.
Basically, the U.S. is saying that it realizes the need for supply and will move forward with projects as long as the medical isotopes can be produced while minimizing HEU.
HEU is a very dangerous substance, a material slated to be secured under the President’s four-year lock-down agenda. Thankfully, in addition to Advanced Medical Isotope’s relationship with MURR, it also has its own technology in which Mo-99 can be produced with a single electron, therefore consists of Low Enriched Uranium (LEU). With that being said, it looks as though Advanced Medical Isotope has everything in its favor, and at this point it is simply a waiting game for the NRU reactor to close, which should be very soon.
Once the NRU reactor closes, Nordion will lose most of its $80 million in last year’s revenue from its medical isotope business. As a result it has lost 35% of its value in the last three months, since announcing that Canada would not be reconstructing its last hope at salvaging its medical isotope segment, the MAPLE facilities. Advanced Medical Isotope could earn $50-$60 million of that revenue, with the production of Mo-99 alone. The company’s current market cap is $15 million; therefore if you consider a price/sales ratio of 4.0, Advanced Medical Isotope could reach a market cap of $200 million, or $2.60 in the next three years.
Well the price of the stock is still very affordable--as, in my opinion-- the stock is much under the value where it should be.
Sentiment: Strong Buy
ADMD can really help this country with the medical isotope shortages that we face.
Sentiment: Strong Buy
Here is the section from the article about ADMD
In my search for a company that could benefit from closing reactors and one that has the means to supply the U.S. with a commonly used isotope, I found Advanced Medical Isotope Corporation (ADMD.OB). The company is small, and its success will be dependent on Canadian policy and its impact on isotope production. However, ADMD is perfectly positioned to benefit from the shortage of Mo-99, which is the most commonly used medical isotope, along with its derivative, technetium-99m. The NRU reactor, used by Nordion, produces most of the country's Mo-99 and its derivative. Therefore, once the reactor closes, it could leave a gaping hole in the U.S. supply line. The Petten reactor could pick up some of the slack; however, it's nearly 50 years old and has had its share of problems, including being temporarily closed in 2009 to fix corroded pipes. Both Covidien and Nordion are attempting to correct the issue. Covidien will try with its tiny reactors, but won't be able to meet the full demand. Nordion will attempt with its overseas supply, but with increased costs, and the inability to reach certain locations in the isotopes' short lifespan.
ADMD is surprisingly similar to both companies, and just so happens to have fallen into the perfect situation. ADMD does not own a reactor, but has close ties to Missouri University Research Reactor (MURR). By using a reactor for production purposes, the company would have a similar business model to Nordion, which involves large returns on invested capital along with requiring very little additional capital. The company's joint venture with MURR entails a propriety compact method to produce Mo-99 and believes that it can provide half of the U.S. demand. Finally, the company also plans to expand its presence in Positron Emission Tomography (PET), a $1 billion industry growing at over 25% annually, as well as other fast-growing isotope markets that are widely used in the U.S. The company already has the technology, is producing revenue, and is well positioned to capitalize on the massive shortages that will occur, but must be addressed in the U.S.
When making an investment decision, it is important to gauge the health of certain sectors and determine its outlook based on known information. Right now we know that the NRU reactor will soon close if drastic updates to the reactor do not occur. A nuclear reactor is not intended to last forever, and eventually must be replaced. Both Covidien and Nordion have been effective at innovating to meet demand and to create a better product with less supply. But as supply continues to dwindle, the price for diagnostic procedures and treatments for conditions, such as heart disease and cancer, will rise. With 30 million worldwide procedures, this is a necessary product and a problem that cannot be ignored. And since the U.S. is highest in demand, it becomes our duty to supply the product. The problem is identifying the shift in power. Both Covidien and Nordion have controlled this space for many years, and there aren't many companies positioned to replace either in this particular market. It's possible that nothing changes and Canada makes the moves to update its facilities. However, the U.S. simply cannot wait and hope that the Canadian government will fund and rebuild crucial reactors, because these reactors are too important to our healthcare system. Hence, U.S reactors, such as MURR, must become active, and new innovating techniques to produce Mo-99 will go into effect. At that time, companies that are best positioned will benefit, as will patients, the healthcare system, and the U.S. economy. All these factors are dependent on the country producing such an important isotope rather than relying on production from outside. Advanced Medical Isotope Corporation is an OTC.BB company and the associated risk must be considered prior to any investment in the company.
Sentiment: Strong Buy