September 27, 2010 / 8:27 PM / 7 years ago

MDS Nordion says Russia deal to supply key isotope

* Not a replacement for elderly NRU reactor

* Still believes Canada's Maple project should proceed

* Pricing in Russian deal may yield lower margins

By Solarina Ho

TORONTO, Sept 27 (Reuters) - A deal with Russia's Rosatom is expected to provide MDS Nordion MDS.TO with a key medical isotope for at least the next 10 years, but the move is not intended as a permanent replacement for supplies from an aging Canadian reactor, the company said on Monday.

MDS, one of the world's largest providers of medical isotopes -- used in cancer testing and other procedures -- spoke with analysts on Monday after signing a framework agreement last week with Rosatom State Corp, a state-owned Russian producer.

Both MDS and the global medical community took a severe hit after a shutdown at Atomic Energy of Canada Ltd's (AECL) aging reactor in Chalk River, Ontario, which lasted more than a year, cutting off a major source of medical isotopes.

MDS's exclusive deal with Rosatom's Isotope unit, the first to bring additional supplies of the key isotope molybdenum-99 (Mo-99) to market since the shutdown, aims to cushion the impact of any more disruptions at Chalk River's National Research Universal (NRU) reactor. [ID:nSGE68M0EZ]

The NRU is one of the few reactors in the world that produces commercial quantities of Mo-99. Rosatom's Isotope aims to join those ranks and hopes to eventually supply about 20 percent of the Mo-99 market.

Mo-99, the most prominent isotope used in nuclear medicine, is the parent isotope for technetium-99m, used in roughly 80 percent of nuclear medicine procedures. Applications include diagnosing heart disease or detecting hard-to-find cancers.

Rosatom will allocate three reactors for Mo-99 production, the newest being 27 years old, said MDS. However, the deal should not be seen as a replacement for for a Canadian supplier, the company said.

"We want to be very clear this does not replace NRU, it does not replace Maple and this does not diminish our interest in seeing Maple project completed for long term supply," Chief Executive Steve West said during a conference call on Monday with analysts.

The Maple project is based on a 1996 agreement between MDS and AECL to build two nuclear reactors and a processing facility intended to replace NRU. MDS has been in arbitration with AECL after the operator and the Canadian government abandoned the Maple project.

At 53, NRU is the world's oldest reactor and is widely expected to be decommissioned by 2016. When in full operation, the operation in eastern Ontario provides about 35 to 40 percent of the world's medical isotopes and roughly 50 percent of those used in North America.

MDS also said during the call that the pricing in its contract with Rosatom Isotope could yield lower margins compared with other sources, but noted that it would not be as affected by capital investments in processing or reactor facilities.

Despite lingering uncertainty about the isotope market following the shutdown of the NRU reactor, MDS believes it is likely the market price of Mo-99 will continue to rise.

"There's still a lot of concern about the overall supply capacity in the long term and so I think we just have to see how that unfolds," said West. Future supply agreements for other isotopes with the Russian producer are also possible, he added.

MDS shares were closed down 16 Canadian cents, or 1.5 percent, at C$10.53 on Monday on the Toronto Stock Exchange.

$1=$1.03 Canadian Reporting by Solarina Ho; editing by Rob Wilson

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