September 15, 2010 / 6:18 PM / in 8 years

MDS says outlook uncertain as isotope market shifts

* Market demand for moly-99 isotope uncertain

* Customers diversifying supply source (In U.S. dollars)

By Solarina Ho

TORONTO, Sept 15 (Reuters) - Canada’s MDS Nordion MDS.TO, one of the world’s largest suppliers of medical isotopes, said on Wednesday that market demand has become uncertain following the shutdown of a key isotope-producing nuclear reactor that forced MDS’s customers to diversify supply.

MDS Nordion’s nuclear imaging and radiotherapy segment took a severe hit after the Atomic Energy of Canada’s Chalk River nuclear reactor in Ontario was shut down in May 2009 due to safety concerns. The reactor resumed operations last month.

Chalk River, which supplies isotopes for MDS Nordion’s imaging and radiotherapy products, is one of the few reactors in the world that produce commercial quantities of molybdenum-99, the most prominent isotope used in nuclear medicine. It is the parent isotope for technetium-99m, used in most nuclear medicine procedures globally.

“Our initial expectation is that our demand will trend lower than historic levels and market pricing will be higher,” MDS Nordion Chief Executive Steve West said during the company’s quarterly conference call with analysts.

“In terms of market share, the overiding issue is first what the total demand is going to be. And I think it’s uncertain for everybody to really, at this moment, predict that.”

Customers are diversifying supply sources to reduce their reliance on a single source in times of extended shortages, he said, noting that multi-source contracts are here to stay. “That is the most appropriate way for the industry to have stability.”

MDS Nordion said that it is also taking steps to secure supplemental sources for its medical isotope supply.

The medical community also implemented alternative procedures and methodologies during the Chalk Rover outage so that they could use medical isotopes more efficiently.

“To offset that, you have to get commensurate price increases that will stick,” said analyst David Windley of Jefferies & Co, noting that MDS seemed to believe that market hopes for a three-fold price increase were overly optimistic.

Ottawa-based MDS Nordion reported a narrower third quarter loss late Tuesday evening. It had a loss from continued operations of $18 million, or 27 cents a share, in the quarter ended July 31, compared with a profit of $9 million, or 8 cents a share, for the same period a year earlier.

West said the company’s current strategy is to strengthen its core isotope business, but he signaled that it is exploring growth opportunities.

“In the coming months, you can expect us to talk more about that...we just need a bit more stability in our existing core business before we address some of those issues,” West said.

$1=$1.03 Canadian Editing by Peter Galloway

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