Medical Isotopes Sector Girds For Summer Supply Constraints
10 Julho 2009 - 2:12PM
Dow Jones News
Big companies in the supply chain for medical-scanning isotopes
advised customers this week of supply shortages linked to sidelined
reactors that help make the material, although estimates are mixed
regarding the problem's impact.
Covidien PLC (COV), which both makes generators that produce the
most widely used medical isotopes and runs pharmacies that sell
them, is girding for more than a month of sometimes severe
shortages. Cardinal Health Inc. (CAH), which has the largest
nuclear pharmacy business with nearly 160 outlets in the U.S., has
identified just a handful of days when it will have shortages of
the material used in imaging and treatment of disease.
The problems stem from an outage at an important Canadian
reactor that began in mid-May. The reactor's operator confirmed
this week that the plant won't return to service following repairs
until the end of this year at best, much longer than initially
estimated. A planned monthlong outage due to start soon at a Dutch
plant will compound the problem.
Covidien's supply chain arrangements give it long-term access to
remaining online reactors, Covidien told customers in a letter sent
Wednesday. But "there will still be a more significant global
shortage" of generators used to make the isotopes during the Dutch
reactor outage, the company said.
The letter included a color-coded calendar of both July and
August that detailed when the company anticipates shortages. It
expects normal supplies through July 23, then a severe shortage
from July 24 through July 27.
The company then expects more moderate shortages from July 28
through Aug. 21, followed by a four-day stretch of severe shortages
and then normal supplies for the rest of August. The upcoming
period of expected shortages coincides with the planned maintenance
outage at the Dutch reactor, to which Covidien is strongly
connected.
Covidien is in a quiet period ahead of its July 30 earnings
report and cannot provide additional financial details about the
impact of shortages, spokesman Bruce Farmer said. However, the
Dutch reactor outage has long been expected and was built into
guidance issued in April, he said.
Meantime, the Canadian outage "potentially has a minimal
positive impact for us," Farmer said. Covidien is not heavily
dependent on the Canadian plant, creating an opportunity to supply
customers who are.
Cardinal has identified five days when it will have shortages:
two days earlier this week, July 27, Aug. 24 and Aug. 25, spokesman
Troy Kirkpatrick said. "Otherwise we're at near-normal levels."
"We're not seeing a material impact to financials at Cardinal
Health," he added.
Jefferies & Co. analyst Richard Close said in a note Friday
that the isotope constraints appear manageable for Cardinal, with a
doomsday scenario of an 18 cents per share hit to annual earnings
if supplies totally vanished. But that is unrealistic, the analyst
said.
Shares of Cardinal were recently down 1.6%, or 48 cents, at
$29.22, while Covidien shares were unchanged at $35.61.
The reactors in question produce material called molybdenum-99
that decays into technetium-99m, which is the world's most commonly
used medical isotope.
MDS Inc.'s (MDZ) Nordion unit performs additional processing of
material from the Canadian plant and then two companies - Covidien
and privately held Lantheus Medical Imaging - make generators that
produce the medical isotope. These are distributed to hospitals and
through radiopharmacies, many of which are run by Cardinal Health,
Covidien and General Electric Co (GE).
The industry is scrambling to come up with new ways to supply a
market that depends today on a small fleet of aging and sometimes
unreliable reactors. Lantheus announced on Thursday, for example,
that both U.S. and Canadian regulators have approved the company's
plans to get molybdenum-99 supplies from an Australian plant. That
material is made from low-enriched uranium.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com