The Economics of Reactor Produced Mo-99

Transcription

1 The Economics of Reactor Produced Mo-99 Francois Couillard CANM, April 21, 2017

2 Disclosures I am a GE shareholder The CAMRT receives funding for Continuing Education and/or its annual conference from Curium, Isologic, Siemens, Hermes, Bayer, Philips, GE Healthcare and Lantheus

3 Objectives 1. Help the audience understand the profitability of the different production stages of the Tc-99m supply chain 2. Explain the various factors that influence the price of nuclear medicine products 3. Explain the necessity of "full cost recovery" for reactorproduced isotopes and the impact on the cost and availability of Tc-99m

4 Overview Supply chain economics Full cost recovery concept Generator economics & pricing Impact of new entrants

5 Tc-99m Most widely used nuclear isotope in Nuclear Medicine % of all procedures million exams per year worldwide

6 Reactor-produced Tc-99m supply chain U 235 targets Research reactor Target dissolution & Mo-99 Processing Hospitals Generator production

7 Tc-99m USA/Canada logistics map Reactors Mo-99 extraction & purification Tc-99m Generator manufacturing HRF Maria Curium, NL Curium BR2 LVR-15 OPAL SAFARI IRE, Belgium ANSTO, Australia NTP, S.A. Lantheus

8 What % of the cost of a typical nuclear medicine procedure goes to Mo-99?

9 Share of Mo-99 revenue of each stage (%) of the final reimbursement rate * Generator, reactor and processing costs = 1.76% 20 0 % reimbursement rate radiopharmacy Generator Mo99 processing Reactor Other *Reimbursement rate of EUR 245 ( ref. OECD 2010)

10 Profitability comparison (EUR/6day Ci) Reactor Mo-99 Processor Generator Mfg -50 Revenues Costs Margin (Ref. OECD 2010)

11 Conclusions 1. Reactors price Mo-99 are at levels that don t fully reflect their production costs 2. Tc-99m generators manufacturing runs on very thin margins 3. Traditional Mo-99 processors can usually sustain profitable operations

12 Full cost recovery concept

13 Reactor economics- traditional thinking built to do nuclear technology research production of medical radioisotopes as a bi-product (not core) price charged for isotopes does not reflect full costs Artificially low prices prevents new entrants

14 Mo-99 reactor production costs Specific Mo-99 operating costs: Irradiation Handling Waste management Shipping Reception Storage Other costs Capital Operating General overheads (HR, accounting ) Decommissioning Replacement costs General operating costs: fuel reactor operations Maintenance Utilities Licensing QA,QC Security waste management

15 OECD Nuclear Energy Agency s High-level Group on the Security of Supply of Medical Radioisotopes (HLG-MR) (2011) Principle 1: All 99mTc supply chain participants should implement full-cost recovery, including costs related to capital replacement.

16 Supply Chain Level Reactor 100% 151% 220% 318% 345% 345% Processor 100% 107% 117% 131% 135% 135% Generator Manufacturer 100% 107% 116% 129% 132% 132% Impact of FCR on pricing scenario (non-competitive market) Ref. Cdn multi-stakeholder working group for informational purposes only

17 Other cost factors ORC: Outage Reserve Capacity (minimum +35%) Conversion HEU to LEU Regulatory requirements

18 Generator economics Generators are a not blockbuster drugs «Generic» product Low margins High level of regulatory burden : Pharmaceutical GMPs Radioactive (nuclear safety) Transportation

19 Pricing 101 The 10 Commandments of Pricing Strategy By John Rampton Free vs. regulated market Balance of power Not cost based Not uniform Contractual constraints Presence of alternatives Dynamic in time Loss-leader concept Price wars are bad for everyone

20 Impact of new entrants Why do we need new players?

21 Estimated end of production for world's global reactors Country Reactor Estimated end of production * Canada NRU 2016 The Netherlands HFR 2024 Belgium BR South Africa SAFARI 2030 Australia OPAL 2055 Poland Maria 2030 Czech Republic LVR-15 REZ 2028 *Ref. OECD/NEA 2016

22 International projects Major new Irradiators or increased capacity ( ) NortStar: MURR +Linac (USA) SHINE (USA) Nordion/MURR (USA/Canada) Korea Brazil MR Ra-10 (Argentina) Jule Horowitz RR (France) (2022)

23 International Projects Major new processing facilities ( ): ANSTO NortStar/Murr (USA) NortStar (LINAC) (USA) SHINE (USA) Maria (Poland) Korea Ra-10 CNEA

24 Canadian projects Project Irradiator Particularities Location The Canadian National Cyclotron Network PET cyclotron Direct production of Tc-99m Distribution similar to PET local distribution Edmonton Sherbrooke+ Canadian Isotope Innovations E-beam accelerator Production of Mo-99 Proprietary generators Canada-wide distribution Saskatoon & Winnipeg CycloMed99 PET cyclotron Direct production of Tc-99m Distribution similar to PET local distribution Vancouver London, On

25 How will they succeed? The mid to long-term issues are commercial in nature, not technical Private/public investment Attractive business plan showing a return on investment «Fair» market prices based on full cost recovery Willingness of current players to «give away» market share in the interest of the long-term sustainability of the modality* Willingness of payors to fund price increases

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