MDS files $1.6 billion suit over abandoned Mo-99 reactors

July 9, 2008

MDS has filed a $1.6 billion breach of contract lawsuit against Atomic Energy of Canada Ltd. and the Canadian government for their decision in May to halt development of a twin nuclear reactor complex designed to provide a long-term supply of molybdenum-99, to be refined and distributed by MDS.

MDS has filed a $1.6 billion breach of contract lawsuit against Atomic Energy of Canada Ltd. and the Canadian government for their decision in May to halt development of a twin nuclear reactor complex designed to provide a long-term supply of molybdenum-99, to be refined and distributed by MDS.

The Toronto-based firm for medical imaging applications (formerly MDS Nordion) also announced that it would seek arbitration proceedings with AECL concerning the project.

"We have had to resort to taking these steps to protect the interests of patients, the nuclear medicine community, our shareholders, and customers," said MDS CEO Stephen P. DeFalco in a release. "We are disappointed that AECL and the government decided to abandon the project without establishing a clear plan for the long-term supply of critical medical isotopes."

In response to the suit, AECL issued a statement saying it is complying with the terms of contracts with MDS and will vigorously defend itself during the arbitration and civil action.

The lawsuit aims at forcing AECL to honor a contract that promises MDS a 40-year supply of medical isotopes. Mo-99 is the precursor isotope for technetium-99m, the workhorse tracer for most diagnostic nuclear medicine procedures. AECL produces Mo-99 at its aging National Research Universal reactor in Chalk River, ON. Under normal conditions, the capacity of the NRU research reactor is large enough to meet 70% of the isotope demands of North American hospitals and clinics.

The importance of alternative sources for Mo-99 was underscored in late 2007 when a 28-day shutdown of the NRU reactor led many health facilities in the U.S. and Canada to ration or shut down their nuclear medicine services.

Because of long-term supply concerns, MDS began working with AECL in the mid-1990s to develop successor sources for the isotopes produced by the now 50-year-old NRU reactor. It hired AECL to design and build the Multipurpose Applied Physics Lattice Experiment (MAPLE) complex at an original planned cost of $145 million. Construction was completed in 2000, but the twin reactors remained offline because of design problems. Despite numerous modifications, MAPLE was unable to operate up to minimal performance standards in repeated tests.

New talks were initiated with AECL in 2005 after the cost of MAPLE exceeded $350 million, according to MDS. An agreement forged in 2006 transferred ownership of the dedicated isotope facility at the MAPLE complex from MDS to AECL for $68 million. MDS wrote off a $345 million loss from the transaction. The contract also stipulated that AECL would bring the MAPLE reactors into service in October 2008 to provide MDS with a 40-year supply of isotopes.

AECL and the government of Canada in Ottawa announced plans May 16 to permanently shut down the MAPLE project. MDS officials expressed surprise at the time, saying they were not informed before AECL went public with the announcement. Informed sources noted in June that MDS continued to operate with the understanding that AECL still had a contracted 40-year obligation to supply it with isotopes.

AECL had previously announced plans to seek an extension for the NRU reactor's regulatory license, now scheduled to expire in 2011. MDS supports that policy but deemed it inadequate to address the long-term supply issue, according to a release.

For more information from the Diagnostic Imaging archives:

Isotope supply crash drives push for new moly sources

Canadian agency pulls plug on molybdenum reactors

Fear of nuclear terrorism lurks behind molybdenum supply debate