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Chances slim for medical plants to re-open

Profile image for By Peggy Heinkel-Wolfe
By Peggy Heinkel-Wolfe

Licensing officials remain skeptical of company's progress

Hopes to re-open two medical manufacturing plants in Denton are dimming because state licensing officials in the radioactive materials division appear to have run out of patience.

Paul Crowe, a Utah businessman, has been trying for seven years to raise money to re-open the plants, which manufacture medicine to diagnose and treat cancer and other illnesses.

Crowe recently told the Texas Department of State Health Services his company, U.S. Radiopharmaceuticals, is close to securing $27 million to pay off old debts and infuse new cash into the project. In the past year, the company has paid off more than $1.4 million in back taxes owed to the school district, city and county.

The Denton Record-Chronicle recently filed an open records request with the state health department and obtained internal memos about the plants’ application to re-open.

The records show state licensing officials remain skeptical, however. In January, they noted USR hasn’t made substantial progress on financing since 2013. The company also lacks a key manufacturing license from the Food and Drug Administration needed to re-open the plants.

State licensing officials recommended that USR receive a notice of violation on its manufacturing license application pending in Austin for years. The citation serves as the state’s first step in denying the application.

Adam Whitten, USR’s local attorney, said the company still has a license to store the low-level radioactive waste that has remained on the site since the plant closed.

“The site is and always has been licensed for storage of radioactive material,” Whitten wrote in an email. “In fact, the site has just passed state inspection and remains secure. The site is not currently licensed for production of radioactive material until fulfillment of certain requirements, which we are working diligently with our partners and investors to complete.”

Twice in 2015, state licensing officials set deadlines for USR to settle its financing. Twice they granted the company extensions on those deadlines. In January 2016, they gave their final, 30-day deadline.

The state has not yet issued the notice of violation, according to Chris Van Deusen, spokesman for the Texas Department of State Health Services. He couldn’t say when the citation might be issued, since the administrative team that evaluates those cases meets monthly.

In addition, USR has the right to protest the citation once it’s issued, including asking for a formal hearing with an administrative judge.

“So, that can take some time,” Van Deusen said.

The back story

After state and federal officials abandoned the $2 billion Superconducting Super Collider project in Ellis County 20 years ago, local scientists acquired the project’s linear accelerator for $5 million.

They had been making isotopes at a plant on Jim Christal Road using cyclotrons. They re-engineered their new atom smasher to produce a wider variety of medical radioisotopes in a new plant on Shady Oaks Drive.

Medical radioisotopes can help diagnose and treat disease. Iodine-123, for example, helps doctors see a patient’s thyroid, and thallium-201, a patient’s heart. Iodine-131 can treat thyroid cancer. Copper-67 shows promise as a treatment for non-Hodgkin’s lymphoma.

Ten years later, the plants saw financial troubles worthy of a movie script. A Canadian company bought the plants from the local scientists. Then its financial backer, Medical Capital, ousted the original management team and put Crowe in charge of the plants.

Soon after his arrival, Medical Capital collapsed, triggering an investigation by the U.S. Securities and Exchange Commission. The plants closed.

A court-appointed receiver alleged that Medical Capital, which no longer exists, was a Ponzi-like scheme that had taken about $1 billion from 12,000 investors. Medical Capital’s president eventually pleaded guilty to wire fraud.

Although the Denton plants were not implicated in the federal investigation, they were swept into federal receivership along with Medical Capital. Crowe secured the property out of federal receivership in December 2011. He had hoped to reopen the plants in January 2013.

No one has made medical radioisotopes at the plants since 2009. Leftover, low-level radioactive waste has been sitting in the warehouse on Shady Oaks Drive ever since.

The linear accelerator sits idle and radioactive, but contained, in a subterranean concrete tunnel in the building next door. Cyclotrons, also used to make medical isotopes, also sit idle, but radioactive, in the plant on Jim Christal Road.

An uncertain future

It took state officials a while to claim the bond the Canadian company put up when it first bought the plants. The state requires manufacturers to set aside money to clean up and dispose of the radioactive waste in case a plant closes.

Van Deusen said state officials recognized the position they were in, should the state ultimately deny USR’s manufacturing application.

“It’s certainly on our radar, but it’s premature to go down that road,” Van Deusen said.

The bond money is probably enough for the state to pay for crews to truck off and dispose of the leftover waste sitting in drums in the concrete-lined warehouse at the Shady Oaks plant.

But it’s not enough to truck off and dispose of the manufacturing equipment. Previous estimates to decommission the linear accelerator and cyclotrons started at $2 million, state documents showed.

Several years ago, radioactive materials staff members informally estimated that figure could reach $7 million or more, depending on where the equipment was disposed at.

“We recognize that position and we’ve been in contact with the city and the county,” Van Deusen said.

According to the Texas comptroller’s last report to the Legislature, the state treasury has about $30 million in a fund dedicated to clean up low-level radioactive waste. The Legislature appropriated about $3.6 million for clean-ups around the state in 2015-16.

The Legislature convenes for its 85th biennial session in January.

 

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.