ASP Isotopes, Inc. (NasdaqCM: ASPI) stock is in rally mode. At $1.32 currently, ASPI shares are over 127% higher than where they started in June. And that’s accounting for some profit-taking in the first week of August, with investors early to the ASPI proposition able to book gains from an over 206% move higher to $1.78. The excellent news on Wednesday- the trading momentum is again at ASPI shares back. ASPI stock opened higher by nearly 10%, with investors responding enthusiastically to ASPI’s announcement in June detailing a new supply contract for a highly enriched isotope worth approximately $9 million. In addition to roughly 10% of that, or $900,000, expected to hit ASPI accounts this quarter, the better news is that the deal marks a milestone reached- the contract marks the debut for ASPI doing business in the US markets.
That’s a big deal, noting that ASPI’s foot through the business door could lead to other high-dollar US-based contracts. In the case of South-Africa-based ASPI, and with isotopes in high demand from multiple sectors, that’s more likely than not. Better still, surging demand for the types of isotopes ASPI can supply allows them to capitalize on sales in a seller’s market, meaning clients are willing to pay a premium for specialized isotopes that can be reliably produced and supplied. ASPI checks that box.
That’s not all driving the value proposition. ASP Isotopes has only about 37.39 million shares O/S, and about 45% of that is tightly held by insiders. While that can account for fast directional moves, considering that ASPI is better positioned than ever to increase its client list and expand its business reach, more likely than not, the path of least resistance is higher.
ASP Isotopes Differences Are Advantages
That optimistic sentiment isn’t based solely on the company’s stock performance. It’s fueled by ASPI providing bullish guidance that sales in the US and abroad could catch a tailwind, saying they are earning considerable interest from US and non-US customers to supply specific isotopes needed by end market users in the healthcare, technology, and green energy sectors. Of course, interest is one thing; being able to serve it is another. ASPI can do the latter. The company is strengthening its production infrastructure with the buildout of its facilities, which is expected to immediately contribute to scaling its operations. Completing that mission will do more than drive revenues higher; it positions ASPI to take advantage of its intrinsic and inherent strengths to grow bigger faster in the isotope production sector.
For those unfamiliar with isotopes and why global demand from different sectors is steadily rising, here’s a quick lesson: Isotopes are like identical twins or triplets, very similar in most aspects, except for a few subtle differences. Another definition, this time a more scientific one, calls isotopes two or more atoms of the same chemical element with the same number of protons and electrons but slightly different numbers of neutrons. Here’s where it gets technical. They are mixed together in nature, just like M&M chocolate candies: same composition, taste, and size – just different colors. Needing to be sorted, the isotope separation process puts them into fractions of precisely the same types. As one would expect, it’s a challenging and expensive process because isotopes are so similar, with only minor weight differences being the distinguishing factor. ASPI is up to that challenge.
They leverage two decades of experience as an advanced materials company to develop technology and processes to produce isotopes for multiple industries. That’s made possible by the proprietary technology empowering its Aerodynamic Separation Process (“ASP technology”), contributing to successful production, distribution, marketing, and sale of the ready-for-client isotopes. As noted, ASPI’s work is highly specialized and client-specific, currently targeting revenue-generating opportunities from producing and commercializing highly enriched isotopes for the healthcare and technology industries. While those markets are its current focus, ASPI plans to capitalize on additional market potentials, including those from the green energy sector, with all opportunities served from its two isotope enrichment facilities in Pretoria, South Africa.
One of those facilities is dedicated to enriching isotopes of elements with a low atomic mass (light isotopes), leading toward the initial production of Carbon-14. The second, larger facility will focus attention on producing multiple different isotopes to meet growing client demand for isotopes like Silicon-28, which can be used for quantum computing. Other in-demand isotopes include Molybdenum-100, Molybdenum-98, Zinc-68, Ytterbium-176, and Nickel-64 for new, emerging healthcare applications. To monetize its green energy interests, ASPI plans to produce Chlorine-37, Lithium-6, and Uranium-235 for applications relevant to that sector. Meeting this diverse demand wasn’t an afterthought; instead, it’s an intentional result of ASPI’s ASP Technology, which has proven ideal for enriching low and heavy atomic mass molecules. Both plants are expected to enter commercial production from late 2023 to early 2024, which ASPI expects can generate considerable free cash flow.
Isotope Demand Is A Billion Dollar Market
Higher revenues won’t be coincident with being in the right markets at the right time. Instead, it can result from ASPI’s competitive advantages, allowing it to effectively compete for the lion’s share of a market opportunity estimated well into the billions. That factors in the demand from the target markets mentioned, as well as new ones inherent to its plans to serve isotope needs in the Nuclear Medicine and Green Nuclear Energy space. ASPI is well-prepared to reach these markets, and its production technology will likely attract plenty of business.
That’s because, besides ASPI’s innovative isotope enrichment technology being cost-effective and having modular scalability benefiting them, it’s also environmentally friendly and unique compared to competing separation facilities. Clients appreciate that. They also like that ASPI’s isotope enrichment plants utilize natural isotopes and accelerator-based production, generating zero overall waste. There’s more driving the value proposition.
There is an urgent need to maintain a reliable global supply of various isotopes. Recent geopolitical events have made governments and companies reassess their reliance on Russia to produce isotopes. That’s wise. Russia’s production share of the global medical isotope market is 22%, and China and Russia together comprised 57% of the world’s Uranium Enrichment capacity in 2020. Dependence on those suppliers is in jeopardy of becoming even more significant as 8 of the world’s 9 major reactors producing medical isotopes are expected to shutter over the next 15 years, adding to an already wide gap in global supply for Mo-99 and other isotopes.
Proactive clients are doing what they should- sourcing reliable supplies. And ASPI may already be benefiting from the scramble to do so. An update indicated at least two more supply agreements for crucial isotopes could be in its queue. Securing these contracts could be a significant near-term achievement for ASPI, bringing more revenue streams to help push ASPI closer to positive cash flow. Longer-term guidance shows ASPI expects to sign additional supply contracts for other isotopes from 2025-2028, with increased production supported by planned facility builds and upgrades. In addition to the two mentioned, a third enrichment facility could be completed by the end of 2024. That one is being designed with enhanced energy-saving integrations to facilitate revenues falling faster to its bottom line.
Know this- while most people have yet to hear of isotopes or what they do, demand is real and growing. Carbon-14 is already serving user demand in the pharma and agro-chem sectors. Additionally, two Molybdenum isotopes will be available in late 2023 for nuclear medicine, adding to the value from its silicon-28, under construction for quantum computing uses. Other isotopes in ASPI’s research and development pipeline include variants of Germanium, Ytterbium, Nickel, Xenon, Chlorine, Lithium, Zinc, and Uranium. Each brings tremendous potential for ASPI to exploit diverse revenue-generating opportunities.
ASP Isotopes Unique Separation Processes
Attribute that to ASPI’s unique approach and technological processes to making isotopes. Unlike conventional methods for isotope separation, such as gas centrifugation, which are costly and often require substantial capital investment, ASPI’s separation process utilizes a stationary cylinder wall while gas spins rapidly due to pressure application and flow directors. The absence of moving metal components leads to reduced expenses and simpler operations. It also mitigates excess capital expenditures and lessens maintenance costs.
That’s a key differentiator and advantage expected to help increase ASPI revenue run rates during the remainder of this year. So should business generated from its Carbon-14 isotopes. It’s already expected to contribute significantly to ASPI growth through in-place multi-year supply agreements expected to generate upwards of $2.5M. Applications for Carbon-14 are plenty, especially in the science space, appealing to that sector because of its relatively harmless emission and long-lasting half-life. Commercial Carbon-14 production is expected to commence by the end of this year. Additional milestones in the crosshairs include targeting isotope market opportunities from the SPECT scan imaging market, with a combined global revenue-generating potential from that market, a $4.61 billion opportunity. Notably, that number could grow further as specialized isotopes pave the way for new, inventive uses.
To reiterate: concerns that 95-98% of Molybdenum-99 is produced using highly enriched uranium targets, coupled with those 8 of the world’s 9 major reactors retiring in the next 15 years, ASPI is in the right markets at the right time. Moreover, they have the right products to serve and even more in development.
Potential To Fill A Massive Global Supply Gap
That’s excellent news for countries, including the United States. It relies on imports for 95% of its uranium and 81% of its enrichment from foreign sources, exemplifying the potentially massive revenue-generating opportunity from that market potential alone by being a “friendly” and reliable isotope supplier. Putting more revenues on target, other countries are focusing on raising nuclear power capabilities. For instance, the UK aims to expand nuclear power from 15% to 25% by constructing 8 new plants by 2050. India and France have plans to build 10 and 6 new reactors, respectively, and Japan aims to produce 20-22% of its electricity from nuclear sources by 2030. China currently has 38 operational reactors and 19 under construction, with further plans to produce 70 GW of power by 2025.
Those figures indicate growing concern has indeed led countries to plan new solutions. Again, Russia can be the wild card; it contributes 35% of the world’s enriched uranium. Moreover, it exposes a potential supply chain disconnect between their ability and/or willingness to supply and the United States need to import.
Fortunately, microcap ASPI could be a game-changer for the isotope sector. Its proven proprietary technology and research to enhance isotopes of varying atomic masses enable specific isotope production for multiple industries and applications. Furthermore, geopolitical factors and favorable market conditions support rapid expansion driven by an urgent need for reliable isotope sources. With ASPI’s operational performance and two enrichment facilities near completion with a third to follow, they are ideally positioned to help address a global need. In fact, ASPI looks better positioned than ever to have breakout growth starting this quarter, leveraging innovative isotope technology enabling ASPI to serve the increasing demand and, as importantly, mitigate potential supply shortages and reliance on sometimes hostile trading partners.
Thus, despite shares surging 127% in July, there could be more upside to ASPI stock. Even reclaiming its August high of $1.78 puts an over 32% increase in the sights. But, with revenues accruing and additional contract announcements expected, reaching that level may be a brief rest stop, not a stopping point.
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