Episode #335: Startup Series – Thomas Eiden, Atomic Alchemy, “There Is A Vast Shortage Of Man Made Radioactive Materials”

Episode #335: Startup Series – Thomas Eiden, Atomic Alchemy, “There Is A Vast Shortage Of Man Made Radioactive Materials”

 

Guest: Thomas Eiden is the founder and CEO of Atomic Alchemy, a company dedicated to producing radioisotopes used in nuclear medicine.

Date Recorded: 7/7/2021     |     Run-Time: 1:01:13

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Summary: In today’s episode, we’re going nuclear! Thomas is undertaking the audacious goal of building a nuclear reactor, something that takes almost a decade and roughly 100 million dollars. We start with what sparked his interest in nuclear energy and what gave him the nudge to apply to Y Combinator and raise seed capital with just a business plan. We take some time to dispel myths around why nuclear energy is dangerous and then pivot to talk about the uses in the medical field, whether it’s with MRI’s or trying to fight cancer.

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Links from the Episode:

• 2:25 – Intro
• 3:03 – Welcome to our guest, Tom Eiden
• 5:16 – How Atomic Alchemy is helping to solve the unknown nuclear crisis
• 8:06 – Understanding nuclear energy
• 9:38 – How startups are changing the landscape of nuclear waste
• 11:35 – Putting our fear of nuclear power in perspective
• 12:23 – Tom’s TEDx Talk: Sex is More Dangerous than Nuclear Power
• 15:41 – Why the Chernobyl disaster isn’t a valid argument against nuclear power
• 17:01 – The spark that started Tom’s interest in nuclear medicine
• 19:15 – Tom’s decision to apply to Y Combinator
• 21:52 – Atomic Alchemy’s journey from initial funding to building a facility
• 27:03 – The unique advantage offered by Atomic Alchemy’s facility
• 29:59 – The main use case for nuclear medicine
• 31:28 – A promising new field of nuclear therapeutics
• 33:24 – Problems with the current supply of nuclear medicine
• 36:05 – How a volcanic eruption highlighted the severity of a nuclear medicine shortage
• 38:59 – Planning for the time-consuming regulatory process
• 40:30 – Atomic Alchemy’s key milestones
• 42:47 – Atomic Alchemy’s launch timeline
• 43:40 – The size of the nuclear medicine market
• 46:21 – Industrial applications for radioactive materials
• 49:09 – Why Tom is hesitant to seek government funding
• 50:10 – Atomic Alchemy’s plans for future financing
• 49:33 – Tom’s memorable experiences on the startup journey so far
• 54:41 – Connect with Atomic Alchemy; Twitter, LinkedIn, Facebook

 

Transcript of Episode 335:

Sponsor Message: Today’s episode is sponsored by The Idea Farm, my own private, curated research service that gives investors access to research reports often used by the world’s largest institutions, funds, and money managers. These reports come from some of the most respected shops in investing, many of them costing thousands of dollars. We also send our favorite investing podcasts from the past week, and so you can be sure to only listen to the best of the best. Also included in the subscription, we send out our quarterly valuation updates like the CAPE ratio, so you can see which countries appear to be the cheapest for new investment dollars in the stock markets all around the world. We also have the Quant backtester, which allows you to evaluate various strategic and asset allocation strategies going back in time. So all this can be yours with a subscription to The Idea Farm, and best of all, you can try it out for a free, no-risk 30-day trial. Are you ready for an investing edge? Visit theideafarm.com to learn more.

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Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: Welcome, podcast listeners. Today, we have another episode in our podcast founder series, where we invite kick-ass entrepreneurs to chat about their experiences from the frontlines of starting a company. We cover everything from newly minted startups still struggling to make it out of their garage, all the way to the elusive unicorns that are either transforming traditional business sectors with innovative ideas, or creating entirely new ones through cutting-edge technologies. Either way, the result will be total catastrophic failure and bankruptcy, or hundreds of millions of dollars of revenue and a valuation worth north of a billion dollars. Listen in to hear the tales of blood, sweat, and tears as these founders try to change the world. As a disclosure reminder, I’ve invested in most, if not all of these startups, and will look to invest more as they continue their startup journey. Please enjoy the next episode in our founder series.

Meb: Welcome, friends. In today’s episode, we’re going nuclear. Our guest is the founder of Atomic Alchemy, a startup undertaking the audacious goal of building a nuclear reactor, something that takes almost a decade and roughly $100 million. We start with what sparked our guest’s interest in nuclear energy, what gave him the nudge to apply to Y Combinator and raise seed capital with just a business plan. And we take some time to dispel myths around why nuclear energy is dangerous, and then pivot to talk about the uses in the medical field, whether it’s with MRIs or trying to fight cancer. Please enjoy this episode with Atomic Alchemy’s Thomas Eiden. Tom, welcome to the show.

Thomas: Pleasure to be here.

Meb: Audio listeners can’t see this, but you’re on the moon, or at least it looks like on the moon.

Thomas: It’s Pluto.

Meb: Oh, is it a planet in your mind or what?

Thomas: Always has and always will. But there’s a special reason why I have this as my background, and I can get into that a little bit here.

Meb: Let’s hear it. What is it?

Thomas: Well, it has to do with some of the noble talk about what my company’s trying to make and how it ties into space exploration.

Meb: Oh, interesting. I’ve never heard that angle. Where do we actually find you in the real world today?

Thomas: I am in the wonderful desert city of Idaho Falls, Idaho.

Meb: I come from a family of fishermen in Colorado, and I really want to float down, it’s like a five-day trip though, and go fishing in Central Idaho. Some of the most beautiful country over there. But as with anything, trying to coordinate and find some time to take five, six days off to go on a fishing trip. But we’ll definitely come say hi when we do.

Thomas: It’s kind of funny because the National Lab in the area here, Idaho Falls is kind of really known for Idaho National Laboratory. They kind of compete with Oak Ridge National Laboratory over in Tennessee for who’s got the better sort of outdoorsy sort of extracurriculars to do. So, please work here. We have lots of fishing, and hiking, and mountains. So, it’s a fantastic place to come do those things.

Meb: We had an awesome time over in Sun Valley and driving through. And there’s like a back way to get to Sun Valley that’s on a pretty suspect road. And we had sort of a hair-raising experience where there are no guardrails. You just look over the side of this gravel road and, well, that would be the end of that if you went off the side. But a lot of good breweries and everything else in between.

So, let’s get to the topic of the show. We’re going to mash together two words that have probably never been uttered outside of today’s podcast and your background, and that’s nuclear reactor and startup. Has anyone ever said those two together before? Talk to us a little bit about what you guys are up to, and then we’ll dig deep into this topic and the full story.

Thomas: Nuclear reactor and startup. And interestingly enough, if you kind of do a search for those two terms, you will come up with some startups that involve nuclear reactors for power production. Nuclear energy is a pretty hot topic these days, especially in the context of climate change and climate change mitigation. But we’re kind of different in that we’re building nuclear reactors, not for electricity but for manmade radioactive materials. The first thought is, “Well, why do you want to make more radioactive materials?” Because the number one question with nuclear energy is, what about the waste? And so, what we’re doing actually is making manmade radioactive materials in the service of humans, specifically for nuclear medicine. And so, there’s a very little known problem, I kind of call it the unknown nuclear crisis, is that there is a vast shortage of manmade radioactive materials. And the reason that is because there aren’t enough nuclear reactors making these materials that go into the manufacturing of very important things like nuclear medicine.

And so, what our startup is trying to do is build the world’s first set of nuclear reactors specifically for the production of what we call radioisotopes, or radioactive materials. And the last time there was a commercially owned and operated reactor specifically for this purpose was at least, what? Thirty years ago now. The only privately-owned reactor that made these materials actually was in the United States, in upstate New York. It was commissioned in the late ’50s, early ’60s, and shut down in the ’90s. And so, since then, there’s been kind of a harrowing issue with sourcing these materials because the number of reactors that make them have been dwindling as they’ve aged and shut down over the decades.

Meb: It seems like one person’s structural problem is another’s opportunity. It’s funny you mention that about the general shutdowns. You’re a Wisconsin grad. I’m a Virginia grad. And I’m fairly certain we had a nuclear reactor at our campus. This is in Charlottesville, Virginia. And I think it shut down when I was there, because they actually…I was an engineer, they offered a nuclear engineering degree at the time. And I said, “No, no. That looks way too hard.” And so, opted for one of the easier ways out. That’s kind of been the story of the past 50 years. And part of that, I think, is due to the perception, right or wrong, probably wrong, from nuclear in general that I’m sure the recent show, “Chernobyl,” probably didn’t help at all. I’ve seen you talk about nuclear industry in general. Give us a quick overview for those who aren’t as familiar with nuclear power in general, what is it? Why do people hate it? Should they be afraid?

Thomas: Nuclear energy is really a fancy way of boiling water and making electricity. That’s all it really is. A predominant form of electrical production today is either coal or natural gas, where you’re burning a hydrocarbon, and you’re burning it to heat water, generate steam, turn turbine, make electricity. And so, nuclear is a better way of doing that because it does not produce many emissions, whether it’s particulate matter, or if you’re concerned about carbon dioxide, that, but it also is amazing in that it’s got incredible energy density. There’s so much energy packed away in an atomic nucleus versus a combustion reaction, where it’s just a chemical reaction.

Nuclear power plants only have to refuel once every year and a half to two years because of how energy-dense it is. And another really great thing about energy density is that all of the, at least United States… I forget if it’s the United States or the world, but all the nuclear waste ever generated from power production can fit any football field about 10 meters high, and that’s all of the waste generated over us ever producing electricity with nuclear power. And that’s an incredibly small amount of waste for five, six decades of energy production, for which a lot of people who are concerned about nuclear waste, it’s like, well, it’s a hunk of metal that just sits here, and there’s not much of it for how much power we produce.

And what’s really cool too is that, a really neat reframing nowadays of nuclear waste because that’s sort of people’s number one concern, the general public’s concern, is that only a small fraction of that fuel has really been “burned” when it was being used. There’s still at least 95% or more useful energy locked away in that spent fuel. And so, there are a number of interesting startups these days that are developing what are called fast reactors. They work, without getting into too much nitty-gritty technical detail. They, unlike the current regime of power plants we have, which are cooled with water, and they use slow neutrons to fission uranium. These reactors use really fast neutrons, high-energy neutrons, and can actually burn that nuclear waste. What’s really exciting about that is that all of this waste that’s been accumulating over the last several decades is now wealth that can be used to make more electricity with little to no emissions. It’s just really cool to see these companies developing this technology kind of being in the field at this time, which sometimes feels like we’re kind of at the trough because there has been a very strong anti-nuclear movement in the last couple of decades. I’m starting to become a bit more optimistic. I’ve been more of the, “I’ll believe it when I see it,” and I’m starting to see it.

Meb: Is it just because the major events that get people worked up about nuclear, the Fukushimas, the Chernobyl’s, the nuclear power bombs that get everyone fearful? What is the big opposition, if you had to boil it down to its basic core? Because there is, if you were to ask people, I’ve heard you ask this, like how many people has this killed over the past 50 years, etc.? And, listeners, come up with your number in your head. There tends to be a pretty big disparity, what’s behind it?

Thomas: And that’s something I’ve been kind of struggling with for the longest of time because, since I’m in the thick of it, and I have at least, I believe, a pretty strong technical understanding of how the technology works, it’s kind of starting to get to the point where there’s really no excuse. If you’re like really serious about a lot of the climate change related issues today, it’s really hard to say you have an issue with nuclear power just because of all the upside it has. Now, the downside is, what’s commonly cited, the big Boogeyman, is the meltdown. And we saw that with Chernobyl, and we saw that with Fukushima.

But the interesting thing is, the number of people that died because of Fukushima, from the radioactivity per se, essentially is zero, and more people actually died from the forced evacuation around the plant. So, to kind of put it in perspective our risk perception. I actually did a TEDx talk a couple of years ago that was provocatively titled “Sex is More Dangerous Than Nuclear Power” because there’s actually more documented cases of people dying from sex, or from childbirth, or from so many mundane things in our daily lives versus the number of people that have died from commercial power in the United States since it started in the 1950s, which is zero.

If you think about the United States Nuclear Navy, the people that operate submarines and aircraft carriers that are run by nuclear reactors, they’re kids, literally kids. They’ve got 18-year-olds that go through nuclear power school. And so, you have people in their early 20s that are operating these megawatt power plants. And over millions of miles, I don’t have the number off the top of my head here, but over a million plus miles of, and decades of operational experience, there have been essentially no fatalities from kids operating the power plants.

And so, there are credible issues as with any technology where you’re unleashing large amounts of energy. You got to be careful. But if we look at sort of the deaths per terawatt energy produced between the various forms of electrical production, nuclear is by far the lowest. I mean, more people fall off of roofs trying to install solar panels and died than from the radiological aspect of nuclear power. So, it’s hard for me to understand where someone who looks at nuclear power and says, “Oh, this is an incomprehensible risk. We cannot afford to do this because there’s just this existential threat to human life and/or the planet.” And it’s like, the numbers don’t lie.

Meb: It’s weird to square that circle, because, an example we like to give when we talk about this with investing, we’re like, the things that matter are not the things you’re really afraid of. What’s everyone worried about in investing? It’s like market crashes. But what they totally ignore things that are so simple as fees, and taxes, that actually erode your wealth in the long term. And the example we give, and we should throw nuclear in here, is it’s actually Bill Gates’ chart, and I know he’s a big nuclear fan, it’s like the top 20 animals that kill humans per year. And I was like the ones that are everyone are afraid of, sharks, lions, wolves, whatever, they kill like 100 people total worldwide. And so, I always try to get people to guess any of the top 10. And number one is mosquito. Number two is I think people, other people kill other people, not surprising. And man’s best friend is like number three or four, so, your favorite pet. But then the next six to the next eight are like snails, bugs, worms that you’ve never heard of, and no one wakes up crying at night saying, “Man, I had this terrible dream about a snail.” So, it’s a weird behavioral sort of artifact. But hopefully, that’s changing, and hopefully you get innovative countries or legislators that are open to it. There’s some in Europe that have pretty high percentage power generation from nuclear. But anyway.

Thomas: France is a fantastic example, because I think it’s like 80% of their power, it’s something, a very high percentage like that. And like the issues with Chernobyl, there must be some sort of logical fallacy that we can come up with or name after the Chernobyl thing. Because like, drill, checkmate. It’s like, it’s a single accident that happened almost 40 years ago because the communist government there was doing some things with a poorly designed reactor that it shouldn’t have been doing. And it’s like, “Okay, let it rest.”

Something happened 40 years ago, killed a couple of dozen people in the cleanup effort, and the consequences were as far-reaching as they were because the Soviet government was trying to cover it up and say, “Hey, look, nothing happened.” And so, it’s like, “Let it rest.” We’ve got fundamentally different technology today. That technology in Chernobyl never was used here in the West. And it’s just like, “Let it rest.” We’ve got better technology and better ways of doing things now. Let’s do it.

Meb: So, let’s rewind back. So, you were a reactor engineer. And tell me a little bit about the origin story behind the idea behind Atomic Alchemy. It’s such a great name. I can’t imagine someone sitting around saying, “You know what, I got a great business idea. I’m going to go build this very ambitious startup idea.” How did the idea come to you? And how did you decide you had the crazy inspiration to actually make it happen?

Thomas: I think the story kind of starts way back in the olden days when I was a wee college student. I was fortunate at the University of Wisconsin-Madison to be able to go through a nuclear power program that involved actual operations of a nuclear reactor. There is a reactor on campus. It’s actually next to the football stadium, which surprises a lot of people. But there are technologies that are so safe that they can’t really melt down, and a small reactor like that is one of them.

I was going through reactor operations class. It’s one of those things where, as you kind of go through your program and you start learning more about the technology, you start learning about the broader industry in general, there was always this sort of weird problem that wasn’t really ever…had anything to do with power, but it still had to do with nuclear technology. I mean, it was this lack of or this chronic shortage of these radioactive materials.

And I would always ask, “Hey, why is no one doing this? Why can’t we just build reactors like the one we’re operating, maybe a little more powerful, so that they can produce more material?” I always got this answer of, “Oh, it’s too hard, or nobody’s really done it before, blah, blah, blah.” There’s always some sort of excuse. And it always kind of bugged me. And then I kind of forgot about it as I graduated. My first big boy job at Idaho National Laboratory, where I was designing fuel loadings for the Advanced Test Reactor. And one of the things that the Advanced Test Reactor does, tangential to its primary mission of scientific research, is produce some radioisotopes for a select few customers. And it got me thinking again, like, “Oh, yeah, there’s some cool capability in this reactor. We can make some cool stuff.” And I kind of started revisiting this issue that there’s, at least since the ’90s, have been the shortage of radioactive materials for important things like nuclear medicine.

There’s a discrepancy here between what I’m hearing, where people are saying, hey, there’s not a big enough market. It’s too hard to do. It’s too expensive. And looking at the raw market numbers, where it’s like, hey, this is a $10 billion industry. And it’s just like, okay, something’s not adding up here because there’s a lot of money being made, and there’s a lot of stuff not happening to make that market cap bigger. There’s a segmentation of knowledge here between the people that actually have the nuclear understanding, the reactor understanding and the people actually making the medicine.

So, the more I looked into it, the more I’m like, “Oh, this is definitely doable. I know how to design reactors. I have a good understanding of the underlying technology here. And there’s an interesting idea here. I think something can be done.” This idea kept kind of festering and festering, “I should do something about this.” And I had the very great fortune of sitting down for breakfast one day with Blake Scholl, who’s the CEO of Boom Supersonic, really awesome guy. And he’s like, “Have you ever tried applying for this program called Y Combinator? They fund crazy ideas like this.” I’m like, “Never heard of them.” So I did some research and like, “Hey, this is cool. I can fill an application, and people will give me money to start a company to do this crazy idea.” So I did.

And I actually got in on the first shot. I learned later that my batch had an acceptance rate of 1.2%. It was something crazy low. I thought getting into college was hard, and I was like, “Oh, man.” So, it was kind of a crazy ride, because I had this interesting idea where I almost have an unfair insider knowledge of how to make the stuff, and some people that were like, “Yeah, this is a really interesting moonshot idea. Here’s some money.” And so, I quit my day job, which was kind of…I remember my dad going, “You did what?” Because working as a reactor engineer at the Idaho National Lab, I had almost what you would call a dream job in the nuclear field, because there is not a whole lot going on in terms of real development. The pace is starting to pickup. But because a lot of the academic stuff, reactor design more or less ends up in a filing cabinet after you write your paper. I was in a unique position where I would do reactor analysis, design a core for the Advanced Test Reactor, and then people would actually configure it that way and run their tests. So, it was like my work actually turned out to be real stuff. It was really cool. And it’s like a nuclear dream job.

And so then, when I told my dad that I quit my job to start this company, he’s like, “You were set for life.” This is one of those things where, if you don’t do it or at least you don’t try, you’re going to regret it in 20 years. If I fail, I can always go apply back there again. They miss me. I did a good job.

Meb: That makes two of us. My old man had the same reaction when I started my company, and that’s going on over a decade now. So, kudos. Well, also kudos to Y Combinator. I mean, you definitely don’t fit the traditional mold of a startup. So, okay, give us the kind of timeline horizon. Y startup, I mean, Y Combinator, is what year, and then what happens next?

Thomas: Yeah. So, I was in the Winter ’19 batch. And so, my demo day was the spring of March 2019. And just a little bit of background too about YC, because you mention it, where it doesn’t fit the traditional mold. It was difficult because, as a sort of non-software company, I had to do a lot of translating of, “Yeah, okay, this applies to SaaS companies. But I’m not a software company. I’m not a B2B software company.” So, there was a bit of translation. But I was fortunate because, each year they’re increasingly adding more bio companies. And so, I was able to make a lot of friends who were doing similarly challenging things in the field of biology, therapeutics.

But my demo day was March 2019. And I had a pretty decent initial seed raise that was very difficult trying to lay out the context, the full picture of, “Hey, this is what we’re doing.” Because a lot of people get caught up on, “Oh, you’re building a nuclear reactor?” Where it’s like, “Yeah, we are, but it’s a part, a component. It’s a widget in factory that we’re building. It’s more than just the reactor.” But that’s the big, hard challenge is licensing a reactor.

And so, in the fall of 2019, we actually sent in our letter of intent to the Nuclear Regulatory Commission to say, “Hey, we’re doing this. We would like to engage you a bit more and to tell you what’s up and start the process.” And then, in the spring of 2020 and then the last year and a half, it’s been a lot of facility design. So, not only did we have to kind of come up with a unique reactor design that’s specifically built to be efficient for production of these materials, because, like an airplane, the design of the reactor plays a big role in how well it does on a particular thing you want to do. We also designed the factory. Because one of the challenges with radioisotope production is that the material you’re working with is radioactive and is treated as hazardous material. And you need to get it around the facility in a way that you’re not giving a bunch of people radioactive doses.

Meb: How much of this is like a template? I mean, is there a thing where the Nuclear Commission or whatever you call them is just like, “Here’s the standard design. We’re doing this.” It’s just boilerplate, stamp, good? Or is it like, no, you have to recreate the wheel and start from square one? How customized is it? And I’m picturing you at Y Combinator. I mean, how many, was it just you? Was it like you have a team of a dozen already or what it look like?

Thomas: So, the phenomenal thing is that I managed to kind of get to this point as a single founder. I had a co-founder that I originally acquired through YC. But he kind of had cold feet. I mean, when it came time to put the feet to the fire, he was like, “Oh, no, I like my financial security. I’ll work on the side.” And YC was like, “No, you’re not.” And so, he had to depart. And so, I raised my initial seed round as a solo founder with no employees yet, going, “Hi, I’m Thomas Eiden, and I’m going to build nuclear reactors.” And it was challenging because the conventional answer was, “Bless your heart.” But there were some who saw the vision. And it’s like, “Hey, I get this funding, we can start hiring people,” because Idaho Falls here has a vast wealth of nuclear experience knowledge. There have been 52 reactors that have been built at Idaho National Lab site. So, there’s a lot of knowledge out here that I was able to tap into.

A lot of the way we’re billing the project to investors is that we are trying to use as much commercial off-the-shelf technology as practicable. Because, yes, from a regulatory standpoint, if you’re using technology that’s already been approved in some fashion and is not being used in an entirely different way that would challenge its design, it’s vastly easier to get that permission to build and operate these facilities. So, that’s exactly what we’re doing. We did have to come up with a slightly new reactor design that’s optimized for the production of these materials. But by and large, it’s really just a bunch of components that are used in currently operating reactors, just rearranged in a different way to make it more favorable to producing radioactive materials versus power, essentially.

So, there’s no template per se. If I were to build a power plant, there’s a lot of “templates.” You can go to a vendor like Westinghouse, or GE, Hitachi, and they have reactor designs, pressurized water reactor designs, boiling water reactor designs that you can be like, “All right, I want to build this thing.”

But for what we’re doing, like I said, the last time that anyone’s really done this specifically, I mean, it was in the ’90s. We did have some template portions of our, say, production process. So, the separation of the radioactive materials you want to use for the nuclear medicine and the stuff you discard that is not very useful. That process is actually pretty well-fleshed out. So we were also able to use a lot of prior art from decades of the stuff having been produced domestically also long ago. So there are aspects that were kind of taken from existing designs. But what’s unique about our position is that, unlike how anything in this realm of manufacturing is done today for nuclear medicine, we have the unique opportunity that we are able to design our facility from the ground up and kind of see what do we need to incorporate from a facility-wide perspective.

And I guess, to give you an idea of what that means. So, right now, the supply chain is, you’ve got some government reactor that is what is used to make the material. It then gets shipped off to either a government, or a private entity’s chemical separation facility, somewhere else geographically to separate out the stuff you want. And then that sort of purified material goes to a third place where they actually turn it into the medicine that then goes to the hospital. It’s a very segmented, very fractured supply chain owned by multiple entities throughout the process. And so, what we’re able to do, that efficiency, that ability designed from the ground up is so important because we can take that whole supply chain and shove it into one facility and increase the efficiency.

So, to put it in perspective, it’s kind of a made-up unit, but it’s called the six-day Curie. Now, Curie is a unit of radioactivity. And the six-day Curie is used as a standard-ish unit for, “Hey, I’m going to order a thousand six-day Curies at this hospital I work at.” What that means is, you make a bunch of stuff over here, and by the time it actually gets to the hospital, there’s only a thousand Curies of that material left because these materials are radioactive. Every second, every minute, every hour, it’s disappearing. It’s radioactively decaying into something not useful. For the time it takes between six days of creation to receipt, you lose a bunch of material, and then the unit they use is the unit of radioactivity of what you receive at the hospital. And by being able to shove all the stuff into one facility and vertically integrate it, we can bring it down to something like a two-day Curie. Because we can take it out of the reactor, straight to the box where we do the chemical processing, straight to the device that you have the sterile creation of the drug, essentially, and then direct from manufacturer to the hospital. So, it’s a very unique opportunity to sort of capture all of the gains in reduction of manufacturing costs, reduction of shipping costs, because it’s very expensive to ship radioactive materials, heavily regulated, and all the associated regulatory costs in terms of all the different types of facilities that handle these materials and all the shipping in between. Well, it’s a unique opportunity to capture a lot of gains that can’t otherwise be captured with existing facilities.

Meb: What’s the use case? Is it mostly MRIs?

Thomas: So, the largest use of this is, yes, diagnostic imaging, but by far, the biggest use of these materials is for imaging the heart. Like cardiovascular disease is a huge issue in the West. And it is, I think, 80% of the radiological procedures for nuclear medicine. So, I think it’s called myocardial bifurcation. It’s a really fun name like that. But it’s essentially, you receive a dose of this radioactive material in a sort of low-stress environment, which they use the radioactivity to capture with a camera, kind of like when you go to the dentist and get an X-ray. It’s very, very similar to that. And so, they image your heart with the radioactive material coursing through your veins, so to speak, and then they put you through a stress test, and then give you a second dose and take an image of your heart under stress. And then they can find those changes and see where there may be a torn thing here, a worn-out valve there. So, by far, imaging and then specifically heart imaging is the biggest source of market share of diagnostic imaging.

Another very unique and exciting technology that these radioactive materials are starting to be used for, and there’s still a lot of clinical trials that need to be performed first. But a burgeoning new field is therapeutics using radioactive materials. And what’s so cool is, if you think of fighting cancer, you basically have chemo and it’s like a war of attrition. You’re trying to kill the cancer, and you’re kind of dosing yourself with some really nasty poison to do that. It affects your whole body.

Well, what you can do with radioactive materials is attach that radioactive atom to something like a glucose molecule, sugar, or to an antibody that specifically seeks out this cancer and deliver that radioactive material to the tumor. The tumor either consumes the sugar and consumes it faster than the rest of your body, or the antibody directly attaches to that cancer cell. When the radioactive atom undergoes decay and unleashes a lot of energy, it will then kill the adjacent cancer cell. So, it’s like targeted chemo. So, this is a really cool development that I’m kind of watching happen before my eyes as I get into…because most of my experience here is with reactors. But as I get more into the medical side of things, reading the research papers, how they’re using this material, it’s phenomenal. And I’m really looking forward to a lot of these developments that will have significantly less sort of collateral damage on the body and is a much better way of delivering radiation than say like beams, where you have to shoot the radiation through your body to get to the tumor. Something to look out for, nuclear therapeutics.

Meb: So there are a lot of use cases. You’ve figured out there’s a supply chain disruption. Who makes most of these? Is it governments? Is it companies around the world?

Thomas: I should have probably started with this as part of the problem statement. But right now, the United States consumes about 50% of the world’s supply of nuclear medicine each year. The collective we produce about 0% of it. And right now, the entire world’s supply of these radioactive materials that go into the production of nuclear medicine are sourced from just six nuclear reactors worldwide, just six. And they all happen to be government-run, which is a little bit of icing on the cake. If you were a fan of the recent vaccine distribution, just wait until you see how they distribute nuclear medicine.

Really, the problem is, is that these nuclear reactors that these governments run, their sole purpose is not production. They’re not factories. Their staff is not factory workers. It’s for scientific research. And so, they’ve been designed in a particular way that is for one purpose, but you actually can also kind of do this other thing with them. But the fact of the matter is, once you build the reactor and the facility around it for this purpose, it’s a lot of time, money, and regulatory pain to like kind of change what you use it for. And you can’t just scale the size of the reactor up. Once you build the reactor, it is what it is until you decommission it. You can’t scale the facility, so to speak.

The huge problem that we’re trying to build this factory as quickly as possible, get our technology licensed as quick as possible, is because five of those six reactors are over 40, 45 years old. Once you have a machine that’s that old, that is as complicated as reactors typically are, you do get increasing unexpected maintenance outages, which, if any two of these six reactors goes down at any time, you’re looking at legitimate you can’t buy the stock shortages. One of the things that really woke the world up, so to speak, at least in the nuclear medicine community, because a lot of people still don’t know this problem exists, was when, and it’s a really long name, but a volcano in Iceland erupted a couple of years ago, I think sometime in the last decade.

Meb: I got a great, to interrupt you, story about that. There is an Irish pub in Los Angeles that has well-known for many years as being an incredibly hard trivia pub night. And it’s like half of the contestants are Jeopardy winners, right? And I like to just go and drink Guinness and hang out. And they asked that question once, what’s the name of this volcano, and you have to spell it exactly correct. And it’s 18 letters long. I can’t even pronounce it, more or less spell it. But that just gives you an idea. I can’t even understand some of the questions. They would often ask questions, like I don’t even understand what they’re asking. So we go to like the JV trivia down the street. It’s like “Simpsons” trivia. I can do okay on that one. Anyway, keep going. Sorry.

Thomas: So, you’ve got this volcano, this extremely long name, and it erupts. And it shuts down transatlantic flights for I think it was like a month. It was a long time, several weeks, at least. Well, all of the, I would say, the vast majority of the materials for nuclear medicine in the United States come from Europe and European Research Reactors. So, when that was halted, the supply dried up pretty quickly because not only are you using it, but also what you don’t use radioactively decays away and is no longer there to use, and we couldn’t get any more. There were at least 50,000 doses of this medicine short every day once the supply dried up. So, it’s a real issue, like the supply dries up. We use at least 50,000 doses a day, a non-trivial number.

It’s interesting too because this is part of the sort of weird discrepancy in what people say and what the data shows. It’s also interesting, because if you look at charts of how much the stuff is used per year, you see this kind of trending downward, slowly trending downward. And the assumption is, “Oh, yeah, people are using less of it.” Yet, the market values are projected to keep going higher. The uses, the sheer number of people using these procedures keeps going up. And to hear like, well, no, it’s not that we’re using less of it or that we’re using it particularly more efficiently, it’s that, if you look at when the reactors that primarily produce these materials shut down, you see these little dips. And it’s not that we’re using less, it’s that you can’t buy as much. It’s simply impossible to buy as much as the market is demanding. So, this is a little aside in terms of the business case.

But you basically are seeing the demand lagging because the number of reactors is diminishing each year. And of those six reactors, the five oldest ones are set to have their operating license expire by 2030. So, the earliest in a couple of years here, and then a few more throughout the years up to 2030.

Meb: This is like such a classic opportunity, from a government standpoint in policy. You think the U.S. government, I mean, who knows, maybe you got a bunch of grants coming your way. It’s something where it becomes a security or just general health concern, being able to guarantee some supply, like you mentioned. Talk to me about milestones. I don’t think you can just pop one of these up overnight. How did you find the location? People tend to be notoriously squeamish if you build a nuclear anything in their backyard, despite the fact that there are current ones next to football stadiums. How did you figure that out? And then walk us through what the future looks like for this project.

Thomas: Everything takes a really long time. But in terms of nuclear technology, we’ve been executing rather quickly. We have a short list of potential places to build this facility. And we’re working with the various owners of those properties to pick that final location right now. We’re kind of in the end stretch of approvals for a couple of places. We’re in the thick of it with the Nuclear Regulatory Commission. So, we just submitted a couple of very large documents within the last couple of weeks here, namely a beautiful 400-page document that shows how we comply with every Title 10 Code of Federal Regulations, Part 50 nuclear regulation. So, how basically how we designed our facility and that it complies with all applicable regulations. We’ve recently submitted that.

And then, our next big milestone that a lot of that work we just turned in is, we normally would have that in our construction permit application, but we submitted it early to kind of get early buy off from the regulators to say, “Hey, here’s our methodology. Here’s our design philosophy. Give us some early feedback.” Instead of over here, at this next milestone, the one we’re trying is like, we want to commit big resources to putting together a final design, kind of get construction blueprints and get all that wrapped up. So, we’ve kind of broken it up into much smaller pieces to get early feedback. But the large milestones are the construction permit, which is sort of like your rough draft of, “Hey, this is what we’re going to do.” And then you have your operating license that the regulators will then issue for you to actually operate the facility, which is sort of that final draft.

So, to kind of reiterate, you’ve got construction permit, the big-picture preliminary design of, “Hey, this is how we comply with the regulations. Here’s how we show we meet the applicable codes and standards for our pieces and parts for the construction.” And then, once they approve of that, we can break ground and start building the building. The operating license is, “Hey, look, we said what we were going to do. Here’s how we intend to train operators. Here’s how we intend to operate the facility safely.” And then when they buy off on that, we can actually turn the facility on. But a lot of that work goes in parallel. So, it’s a time-consuming regulatory process. That’s one of the things that are simultaneously a challenge to convince people in terms of a longer timeline project. It also acts as a great moat because it deters a lot of people from trying to tackle these big problems.

But while the regulators are mulling over the construction permit and kind of going through their review, we’re working on final design. We’re working on our programs, and policies, and procedures for operating the plant. And so then, once an approval is underway, we submit the next batch of approvals, and it’s a largely parallelized process that takes a number of years. And so, we intend to submit this construction permit in early next year. I would say spring of 2022 here. And it’ll take about two years for them to approve of construction. But the time is not wasted. We’re not sitting idle. We’re taking that preliminary design that we submitted and putting in all the final details, “Hey, here’s where the bathrooms go. Here are the cable trays. Here’s how we will train our operators to operate the reactors and the chemical process units. Here are us working out details for shipping the material to our customers.” And a lot of it too building that customer base.

Meb: Theoretically, if you got a knock-on-wood, no promises, what’s the ballpark time horizon for flipping the switch on?

Thomas: COVID kind of…that lost year of 2020 sort of threw a wrench in our timeline. But it was originally 2026. And now it’s been pushed back to 2027 just because a lot of things slowed down in terms of collaborating with some of our partners and getting some of these approvals, or working on siting and stuff like that. But right now, we’re looking at 2027. In this industry, anything nuclear is lightning speed. We all add that though to it’s a small, low-powered, compared to a power reactor, very low-power, low-consequence if something happens. A lot of very familiar technology to the regulators.

Meb: What’s the market size for this sort of opportunity worldwide? Is this a pretty big addressable market on top of the fact you mentioned that it’s actually underserved at this point because of the supply constraints?

Thomas: Yeah. Right now, the number that’s kind of thrown around out there is $10 billion worldwide. And 50% of that, approximately, is North America. And the United States, by far, consumes the most nuclear medicine. But there are a lot of opportunities with certain developing countries, well, developing and fleshing out more of their health infrastructure. And it kind of sounds weird to frame it this way, but as countries adopt a more Western lifestyle, they tend to get the same problems that we have in terms of like cardiovascular disease, and, yay, business opportunity. But it’s true. As a population ages or adopts this lifestyle that creates certain issues that nuclear medicine is good at helping solve, there will be more burgeoning markets around the world. And on top of that, like you said, I think that number is artificially small, very small compared to what we truly could see if we had a stable, constant supply of these materials.

Because if you kind of dig into the nitty-gritty of interviews with some of the nuclear medicine practitioners, the hospitals, they’ve found interesting ways to kind of cut how much material they have to use at, I guess, an acceptable amount of image degradation in their nuclear medical imaging. They try to cut down the total amount of material they use for an acceptable image quality, which, if there was a more stable supply, they could potentially go back to using a bit more and getting much better image, and just being able to do more of these procedures. By far to developing more of these new therapeutics, like these sort of targeted chemo treatments. Any other medical procedure that the scientists can think of using these materials is largely driven by their availability for not only the R&D, but for the quantities needed to get through, say, a clinical trial. Because if you only can get a batch of a particular rare material once every year, or whenever this government reactor decides to make, it’s hard to kind of get through a timely clinical trial schedule. I think there’s a ton of growth potential, just being able to get back to the levels that you saw these materials being used in the ’90s, ’80s, etc., when they were more abundant because of more availability of production capacity.

Also, our big target market right now is medical. I’ve spoken a lot here about the medical uses. But to kind of come back to the Pluto picture in the background here, there are a wide variety of industrial uses. Radioactive materials are used in level gauges, density gauges, quality assurance items, like if you have a radioactive source, if you’ve got a sheet metal production line, you can measure the thickness of the sheet metal by how much radiation gets blocked. And so, you can kind of, as you have metal flying through a production line, you can very quickly do quality assurance on it at the end of its production line. You can use these materials as tracers in medical research, seeing how material moves through and metabolizes through your body. And those same tracers can be used for, say, climate change studies. If you want to see how a particular material kind of permeates through the atmosphere, you can do that with a type of radioactive material that you can readily kind of differentiate from background, or how does a beach redistribute sand by introducing a very lightly radioactive silicon.

Pluto is important because the Mars Curiosity rover, the Voyager probes, the Cassini probes, the Pluto New Horizons probe were all powered with plutonium 238, a non-bomb-grade plutonium used in what’s called a radioisotope thermoelectric generator, or a nuclear battery. Use the heat from the radioactive decay to produce electricity directly and power these probes often to the furthest reaches of our solar system. And so, right now, NASA has essentially run out of how much plutonium they have for the space missions. They’re trying to restart production in some of the U.S. government’s research reactors, like the one I used to work at. That was actually on production research projects. But the capacity isn’t there. The two reactors, the one here in Idaho and the one in Oakridge, just doesn’t make enough per year to satisfy the demand of the NASA launch schedule that they want for launching probes to other planets or moons. And so, there’s a lot of opportunity for these reactors that we have developed, once built, to produce not only our life serving and saving radioisotopes using nuclear medicine, but for all of the really other cool things that humans do like send probes to the end of the solar system.

Meb: So you guys kind of went through an initial Y Combinator, a little bit of funding. What’s it going to take for this next 10 years? I’m assuming it’ll all be kind of milestone-based where a year goes by, two years goes by, you need this amount of money, this amount of money. In my head, if I want to build a nuclear reactor, I’m having a hard time costing it, is it like $10 million? Is it like $100 million? What’s the ballpark? And is this going to be, you think, VC-backed? Is it going to be government? Is it going to be what?

Thomas: One thing I’ll point out too, just before I fully answer that question, regarding government money. I think it’s kind of cliché at this point that free government money isn’t really free. And we’ve been actually shying away from…there have been a number of initiatives to fund entities to promote the production of a lot of these materials for nuclear medicine. For various reasons, either at the early stage we’re in, we didn’t either fit the criteria to receive it and/or once you’re really in the middle of it and you kind of look through what the terms and conditions are of that money, you’re like, “I don’t want this. This will make my timeline five years longer.” Because when the government gives you a lot of money, they like to be involved. And for many reasons, you don’t want that because we’re doing things on a fundamentally faster pace, efficient timeline here. And, well, if the government was really the answer, they would have solved this, what? Thirty years ago. So, we’ve found that we really want to shy away from government.

So, to fully answer your question, it is a very milestone sort of based project. We have successfully done the whole seed round. That’s getting us to our construction permit application submittal. And then, actually, in a month or two here, I’ll be doing our series A to sort of fund everything up into submitting that operating license. And then, after that, the big ticket item there is actually building the facility. And, yeah, we’re talking, it would probably be on the order of $100 million to build one of these facilities. A lot of it because it’s a pretty big construction project, a lot of concrete, nuclear fuel is not cheap, but also the sort of regulatory costs of getting there too.

But that would be primarily financed with a construction finance loan, a traditional construction finance loan, they exist. Some of our, I call them quasi-competitors because they’re doing something similar but not on the same scale as we are, or even reaching the same market as we are, but building similar radioisotope production facilities. One of them has already sort of secured some sort of traditional construction finance loan. So, it’s definitely very doable.

Because of the milestone-based nature of it, there is a really unique balance of, you need to have the right people on the team to be able to do this design work and to hit these regulatory milestones in a good amount of time, because, like you said, the progress begets more funding. So, the seed stage, series A will be venture-backed. And then once we get to that sort of, we’re ready to actually build this thing, then traditional construction financing.

Meb: This is so fun. I love following along the journey. I mean, the coolest part about this, I mean, it’s almost like a biotech company working on a drug where the time horizon is so defined. Like you said, you just can’t flip the switch tonight. But you have such a, if you’re even working on it, you have a lead in the race where, even if someone says, “We got to turn these on too,” it takes a while. What’s been the most memorable part of this journey so far? I know you got a long road ahead of you. But is there anything in particular that sticks out, good, bad, in between, as being particularly memorable?

Thomas: Definitely, the fundraising experience is very memorable as being the highest of highs and the lowest of lows because you can do so much diligence and get so far. And then you get that no and it’s just like, “Oh.” So, for a while, it’s well-known that you get 100 no’s to 1 yes. And I experienced that too. And so, at one point, I had a visceral reaction to my phone going off and making the little bloop bloop noise for my email. So, I’m like, “Oh, God, not another email. I don’t want to see it.” But when you do get the right people to share that vision or see that vision and write that check, it’s the highest of highs in a sea of low. But that’s been a very memorable experience.

And then, just in general, in the same vein, going through the process of, “Hi, I’m Thomas Eiden. Basically, I’m the only employee of my company, I’m going to built nuclear reactors.” Going from those kind of conversations where they’re like, “How the heck are you going to actually do that?” To getting to where we are now, where they’re like, “Oh, they’re doing that.” So, it’s just been really neat to kind of be able to show people, whether they’re nuclear industry folks, or people that are just very passionate about these issues, that, yes, it is possible to build nuclear reactors today. You just have to have the right domain expertise and basically the grit to do the hard work.

It was funny because, at the very beginning of this, just after I left the laboratory and started this, I had a guy from the lab email me saying, “Hey, I had a similar idea, but I was going to approach it this way. What are you doing?” I kind of gave him the high-level because I don’t want to give him my business secrets. He’s like, “Oh, okay. But you know you have to do like a lot of regulatory submittals, multi-hundred-page documents, blah, blah.” It’s like, “Yeah, I’m familiar with this.” And actually learning from my friends back at the lab that this guy had come in asking around to people I had worked with, like, “Who is this guy? What’s his character like? Is he the real deal?” Because he was of the opinion that I was out there to start swindling investors because, clearly, the way I was approaching this was never going to work because you obviously have to get government backing and let the government do all the stuff. It’s like, “No, no, no. You can actually do it.” And so, it’s been really nice to kind of see that change in perception too as the story has been unfolding. And so, those have been kind of like slow burn highlights where you look back and you’re like, “This is how we started, and here’s where we are.”

So, after we made one of those big submittals two weeks ago, this 400-page beast, it was like a huge weight off the shoulders. It’s like, we just submitted 60% of the technical content needed for our construction permit to the United States Nuclear Regulatory Commission. Like, they’re taking us seriously on this stuff, and we’re submitting some real serious stuff that’s, when you’re in the moment, when you’re doing all this work, it doesn’t feel very special. But then when you hit these kind of little or big milestones, you take a step back and go, “Yeah, this is pretty awesome. We’re doing something really cool that no one has really done in a very long time, or people don’t think is possible.”

Meb: It’s such a cool idea. I remember seeing it for the first time and just getting it from the get-go. So, we will definitely wish you lots of luck. If the listeners want to follow along with what you guys are up to, if they’re even interested getting on your cap table one of these days, what’s the best place to track what you guys are doing and follow along?

Thomas: So, that is a very not easy, straightforward question actually, because of, for the same reason why I kind of brought up this one, of several people who were like, “Are you just trying to con investors here?” I have actually been keeping a pretty low profile in doing all of this because there really has been no benefit for when you’re kind of going through the slog of writing hundreds of pages of regulatory documents to every week be like, “We’re writing regulatory documents.” There really hasn’t been a real need to advertise ourselves, because, for so long, I’ve seen so many entities, whether it’s these big bureaucratic sort of existing companies that do something with nuclear, or whether it’s some flashy startup. They’ll promise all these things. They’ll talk the talk, and really talk the talk, “We’re going to do all this stuff.” And then, one day, they’re just gone, they evaporated.

And so, like I said before, at the beginning here, I’ve taken this “I’ll believe it when I see it” approach. And so, for that same reason, I’ve actually been very careful not to put myself up, or at least the company out there too much because I want to hit these milestones first, say, “Hey, look, we’ve done this stuff already. We’re here,” and then it’s kind of hard for people to not take us seriously because we’ve already done half the work. It’s like, “Oh, you’ve gotten this far, you’re going to get to the end.”

And so, to follow along, we do have a Twitter. We do have a presence on LinkedIn and Facebook. So, right now, they’re not very active. But that will be changing towards the end of this year as we get much closer to submitting this construction permit. So, I won’t discourage people from following us. So, yeah, we do have a presence on all the social media that are extremely quiet right now. But that will be changing. Please follow us and await the good news as we start hitting these ever-bigger regulatory milestones and actually construction-type activities.

Meb: Tom, it’s been a blast. We’ll even add your Twitter handle, which is a great name too, The Isotope Factory, to the show notes. Thanks so much for joining us today.

Thomas: Yeah. Thank you for having me. It’s been fun.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.