GARY | City officials want to finalize a deal with Positron Corp. to have a high-energy cyclotron and manufacturing facility built near Interstate 65 and 15th Avenue.
Positron's announcement about a Gary site comes at a time when the Westmont, Ill.-based firm is dogged by questions of whether it can earn a profit and CEO Patrick Rooney battles a lawsuit filed last year by the U.S. Securities and Exchange Commission accusing him of misleading investors in a hedge fund he managed.
Despite these issues, Rooney said via email that Positron will select a finance partner for the $65 million Gary project this month after being in discussions with "investment banks and capital centers."
“Our position is that we opened the door for them to locate in Gary and to use financing, but of course it's contingent on their ability to get a financing partner,” Gary Mayor Karen Freeman-Wilson said.
Positron is a molecular imaging company that manufactures and sells medical imaging devices and radiopharmaceuticals, which are drugs that emit radiation and are used in procedures including those that enhance images of organs to make it easier to identify abnormalities and shrink tumors.
However, the 29-year-old company had an accumulated deficit of $112.6 million as of June 30 and has struggled to earn a profit, according to financial statements filed with the SEC. In its recent filing, independent auditors questioned Positron's ability to survive and said the company would need to raise revenue through product sales, collect revenue through bond issuances or collect funds through sales of stock.
Positron said its roots are as a research and development company, which has evolved to "a true business enterprise with a strong recurring cash-generating business model," a company news release said.
Rooney, who has been Positron's CEO since February 2009, said a 70 million electron-volt cyclotron would be the highest-energy commercial cyclotron in the nation. The cyclotron, which accelerates subatomic particles to greatly increase their energies, would be the centerpiece of an operation that could produce industrial and medical radioisotopes. Radioisotopes such as strontium-82 are in short supply, Rooney said, and are critical for use in medical diagnostic imaging and to treat diseases using radiation.
Region touted for company investments
Opening the Gary facility would return Positron to the region. It shuttered its Crown Point facility at 1195 Arrowhead Court earlier this year. Positron said acquiring a company earlier this year resulted in its moving the Crown Point work to Lubbock, Texas. The company disclosed in recent financial statements the owner of the now-shuttered office building is suing Positron, claiming it still owes $312,000 under the lease. The matter has yet to be resolved.
Rooney said Gary is an ideal location because of its access to trucking and air transportation and its proximity to Argonne National Laboratory in DuPage County and other entities to provide a strong technical base and quality educational and medical institutions.
As incentives, Gary is pledging to provide $15 million in tax increment financing bonds. The company would recoup $10 million under the New Market Tax Credit Program for investing in a low-income community.
Freeman-Wilson said the U.S. Department of Energy is interested in Positron's potential to produce isotopes and she's excited about such a company locating in the city. She said Gary will work with state and federal permitting agencies to ensure the facility meets regulatory guidelines in its construction and operation.
Engineering and construction of the facility would create up to 150 temporary jobs, and the facility would employ more than 50 people within five years.
In July 2011, the company made a similar pitch to locate a more than $50 million cyclotron and operations center in Noblesville, Ind. That city offered $8 million in TIF bonds with proceeds to be paid in four installments based on Positron's meeting certain investment benchmarks. Noblesville spokeswoman Cara Culp said Positron representatives contacted the city before sending out the Gary announcement, but she wasn't sure when Gary became a candidate to land Positron.
Fed agency concerned about CEO investments
The SEC alleged Rooney made more than $3.6 million worth of undisclosed investments over four years from a hedge fund he managed, Solaris Opportunity Fund LP, to Positron through interest-free loans and market purchases. The fund started in 2003 and Rooney, of Oak Brook, Ill., became chairman of Positron in 2004, according to the complaint.
The SEC also claims 80 percent of the assets in the hedge fund, which was supposed to be a diversified, long-term investment vehicle, are tied up in owning 60 percent of the company's outstanding shares. The agency claims Rooney breached his fiduciary duty to the fund, misused fund assets and misrepresented and omitted investment information to investors.
In an answer filed in February to the complaint, attorneys for Rooney said their client was not involved in wrongdoing and denied many of the SEC's allegations. Discovery is expected to be complete by Dec. 13, which is the date of the next status hearing.
Rooney said he expects a resolution to the matter in the near future and affirmed the case has nothing to do with Positron Corp. He said Solaris remains a significant investor in Positron.