Scientists have been testing ways to produce the isotopes, used for diagnostic images of diseases and treatment of diseases, following shutdowns at the Chalk River nuclear reactor in Ontario and other reactors worldwide.

The government said it was offering the money to fund research through its Isotope Technology Acceleration Program. It wants to support collaboration among academic, private and public sector partners to develop alternatives to producing isotopes with linear accelerators and cyclotrons.

"We are investing in the work needed to attract private sector interest and to bring new technologies to market, and to help ensure that isotope production is on a sound commercial footing," Canadian Natural Resources Minister Joe Oliver said in a statement.

Ottawa-based Nordion Inc is one of the world's largest suppliers of molybdenum-99 (moly-99), used to manufacture technetium-99m generators, the most widely used isotope in medical imaging.

The Canadian government closed the Chalk River facility that supplies the bulk of Nordion's raw materials due to safety concerns in fall of 2007 and again from May 2009 to August 2010.

The closures caused a worldwide shortage of moly-99, and encouraged many of Nordion's customers to look for other sources, which hurt Nordion's prices.

The Chalk River plant is set to close in 2016.

Nordion's shares rose almost 2 percent to C$9.74 on the Toronto Stock Exchange following the announcement.

($1 = $1.03 Canadian)

($1 = 1.0271 Canadian dollars)

(Reporting By Claire Sibonney)

• A Permanent Economic Emergency