IsoRay revenues are up and so are losses but the company is working on a plan to turn around its fortunes.

Sales were up 8 percent to about $1.8 million in the first quarter, thanks to an increase in the sale of its signature product Proxcelan, but the gross margin was down $88,000, or 47 percent, compared with the same period last year, the company announced Tuesday.

The Richland-based company that manufactures medical isotopes - Cesium-131 brachytherapy seeds, mostly used to treat prostate cancer - saw its net loss rise from $2 million in the third quarter of fiscal year 2007 to $2.2 million in the quarter ending March 31.

Higher production costs including an increase in isotope procurements costs and sales and marketing expenses contributed to the loss, in addition to the cost of moving to and remodeling its new facility.

The company plans to bring down production costs through process efficiencies and expand its customer base with the help of special educational workshops for doctors who treat prostate cancer.

IsoRay will focus on its core market in the U.S., said Dwight Babcock, IsoRay chairman and interim CEO, during a conference call.

Over the nine-month period ending March 31, the company's sales stood at about $5.4 million, an increase of 32 percent in the same period a year ago, which was a result of reaching out to 79 medical centers, up from 44.

IsoRay will seek new customers as well grow its existing customer network by concentrating on marketing and distribution efforts.

There's need for more presentations to physicians, Babcock said, adding that increased inquiries and sales generally follow IsoRay's educational initiatives and workshops.

The company also plans to restructure the work areas at its new facility at the Applied Process Engineering Laboratory in Richland.

Strategic automation may help reduce operational costs, Babcock said.

IsoRay has been able to reduce general and administrative expenses about $68,000, or 7 percent, in the first quarter through job cuts and reduced consulting costs.

The company also is not actively recruiting a permanent chief operating officer.

IsoRay also is excited about UralDial LLC, a Russian medical isotope manufacturing and distribution company it has partly owned since January. As regulatory controls get worked out, UralDial will ensure the supply of cesium, Babcock said.

IsoRay shares fell 5 cents to 75 cents after the company filed a report with the U.S. Securities and Exchange Commission.