Issue Date: June 18, 2007
Counting On Electrochemistry
EARLY THIS YEAR, the London Stock Exchange's Alternative Investment Market (AIM) had an unusual debut: a company that specializes in electrochemistry.
The company, Applied Intellectual Capital, is also unusual for its geographical location. Far from being British, AIC is based in the California Bay Area town of Emeryville. Stephen R. Clarke, chief executive officer, explains, "We looked at NASDAQ, but it was just too expensive with the Sarbanes-Oxley requirements," referring to the costly accounting and documentation rules now specified by law for companies that are publicly traded in the U.S. "So instead, we came to AIM in London."
The initial public offering (IPO), which raised some $36 million, was quickly followed by a trio of developments.
In February, AIC completed what it calls successful trials of its proprietary metal-mediated-redox (MMR) technology, which electrochemically processes cellulosic wastes to produce biofuels, in direct competition with enzymatic routes.
In May, AIC announced that a majority-owned subsidiary, EverClear Solutions, had entered a joint venture with mining company Weatherly International to recover copper, zinc, lead, and silver from Weatherly's mine-tailings dam in Namibia. According to AIC, the tailings contain unrefined ores worth roughly $1 billion.
And also last month, AIC formed a collaboration with Oregon-based OnTo Technology to develop technology to recycle batteries used in hybrid and electric vehicles. The contract was awarded by the Vehicle Recycling Partnership of the U.S. Council for Automotive Research.
The three disparate technologies are an indication of the broad scope of AIC, which has evolved since 1994, when it was set up as a consultancy to handle a variety of electrochemical projects for clients.
Clarke, a mechanical engineer and management consultant; his father, electrochemist Robert L. Clarke; and Darron R. Brackenbury, a mechanical engineer and business developer, set up AIC Labs to carry out any pure R&D tasks that came its way. In 1996, it built its own labs, initially in Berkeley. By 1997, clients such as the Navy were asking the company to design and deliver prototypes and field-scale demonstrators, so the firm added design engineering and rapid prototyping facilities.
By 1999, AIC Labs had developed a portfolio of electrochemical and materials patents in water purification, clean energy, and sustainable mining. It formed a new holding company—Applied Intellectual Capital—to commercialize the intellectual property. The intention was to become a self-funded technology development and commercialization company, using the proceeds of technology "sales" to fund further technology development, Clarke explains.
AIC issued its first license in 1999. Since then, it has moved from a commercialization rate of one technology every two years to a current rate of two technology spin-offs per year.
TECHNOLOGY DEVELOPED for one market can often be applied to another, Clarke argues, while established labs, engineering facilities, and staff obviate the need to build new facilities for each new business area.
When a technology begins to generate commercial sales, AIC moves it into a separate business unit with a goal of launching a stand-alone company on the stock market. It has already started this process with EverClear and another subsidiary, Plurion Systems, which specializes in battery research.
Although AIC's own IPO brought in a nice bankroll for this kind of business development, its current revenues are still a mix of technical consulting and license fees. Sales for the six months ending Jan. 31 were $1.2 million, compared with $2.6 million for the comparable period the year before. Because of increased spending on R&D, AIC posted a net loss of $2 million in the period, compared with an operating profit of $1.6 million the year before.
One of AIC's first spin-offs was Plurion, founded to commercialize batteries based on proprietary cerium-zinc-methanesulfonic acid chemistry. Plurion's products will be large batteries for use in wind farms, transmission line support, and emergency backup. AIC currently holds approximately 30% of Plurion.
EverClear has roots going back to the 1990s, when the Navy asked AIC to develop a method of removing lead sulfate from coral-based sand at a former battery-reprocessing facility in Hawaii. Success in that project encouraged AIC to explore where it could commercially employ the technology. The mining industry was the most obvious candidate.
EverClear was formed in 2005 to work with Montana Resources to clean up the Berkeley Pit, site of a former Anaconda Copper mine in Butte, Mont. The pit holds roughly 40 billion gal of toxic wastes containing copper and zinc in acidic solution.
Within 14 months, EverClear had demonstrated the commercially viable recovery of copper of 99.996% purity. That capability opened the door to other opportunities, including the Weatherly deal. EverClear is one of AIC's candidates for an IPO, according to Clarke.
Meanwhile, the MMR technology is giving AIC entrée to the booming biofuels field. The technology is a closed-loop process that, as the company puts it, "electrochemically digests" low-cost organic feedstocks such as cellulose, plant matter, and wood pulp to produce synthetic fuels.
One of the key things about the technology, Clarke says, is that it is feedstock-tolerant. "You can throw anything at it, and it'll work to give ethanol," he notes. In a whimsical gesture to show the versatility of the process, the company's trials featured an unusual feedstock: used cotton lab coats.
Clarke says MMR's iron-based chemistry recognizes that many enzymatic processes are essentially redox reactions. AIC is positioning MMR as a competitor to the enzyme-based processes of the biotech industry. "A metal-redox species with the right electrolyte can replicate the bond-specific action of an enzyme," he says. "The redox species is not consumed and can be regenerated."
Other potential AIC spin-offs include a subsidiary that is developing a battery for use in hybrid and electric vehicles and one that is working to commercialize a novel process for chemical synthesis.
Sir Andrew Likierman, acting dean at the London Business School, became AIC's nonexecutive chairman in November 2006. He says he was attracted to the company by "the sheer difference from everything else I do." His other work, Likierman notes, "is well-established, and risk is calculated and managed. This is a high-risk venture working at the frontiers with exciting areas: There is big upside and big downside."
As Clarke sees it, sharing AIC's laboratory equipment, rapid prototyping facilities, and staff across related projects has helped minimize risks while developing new technologies. He says, "We have managed the risk and incubated these separate business streams to the point that they can fly free."
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