John Heathcote, chief executive of Pursuit Dynamics
Pursuit Dynamic's CEO, John Heathcote, gives a refreshingly frank insight to the listed company's emergence on to the world scene in this week's Q10.
Backgrounder: Pursuit Dynamics identifies, proves, develops and commercialises applications of its 100 per cent owned platform PDX technology. The core technology has a wide, and growing, list of application areas and is split into two main patent families - the reactor technology and the atomising technology.
The reactor technology is a continuous flow vacuum mixer or separator, which simultaneously heats and pumps. It is in commercial use today in the food and beverage industry and is being rapidly developed in biofuel production, and various brewing applications.
The atomising technology develops smaller water droplets, in greater quantities, and projects them further than any other available technology. It licensed the fire suppression applications of this to Tyco at the end of 2005 and is currently developing the decontamination capabilities of the system with defence contractors and various government agencies.
1) What have been the biggest challenges you have faced thus far?
Most R&D companies are chronically undercapitalised in their early days and Pursuit was no exception. In the first few years, maintaining acceptable technical progress and overcoming the inevitable obstacles, whilst operating on a shoestring, was tough. Carrying the key shareholders with us as we developed markets for the technology was also trying. Our first foray into selling a product (food manufacturing equipment) was a total nightmare - but we did learn some invaluable early lessons.
2) What are the keys to being a successful publicly-listed R&D company?
By our reckoning, we aren't yet successful. To be successful we need to be handsomely profitable. What success we have enjoyed thus far is largely down to having a clear plan, good people and not compromising commercially. It is all too easy to succumb to the temptation to sell or license parts of the technology too early. We have maintained very tight control over our IP and, in the early stages, this caused us to lose out on a number of deals. Pursuit wouldn't have anything like the future we see for it now if we had weakened back then. The key is never to confuse long term corporate goals with the shorter term imperatives of those who don't necessarily have the company's best interests at heart.
3)Your share price took a hammering during 2006 but has picked up considerably recently. Can you give the reasons for this?
A host of external factors contributed to the fall of our share price in 2006, none of them related to how the company was performing. We were repeatedly hit by rumours in the press and on the bulletin boards: that we had run out of money, we had suffered an irreversible commercial set-back, and so on. This attracted (or was caused by) a major short position in our stock - at one stage well over 10 per cent of the issued capital. We ignored the distractions and just kept working on the business. This approach was successful. In 2005 we had reported around £90,000 of turnover, in 2006 that number was close to £1.5 million and continues to grow rapidly - we should be cash flow positive on an ongoing basis at the end of 2007. The bears ran for the hills, the rumours stopped and the share price recovered.
4) You are successfully making the transition from an R&D company to a revenue-generating, profitable entity. What challenges are inherent in this process from a CEO's point of view?
Ensuring you have the right structure and people in place as you start the commercialisation stage is by far the biggest challenge. The whole company's focus changes, becomes more urgent, as you start to pursue dollars rather than technical results and there are inevitably some casualties along the way. When it became clear that we were going to be technically successful, we immediately started creating the structure to allow us to prosecute direct sales into the process industries and then focused on developing the structure to drive our licensing model in our other near-commercial areas. We were extraordinarily lucky to be able to attract very high quality people. The management team we have in place today is world class.
5) How difficult has it been to manage the scope of the potential and to retain focus?
Not as difficult as you might think. In 2004 we took the four most technically advanced potential applications - food manufacturing, brewing, fire suppression and decontamination - and targeted commercialisation of all four by the end of 2007. That decision was made nearly three years ago and we are on target to achieve our goal. We are already selling equipment into the food industry and we licensed our fire suppression technology (PDX FireMist¨) to Tyco just over a year ago. The Tyco licence, defence related licences and brewing equipment sales are on target to generate revenues in 2007.
6) Which of the host of different applications for the PDX technology holds the most potential and why?
Outside the four commercialisation targets mentioned above, we have projects running in a large number of application areas from bitumen recovery from oil sands through to cryogenic applications of our technology. The biggest markets that we are addressing are those in the oil and gas and renewable energy sectors. It is early days but initial indications are encouraging that our PDX technology may hold the key to cheaper and faster production in both areas. These areas form the primary focus of our R&D group going into 2007.
7) You floated relatively early in your development rather than pursuing the venture capital route. What have been the benefits of the strategy?
We floated early as a mechanism to acquire 100 per cent of the technology - the vendors of the technology agreed that paper was a good substitute for cash. In the early days, we acted as our own VCs by investing personally and by using the "friends and family" approach. The main advantages of floating early have been access to capital, the ability to attract good people, credibility with commercial partners - and the founders maintained control of the business in the early, critical days.
8) You started off as a marine drive company but this application has subsequently been put on the back burner. What are your plans for it going forward?
We have a lot on our plate at the moment. To get Pursuit up and running on a profitable basis, we need to maintain focus and prioritise those opportunities which will provide us with major cash flow in an acceptable timeframe. We will one day get back to developing the marine drive system. It is a fantastic application of the PDX technology, but at the moment it would be thoroughly irresponsible to do so.
9) You are granted three wishes as CEO of Pursuit. What would they be?
That Pursuit shortly becomes a highly profitable - and rapidly growing business - and that this is fully reflected in the share price.
10) Describe the Pursuit Dynamics you hope to have created five years from now.
Pursuit will have two major income streams, direct sales into the process industries and royalties from technology licensing. We will be immensely profitable.