Zeus Capital Research Director Dr Tom McColm caught up with DirectorsTalk for an exclusive interview to discuss Ilika plc (LON:IKA)
Q1: First off, could you give us a brief overview of Ilika’s business?
A1: Sure, yes. I’ve been following Ilika for quite a few years now as an analyst, at the heart of Ilika’s business they’re experts in what we would call ‘materials discovery’, they have a state of the art platform that’s capable of producing and testing a number of sort of 100 different compositions of material set very accurately to find trends and ultimately look for optimal conditions i.e. conductivity or strength etc. of a material.
Initially their business was based on doing sort of blue-chip contract research, sort of paid for project research for blue-chip companies such as Toyota, Toshiba etc. where they would outsource their ‘materials discovery’ activity, Ilika would do it very quickly and come back them and get paid but part of that business model was that any IT that was generated out of such a project, Ilika would have some rights to, be it in a different market for instance in that which the client was in. It was going well and it still is going well, that is still the crux of their business but what actually happened was because of the huge market pull for superior batteries, they found that the majority of the ‘materials discovery’ and optimisation projects that they were doing were to look for materials suitable to put into solid state batteries in particular with Toyota, who were looking to improve their car batteries. So the IP that came out of that series of Toyota contracts, Ilika in a way they shifted the emphasis of their business model a little bit to say ‘hey, we’ve now got some great IP in this very hot area and we’ve got the right to try and commercialise it in pretty much all of the markets expect for automotive’ and that’s what they’ve been doing over I’d say the last 2 or 3 years to some success.
So in summary, they’re a ‘materials discovery’ business who’ve come into possession of some very exciting solid state battery intellectual property which they have embarked on commercialising.
Q2: OK, that kind of answers my next question but if Ilika is a ‘materials discovery’ company, how come it’s launching a battery product?
A2: Well that’s exactly like I just said so they’ve kind of shifted quite a lot of their resource emphasis into instead of just doing straight discovery in their state of the art platform, it’s a very clever way of directly depositing solid materials onto a substrate designed for testing and optimisation. They’ve basically took that rudimentary sort of system and built what could be more described as a sort of pilot commercial line to sort of take out costs and speed up position rates and things so that they could actually go into producing batteries.
Now even initially I think the idea was to demonstrate this could be done and then partner with larger companies to scale it up to the sort of battery markets that existed, what still exist at the time, the ones we all know about like mobile phones, laptops etc. but in the meantime the whole Internet of Things explosion and the need for vast numbers of sensors for which is growing all the time, it’s sort of serendipitous in a way but it’s created a great first market that actually suits the size of batteries that Ilika can make on their pilot line. They’ve almost now got what would be a pilot commercial demonstrator line for laptop batteries phone batteries etc. is actually at a proper commercial demonstrator line for the size of batteries required for sensors so it made perfect sense for them to go straight into product launch.
Q3: So with respect to battery production, is that Ilika’s unique selling point? If not, what is it?
A3: What Ilika’s materials are all about is replacing the encumbrance of lithium ion battery with what’s called a solid state lithium battery, if you like. What that means is that you replace, in the current encumbrance, the sort of electrolyte, the power-producing bit of a cell, it’s probably a 50 micron polymer sponge soaked in a lithium salt solution and that’s the sort of electrolyte, where the power is produced, all of the work that they’ve been doing is to replace that 50 micron thick soaked polymer sponge effectively with a much thinner sort of sub-micron single solid layer that does the same job.
Now they’ve done that and they’ve found materials but those materials have existed before and solid state batteries have existed before but what Ilika’s real USP was because of their clever way of processing these layers, they can now actually stack more than one cell, like multiple cells on top of each other, in a single process so they can have multiple stack cells. Now that’s something that no solid state battery producer has ever done before, they’ve got the IP on that and that’s what their USP is and that’s what‘s quite exciting about this company now in terms of scaling up and trying to attack the battery market.
Q4: So if things go to plan then, where do you think Ilika will be in 5-10 years?
A4: I think the point is here that ultimately Ilika, they don’t want to be a big huge producer of batteries, they still are what you’d call an IP company. They will be a licencing company ultimately to large partners who will really scale up and produce these batteries for the mass market, a little bit like ARM did for the semi-conductor industry, Ilika sort of think they could do for batteries. So they would have multiple large OEM partners licencing their battery materials and their battery processing IP and knowhow to mass produce superior batteries to the encumbrance that are there now and potentially not only that, they could do the same thing in lots of other areas of material discovery so I’d say that’s where they’d be, or more so they’d like to be.
