The following is a Q&A with Zecotek Chairman, President, CEO and founder Dr. Faouzi Zerrouk.
Tell me about Zecotek.
Zecotek Photonics Inc. (TSX: V.ZMS, Stock Forum) is a company that develops leading-edge photonics technologies for medical, industrial and scientific markets. I founded the Company in 2004 and focused on commercializing value-added components, systems and sub-systems for use in scientific and medical imaging, lasers and 3D displays. Our key products include patented LFS scintillation crystals and solid-state photo detectors which are being used in positron emission tomography (PET) medical scanners, experiments for the large hadron collider at CERN and many other applications.
We have a patented 3D display technology that offers a true, multi-view, volumetric 3D experience without the need for special glasses. We are also working on micro lasers and sensors and associated architecture for the new generation of free space interconnect and high speed computers. All of our key technologies are patented and we have built up a patent portfolio which covers more than fifty scientific technologies and applications.
What is photonics and what is it used for?
Photonics is the science and application of light. Photonics generates, controls and detects particles of light across many industries. For example our scintillation crystals generate light, our solid-state photo detectors detect light and our sub-systems control and produce a readout of the light. Our photonic technologies have both medical and non-medical applications and can be used in PET medical scanners, drug research, and medical gamma cameras, as well as gamma ray detector systems, geological surveying, materials analysis, high energy physics, nuclear stockpile monitoring and next generation 3D displays. Photonics also is used in advance manufacturing, robotics, defense technologies, biometric security, image processing, communications, astronomy and much more. Photonics is part of our everyday life.
The recently announced partnership with Hamamatsu is a significant milestone. Can you tell me why this partnership is so important to the company?
Zecotek has signed a strategic partnership with the world’s leading supplier of opto-electronics components with approximately US$1 billion of annual sales and over 4000 staff worldwide. Hamamatsu has production facilities and business locations around the world and is the leading supplier of photo multiplier tubes and photo-diodes used in PET medical scanners, and by European Organization for Nuclear Research (CERN) projects and other industrial and scientific entities.
Not only does this agreement endorse the next-generation technologies developed in Zecotek`s labs, but it gives us priority access to those markets we have targeted for our photonic technologies. In the first four months of the agreement which, was announced in July 2013, Hamamatsu has purchased from Zecotek, over US$2 million worth of LFS scintillation crystals. We have established a joint collaboration framework to develop a new integrated detector module to be used in PET medical scanners. We are working very closely with the Hamamatsu scientists to improve existing technologies and develop new technologies, and expect to make history within the scientific community with new next-generation technologies.
The Hamamatsu partnership is a very significant milestone for our Company. The importance of having such a partner cannot be understated.
You are currently suing Saint-Gobain and Philips for patent infringement. Can you provide some background to this legal action?
Our scintillation crystals have very high light yields and ultra-fast decay times, and when combined produce significant performance advantages which enables faster, higher resolution operation of medical and industrial imaging devices. In the medical industry this can result in improved patient outcomes and reduced healthcare costs. Thus our crystals are very valuable intellectual property.
Developing scintillation crystals is a very challenging and expensive process. Our LFS crystals were developed over a number of years and at great expense due to the complex nature of growing this type of crystal. We have filed numerous patents to protect, not just our scintillation crystals, but all of our photonics technologies.
The lawsuit alleges that Saint-Gobain’s LYSO crystals infringe on Zecotek`s U.S. patent No. 7,132,060 and that Philips infringes by using those crystals in the PET scanners it sells. We will vigorously defend all of our patent position and protect our intellectual property when necessary.
What is the status of the lawsuit against Saint-Gobain and Philips?
While I cannot talk about the specifics of the lawsuit, I can say that a Markman Hearing was held in July 2013. A Markman Hearing is a technical tutorial where the judge considers the meaning of certain technical terminology used in the patent claim. At the time of this interview we are still awaiting for the court to rule on the terminology.
Who are some of your customers?
The main customers of our technology are those organizations which require scintillation crystals, solid-state photo detectors and subsystems related to translating the signals used in scientific experiments or medical applications. Due to the superior performance of our technologies original equipment manufacturers (OEM) of positron emission tomography medical scanning devices are using Zecotek`s patented technology. Our technologies are also being used in six experiments at the European Organization for Nuclear Research (CERN), in addition to many universities around the world.
Can you explain the nature of the strategic partnerships you currently have?
We are working with a number of strategic institutions to both commercialize existing technologies and develop new next-generation technologies. Our partners include: Hamamatsu Photonics of Japan, the European Organization for Nuclear Research in Switzerland, Beijing Opto-Electronics Technology Co. Ltd. of China, The University of Washington in the USA, NuCare Medical Systems of South Korea, National NanoFab Center of South Korea, and Intellectual Ventures of the United States.
Can you outline your strategy going forward and say how you differ from others in the industry?
Our central objective has been to enter growth markets with technically challenging products featuring performance superiority and competitive costs which leads to above average profits and shareholder returns. Zecotek’s core business strategy is to then commercialize those photonic products and technologies through strategic alliances with major corporations.
Zecotek brings leading-edge photonics technologies to strategic alliances while corporate partners, for example Hamamatsu Photonics, bring their existing product development, marketing, manufacturing and distribution resources. The product delivery vehicle is generally a joint venture, structured to clearly identify each partner’s contributions, efficiently manage project costs, preserve each partner’s IP rights, enable investment by fourth parties and minimize time to market. This structure which is working very well for us.
Has the company started to generate revenue? Is it profitable? What does your balance sheet look like?
Zecotek has started to commercialize its patented photonics technologies and thus we are generating revenue. We have no debt on our balance sheet, and while the Company is not yet profitable we look forward to growing our revenue and bottom line as the strategic partnership with Hamamatsu Photonics matures.
Why should an investor be interested in Zecotek?
Zecotek Photonics is a growth story with a number of potential near term catalysts which could significantly impact the value of the company: 1) strategic partnership with Hamamatsu, 2) the growing need of our technologies by major OEM’s and industries, 3) the potential of the 3D display technology, 4) the patent infringement case against Saint-Gobain and Philips. While there are risks in any early stage company like Zecotek, we have taken steps to mitigate the risk factors associated with commercializing our technology through patents and strategic partnerships and will continue to do so as we advance our intellectual property.
Disclosure: Zecotek is a Stockhouse client.