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MFIC
Corporation (MFIC) |
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CEOCFO Current
Issue |
This is a printer friendly page! MFIC Corporation’s recent
enhancements to its Microfluidizer® processor product line and new Multiple
Stream Mixer Reactor (MMR) are strengthening the company’s competitive edge and
out-look for the future and positioning MFIC as a leader in nanomaterial manufacturing BIO:
He was Executive Vice President of DuPont's New England Nuclear Division until 1982, in
charge of health care activities, and was responsible for the development and commercial
success of Thallium-201 as an imaging diagnostic for heart disease assessment. He
operated a profitable $100,000,000 business employing 1200 people, which was acquired in
1981 by DuPont. Achievements included establishment of a multi-cyclotron facility to
produce medical radioisotopes and the first commercial linear accelerator designed for
manufacture of such radioisotopes
Mr. Gruverman is a Professional Engineer, with substantial
experience in radioisotope applications in medicine and industry, and the application of
chemistry, biotechnology, physics and engineering disciplines to commercial
opportunities.
He is a graduate of The Cooper Union (B.S. Chem. Engg. - 1954) and MIT (M.S. Nucl. Engg. -
1955), and has completed post-graduate executive management courses. Mr. Gruverman has
applied a knowledge of venture funding approaches and public financing to launching
and/or financing of more than 60 technology-based enterprises.
He has authored more than 100 technical articles, presentations and papers, mainly in
the fields of isotope methodology, engineering applications, biotechnology applications in
medicine, agriculture and the chemical industry, and analysis of business/high
technology funding options. Mr. Gruverman is
a member of Sigma Xi (Experimental Science Society), Tau Beta Pi (Engineering Honor
Society), American Chemical Society, Society of Nuclear Medicine, and other professional
groups. The Microfluidics Division manufactures 3 levels of
Microfluidizer® material processors; laboratory, pilot manufacturing and large
scaleup production units. Laboratory processors offer process pressures from 2,500 psi up
to 40,000 psi in applications ranging from industrial processing of chemicals, inks and
pigments to cleanroom applications for manufacture of injectable drugs and vaccines. These
include Homogenizers, Table Tops and Floor Models. The scaleup processors include the M700
and M710 Series, the M210EH electric-hydraulic processors and the custom designed M610
processor. MFIC's Morehouse-COWLES Division manufactures high-speed dispersers, mixers,
vertical and horizontal media mills with industry-leading reliability and performance.
Uses include paint manufacture, chemical formulation and premix preparation for final
Microfluidizer® processor formulation. New Products and Applications: MFIC Corporation has introduced a new, patented
High-Pressure Multiple Stream Mixer Reactor (MMR) from their Microfluidics Division. It
produces uniform nanoparticles with phase purity previously unachievable with conventional
batch reaction technology. This degree of reaction chemistry control can lead to
cost-effective product improvements and the development and manufacture of new
nanomaterials in scalable quantities. Applications for the new technology include
improving the performance of catalysts, planarization polishing media, superconductors,
abrasive silica, recording media, photographic media and pigments. It also may be used in
the development and production of unique pharmaceutical products. The Microfluidics Division has announced new and significant products and product advancements and options for their Microfluidizer processor systems. The most recent and significant announcement was the introduction the new M710 Microfluidizer high throughput production system. This 100 H.P variant of the established M700 line should materially enhance Microfluidics’ competitive position in terms of pricing and performance in all industries and applications that the company serves. In addition to biotechnology and pharmaceutical production, this product targets markets such as foods, chemicals and personal care, by offering pricing that is more competitive with traditional homogenizers. The new M700 Microfluidizer Containment System is utilized for the processing of highly toxic cancer drugs and other hazardous materials. The first such recently installed system is now producing pharmaceutical product. The M700 Microfluidizer Split System (separating the power source from the mixing/processing apparatus) accommodates demands of limited space within clean rooms and for noise abatement within pharmaceutical production facilities. In conjunction with this system, a Level II Steam Sterility Option was also introduced for all our pilot and production systems used for production of injectable and other pharmaceuticals. This option enables compliance with stringent regulatory production requirements. The Ultra Clean in Place (UCIP) option improves the ability to clean in place (CIP) Microfluidizer systems between product batch runs or before storage. This capability differentiates the company’s Microfluidizer materials processor systems from all other competitive products. All these features and options are available on the M-710 production systems. CEOCFOinterviews: Mr.
Gruverman, will you tell us about the industries where your product is applicable and if
there are new industries or areas that your product has entered during the past year? Mr. Gruverman: “In the last year we have done some rather interesting things and some of them I believe will play out very well in our future. Our principal target right now is the pharmaceutical and biotech industry where approximately 80% percent of our sales are made. This has come about in the last few years because those industries have not been affected by the poor economy as much as many of our other industrial bases and we therefore migrated more toward those applications. We have come a long way in the pharmaceutical and biotech areas. We have been the equipment of choice in performing cell disruption in the biotech industry and there are few biotech companies today that do not use it for that application, as well as for efficient formulation development. We believe that you cannot do modern day formulation without a MicrofluidizerÒ laboratory level processor system because of its versatility, its ease of cleaning and its light weight. At only forty pounds, it can be moved easily from place to place. In other industrial settings, we also bring competitive advantages to users. The ink-jet ink application is one of the biggest ones in which we are involved. If you use an ink-jet printer, it is highly likely that the ink was made on a Microfluidizer System. We are also involved in the electronic chemical industry, in that our Microfluidics processors are used to manufacture CMP (Chemical Mechanical Planarization) slurries that are used to create near-perfect surfaces on multi-layer microchips in order to deposit circuit elements on them. They also use the polishing technique between depositions to get a flat new surface to lay down additional layers. We have made some inroads in the food industry, which we did not have a year ago. For example, producers of soy milk and other soy products desire to increase the protein and fiber content by including all of the solid components of the bean, much of which is now a waste material. This can be enabled by our technology, by reducing the particle sizes of the solids and creating a stable dispersion. Also, the process improves the texture and mouth-feel of soy milk and reduces grittiness, thus improving consumer acceptance of the product. Further, we have made more penetration into many diverse areas such as pigments in paints and coatings, as well as in the biotech and food industries.” CEOCFOinterviews: Can
you give us some additional examples of how your technology works with the various
industries? Mr. Gruverman: “We
have just recently finished two demonstrations in our labs in cooperation with biotech
companies where they had an API (Active Pharmaceutical Ingredient) that was very potent
but could not dissolve or formulate in a way that they could inject it. We were able to
create suspensions, which are very stable and can be injected and slowly release their API
into the blood stream. In some cases we are able to do that with our conventional
Microfluidizer processing equipment; however, more often we have to convince the user that
they need to try our new technology, which is called MMR (Multiple-Stream Mixer Reactor),
in which chemical reactions are conducted and usually result in particles in the nanometer
size range. This is a new method for making quantities of nanoparticles with applications
in medicine and many other areas. For example, it is very important when creating
superconductors that there is uniformity and phase purity at the nanometer scale. This is
also true of recording tape elements materials and in photographic materials. We address
the need for pigments and dyes that have superior properties. Ink-jet printing on ceramics
and fabrics require better resolution than current print devices. You cannot have clogging
during a production run, so you need to have very uniform and small particles in the
pigment or dye suspension. This is an ongoing process for us and we keep discovering new
application areas. We have a very talented team of engineers who are able to adapt our
equipment to new, exciting applications.” CEOCFOinterviews: Will
you tell us about where you are with R&D and do you have the necessary funds to move
forward with your plans? Mr. Gruverman: “We
are putting a lot of research and development effort into the MMR. There are still aspects
of processing and use of the equipment that we do not fully understand because it is so
new and because we often have difficulty in getting customers to tell us as much about the
formulations they are trying to produce as we would like to know. This is all based on
their desire to keep secret their important information. In the end, we often sign an
agreement and get the information, which enables us to do development work. Once we get to
the point where the customer gets excited about it and is willing to accelerate the work,
we can often get contract revenue from such development work. We expect to make strategic
arrangements that will enable us to accelerate much of the work by entering into joint
ventures with potential users once we get past the missionary selling that is involved in
introducing a new technology. We think that there will be many such applications in the
future. We are constrained right now by our financial structure, which includes a working
capital loan that is asset based and permits us to operate our business. We do not have a
lot of excess capital availability, but we are working hard to try to find new ways of
bringing capital into the company. Unfortunately, our stock has not cooperated that much
and it would be difficult to raise the kind of capital we would like without significant
dilution of our equity, which is one thing we would prefer not to do. We are hoping that
our continued good performance in the financial area will attract more attention and
ultimately resolve this.” CEOCFOinterviews: Can
you tell us about the new enhancements to your existing systems and the reason for these
new enhancements? Mr. Gruverman: “We
are continually developing engineering improvements. A good example of that is the M710
production equipment, which we recently introduced. This is a Microfluidizer System that
can produce high throughput levels and will be used in manufacturing. We have already
written more than twelve proposals for individual units that could be placed over the next
couple of years. Our M710 line is a good example of what we can do with a product line
extension that makes a difference. We have an Ultra Clean-in-Place option now, which we
recently developed, and it is very important for the biotech and pharmaceutical
industries. They are able to clean the equipment in place before changing the product
running through it and that saves them effort and problems. Another thing we have created
is the Microfluidizer Containment System, which is utilized for processing highly toxic
materials such as cancer drugs and other hazardous chemicals. The first such recently
installed system is now producing a pharmaceutical product, and we have had inquiries for
other up-grades of existing systems. The other recent innovation is to offer M700 and M710
in a Split System where we separate the power source from the mixing and processing
apparatus. This accommodates limitations of space in clean rooms and abates the noise
within the pharmaceutical facility. We have also introduced a Level II Steam Sterility
option for all of our pilot and production systems used for producing sterile injectables.
This enables the manufacturers to comply with stringent regulatory production
requirements. We have delivered a system for use in a manufacturing application. All of
these advances come from our continuing development efforts, many of them resulting from
feedback from customers who are required to meet a regulatory requirement or to address an
internal problem. We have complied with these requests and that has permitted us to go
back and develop the equipment in the format that allows us to offer it for sale in other
settings.” CEOCFOinterviews: How
have you been able to lower the pricing structure on your manufacturing systems? Mr. Gruverman:
“The M600 line was built with a purchased intensifier component proprietary to the
supplier, which was the most expensive part of the equipment. We had to buy this at a
large mark-up from the manufacturer since it was patented. We have designed our own
intensifier pump for applying the pressure to the fluid in our M-700 systems. Now that we
have our pump design manufactured exclusively for our equipment and use, our cost
structure has become a lot better and we can offer superior equipment at a price that is
competitive with homogenizers and other equipment that cannot perform at the level that we
do. We offer the M700 system that can replace the M-600 line, and the new M710 line for
high throughput manufacturing applications. We are offering equipment that is less
expensive and is proving to be more reliable and more profitable than our mature product
line. We are excited about it because it is based on our own designs instead of acquired
technology.” CEOCFOinterviews: You
mentioned homogenizers, is that your main competition in the marketplace? Mr. Gruverman:
“Homogenizers are our largest competition for production systems. We meet
homogenizers in many applications but we win against homogenizers, especially in high
pressure applications, because we can go to higher pressures reliably and apply much more
energy to the liquid stream that we process. In many cases, we can meet the price of a
large homogenizer and can achieve smaller size and better size distribution
characteristics in the fluid structures or in particulate structures and suspensions than
a homogenizer can. The reason for this performance advantage is that our system is a fixed
geometry system, which means every element of the stream is treated in exactly the same
way. Homogenizers are a variable pressure and geometry system, in which variations in the
process stream characteristics will change the orifices through which the liquid flows and
therefore deny uniform treatment of all elements of the fluid stream. We find that we can
produce tighter ranges of size and somewhat smaller sizes for particulate structures. All
those advantages reflect themselves in product characteristics that are often superior to
what are produced by a homogenizer.” CEOCFOinterviews: Most
people relate the word ‘homogenize’ to milk. Is that an area in which your
products are used? Mr. Gruverman:
“That is a different application and not one that we compete in. That is a
low-pressure application, which has been around for about one hundred years and has been
dominated by a few manufacturers that have been providing equipment for a very long time.
We cannot compete price-wise with that equipment and we do not try. On the other hand, we
will be competing in the manufacture of soy milk when that becomes a much wider spread
commodity because we can give them advantages in creating the textures for soy milk that
they want to achieve. Soy milk will become more important in our society because of the
trends to healthier foods. There are also many people that are allergic to milk, usually
due to lactose intolerance. A high percentage of Asians are lactose intolerant.” CEOCFOinterviews: Where
is your product in demand? Mr. Gruverman: “Our
equipment is used to manufacture vaccines, including those required for anti-terrorist
applications. It is the mainstay of companies in that field. Our equipment is used for
manufacturing injectable anesthetics. Several companies that make injectable anesthetics
use our equipment because very stable microemulsion is required. Our equipment does that
superbly and uniquely. In addition to that, manufacturing injectable drugs from actives
that are not easily soluble and thus difficult to formulate also plays into the cancer
treatment area. There are a lot of anti-cancer drugs that are very difficult to
formulate.” CEOCFOinterviews: You
are currently developing the Multiple Stream Mixer Reactor (MMR). How did this come about,
why is it so important and where are you as far as production of the new product? Mr. Gruverman:
“Much of this started with a 2.2 million-dollar grant from the government to develop
new catalysts based on our new MMR technology. We completed that work about five years ago
and it has led us into this field. We are finding, as we found in the Microfluidics area,
that there is a plethora of applications to which this new technology brings value. The
value proposition here is that we can make reaction chemistry an exciting field.
Currently, most reaction chemistry is done in batch reactors, which is a very high capital
and high operating cost way to go. We can do it on a continuous basis and make the
structures far smaller and more uniform than they can in a batch reactor system. We are
out to prove that to customers and other potential users. We want to do more marketing now
that we are confident that we can build the equipment. We are trying to attract strategic
partners for whom we can represent the MMR as being a major new tool for them to introduce
new types of products that are superior, and we are having some success. I have given
about forty presentations and we have published three technical journal papers, which talk
about the equipment and the applications. We have two operating systems in our labs now
and we have performed demonstrations on those systems very successfully; we are very
confident. We have not yet made a production level device, but our modeling does not
suggest that it will be difficult. We expect potential customers to hold back from
becoming involved in the technology until we can point to manufacturing systems that are
actually in the field, and that is going to be a time consuming and expensive proposition.
Our capital constraints will likely stretch out that time line. That is one reason why I
am out trying to raise capital for this exciting new area and I think we will be
successful in doing so at some point in the next couple of years.” CEOCFOinterviews: So you
would say that you are about two years away from seeing a product out there that people
can use. Mr. Gruverman: “Our
projection is that we will sell our first development level systems sometime in 2004.
These will be priced in the $250,000.00 range. The first manufacturing system could be
ordered in late 2004 or 2005, and those are going to be priced well above half-a-million
dollars and may go to a million dollars. It is an important aspect of our business. Keep
in mind that last year our total sales were under fifteen million dollars and new large
orders at this level will be tremendously exciting and accelerate our growth dramatically.
We are focusing on this and spending a lot of effort on the development side, as much as
we can afford to do, and we are doing a modest amount of marketing, and plan to generate
the capital to greatly expand these efforts.” CEOCFOinterviews: With
regard to the MMR, is it applicable to the same industries as the Microfluidizer
processor? Mr. Gruverman:
“Generally it is the same customer base. It tends to focus more on coatings and
pharmaceuticals, which is exactly what we find for Microfluidizer Systems. The difference
between the two technologies is one of degree, not of kind. We treat the fluid streams
with the MMR as we do in a Microfluidizer processor but we do not allow the pressurized
pure streams to interact until they actually are in the ultra turbulent reaction zone. In
a Microfluidizer processor system, we create a pre-mix and then split the flow into two
separate streams within the equipment, which are forced to interact. In the MMR, we can
control reaction kinetics to produce pure product, to produce at smaller size levels, and
more importantly, to save a lot of effort in the manufacturing process, in that it is a
very efficient process due to its continuous and reproducible nature.” CEOCFOinterviews: What
is your current financial position? Mr. Gruverman: “We
had a very good first half of the year, particularly in our Microfluidics business.
Our other business, the more conventional mixers, mills and dissolvers, was disappointing
because its primary target is the paint, ink and coatings industry, which is still not
vibrant. However, we were able to overcome some short falls in that line with some of our
Microfluidics sales. We are not likely to see growth over all, but we expect to see some
growth in the Microfluidizer equipment area. Profitability in the first two quarters of
the year was excellent. The third quarter will be reported very shortly and we did
announce that we would have lower sales volume than posted in the first two quarters. That
is a consequence of having shipped a lot of large equipment in the second quarter, which
reduced our backlog and made it difficult to reach good numbers in the third. We have seen
a very good order flow, good inquiries, and quotation levels in the third quarter and are
seeing that into the fourth quarter. We believe that the fourth quarter revenues will
return nearer to the levels of the first and second, and that we will show a profit for
the entire year. We have had almost five years of positive cash flow and it looks like
that will continue this year. We are very optimistic about next year because of the
current business activity level that we are seeing and the interest in our Microfluidizer
equipment lines, particularly the new M710, but also in MMR.” CEOCFOinterviews: Do you
think that in the end, that the MMR will replace the Microfluidizer processor? Mr. Gruverman: “The
MMR and the Microfluidizer processor address different types of applications; the MMR is a
continuous chemical reaction system. It happens to make nanoscale products extremely well.
The Microfluidizer processor has always made nanoparticles. Twenty years ago, we did not
call them nanoparticles. The Microfluidizer processing equipment can make excellent
formulated products. It is only when you need to make uniform nanoparticles or structures
that are at the nanometer level that you have to turn to the MMR. I view the MMR not so
much as a mixer but rather as a chemical reactor system, operated on a continuous basis,
at energy deposition levels that are at an order of magnitude higher than competitive
equipment. We do not expect to cannibalize any of our Microfluidizer processor sales by
introducing MMR. We believe that in the future there is a much bigger potential market for
MMR technology than for Microfluidizer processor equipment.” CEOCFOinterviews: Are
you reaching other countries? Mr. Gruverman: “For
a small company, we operate on a global level. We have excellent agents and distributors
in Asia, including Japan, Korea, Taiwan and China, who accounted for 10-15% of our sales
last year. In Europe, we have our own offices and sales group as well as a demonstration
laboratory. Our business in Europe represents about 10% of our sales and we think it will
grow significantly in future years. We do some business in Latin and South America, and in
the Middle East as well.” Mr. Gruverman: “If
anything, our overseas component will grow faster than the North American component. I
would hasten to say that we have barely penetrated our potential Microfluidics market, we
estimate at this at more than $100 million dollars a year, and that does not include the
MMR possibilities. I would not be surprised if we grew to more than thirty or forty
million dollars in total sales in the next five to seven years.” CEOCFOinterviews: In
closing, what would you like to say to current shareholders and potential investors? Mr. Gruverman: “We believe 2004 will be a good year for us and we believe that in subsequent years it will be even better, particularly if we can expand our marketing and selling efforts, in which we have been constrained. Acquisition of modest amounts of capital will help us tremendously and we are looking forward to that happening within the next few years.” disclaimers |
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