PowerZyme says it has the juice
to play in portable power market

SUMMIT, N.J., June 10, 2002 — PowerZyme Inc. may still be in an under-the-radar R&D phase, but it could be incubating an important technology in the market for mobile power.

The company’s micro fuel cell, developed with Sarnoff Corp. in Princeton, N.J., harnesses organic enzymes to combine the power of conventional batteries with the long run-time of fuel cells. Microfluidics in the device would control the supply of enzyme-enriched methanol fuel and carry away the waste products, carbon dioxide and water.

Don Scuilli, the company’s chief executive, said PowerZyme’s device would be environmentally friendly, operate at room temperature and capable of powering a laptop for as long as a week.

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Users would “recharge” their power source by swapping out a fuel cartridge that may initially cost about $4 or $5 and be significantly lighter than existing battery technologies.

Rose Ritts, the company’s chief operating officer, said the device would be environmentally “green” in several key ways. Unlike other micro fuel cells that use platinum or palladium as a fuel catalyst, PowerZyme’s doesn’t employ any heavy metals. That means a cleaner manufacturing process and no environmental contamination when the device is thrown out.

In other fuel cells, protons diffuse across a membrane fairly slowly. Scuilli said the company’s patented enzyme-enriched fuel mix actually pumps protons across its Active Transport Membrane.

Other companies racing to commercialize micro fuel cells include Angstrom Power Inc., Lilliputian Systems, Manhattan Scientifics Inc., MTI MicroFuel Cells Inc. and MesoFuel Inc.

“PowerZyme is in an extremely attractive market,” said David Berkowitz, vice president of Ventures West Inc., a venture capital firm in Vancouver, British Columbia, that has stakes in several fuel cell companies, though not in PowerZyme.

Industry analysts at the Freedonia Group expect the $7.5 billion U.S. market for portable power products to grow 7.2 percent a year through 2005.

“There’s a lot of pain among consumers with laptops that run only an hour or two before needing to be recharged,” said Berkowitz. He noted that laptop designers can’t add new features that consumers want because of the limitation of current battery technologies. “The lithium ion technology powering most laptops is hitting the wall,” he said.

PowerZyme was born with an initial $2.5 million from a group of angel investors. Vernon Bremberg, a former DuPont senior manager, is the company’s acting chief technology officer. Ritts, the project’s program manager at Sarnoff, is overseeing R&D at a small six-person lab on the outskirts of Princeton, N.J.

The company netted $5.4 million in a second round of funding in August 2001 from a group that included Arete Corp. Micro-Generation Technology Fund, Rockport Venture Partners and SAM Private Equity.

Scuilli said the company is on track to demonstrate a prototype for a laptop power source by the end of the year, but cautioned that it was too early to say how soon a commercial product would be ready. He also said that it’s too soon to know whether he’ll build a full company around the technology or license it to an industrial partner.

PowerZyme’s technology may not just enable existing products to work longer, the thinness, lightness and power density of the fuel cell may make new categories of products possible.

David Redstone, editor of the Hydrogen & Fuel Cell Investor, sees promise in PowerZyme’s approach. “Enzymes have evolved over millions of years to be very efficient and have high power densities,” he said. But he sees disadvantages with any micro fuel cell system that runs on methanol, which can be toxic. He believes companies such as Medis Technologies, which is commercializing a fuel cell that operates on alcohol, have the best chance to grab an early lead in the market.

On June 6, Medis, based in New York and Israel, announced that it will develop a mobile fuel cell battery charger system for the U.S. Army.

Scuilli is not dismissing the significant competition and technical hurdles, but noted that “when a baseball team is in a pennant race, you can’t spend all your time checking the out-of-town scoreboard. We’ve got to focus on what we can do and not worry about what we can’t control.”

Focused and careful product development is important in such a consumer-driven market, Berkowitz said. “Micro fuel cells have to work seamlessly and safely” if they are to satisfy millions of demanding customers.

If PowerZyme and other fuel cell developers can solve its significant R&D challenges, he predicts that their micro fuel cells, like the mobile phones and laptops they will power, could “start out as a small niche and work their way down” in price and into many devices.

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