Scorpio Technology is a UK company, involved in the development and rollout of a new anti-viral, anti-bacterial air-purification technology for use in hospitals, care homes, schools and offices. Its technology avoids the use of HEPA filters and UV, together with their associated environmental and operational shortfalls.
- British technology, addressing the global need for protection against airborne viruses – Covid-19 (all variants) and beyond – bacteria and allergens
- Initial research and development funded by INNOVATE UK (£100k grant)
- Performance of prototype independently verified by The University of Bristol
- Eliminates the need for HEPA filters and UV radiation in air-purifiers
- First patent filed
- $9.6bn global market, predicted to grow to $24.6bn by 2027
- Hospital market need validation received from NHS national testing and evaluation group (MD-TEC)
- Other target markets include care homes, schools, universities and offices
- UK manufacturer recruited (Teddington Systems)
- Future (Series A) fundraising partner recruited (GRECA Finance)
- Management team has over 90 years’ experience across technology development, IP and business management
- Over 15 months sweat equity invested by management team
- SEIS/EIS Advance Assurance received
It’s the Summer of 2020, and two former government research engineers and a Cambridge engineering graduate with a background in corporate finance hold a series of Zoom meetings. The subject for discussion is whether there is a combination of technologies that can be brought together to address not just the current pandemic, but also the need to protect people against future variants and future viruses, thereby enabling us to live with Covid and be ready for future pathogens. Whilst vaccines are needed to provide the ‘baseline’ protection against severe infection and death, there are whole swathes of the economy (Hospitality, Retail and Commercial Office space) and social infrastructure (Hospitals, Nursing Homes and Schools) that will continue to need protection into the future.
At around the same time, around 240 leading scientists from 32 different countries write to the World Health Organisation (WHO) to explain that a significant (and possibly the most significant) means of transmission of SARS-CoV-2 (the virus that causes Covid-19) is through airborne droplets, exhaled by infected individuals.
This, alongside their own research into the needs of the anti-virus air-purification market, together with a detailed gap-analysis of current products, led the three (Mark Tothill, Dave Bannister and Tim Crocker) to found Scorpio Technology Ltd with the aim of developing a technology that not only captures these airborne droplets, before they spread infection, but also kills any virus contained within them.
The nature of the problem:
Thanks to vaccines, developed countries are moving from the pandemic phase of Covid-19, to the endemic phase. This means that whilst levels of severe illness and death are greatly reduced, compared with the winters of 2020 and 2021, we are nevertheless going to be living with a virus capable of causing significant illness amongst the general population, including key-workers, as well as severe illness amongst the elderly and other high-risk groups. This requires hospitals, schools, businesses and other organisations to provide effective protection against the spread of the virus, in all of its current and future variants, as well as against future viruses.
Beyond the current pandemic, Covid-19 has highlighted a need for increased Indoor Air Quality (IAQ) across critical settings. Hospitals, schools and care homes need affordable, reliable, cost-effective solutions to the threats posed by airborne pathogens – viral and bacterial. Opening the windows and seeing fuel bills spiral is not a practical solution in many of these settings.
Current products, based around the use of High Efficiency Particulate in Air (HEPA) filters, often in combination with Ultra-Violet (UV) suffer significant drawbacks. These range from high power consumption and noise brought about by filters which readily become blocked after even moderate use, to the need to dispose of non-recyclable filters and low-pressure Mercury lamps, which are often used to generate UV light. The use of UV can also generate Ozone, which is harmful to humans in even low concentrations. Together with the high purchase and lifetime costs associated with current air-purifiers, these drawbacks have led to low levels of take-up within user groups with high levels of need, such as schools, care homes and hospitals.
Meanwhile, in developing countries, the move from pandemic phase to endemic phase remains some way off, due to a combination of constraints on vaccine availability and roll out, together with high levels of vaccine hesitancy. This creates a need for cost-effective equipment capable of significantly reducing the spread of the virus.
Given the fact that indoor transmission via droplets – often referred to as ‘aerosol transmission’ – is now known to be the dominant means of transmission of not only SARS-CoV-2, but a wide range of viruses, including Influenza A and B, there is now a need for a cost-effective air-purification technology, capable of being deployed in several forms, ranging from standalone units, for use in poorly/moderately-ventilated spaces, to units integrated into Heating, Ventilation and Air-Conditioning (HVAC) systems in larger spaces, including entire buildings. There is a corresponding need for this to be done without HEPA filters and without UV radiation.
Scorpio Technology Ltd has developed – partly under funding by the UK government, via Innovate UK – a new form of anti-viral air-purifier, capable of both capturing droplets from the air and killing virus particles and bacteria contained within the droplets, without the use of any blockable filters, or UV. Details of the technology are the subject of a patent application, however, in essence, it is based on the separation of these droplets (comprising mainly water) from the air, followed by indirect heating of the captured droplets, to a level that has been found by independent research, to kill a wide range of viruses, including Coronaviruses, such as SARS-CoV-2, as well as a wide range of other viruses and bacteria. The separation mechanism is also applicable to the removal of common allergens, such as pollens, from the air.
The technology, which we are now looking to develop from prototype to product, has been tested by a team of aerosol chemists at The University of Bristol, and has been found to capture over 90% of airborne droplets down to 1 micron in diameter, and over 95% of droplets down to 1.5 microns in diameter. Above 1.5 microns, the capture efficiency rises to over 99%. Airborne droplets above 1 micron diameter, have been found to provide the main means of transmission of coronaviruses, as well as other airborne viruses – see SAGE-EMG. In addition to this very high capture efficiency, the technology was found to kill 99.996% of all virus particles contained within the captured droplets. This meets the hygiene standards set by the NHS for clinical environments such as operating theatres.
The use of this technology, with its high efficacy, together with the elimination of the need for UV, or HEPA filters, will bring advantages across a wide range of settings, worldwide. In particular, its use in medical and care settings will provide a much needed layer of protection for staff, against infection within wards, waiting rooms and other enclosed spaces. Also, its use in classrooms and corridors will enable schools to provide protection against airborne transmission, without the need to ramp up their heating bills by opening windows during winter.
Scorpio Technology will work with our manufacturing collaborator, Teddington Systems, to develop a range of standalone air-purifiers, initially for the UK market, during 2022. This will be followed by a technology licensing scheme, under which non-UK manufacturers will be licensed to bring standalone and HVAC-integrated versions to market worldwide. We anticipate recruiting licensee manufacturers in 2023.
Our planned exit-route is through a trade sale to an established air-purification systems manufacturer.
The global air-purifier market, which totalled $9.6bn in 2019 is projected to grow to $24.6bn by 2027. Much of this growth is predicated on the increased public awareness of airborne viruses and the dangers of indoor transmission.
By targeting the UK market through an OEM model, whilst also addressing the needs of the worldwide market through a technology licensing model, we anticipate (based on very conservative assumptions) driving revenues in excess of £5m pa by the end of FY23/24, leading to earnings before interest, tax, depreciation and amortisation (EBITDA) of around £1m pa. These figures are predicted (on the basis of the same conservative assumptions) to rise to £14m pa and £6.5m pa respectively, by the end of FY24/25 and to £25m pa and £14m pa respectively, by FY25/26.
In addition to these significant projected revenue numbers, the Corporation Tax liabilities of the company will be minimised through the use of the UK government’s Patent Box scheme.
Our plan, following-on from these Seed-round funded developments, enabling early revenue, is to raise £1.6m through an A-round, enabling the company to become fully self-funding via revenue, by 2025. We have already received significant interest in the A-round, from both individual investors and an international investment group.
Our competitors range from large organisations, such as Dyson, through to new entrants such as Rensair, Aeramax and Radic8. All of these rely on combinations of HEPA filters and/or UV-C lamps. They therefore suffer the environmental and performance shortfalls associated with these technologies, ranging from noise and airflow reductions arising from HEPA-blockages, to the non-recyclability of both UV lamps and most HEPA filters.
We are introducing a new UK technology which eliminates the use of both HEPA and UV, whilst providing reliable, affordable air-purification, at low cost. Our technology has undergone independent testing and will be subject to further testing and validation by a leading NHS laboratory (the Medical Devices Testing and Evaluation Centre). It is subject to patent application and details of its operation are available, under NDA.
Please note that any forward looking statements, including financial forecasts are not a reliable indicator of future performance and the information below should be read alongside the company financials.
|Year End : March||Prior Year||Apr 22 - Mar 23||Apr 23 - Mar 24||Apr 24 - Mar 25|
|Cost of Sales||0||493,000||2,920,000||5,832,000|
The majority of 2022 will be devoted to the rapid development and production of Reference Designs for Air Purification Units (APU) which will be deployed either as a standalone product of varying volumetric flow rate or integrated into larger air handling systems (HVAC). In the UK, standalone APUs will be manufactured and sold by STL in order to stimulate the market and demonstrate the technology and market opportunity to potential licensees. Production will be outsourced to a contract manufacturer.
The UK launch of the STL manufactured APU will be in January 2023. This will be followed by licenced APU and HVAC unit licence fee revenues commencing in July 2023. Thereafter, revenues are expected to climb steadily as market share increases and new geographical markets are served. It is expected that revenues for financial year (FY) 22/23 will total £631k and grow to £5.3m in FY23/24 and £14.4m in FY24/25. The majority of expenditure in Q4 FY21/22 and the first half of FY22/23 is devoted to spending on research and development. This is then replaced by marketing and professional fees relating to the promotion and licencing of the reference designs.
In terms of profitability, FY21/22 is forecast to have a loss of £27k after tax (including R&D tax credits). Revenue starts flowing in Q4 of FY22/23, but the year is forecast to be loss making with a net loss after tax of £399k. A loss of £173k is incurred in the first 5 months of FY23/24 followed by a profit of £1.2m for the rest of the year giving an overall profit for the year of £984k. A Profit of £5.7m after tax is then forecast for FY24/25. Gross margin increases from 45% in FY23/24 to 59% in FY24/25 reflecting the increasing proportion of high margins implicit in an IP licensing business model. Net margins increase from 19% to 39% over the same period.
Use of Funds
The minimum raise (£150k) will enable us to further develop the pre-production unit for standalone air-purification, to a point where it can be fully productionised in collaboration with Teddington Systems, for the UK healthcare market. The maximum raise (£450k) will enable us to develop cost-reduced variants of the product, as well as the HVAC version. Our initial market entry will be into those sectors where the need is greatest, and most clearly understood – hospitals, care homes and schools. As a non-medical device, the product will be required to meet only efficacy and building-regulation standards.
Our planned exit-route is through a trade sale to an established air-purification systems manufacturer. Competition amongst existing players is driving a need for clear differentiation, beyond branding. Through its avoidance of HEPA filters and UV lamps, our technology offers a clear path to differentiation on the grounds of cost, environmental friendliness and ease of maintenance.