By Laura Onstot
Medill News Service
Posted Sunday, February 18, 2007

Home Depot stores this month began carrying a line of house paint that does not require a primer or second coat.

The paint uses particles one-thousandth the width of a human hair developed by Romeoville-based Nanophase Technologies Corp.

Behr Paint, owned by Detroit-based Masco Co., developed its Premium Plus Ultra paint to protect homes with less effort required by do-it-yourself house painters.

The paint “did well in test marketing,” Behr spokeswoman Lisa Wade-Grossman said, and it enabled Nanophase to post revenue records for the last two quarters. Although the company still loses money, analysts like the stock.

Nanophase is devoted to figuring out better ways to utilize tiny particles — nanomaterials — in a variety of protective and cosmetic products. “With this technology, we believe we have a class-leading platform,” Chief Financial Officer Jeff Jankowski said in an interview.

Although the company hasn’t been profitable since going public in 1997, its losses have been shrinking.

For the third quarter ended Sept. 30, the company reported a loss of $915,000 or 5 cents per share, down from the year-earlier loss of $1.5 million or 9 cents per share. Revenues jumped 47.5 percent to $2.3 million.

Nanophase was born in 1989 out of Argonne National Laboratory, operated by the University of Chicago.

Scientist Richard Siegel began working with minuscule particles and found they had some promising commercial implications. By creating metallic powders of these itsy bitsy particles, he found you could change the way traditional products worked.

An initial effort to make ceramics that would bend but not break didn’t work, but in time Nanophase created an ingredient for sunscreens and other skin products that provided UV protection without needing thick goopy foundations.

The stock has been erratic. It launched in 1997 at $8, rose to $13, then dipped below $2 the following year. In March 2000, the stock hit a record high of $17.75. Currently, it trades for about $6 a share.

Most of the 60 people on Nanophase’s staff, at locations in Romeoville and Burr Ridge, are devoted to research and development.

“Our holy grail, which we haven’t licked yet, in coatings is automotive clear coats,” Jankowski said.

He explained that a car body paint that would resist some of the strongest scratches and maintain the sheen of a new car for years has long been a goal of auto makers. “If we could do that we know we’d have an incredible amount of business,” Jankowski said.

Alan Thomas, the company’s second employee, now at the University of Chicago, said developing new nanotech products is difficult. Following the company’s success in cosmetics, he said, Nanophase began looking again into solid products without success, then hit upon the idea of putting nanoproducts into solutions to create products like paint.

“You have to work pretty hard to find both unique applications and high value ones that you can create a sustainable market in,” Thomas said.

Nanophase co-founder John Parker, who now works for Aurora-based Cabot Microelectronics Corp., said the technology offered by Nanophase is not unique. That means finding new ways to apply nanoparticles — in paints or coatings — and getting intellectual property protection for those applications, is essential for the company’s continued success.

“The uniqueness of how (nanotechnology) is used is an advantage,” Parker said. “The uniqueness of what they manufacture generally is not.”

Analyst Avinash Kant of Canaccord Adams in Vancouver, B.C., said Nanophase has no competition in the field among publicly-traded companies, giving it unique stature.

“We see a lot of potential.”

Kant believes that even without the development of scratch resistant car paint, Nanophase has a growing market for its current microtechnology, including further developments in cosmetics, paint, and coatings for semi-conductors.

“The applications that they are into already, those applications are going to grow,” he said.

Jankowski said Nanophase is also expanding its physical reach. It has a client in China and is working to set up a deal with a client in India.

For the current quarter, analysts are predicting 66 percent sales growth and a loss of 3 cents per share. The analysts’ average stock target price is $8.28. Of the three who rate the stock, two call it a buy and one a hold.

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