StreetTalk: With Nanotechnology, It's the Little Things that Count

Sizeable investments in "tiny technology" could result in big profits and innovative life sciences products.
Jul 01, 2005
Volume 18, Issue 7

Brian O'Connell
I was playing tennis recently with my friend Ron who, in addition to a wicked backhand, is well-versed in new technologies and gadgets.

Between points he told me about a new technology that could make a tennis ball bounce twice as high and twice as long as today's brands. He said it was the same technology that promises to produce stain-resistant clothes and develop computer storage media with 40 times the capacity of current models.

The technology Ron is talking about is called nanotechnology. Maybe you've heard of it.

So while we're talking small in terms of deployable technologies, the upside of the nanotech industry is huge. The National Science Foundation (NSF) pegs the US market growth for nanotechnology products at about $1 trillion over the next ten years. The NSF also claims that the technology will boost job growth significantly, adding between one to two million new jobs in the US by 2010, and that about half of all new drugs developed in the US will be created using nanotechnology tools.

Another study – "Nanotechnology in Health Care" – from the Cleveland-based Freedonia Group states that key growth areas within the nanotechnology sector include new, improved cancer and central nervous system therapies based on solubilization technologies. In the pharma sector, protein- and peptide-based compounds for cancer, diabetes, infectious diseases, and organ transplant acceptance should fuel nanotechnology growth. Investors, however, shouldn't expect those technologies to materialize overnight. "Diagnostic tests based on nanoarrays and quantum dots, and imaging agents based on superparamagnetic iron oxide nanoparticles will also see strong growth," says the study. "(But) in spite of progress in introducing new products, the vast potential of nanotechnology in the health care field will not be fully realized for at least a decade as stringent regulatory barriers and technical complexities delay its commercialization."

Eager to be the first kids on the block to capitalize on nanotechnology financially, the venture capital industry has poured $700 million into the sector over the past two years.

WHAT IS NANOTECHNOLOGY? Lux Capital, which recently launched a nanotechnology index on the American Stock Exchange, defines nanotechnology as "the manipulation, precision placement, measurement, modeling, and creation of sub-100 nanometer scale matter." Another financial services firm, ThinkEquity Partners LLC, has published a report entitled "Thinking Big About the Small World: A ThinkPiece on Nanotechnology." Aside from in-depth research reports on over 30 publicly-traded nanotechnology companies, and a useful primer on nanotechnology called "Nano for the Novice," the report has much to say about the impact this technology will have on society.

Their findings are myriad and useful, especially the ones with an investment focus. . .

  • Recent applications, such as stain-resistant apparel and nanocomposite tennis racquets, are only suggestions of the type of commercial applications we are likely to see before the end of this decade. (This) includes non-volatile RAM, 15 nm node devices, diagnostics for disease, flexible displays, and biosensors. The most interesting and useful applications will be applied to information technology, communications, and healthcare. Carbon nan-otubes could play critical roles in many of these applications.
  • Government funding around the world, totaling over three billion per year, is growing and really unprecedented for the physical sciences arena. The US federal government, through the National Nano-technology Initiative, appropriated close to $1 billion for research in fiscal 2005, but the European and Asian countries are keeping pace.
  • The public market for nanotech investment is at best, "under-developed", although some small capitalization companies like Harris and Harris Group, Lumera (LMRA-not rated), Immunicon (IMMC-not rated), and Flamel Technologies (FLML-not rated) are publicly traded. Large firms like Intel, IBM, DuPont, 3M, General Electric, Samsung, and Hitachi are also heavy investors in the nanotechnology sector.
  • The societal debate on nano-technology is just starting. Advocates will see it as a solution to many problems, while detractors will view it as an unregulated technology with little under-standing as to its consequences. Expect these two extreme views to be expressed in the media more than those of the vast majority who believe in progress with a steady focus on safety, health and the environment.

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