By Richard Acello
Small Times Correspondent

The recent alarm over the threat of biowarfare has thrust Nanogen, a San Diego-based biotech, and a handful of other technology firms into the spotlight as the nation scrambles to assemble a readily available biowarfare defense plan.

On Wednesday, shares of Nanogen shot up almost 50 percent to $8.33 on news that the company won a three-year contract from the U.S. Army, valued at $1.5 million. The military is a relatively recent client addition for Nanogen (Nasdaq: NGEN), whose traditional customer base includes Johns Hopkins University and the National Cancer Institute.

Nanogen’s part of the puzzle is the creation of a miniature electronic device

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Nanogen received a $1.5 million contract from the U.S. Army to develop a battlefield version of its “NanoChip” system to detect biological attacks.

for isolating and detecting biological warfare and infectious disease agents from blood samples that would be part of the front line defense in a bio attack. “The intention is to create a simple, easy-to-use system that can be used in the field, in a doctor’s office, most likely by a nurse,” said Kieran Gallahue, president of Nanogen. Gallahue said the “sample to answer” system would be able to yield results in less than 24 hours.

The technology for the blood analysis is based on Nanogen’s “NanoChip” system that analyzes genes, also known as molecular diagnostics, and applies the findings to clinical research. The NanoChip allows computer-assisted blood analysis, or as Gallahue put it, “DNA analysis on a microchip.” The company markets its NanoChip Molecular Biology Workstation to genomics laboratories and research facilities.

Though the terrorist attacks have changed the nation’s consciousness about biological warfare, Nanogen announced a $1.1 million Army grant in October of last year, to much less fanfare. These are in addition to prior grants totaling $15 million from the National Institute of Justice (NIJ) and the Defense Advanced Research Projects Agency DARPA) for both law enforcement and defense purposes.

Nanogen went public in 1997 with a $64 million offering and raised $82 million in a secondary offering last year. Nanogen closed Monday up 51 cents (5.92 percent) to $9.12 and traded as high as $9.80 during the session on about 5 times average volume. The 52-week range is $3 and $20.43.

“Our primary business is clinical research,” said Gallahue. “Our long-term mission is electrodiagnostics for health care applications. But grants like this are important, because core research gets funded by a defense grant and we can apply it to health care.”

A biotech analyst agreed. “Any free money like that is a win for shareholders,” said John McCamant, editor of the Medical Technology Stock Letter, based in Berkeley, Calif. “And a couple of million dollars really makes a difference for some of these $100 to $150 million market cap companies.” Nanogen has a market cap of $150.4 million.

McCamant noted the sharp Wednesday runup for Avant Immunotherapeutics, which doubled after announcing that it would license vaccine technology to DynPort Vaccine Co., which has a contract with the U.S. Department of Defense.

Such wild swings will be typical of companies in the emerging biotech to high-tech arena, characterized by short-term profits that the biodefenders may not be able to hold, the biotech analyst said.

“It’s not a sustainable business model,” McCamant explained. “But it is a real business, including the whole detection business (for safety) of air, food and water.” Nanogen’s “sample to answer” system is not yet in product form and Gallahue did not provide a release date.