Issue

Unidym brings nanotech to market

07/01/2007

Through its merger with Carbon Nanotechnologies Inc. (CNI), founded by the late Richard Smalley, who won a Nobel prize for his work in nanotechnology, Unidym has assembled a full intellectual property portfolio and a range of patents covering many aspects of carbon nanotubes (CNTs).

Arrowhead Research, a publicly traded company that invested in Unidym and retains majority control, aims to assemble a complete management team, a well-stocked patent portfolio, and production capacity to make CNT-based products. Validating that strategy is the recent $16.5 million second-round investment by York Capital Management.

Unidym’s president Sean Olson (see editor’s note below) recently announced a pact with Touch Panel Laboratories of Japan to develop CNT films for handheld gaming devices. Olson tells Small Times’ Jo McIntyre how he manages the challenges of finding new markets while he’s running the merged organization.

Q: Managing industrial innovation is always challenging. What is your perspective on this? Where do you start?

You begin by focusing on which of your capabilities or assets will form the foundation for your new ideas. Whether it’s a technology platform, a customer need, or even a distribution channel, I believe it’s important to pick a starting point, even if the idea-generation process takes you someplace else.

Once you’ve come up with a few concepts, the focus should be on understanding what potential customers want. It is absolutely imperative to get out into the marketplace as quickly as you can-go to conferences, trade shows, and anywhere else you might find potential customers-and talk to them about the concept.

You will learn more from a one-hour discussion with somebody who is in one of your target markets than you will in a month of reading background materials.

Q: How do you handle the complex management structure of Unidym, CNI, and Arrowhead Research?

There was strong agreement on the strategy before the merger, so there aren’t that many management issues associated with the integration. We wanted to bring our carbon nanotube-based products to market, but knew we needed to have a stronger intellectual property position and internal production capability for our proprietary CNTs.

On CNI’s side, they realized that many of the opportunities for carbon nanotubes are ones where you don’t need a large volume of material. For them to be able to capitalize on these characteristics they knew they needed to forward-integrate into the product to capture more of the value.

What Unidym had was one specific product: transparent, conductive film of carbon nanotubes that replaces the indium tin oxide (ITO) films currently used in touch screens, flat-panel displays, OLEDs, and thin-film solar cells. It was a very good fit for what CNI wanted to do.

Q: Arrowhead starts up and operates companies through relationships they have with universities. How does that work?

There are many great technologies at universities, but not many companies are working on pulling them out into the market. That’s the opportunity for Arrowhead.

Arrowhead’s model is a bit different from the standard venture capital model. In addition to providing funding, Arrowhead maintains a controlling interest in each company and provides more management expertise and operational support, like back-office-type services, than most venture companies.

They have five subsidiaries engaged in commercializing nanotech products and applications, including anti-cancer drugs, RNAi therapeutics, carbon-based electronics, and compound semiconductor materials.

Q: How did Unidym begin?

Two years ago, John Miller of Arrowhead started Nanopolaris to assemble a toolbox of patents and productions capabilities. After about a year, the company decided there were near-term manufacturing opportunities in CNTs, so in the summer of 2006 it decided to combine with Unidym, a company that was started by UCLA professor George Grüner.

Nanopolaris took on the Unidym name and became a company with patents and a product direction-transparent conductive films and CNT-based film transistors.

Arrowhead funded the combined company with $7 million, and I got involved about three months after that.

Q: Is that where your business skills were needed?

Yes. There had been no formal management team in place. Arrowhead asked me to get involved, refine the strategy for the company, and bring in a management team. Miller got into active discussions with CNI about a merger a few months after I joined. At the outset, there was strong agreement as to what the strategy of the company should be.

Q: Do you have any customers for this product?

Yes. We sold CNT materials in 2006 to a wide range of different customers, mostly for R&D. We want to continue those relations. We expect to begin selling our transparent conductive film product in 2008. Our thin-film transistor technology leverages the work we’re doing in deposition of CNT-based films and is a second-generation product. We’re aiming for the emerging flexible display market.

Q: With Touch Panel Laboratories of Japan, for example? Do you view this as a major development, or is it just a part of your larger strategy?

It’s a collaboration with them. There is no money involved in the Touch Panel Lab joint development deal we announced in April, but we expect to have product sales in 2008. They have expertise in different touch panel markets. We are working to integrate our products into one specific area-handheld gaming applications-where they think it’s promising.

The reason CNTs are of interest there is that the primary failure mode in touch panels found in gaming devices is microcracks in the transparent conductive films that today are made of ITO. CNT films are actually a network of tiny wires that don’t degrade under repeated mechanical loading, like hitting the panel with a stylus. The CNT manufacturing technology is also less expensive, because it’s an aqueous, roll-to-roll deposition process, almost like a printing press.

Q: Does Unidym also conduct research projects, or do you farm those out to universities?

We do most of our research internally, but there are lots of experts out there doing interesting things with CNTs, and we want to develop strong relationships with them. We are funding two university projects: one at Duke with Jie Liu, who is working on carbon nanotube-based interconnects, and another at the University of Florida with Andrew Rinzler, who is working on thin-film transistors. He’s pursuing a slightly different approach than what we are doing in-house.

Q: Will you also license your many patents to other manufacturers?

Yes. We intend to use them to work with companies to bring products to market. A big driver for our merger with CNI was to get the IP base to get to market. Unidym’s patent portfolio broadly covers many other promising applications, ranging from structural composites to sensors to therapeutics. We want to partner with companies that already have capabilities in these markets.

Q: Which of these are closest to commercialization or licensing out to other manufacturers?

There are already commercial applications for carbon nanotubes in composites, and CNI is selling into that space. That is actually here and now. I believe the next big opportunity is in transparent conductive films, where we’ve got something cheaper and better than ITO films used today. Longer term, we see uses in therapeutics and drug delivery. We expect to license these, because electronics is our core capability.

Q: What do you consider the most promising direction nanotechnology research is taking these days-electronics, medicine, optics, cosmetics ... ?

Electronics definitely presents the most near-term opportunities, most specifically for CNTs. As far as long-term impact, medicine would be my top pick. Arrowhead has two companies working in that space. Insert Therapeutics has developed a nano-engineered sugar that stays in the system longer for drug delivery in oncology. Calando Pharmaceuticals can engineer a delivery mechanism for siRNA therapeutics to reach their intended targets.

Q: What accomplishments are you most proud of?

I’m proud of getting myself into a role where I can help bring exciting new technologies to market. CNTs have great potential, but as with most innovations, it has taken longer than people expected. It takes a network of companies, researchers, and customers to make new technologies happen.

That critical mass is finally here for CNTs and, with the IP, the ability to produce CNTs, and a great product opportunity, we are well-positioned.

The Olson File

Sean Olson, 36, has MS/BS degrees in mechanical engineering from Massachusetts Institute of Technology and an MBA from Harvard Business School. His technical and business experience includes positions with Silicon Valley Group Lithography, Idealab, and The Boston Consulting Group.

In 2004, he co-founded Aonex Technologies, a start-up that develops materials for the blue LED industry with a seed investment from Arrowhead Research. In November 2006, he became president of Unidym, where he will refine business strategy, hire key team members, and position the company for an IPO by the end of 2007.