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Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited
From R&D to ROI: commercialising nanosensors
Article Type: Nanosensor update From: Sensor Review, Volume 31, Issue 2
The previous section has described all manner of intriguing devices, many appearing to offer commercial potential but as with all new technologies, taking the results of a nanosensor research programme to market is fraught with difficulties. One route to market is the commercialisation of university work conducted in collaboration with major corporations who have the necessary marketing skills and financial resources and an example is the nano-biosensor being developed by Philips (Figure 6). However, several academics have been tempted to raise venture finance and capital from government agencies and go it alone. Summary details of three early nanosensor start-ups who adopted this route are shown in Table II.
Table II Details of three early nanosensor companies
The Nanomix product range is based on its proprietary carbon nanotube (CNT)-based “Sensation” technology platform which can be tailored to detect a wide range of compounds through the chemical functionalisation of the CNTs. Products are aimed at clinical uses such as biomolecular assays and asthma monitoring and also industrial applications including environmental (gas) monitoring and demand-controlled ventilation, through the use of its NanoTect monitors. The company has received significant levels of investment, including around $1.3 million from the US Department of Homeland Security, over $1 million from the National Science foundation and $48 million in private equity funding from Alta Partners and others. Being privately held, there is little financial data available but revenue for year ending 2008 is understood to have been around $3 million, so the company has some way to go before it enters a profitable phase. In contrast, Nanosphere is effectively a one-product company. Its Verigene System is based on functionalised gold nanoparticle technology and is used to detect nucleic acid and protein targets in a variety of clinical applications. The system comprises two laboratory instruments, the Verigene Reader and the Verigene Processor, and single-use laboratory consumables, the Verigene Test Cartridges. The company has been generating revenue for several years, with annual figures between 2005 and 2009 ranging from a low of $1.14 million (2006) to $2.21 million in 2009. However, it has incurred significant annual R&D costs of between $13.72 million (2005) and $23.67 million (2008) which, combined with annual sales and admin expenses ranging from $4.50 million to $14.47 million, has led to annual losses of between $16.41 million in 2005 to $53.12 million in 2007. In year ending December 2009, the company made a net loss of $33.95 million against a revenue of $2.21 million. Not all of the revenue arises from product sales; sales and product rentals in 2007 and 2008 amounted to $0.1 million and $1.0 million, respectively, the remainder arising from government grants and other sources. However, Verigene System sales and rentals are now growing, following clearance for use from the US FDA during 2007 but as of December 2009, the company had an accumulated deficit of approximately $239.3 million. The company expects its R&D levels to remain high for the foreseeable future as it seeks to enhance its existing product line and develop new products. The company’s chief executive stated in the 2009 annual report “Because of the numerous risks and uncertainties associated with our product development and commercialisation efforts, we are unable to predict when we will become profitable, and we may never become profitable”. Despite this rather gloomy outlook, the company survives but others have fared less well. NanoSensors’ stated business was the development, manufacturing and marketing of sensors and instruments to detect biological, chemical and explosive agents and the first product was to be a sensor to detect Escherichia coli and Salmonella in food and water. However, despite announcing that prototypes were to be available for independent third-party testing in 2007, the company terminated its operations in November 2008.
These examples illustrate only too well the difficulties in converting nanosensor R&D into ROI and paint a rather dismal picture. With such poor returns on investment, perhaps the nanosensor bubble will soon burst and equity funding will dry up. The reality is that, to take an interesting technology or even a laboratory prototype to market, a massive investment in on-going R&D, together with a highly focussed market strategy is required. However, this is almost always the case with new technologies and the early days of silicon/MEMS sensors are a case in point. Many early start-ups floundered, some merged and others were acquired by larger concerns but as the technology matured and markets were identified that genuinely benefited from it (e.g. automotive), the business boomed. New nanosensor companies continue to emerge. For example, 2006 saw the founding of Alpha Szenszor, Inc., a US-based start-up which has an exclusive license covering CNT technology from Nantero, the first company to develop semiconductor products using CNTs in a production CMOS fab. The company aims to develop a low-cost molecular diagnostics sensing product based on CNT technology and plans to raise $7.5 million in private investment over the next 24 months. Another recent market entrant is Argent Diagnostics, Inc., founded in 2008 and exploiting technology developed at the University of Georgia and Georgia Tech. The aim is to use metallic nanoparticles to enhance the SERS technique (surface-enhanced Raman spectroscopy) for the rapid identification of viruses.
Perhaps, the main lessons to be learned are that nanosensor start-ups need to target applications where their technology uniquely satisfies a real market need and that equity providers need to be in for the long haul to see a return on their investment.