After decades of hype and false starts, the National Science Foundation forecasts that $1 trillion worth of nanotech products will be on the market by 2015. This year, corporations and governments will spend more than $11 billion on nanotechnology research, according to Cientifica, a London-based consulting firm.

Last year, venture firms invested $496.5 million in nanotech-related companies, 21 percent more than in 2004, and sales of products incorporating nanotechnology totaled $32 billion, according to an estimate by Lux Research. A more significant signal that nanotech has arrived may be that in March, San Francisco-based Global Crown Capital LLC started a $250 million nanotechnology-focused hedge fund, the first of its kind. The 2006 U.S. Budget provides over $1 billion for the multi-agency National Nanotechnology Initiative (NNI), bringing the total NNI investment to $4.7 billion.

Nanotechnology is the understanding and control of matter at dimensions of roughly 1 to 100 nanometers, where unique phenomena enable novel applications. Encompassing nanoscale science, engineering and technology, nanotechnology involves imaging, measuring, modeling, and manipulating matter at this length scale. At the nanoscale, the physical, chemical, and biological properties of materials differ in fundamental and valuable ways from the properties of individual atoms and molecules or bulk matter.

The National Science Foundation predicts that the global marketplace for goods and services using nanotechnologies will grow to $1 trillion by 2015, and there are already over 500 products being sold that claim they are made with nanoscale or engineered nanomaterials. These include products like self-cleaning windows, automobile paint, sunscreens, and tennis rackets. In the future, a marriage of nano and biotechnology will likely create a whole new generation of drugs, biomedical devices, and other products.

Nanomedicine has been defined as the monitoring, repair, construction and control of human biological systems at the molecular level, using engineered nanodevices and nanostructures. Current applications of nanotechnology in medicine involve engineered molecules to develop drugs, drug delivery techniques, diagnostics, medical devices and enhanced gene therapy and tissue engineering procedures. “Nanosizing” is a term developed in the pharmaceutical industry to describe how some previously approved products with particle sizes greater than 100 nm are being produced with smaller particle sizes, in order to change certain physical and performance characteristics, such as pharmacokinetic profile (i.e. the rate and extent of absorption and clearance from the body).

Blurring the issue is that many companies are doing small-size chemistry, biology and materials science and adding the ‘nano’ prefix to sex up their research. At the nano- scale, much of traditional physics guidelines don’t apply and key properties of materials can suddenly change. But since many molecules are that size, lots of traditional chemistry, molecular biology, materials science and other disciplines can be included under the “nano” definition.

As we reported earlier, an increase in nanotech patent filings has overwhelmed the USPTO, which totaled 4,996 U.S. issued patents through 2005. However, it has issued many patents with imprecise terms like “nanorod” and “nanowire,” so that patents are issuing with broad, overlapping claims, making for some difficult litigation later if commercialization ever materializes.

Patent litigators, however, report an increase in orders for BMWs (just kidding).

On the downside, with such a fragmented market, few investors are going to be able to understand the competitive landscape. Therefore, many investors might be tempted to believe a patent means more than it does, setting some investors up for a big loss. Very often small cap, nano-companies can skyrocket or plummet on the mere mention of a new patent.

In what could signal a sea change at the USPTO, according to a new report from Lux Research, the rate of new nanotech patent issuances stalled at 4% in 2005 after exceeding 20% in the last few years. At the same time, however, the number of public patent applications for nanotechnology continued to increase, growing by 52% to 2,714 outstanding nanotech patent applications. It doesn’t take a genius to see a huge backlog coming at the USPTO. The pendency rate – the time from the submission of a nanotech patent application to the issuance of a patent – is now nearly four years on average up from two and half years in 1993.

In their report, Lux determined that certain areas, like carbon nanotube and quantum dot applications in electronics and healthcare/cosmetics applications nanomaterials (e.g., dendrimers, ceramic nanoparticles, and metal nanoparticles) represent battles worth fighting because of the broad applicability of these materials to a number of large addressable markets. Time will tell if many of the laboratory-stage experiments will turn into salable products.

Also, as previously described, there remain constant concerns about the safety of nanomaterials since the cosmetics and food industries are deep into emerging nanotechnologies. It is estimated that about one-third of nanoproducts are intended to be ingested or applied to the skin, with no apparent strategy to assess general risks posed by nanomaterials, according to a report by Woodrow Wilson International Center for Scholars’ Project on Emerging Nanotechnologies.

The report calls for spending $50 million annually on nanosafety studies and lays out a strategic plan for assessing long- and short-term risks to human health and to the environment that nanotech might pose. To date, the FDA has no knowledge of reports of adverse reactions related to the “nano” size of resorbable drug or medical device products. The FDA has not established its own formal definition for nanotech, though the agency participated in the development of the NNI definition of “nanotechnology.” Using that definition, nanotechnology relevant to the FDA might include research and technology development that both satisfies the NNI definition and relates to a product regulated by FDA.

We doubt, however, that nanotech will run amuck in creating the “gray goo” (or “global ecophagy“) scenario.

The Nanotech Report, 4th Edition is available for $4,795 from Lux Research’s Nanotechnology Strategies advisory service.

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