Arrowhead Research Corporation (ARWR & ARWRW)
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Arrowhead Research is building a
diversified nanotech company
Arrowhead Research operates three majority-owned subsidiary companies:
Arrowhead is funding three research efforts in nanotechnology at the California Institute of Technology in the areas of nanomaterials, nanoelectronics, and nanobiomolecular tools.
CEOCFOinterviews: Mr. Stewart, what was your vision for Arrowhead and how has it developed?
Mr. Stewart: We are in the business of transferring technology from universities and commercializing it. We started at the California Institute of Technology, known as Caltech. We funded research in different areas of nanoscience. Typical research projects cost $150,000.00 to $200,000.00 a year. In exchange, we get an exclusive right to license from Caltech any intellectual property developed from these research projects. In addition to acquiring valuable patents through funding research, we have three majority-owned subsidiaries seeking to commercialize certain nanomaterials, devices, and systems with near term revenue potential. We will continue to expand our research programs and hopefully we will expand and develop more majority-owned subsidiaries.
CEOCFOinterviews: How did you decide what to fund?
Mr. Stewart: I went to Caltech, wandered around the halls and talked to people, scientists, professors, and researchers. I tried to figure out where nanotechnology was going and who were the leaders in the field. With the help of the administration and the technology transfer office, they pointed me to several research projects, which I looked into and decided to fund.
CEOCFOinterviews: Will you tell us more about the three companies?
Mr. Stewart: Aonex Technologies, Inc., is in the business of developing nano films. The intellectual property came from Caltech, and their first primary product will be ultra efficient and ultra light solar cells. The initial market would be for satellites. The second company is Insert Therapeutics, Inc., and they developed a patented nanoscale drug delivery system, which has many advantages and is probably a year away from significant clinical trials; the animal studies have gone very well. The initial project was a nano polymer that delivers chemotherapy; a lower dose is needed and the drug is released when it gets inside a cancer cell, so it is much safer and more effective. The technology can be used for delivering a number of other drugs as well as gene therapy and RNA interference. The third company is Nanotechnica. The chief scientist of that company is Dr. Michael Roukes; he has spent the last ten years at Caltech developing a number of nanoscale devices, of which he has produced prototypes and small quantities. We are in the process of planning and developing a fabrication plant for mass production of nanoscale devices and systems.
CEOCFOinterviews: What is involved in commercializing the various products and what are the benefits of structuring so that you have these subsidiaries instead of being under one umbrella?
Mr. Stewart: We are not an investment company and we are not a venture capital firm. We are trying to build a diversified nanotech company. The reason for multiple divisions is that the inventors and founders want equity in their own company because they each think their company is going to be the most successful of all the other subsidiaries. We give Caltech some equity in each of these companies in exchange for an exclusive worldwide license to all the technology that has been developed. There is another reason to keep them separate and that is each division can operate autonomously with administrative and legal assistance from Arrowhead Research. We have the option of splitting them out and taking them public or making them wholly owned. It gives you much more flexibility.
CEOCFOinterviews: What is involved in the commercialization process?
Mr. Stewart: You have to put together an infrastructure and management team to build the company, the product and to assemble the equipment that is required. It is not unlike forming any other company; the same rules apply when you form any new start-up.
CEOCFOinterviews: What does Arrowhead know that enables you to do this successfully?
Mr. Stewart: I was the founder, chairman, president and CEO of Accacia, which had a similar model but was not limited or specialized in nanotechnology. I was also the founder of CombiMatrix Corporation. I have a track record of founding companies that have become quite successful. As with any business, the success of the business is attracting the right people and the right management team. That is where I spend a great deal of my energy, in trying to find the right people. I am not the right person to run companies. My skills lie in finding something that will lend itself to becoming a big business; finding the right technology and the right people.
CEOCFOinterviews: There is much talk about nanotechnology today; will you give us a sense of what the potential is and where your three current ideas fit it?
Mr. Stewart: Nanotechnology is the next wave, and the next industrial revolution. Nanotechnology will play a role in almost every aspect of science and technology development. Currently, nanotechnology is being used in things such as stain-proof and wrinkle-proof fabrics. It also plays a role in new sunscreens and cosmetics. Nanotechnology could revolutionize life sciences, electronics, and other fields. The advantage for information processing systems is that they can be extremely small, very cheap, substantially low power.
In the field of medicine, we have been unable to analyze what goes on inside of a single cell. What most researchers have done is take millions of cells and put them in a diagnostic device and analyze them as a group. The real breakthroughs are going to come by being able to analyze what is going on inside a single cell and it requires nanotechnology because a typical human cell is seven or eight hundred nanometers. We havent had the tools in the past go inside and analyze what is going on. The answer to disease and other medical issues is that you must be able to understand what is going on inside of a single cell. Nanotech is going to be playing a role in most aspects. They are predicting that nanotechnology will be ten percent of the gross national product in six or eight years. It will be a more disruptive technology than the computer or the automobile or textile revolutions.
CEOCFOinterviews: How are you funding your development?
Mr. Stewart: I have been successful in raising capital over the years and have developed a network of investors. I can raise the capital myself - my track record helps quite a bit.
CEOCFOinterviews: You have recently moved from the Bulletin Board to Nasdaq. Will you tell us about the importance of that for the company?
Mr. Stewart: Many funds, investors, institutions and brokerage firms will not allow investments in bulletin board companies. The bulletin board is often the place for young, small and very tiny companies. There are also some questionable companies on the bulletin board as well. Nasdaq has rigid requirements that you have to have a certain amount of capital, a certain amount of shareholders, and they have certain rules. Investors are much more comfortable investing in Nasdaq companies than they are in bulletin board companies.
CEOCFOinterviews: Will you give us some more detail on where you are headed with your three companies?
Mr. Stewart: We will take one company at a time: Insert Therapeutics; its product has multiple uses of delivering multiple drugs. The first drug that this delivery system is being tested with is a cancer therapy and the technology would be useful for many other drugs in the future. I believe that human trials will likely begin next year and if they go well as we anticipate they will, I think that there will be a collaborative agreement with a pharmaceutical company, and then proceed to test the delivery system on other drugs in the future. It has a bright long-term future. Aonex - which uses nano films for solar cells and other semi-conductor devices - I would say that they are almost prepared to ship samples but it is probably a couple years before they are in mass production. Nanotechnica has several products that have been tested and prototyped and well be working to develop these products on large scale. The first product is a sensor probe with the atomic force microscope, which should be in mass production in less than a year; it is a thousand times more sensitive than existing probes. It is not a huge market; maybe forty or fifty million a year. The second product, which will be coming along somewhat in parallel, is a device for pathogen sensing. They have several other products that will be following that. I would say that their first product could be a year away before it is mass-produced.
CEOCFOinterviews: This would be a good time for investors to look at the company!
Mr. Stewart: This would be a good time for investors to take a look!
CEOCFOinterviews: What is the competitive landscape?
Mr. Stewart: There are many people in the nanotech arena. We have a broad portfolio of exclusive patent rights. We have over 180 patents and patents pending in the nanotech area, which provides us protection for our products and an opportunity to license other people to use some of our technology. Our plan is to expand our intellectual property base in the near future and to accumulate as much intellectual property as we can. We are primarily working with Caltech at this moment. Caltech is the birthplace of nanotechnology. Back in 1959, Richard Feynman gave his famous speech called, There is Plenty of Room at the Bottom and that was the starting point of nanotechnology. Caltech files more patents than any other university in the United States. It is an active place and very prolific in producing intellectual property. We plan to expand our model to additional universities but right now our hands are full.
CEOCFOinterviews: What should investors know that they might not realize when they first look at the company?
Mr. Stewart: I anticipate that there will be some reports coming out that will describe the nanotechnology industry and describe what various companies are doing in nanotech. I tell people to keep their eye on us and keep tuned in to what we are doing. It is not my policy to recommend that people buy our stock. Now that we are on the Nasdaq, I think that we will become much more visible and a lot more people writing about us and talking about us. We are here to build a large successful, diversified nanotech company. We are specializing in nanotech because we believe that is where the future is.
We have over 180 patents and patents pending in the nanotech area, which provides us protection for our products and an opportunity to license other people to use some of our technology. Our plan is to expand our intellectual property base in the near future and to accumulate as much intellectual property as we can. We are primarily working with Caltech at this moment. Caltech is the birthplace of nanotechnology. Back in 1959, Richard Feynman gave his famous speech called, There is Plenty of Room at the Bottom and that was the starting point of nanotechnology. Caltech files more patents than any other university in the United States. It is an active place and very prolific in producing intellectual property. We plan to expand our model to additional universities but right now our hands are full. - R. Bruce Stewart
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