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Friday, January 13, 2006

NanoNovus: January 13, 2006

Today was a big day in the field of nanotech investing. Elan announced a licensing agreement with EntreMed that grants the company the right to utilize Elan's (NYSE: ELN) proprietary NanoCrystal technology. I have long been bullish on this technology and it is why I recommended Elan in this posting after it dropped to around $3 a share this past spring. (Today, it is trading around $15 and I think it'll continue to go higher in the year ahead).

In a separate item, Arrowhead Research, a company which I wrote about this fall in a Motley Fool article, announced it had sold over 5.5 million shares of its stock to York Capital Management and Knott Partners. The deal allowed the company to purchase shares of Arrowhead (Nasdaq: ARWR) for $3.50 -- a healthy discount of over 20% to today's current asking price of $4.52 a share. This tells me that the stock price will probably drop to near this level in the very near future. The deal also grants York and Knott warrants to pick up an aditional 1.4 milion for a little over $5 a share in the future. My personal opinion is that this offers little solace for current investors. I reiterate my view that ARWR's stock is inflated at today's price, and investors should wait until the price drops back down to around the $3-a-share level before considering an investment.

The third bit of news was that the QinetiQ Group -- which owns Qinetiq Nanomaterials -- is expected to go public on the London trading market next month. I am currently agnostic on whether Qinetiq is a good investment. From the perspective of a nanotechnology investment, however, I would encourage investors to stay away for the time being. Qinetiq Nanomaterials makes up only a small portion of the company's overall value and, as such, in good conscience I can't classify it as a legitimate nanotech investment. (Investors looking to diversify their portfolio's into both nanomaterials and foreign markets might, however, want to consider an investment in Oxonica.)

(Full disclosure: I own stock in Elan but none of the other companies mentioned in this article).

Jack Uldrich