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Nanosys prices IPO, looks ahead

Nanotechnology leader lays out industry challenges with its plan to issue 6.25 million shares.

Nanosys, one of the bellwethers of nanotechnology, will likely price its shares between $15 and $17 when it goes public, the company stated in a filing today.

The Palo Alto, Calif., company plans to sell 6.25 million shares in its initial public offering, according to a filing with the Securities and Exchange Commission. It will trade under the symbol NNSY.

Because there will be about 22 million shares outstanding after the IPO, the company could have a market cap of around $350 million to $370 million after the offering. That's more than 100 times 2003 revenues of $3.1 million.

Nanosys specializes in designing molecules that could conceivably lead to better solar panels, flexible screens or dense computer memory. Technically, nanotechnology refers to the science of making products with components that measure less than 100 nanometers (a nanometer is a billionth of a meter). Space considerations aside, what interests researchers most is that the properties of matter begin to change at those tiny dimensions. Gold, for instance, is no longer gold in color, while silicon can be used to retain, rather than conduct, electricity.

In the small but growing world of nanotech, the 34-employee Nanosys has emerged as one of the most visible and well-connected companies, and its ability to go public will likely be seen by some as a barometer of the future for nanotech.

Nanosys has already struck development deals with Intel; several government agencies; DuPont and IN-Q-Tel, the firm started by the CIA; and others. It also has licensing agreements that allow it to try to commercialize intellectual property coming out of labs at Harvard, the Massachusetts Institute of Technology, the Hebrew University of Jerusalem and other institutions.

Members of the scientific advisory board include Charles Lieber, a professor of chemistry at Harvard and Paul Alivisatos, a University of California professor. Alivisatos also directs the Molecular Foundry, a multimillion dollar research effort funded by the Department of Energy. Lux Capital, Venrock Associates and Arch Venture Partners are early investors.

Now comes the difficult part. Designing commercially viable molecules takes years, and the company will probably have to contend with larger competitors and other start-ups, regulatory changes, public suspicion of nanotechnology and intellectual property disputes, according to Nanosys' IPO filings.

Revenue rose from $283,000 in 2002 to $3.1 million in 2003. Most of the revenue currently derives from conducting research. In-Q-Tel, for instance, has agreed to pay Nanosys up to $3 million for research, while Intel has made a similar commitment for $1.9 million.

The company filed for its IPO in April. It is not yet known when the offering will occur.