Telemolecular Forbes Art (Page 4)

Nano

in the

News

Nanoparticles Show Promising Results in Prostate Cancer Treatment

Harvard researcher Omid C. Farokhzad, an assistant professor of anesthesia at Brigham and Women's Hospital and Harvard Medical School,

along with MIT's Robert Langer and leading researchers in Boston published promising results in a recent edition of the Proceedings of the

National Academy of Sciences. In experiments with mice, Farokhzad showed dramatic reduction in prostate cancer tumors using targeted

nanoparticles-aptamer bioconjugates. This early work could prove valuable for other diseases such as breast and pancreatic cancer.

April 2006

to the point, what NVE needs right now is
proof that their technology works

and it

should take it wherever it can. According to
Devoss, if the technology has real promise,
NVE ought to do everything in their power
to commercialize it and not get bogged
down in royalty fee negotiations, since
Freescale has the engineering capability that
NVE is lacking. Then again, if Freescale is
close to commercializing MRAM

accord-

ing to Baker, Freescale expects to hit the
market sometime this year

perhaps it's

because it's using designs unlike the ones
Cypress couldn't get to work. And if that's
the case, the value of NVE's patents to the
end designs remain questionable.

Shareholders are now up in arms as

they've watched NVE's stock price steadily
decline and several law firms have followed
Seeger Weiss in filing a class action suit
against the company on behalf of investors
who purchased NVE stock between May 22,
2003 and February 11, 2005, during which
time NVE allegedly issued press releases
containing false or misleading statements
regarding MRAM. The window for in-
vestors to join in the suit closed, but at
this point is unclear how many sharehold-
ers are involved or what kind of financial
impact this could have on NVE. Baker
wouldn't comment on the suit.

Despite its apparently bleak prospects,

Baker is confident about NVE's future.
"We're certainly very optimistic," says
Baker. He feels that Cypress's inability to
produce cost-effective MRAM needn't set
a precedent for other companies. "Cypress
has a particular market because they are
an SRAM company," he says, "and that
may make their economics different from
other companies." Quick to point to a sil-
ver lining, he says that Cypress's with-
drawal from MRAM development inspired
NVE to create a new business model.
"NVE changed its strategy with the Cy-
press decision and it allowed us to focus
on an IP model where we'll provide de-
signs, services, and IP to companies with
the capability to make large scale MRAM.
Prior to the Cypress divestiture our strat-

egy was to sell devices that would be man-
ufactured at Cypress under a tech agree-
ment. Now we envision ourselves more of
a provider of technology in MRAM space."
Devoss agrees, minus the optimism. "NVE
has slipped almost into being an IP com-
pany," he says. An IP company with ques-
tionable IP leaves something to be desired.

NVE does have profitable products on

the market, spintronic chips that act as
data sensors and couplers (or isolators).
The chips employ GMR (Giant

tech-

nology less sophisticated than MRAM

for use in applications from pacemakers
and hearing aids to factory automation
and automotive parts. "They're very good
products and they've been well received by
some of the most demanding customers in
the world," says Baker. Its current clients
include St. Jude Medical [STJ], which uses
the chips in pacemakers and implantable
defibrillators, and Starkey, which uses
them in hearing aids.

So NVE is in no dire situation and con-

tinues to grow its business. It's still grow-
ing its IP portfolio

earlier this month the

company was granted their 36th US patent.
Its fiscal Q3 2006 results show that product
sales for the quarter ended December 31,
2005 increased 56% over the prior year, ris-
ing from $1.12 million to $1.74 million. For
the first nine months of FY 2006, product
sales increased 41% to $5.5 million from
$3.93 million in FY 2005. But those num-
bers aren't going to provide much solace to
investors who have been with NVE for the
past several years. The company's market
cap is currently at $78 million

that's

down from approximately $165 million in
2004. Shares are trading at $17.10, 49%
higher than its 52-week low of $11.50 and
up 17% from a near-term low in mid-
March

but still less than half of what they

were worth two years ago. And the success
of its current products simply won't make
up for a failed MRAM program.

"I think right now MRAM is stuck and

it's destined to be a niche technology," says
Devoss. "It was hailed as a very promising
technology to be a replacement for some of

the existing memory technologies today

DRAM, SRAM, and Flash

and in reality

there's been trouble commercializing it at
densities high enough to even be a threat to
those other technologies. They can co-
exist, but MRAM will not replace them.
I'm not saying they don't have a business,
it's just not going to be as robust as people
previously expected."

Still, in February, Toshiba and NEC an-

nounced that they had developed MRAM
with the highest density and fastest read
and write speed yet achieved

a step for-

ward for MRAM, but way short of a revo-
lution...and of no help to NVE.

Major companies can afford to push

ahead with their MRAM development, but
for a small company like NVE, reliance on
MRAM at this point looks like a serious
risk. "Our goal is to continue to grow our
product sales, to provide technology to the
MRAM of the present and to develop the
designs and technology for the MRAM of
the future," says Baker.

I used to be incredibly bullish on NVEC

and I feel lucky that our initial purchase
price was $21.42. Still that is cold comfort
for subscribers who bought shares at more
than $60 per share in early 2004. I'm not as
optimistic about NVE anymore. Cypress's
departure was a body blow, and the lack of
any new MRAM licensing deal with
Freescale does not leave me with confi-
dence. Moreover, even if they do eventually
manage to roll out MRAM products, it's no
longer clear whether MRAM will have a
major impact on the computer memory
industry or if it will simply serve a niche
market. The ongoing litigation might not
impact NVE's fundamentals, but it will
likely serve as an overhang on the stock. I
don't believe NVE is a lost cause. Its oper-
ating business continues to generate prof-
its while the company builds upon a specu-
lative but potential intellectual property
goldmine. But I have lost confidence in the
company's management and its ability to
execute. Following the double-digit gain of
the past month, I am reducing our rating
on shares of NVEC to Hold.

Telemolecular - Forbes Art (Page 4)