Enthusiasm for biomarkers to guide drug development and clinical decision making is high, but given how little we know about them, biomarkers are a risky investment, as shown by experiences with EGFR inhibitors.

The theory that smaller is better--as it is has been in the computer industry--is now driving enthusiasm for nanotechnology, a term that refers to the process of manipulating materials at atomic scale. New players are crowding under this hot rubric, including many working at not nearly so small a scale. Drug discovery methods are among the most compelling near-term nano-applications, but start-ups face challenges like those met by micro-scale pioneers Affymetrix and Caliper. Firms must show they can physically create systems they describe, and that teeny discovery methods actually matter for bench scientists. Business models in this emerging sector reflect the difficulties of harnessing novel science in ways that will satisfy drugmakers who've become extra-tough customers under pressure to deliver commercial results in a shifting, financially depressed market. Some start-ups are working on a fee-for-service basis, on specific projects that address customers' immediate needs. Others are deliberately doing development work on their own, gathering data to attract partnerships that may prove all the more rewarding because of their measured starts.

Oxonica Ltd., which spun out of Oxford University in 1999, is commercializing nanoparticle phosphors as biolabels for genomic and proteomic applications in drug discovery and diagnostics. The company's platform also includes the application of its phosphor based technology platform in sunscreens, fuel catalysts, and flat-panel displays. These phosphors, which are metal-oxides ranging from 2nm to 100nm in size, emit very sharp, unique "signatures" of light when exposed to a stimulus such as UV light.

The ability to manipulate materials and create structures at the molecular level is spurring research in a spectrum of fields--from computing, materials science, and manufacturing, to medicine and diagnostics. Much of the work is still being done in academic laboratories and in big corporations with no near-term plans to launch nano-products. But lately, several new companies have been forming, convinced they can turn blue-sky nanotechnology research into greenback dollars. Their goals range from the deliberately practical to the decidedly high-risk but potentially paradigm-shifting.