Corporation's Chief Executive Officer announces an update to stockholders
on its majority owned subsidiary, Unidym.
Unidym is Arrowhead’s most developed nanomaterials company and a premier
example of our model for building new technology companies. As with Calando,
we believe Unidym is a demonstration of our ability to build potentially transformational
companies that have near-term market entry points. Unidym is a platform company
positioned to address sizeable long-term product opportunities in the electronics
industry and, more importantly in the current market environment, significant
short-term opportunities in the high growth touch panel and display industries.
In 2005, Arrowhead saw a big opportunity in a type of material known as carbon
nanotubes (CNTs) and started the company that would become Unidym to address
it. CNTs had been shown to possess extraordinary electrical, thermal and mechanical
properties and we believed that they had the potential to significantly impact
multiple large and diverse industries. At the time Unidym was launched, the
CNT market was highly fragmented with key patents dispersed across multiple
owners and no clear industry leader. Unidym has since licensed technology from
a dozen universities and acquired three prominent CNT companies, including Carbon
Nanotechnologies, Inc., the pioneering company in high performance CNTs, and
has become a leader in the development of innovative CNT-enabled products for
the electronics industry. In the process, Unidym has assembled a strong and
diverse patent portfolio that we believe covers nearly every aspect of high
performance CNT manufacturing and processing, as well as multiple product applications.
Unidym’s product development efforts are focused on the electronics industry,
where there is continuing demand for higher performance materials. Unidym’s
initial product line is a CNT-based transparent, conductive film that has the
potential to replace indium tin oxide (ITO) and indium zinc oxide (IZO)-based
films currently used in the touch panel, display, and solar cell industries;
an opportunity we believe exceeds $2 billion annually. Unidym’s CNT-based
film offers substantial advantages over ITO and IZO, including: lower cost,
improved durability, enhanced flexibility, higher yields, better readability
in display applications, and simplified processing. In addition, indium, a key
component in ITO / IZO, is already in short supply, and many experts expect
prices to rise dramatically in the coming years.
Unidym expects to initially deploy its film product in the high-growth touch
panel industry in the near term. It is a drop-in replacement for the ITO films
in use today and also offers dramatically improved device lifetimes, improved
daylight readability, and reduced costs. We believe that the unique characteristics
of Unidym’s films could help expand the market significantly. In addition,
because the touch panel film industry is currently supply constrained, Unidym
has the benefit of offering a competing component to companies that are not
able to obtain sufficient ITO film to meet their existing production needs.
Unidym is currently sampling its film products to the world’s leading
touch panel companies and expects to produce volume product sales in 2009. Unidym
is also working with leading LCD companies, including a joint development agreement
with Samsung Electronics, to incorporate CNT films into their display devices.
Through its various collaborations, Unidym has fabricated prototype LCD and
electrophoretic displays incorporating CNT-based films.
Unidym’s film production model is capital efficient. It involves in-house
synthesis of a proprietary grade of CNTs, formulation of those CNTs into a coating
ink, and then shipment of that ink to an outsourced coating partner or customer
for deposition. Capital expenditures associated with CNT synthesis are kept
low by both the scalability of Unidym’s CNT synthesis process and the
fact that only trace amounts of CNTs are required per unit area of film. Unidym’s
use of outsourced coating companies for its touch panel films takes advantage
of the substantial excess capacity left in the coating industry by the decrease
in demand for photographic film. Longer term, if demand for Unidym’s products
continues to grow, Unidym plans to explore partnerships or outsourcing arrangements
to scale its operations.
In addition to its film products, Unidym has two other product lines that could
enable us to more fully extract value from CNT-related opportunities. First,
Unidym sells a range of proprietary CNTs for conductive polymers, structural
reinforcement materials, and anti-static films. In fact, Unidym’s current
revenues are primarily derived from sales of nanotube products for antistatic
composites in the semiconductor industry. While Unidym does not intend to enter
into high volume production of such materials, Unidym believes there is an opportunity
to leverage its patent position and synthesis expertise to work collaboratively
with other companies to develop new proprietary grades of material for outsourcing
or sale. Second, Unidym is pursuing an aggressive, cross-industry licensing
strategy to foster the commercialization of CNTs in a broad range of applications.
The Company has a licensing program for companies seeking to market CNT-based
products outside of its core target electronic products, and has completed two
licensing deals this year.
Unidym’s business progress is further demonstrated by the strategic investments
it has received from Tokyo Electron, an equipment manufacturer for the LCD industry;
Entegris, a producer of materials and hardware for the semiconductor industry
and one of Unidym’s largest current customers; and Battelle, a leading
R&D company which manages a the activities of a number of the United States’
With its strong product portfolio and foundational intellectual property in
a highly promising technology, Arrowhead believes Unidym will offer tangible
proof of value of the Arrowhead proposition. Arrowhead currently owns more than
53% of Unidym and has a number of options for monetizing its investment, including
the commercialization of CNT in its various applications and pursuing strategic
alternatives through the sale of the Company.