Nanotechnology company executives tell me one of their biggest challenges is finding the right application.

At the nanoscale, particles take on properties different than they do at the macroscale, which opens the door to a wealth of opportunities. In medicine many companies pursue nanotechnology to improve delivery of a therapeutic compound. It looks like that’s what University of North Carolina at Chapel Hill spinout Novan Therapeutics is doing with its technology, though that wasn’t its initial focus.

The company, now based in Research Triangle Park, has just closed on a $5.1 million fundraising round (Read details here.). The round follows a $6 million investment last fall.

Novan is led by CEO Nathan Stasko, who founded the company with UNC chemistry professor Mark Schoenfisch in 2008. Stasko was a graduate student working with Schoenfisch researching a nitric-oxide releasing nanoparticle technology. Nitric oxide’s therapeutic potential ranges from uses in immune system response, wound healing and blood pressure regulation. Despite the array of potential applications, use of nitric oxide has been limited by a short half life that makes it difficult to harness for medical applications. Schoenfisch and Stastko’s research involved a controlled release of the compound in a way that could make use of its benefits.

Stasko couldn’t be reached to discuss Novan’s recent fundraise. But when I first talked to him in 2009, he was excited about nitric oxide’s potential as an antimicrobial coating for medical devices. At the time, Stasko said he thought getting U.S. Food and Drug Administration clearance on a medical device coating would be faster to market than conducting clinical trials for a drug candidate.

Novan has since broadened its horizons beyond medical devices. In 2010, the company landed a $140,761 National Science Foundation grant to develop a way to scale up the manufacturing process of a nitric oxide drug candidate with the potential to address healthcare infections. Last year Novan was awarded a $69,821 Department of Defense contract to research its technology as a topical wound care product to treat military personnel. Despite Stasko’s earlier reservations about pursuing a drug candidate, it appears the company is now embracing it. On a sparse website with no details about the company or its research, Novan, Inc. is now called Novan Therapeutics. And the company also now has a compound in clinical development.

Clinical trial records show that Novan has completed a phase 1 study of NVN1000, a topical gel to treat acne. The study started last July and was completed in December. Securities documents show that the $5.1 million raised by Novan could be expanded to $11 million. Novan would need that money to pursue further clinical development. But the company isn’t alone researching nanodelivery of nitric oxide.

Makefield Therapeutics, a Newtown, Pennsylvania company, is pursuing many of the the same applications that Novan is targeting. The company’s nanoparticle drug delivery platform technology was licensed from Yeshiva University’s Albert Einstein College of Medicine in 2009 — right around the same time that Novan was getting started. Makefield says its nitric oxide containing nanoparticles hold potential for microbicidal wound dressings, wound treatments and acne. The company also cites potential uses fighting drug-resistant bacteria, such as MRSA. Makefield is pursuing two product candidates: a topical broad spectrum antibiotic and a topical treatment for erectile dysfunction. Makefield calls the antibacterial opportunities a multi-billion dollar market opportunity. Stasko likely saw that, too. The path to market is rarely a straight line but Novan’s track now puts it parallel to Makefield.

We’ll see who gets there first.