Rapid Diagnostek, one of Minnesota’s most promising biotech start-ups, has raised about $2 million to develop a portable device that can quickly diagnose diseases by analyzing blood, urine, and saliva. The company recently was named a finalist in the biosciences category in the Minnesota Cup, an annual state competition for entrepreneurs. Only one problem: Rapid Diagnostek is no longer based in Minnesota. Last year, the company moved its headquarters from St. Paul across the river to Hudson, WI, where generous tax breaks for angel investors allowed Rapid Diagnostek to secure a better deal. In the spirited rivalry to attract and retain biotech companies, Minnesota is quickly falling behind neighboring Wisconsin. VitalMedix, Inc. — a highly touted drug start-up spun out from the University of Minnesota — also moved to Hudson when it couldn’t find financing in its home state. A planned biotech start-up from U-Minn stem cell researcher Doris Taylor, Medtronic-Bakken chair in cardiac repair and director of the Center for Cardiovascular Repair, also might leave the state unless it finds local financing.
Minnesota depends heavily on medical technology for economic growth and well-paying jobs. Although the state is one of the world’s top producers of heart-related mechanical devices like stents and pacemakers, biotechnology will drive medical innovation in the future, experts say. Meanwhile, Wisconsin has become the regional biotech equivalent of traditional high-tech powerhouses like Boston, Silicon Valley, and Research Triangle Park, thanks to strong political support, an influx of investor capital, and a formidable university TT program. Peter Bianco, scientific advisory board member at Flex Biomedical in Madison, WI, and director of life science business development at Halleland Health Consulting in Minneapolis, says Wisconsin is poaching talent to create biomedical technology that can’t be easily replicated. “You just get this sense of forward motion,” he says. “Wisconsin is doing something right. I would like to see Minnesota do the same.”
Analysts say the Badger State is light years ahead of Minnesota in creating biotech companies, thanks in large part to the Wisconsin Alumni Research Foundation (WARF), University Research Park (URP), and Accelerate Wisconsin — a comprehensive series of tax incentives to encourage innovation. Despite facing a $6.5 billion deficit, Wisconsin legislators passed a budget that boosted angel investor tax credits from $5.5 million to $18.25 million and venture capital credits from $6 million to $18.75 million. To further sweeten the pot, Wisconsin now allows out-of-state investors to accumulate tax credits and sell them to anybody with a Wisconsin tax liability. The budget also allows investors to write off 100% of their capital gains taxes, up to $10 million, if they reinvest that money in another Wisconsin start-up. In contrast, fierce political disputes over how to close a $5 billion budget deficit foiled attempts to offer similar tax credits to Minnesota angel investors this year. Republican Gov. Tim Pawlenty, who supports angel tax credits, vetoed a bill that contained investment credits but also tax increases that he staunchly opposed.
Wisconsin’s tax credits alarm many in Minnesota. “Even if Wisconsin takes a couple of companies a year, that’s significant,” says Joy Lindsay, president of StarTec Investments, an angel investment firm in Bloomington. Tim Mulcahy, U-Minn’s vice president for research, hopes the Taylor start-up will stay in Minnesota, but says the university will do what’s best for the company’s survival. “Technology does better when a company is located near the inventor,” Mulcahy points out. “How do we compete with Wisconsin? We’re thinking about planting the seeds of an innovation ecosystem. But sometimes, you have to put it in someone else’s topsoil.”
Source: Star Tribune