If Massachusetts is the New England innovation economy’s Goliath (and we’d argue that it is), Rhode Island is David. And the state has a new weapon in hand as it goes up against its much larger neighbor: a targeted tax credit of up to $100,000. Rhode Island hopes the credit will encourage investment in its up-and-coming high-tech and life sciences companies and help counter any temptations for them to head across the border to what’s often viewed as more startup friendly Massachusetts (or anywhere else for that matter).

Will it work? Some answers might be coming soon. The six companies preliminarily approved for the Innovation Tax Credit Program last November will have their first opportunity to show proof of fulfilling the requirements later this month. Rhode Island will issue the first set of tax break certificates promptly after this review is complete, according to Melissa Withers, director of communications and market development at the Rhode Island Economic Development Corporation (RIEDC), whose organization oversees the program.

All of which means it’s showtime for the ambitious effort, which is targeted specifically at encouraging investment in companies in health and life sciences, information technology and digital media, financial services, marine trades and defense technology, technical and educational services, and consumer and industrial products. Initially proposed by the Rhode Island Science and Technology Advisory Council, the program was signed into law back in 2006. But given the required public hearing process and other steps needed to put the law into operation, the first few eligible companies are only now coming up for final approval.

The idea behind the program is to offer investors or companies up to a 50 percent credit on any seed, venture, or equity investment in a startup (or fairly young) company in the target areas—with a maximum credit of up to $100,000. To qualify, investments must be made in companies that produce traded goods or services and have had annual gross revenues of less than $1 million in the previous two calendar years. And the firms themselves must be pre-approved for the program, meaning that RIEDC has reviewed the companies to make sure they fall into the required fields and fit the revenue parameters. Firms are also reviewed on the strength of their business plan and how well qualified the applicant is to accomplish it, the perceived economic impact of their business, how well the business supports a culture of entrepreneurship, and their potential for advancing Rhode Island’s agenda of fostering an innovation economy, Withers says.

Presuming all goes well, the program provides a credit against tax liability on business corporation tax, franchise tax, or personal income tax: the company receiving the investment gets to stipulate (presumably in consultation with its investors) how the credit will be distributed. “The company could retain it for themselves, give it entirely or in part to the investor, or even give it to a subset of executive employees…or any combination thereof,” says Withers. Some investors, she notes, may not have a Rhode Island tax liability, or might just determine that the best way to support their investment is to use the credit to offset the company’s tax liability.

However the credit is to be used, being pre-approved is seen as attractive for startup companies as they seek investment, because it provides a keen incentive to potential investors to go ahead and take the plunge.

And so far, so good. A small wave of applications arrived last year as the program went into action, and …Next Page »

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Pharmaceutical suitors shied away from buying Cambridge, MA-based Biogen Idec (NASDAQ:BIIB) last fall because they were too afraid of the risks associated with acquiring a biotech, Biogen CEO James Mullen said in today’s Boston Globe. In San Francisco for this week’s JPMorgan investor conference, Mullen said that pharmaceutical companies are in general much more cautious than biotechnology firms, and that this culture clash ultimately contributed to sale discussions petering out. “They never would have pursued some of the drugs we pursued,” Mullen told the Globe.

Mullen hit a similar note during his conference remarks earlier in the week. Both the Globe and Reuters reported that the Biogen CEO acknowledged that potential buyers were worried about Tysabri, the MS treatment developed by the company and partner Elan. That drug was pulled from the marketplace a few years ago after being linked to a rare brain infection. Sales of Tysabri resumed in late 2006. However, Mullen told conference attendees, “I think there is a fair bit of fear, loathing and tort out there.”

In his interview with the Globe, Mullen noted that would-be buyers were also anxious about Biogen’s partnership agreements with Elan and Genentech involving, respectively, Tysabri and Rituxan, a treament for lymphoma and arthritis. Each partner has the right to buy out Biogen’s share of the co-developed drugs in the event of a change in the firm’s ownership.

Since much of Biogen’s value is associated with its share of sales of those drugs, it would be critical for a potential buyer to know Elan’s and Genentech’s intentions. But Roger Longman over at the In Vivo Blog reported back in December that Biogen evidently made potential bidders sign an agreement prohibiting them from negotiating with its key drug partners. “That means the prospect of buying Biogen wasn’t merely expensive, it was a complete crapshoot,” wrote Longman.

Although Biogen had previously declined to comment on this issue, Mullen confirmed in today’s Globe that the company did indeed block potential suitors from negotiating with its partners prior to making a bid. However, he stressed that any possible buyer would have had the chance to conduct such negotiations before finalizing a deal.

In the end, even though the company was widely expected to command a purchase price of up to $30 billion, it all added up to not a single bid. Biogen had put itself up for sale at the urging of activist investor Carl Icahn.

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Cynosure, a Westford, MA-based cosmetic laser company, (NASDAQ: CYNO) and its largest shareholder are suing a California rival for allegedly infringing on a patent for a liposuction tool.

Cynosure and El.En. of Firenze, Italy, allege that CoolTouch of Roseville, CA, violated their patent for using laser energy to remove subcutaneous fat. The lawsuit was filed this week in U.S. District Court in Massachusetts; it seeks monetary damages from CoolTouch and an injunction to stop them from using the patent.

Cynosure and El.En. say the patent in question is owned by El.En., a major European cosmetic laser company, and licensed by Cynosure. Cynosure’s product based on the patent launched in early 2007. CoolTouch could not be reached for comment.

The cosmetic laser market represents a huge part of the life sciences sector that will only grow as Baby Boomers age and demand more treatments. Market analysts Eli Kammerman and Krishna Gurijala of New York-based firm Cowen and Company estimated in a 2006 report that the sector had reached nearly $1 billion in domestic sales alone. They saw the market almost doubling by 2011, and liposuction laser treatments represent a small, but growing portion of that number.

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Advanced Cell Technology, a Los Angeles, CA-based stem cell company with research operations in Worcester, MA, announced on Thursday that it’s been able to derive five stem cell lines from human embryos without destroying the embryos. The company’s approach (OTC BB: ACTC) was published in the new edition of the journal Cell Stem Cells, published by Cell Press. Scientists in Japan and at the Harvard Stem Cell Institute recently used a different technique—starting with adult cells rather than embryonic ones—to produce similar cell lines.

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Avant Immunotherapeutics, a Needham, MA-based vaccine developer, announced on Wednesday that it is appealing a delisting notice from the NASDAQ market. Avant (NASDAQ:AVAN) was told by the stock exchange on January 8 that it would be delisted on January 17 for failing to boost its share price to at least $1 per share. The company’s stock traded just under 60 cents early on Wednesday, representing a steady drop from about $1.50 in March. However, the firm believes its planned reverse stock split in connection with a pending merger with Celldex Therapeutics will boost its share price.

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