In a bit of a coup for Minnesota, Dr. David Kendall was recently named chief scientific and medical officer for the American Diabetes Association, where he will oversee research grants, clinical guidelines, and certification programs. He starts September.

Kendall is currently medical director and chief of clinical services at Park Nicollet’s International Center for Diabetes.

Minnesota is home to some promising research into treating and even curing diabetes. Researchers at the Mayo Clinic and at the University of Minnesota are close to conducting the first clinical trials to transplant living pig tissue into humans. The tissue could create insulin producing cells for patients.

The university was the first to perform an islet cell transplant in 1974. Since 2000, the university has transplanted islet cells into 26 Type 1 diabetes patients. Five
years later, about half of them no longer need insulin injections.

Exsulin Corp. of Burnsville is developing a technology that focuses on certain proteins that can instruct progenitor cells — basic pancreatic cells that exhibit stem-cell-like
behavior — to form insulin-producing islet cells. The company is well into clinical trials and could gain FDA approval in 3 to 5 years.

And  last year, Best Buy Co. Inc. founder Richard Schulze announced a $40 million gift to the U to help find a cure for Type 1 diabetes.

Let’s hope Minnesota can make the most of these opportunities.

Yee gads!  We already know that Wisconsin has superior angel tax credits than Minnesota (and by superior, I mean it actually HAS them) but this is getting ridiculous.

It would be perfectly understandable if the Badger State wanted to sit on its laurels and count the Minnesota startups fleeing to Madison or Hudson. Instead, as Minnesota preoccupied itself with NOT passing an angel credit, our rival was too busy making its already impressive program, Accelerate Wisconsin, even better. (Accelerate Wisconsin, BTW, sounds a lot snappier than Act 255.)

Wisconsin’s new budget more than triples the annual pool of credits for angels and venture capitalists from $11.5 million to $37 million. Angel credits move to $18.25 million while from $5.5 million; VC credits jumps to $18.75 million from $6 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 percent of their capital gains taxes up to $10 million if they reinvest that money in another Wisconsin startup.

Wait, how can this be? After all, Wisconsin, like states across the country, has been grappling with record budget deficits and a recessionary economy. How can Wisconsin offer these tax credits against a $6.6 billion budget deficit while Minnesota couldn’t pass any credits because of a $5 billion shortfall?

“It’s really a matter of priorities,” said Zach Brandon, senior policy director for the Wisconsin Department of Commerce.

In times of economic distress, businesses tend to zero on its “core functions,” Brandon said. In Wisconsin’s case, Gov. Jim Doyle identified innovation and business development as the state’s core functions, he said.

And there you have it. The difference between Wisconsin and Minnesota is that one state has vision and political leadership and the other doesn’t. While one state stimulates capital and innovation, the other sits on its butt and argues that tax credits are a give away to the rich. One state has Accelerate Wisconsin, the other has JOBZ. ‘Nuff said.

Still don’t believe me? Check out the other stuff in Wisconsin’s budget (Source: Wisconsin Technology Council).

Feel free to weep.

Accelerate Wisconsin
The goal of this initiative is to accelerate new business development in Wisconsin. This initiative was adopted as part of Wisconsin Act 2.

Act 255 Enhancements
• Raise the cap on Act 255 tax credits for angel investments from $1 million to $4 million beginning retroactively for the 2008 tax year.
• Raise the aggregate creditable investment to $8 million per year from any combination of angel or venture sources, beginning January 1, 2011.
• Triple the annual pool of credits available from $5.5 million to $18.25 million per year for angel credits and from $6 million a year to $18.75 million for venture credits, beginning January 1, 2011.
• Allow angel investors to claim the entire 25% credit on their investment in the first taxable year.
• Permit insurance companies to claim the venture capital investment tax credit against gross premium tax liability.
• Permit the Department of Commerce to require that businesses seeking to raise funds specify the investment amount they wish to raise.
• Expand program eligibility
• Allow investors to transfer/sell their credits to one other person, with only one transfer allowed per 12 month period. The Department of Commerce will charge a fee to the seller equal to 1 percent of the credit amount sold or transferred.

Capital Gains Reinvestment
Allow individuals a limited 100 percent capital gains exclusion of up to $10 million for long-term capital gains reinvested in a Qualified New Business Venture (QNBV certified by Commerce under Act 255), beginning January 1, 2011.

Innovate Wisconsin
The purpose of this initiative is to increase R&D activities and biotechnology research in Wisconsin.

Sales and Use Tax Exemptions for Manufacturing and Biotechnology
The Governor will provide biotechnology companies an exemption to the sales and use tax for machinery and other tangible personal property used for qualified manufacturing or biotechnology research in the state, effective January 1, 2012.

Income Tax Credit for Increasing Research and Development
The Governor will provide businesses that increase R&D by more than 125% of their 3-year R& D average with an income and franchise tax credit worth $1 for each $1 of investment above 125%. For example, if a Wisconsin business spends an average of $3 million on R&D over a three year period, and then in the following year increases its expenditures to $5 million, it would receive a credit worth $1.25 million, equal to the value of the research above $3.75 million. This provision would take effect on January 1, 2011.

“Qualified research expenses” would be qualified research expenses as defined under the Internal Revenue Code incurred by the claimant for research conducted in Wisconsin for the tax year. (This is the same definition used for the research credit under current law.)

University Research
Research and development at our universities is an important part of the state’s economy. Advances in science, engineering and health care made there all support job creation and business development across the state.

• Strengthens Wisconsin’s leadership role in medical research by providing $2 for the Wisconsin Genomics Initiative, a collaborative effort between the Marshfield Clinic, Medical College of Wisconsin, UW-Madison School of Medicine and Public Health and UW-Milwaukee that will keep us at the forefront of personalized health care research.

• Places Wisconsin at the leading edge of renewable energy science by investing $4.05 million annually in research and development projects at the Great Lakes Bioenergy Research Center at the University of Wisconsin-Madison and related bio-energy projects UW-Milwaukee, UW-Stevens Point, UW-River Falls, UW-Green Bay. The projects are developing the next generation of bio-based fuels and energy.

• Provides $8.2 to support biotechnology, nanotechnology, and information technologies research at the Wisconsin Institutes for Discovery (WID), a visionary research institute at the University of Wisconsin-Madison charged with enhancing human health and welfare through interdisciplinary research.

Celleration Inc. has tapped Orasi Medical co-founder Mark Wagner to replace Kevin Nickels as CEO. The Eden Prairie-based company is developing a device that uses ultrasound energy to treat hard to cure wounds like burns and ulcers.

The move signals that investors like Minneapolis-based Affinity Capital want Celleration to step on the gas. Despite millions of dollars of venture capital money and a dozen peer review studies backing the technology, the company has struggled to win reimbursement from payers.

So far, only four of the 15 regional payers charged with awarding local Medicare coverage have approved Celleration’s technology. Medica, HealthPartners, and Blue Cross Blue Shield in Minnesota have so far declined to pay for the device.

In an earlier interview, Nickels acknowledged that VCs would not wait forever for Celleration to pay off. Apparently, he was right.

“Mark brings a wealth of experience and a solid history of building companies and delivering results,” Affinity chairman Ed Spencer said in a statement. “We are absolutely confident in Mark’s ability to take Celleration to its next stage of commercialization and build value for its shareholders.”

Wagner is chairman and co-founder of Orasi, a University of Minnesota spin off that’s developing software designed to help drug companies to create treatments for neurological diseases like Alzheimer’s. He is also a former CEO of ProVation Medical, another U-bred company now owned by Wolters Kluwer.

Nickels remains with the company as chief technology officer and business development officer.

“The benefits to the university are substantial. This is designed to help faculty who develop ideas with economic potential to develop a business plan, work with venture capitalists to refine their ideas, and do research necessary to move the idea into something that … can help fuel Minnesota’s economy.”

University of Minnesota President Robert Bruininks- October 2004

Development of this type of biotech laboratory and entrepreneurial corridor will help the region and state take better advantage of its native assets, such as the university, the Mayo Clinic and companies like Medtronic, Guidant, Cargill and Ecolabs, important forces in medical, industrial and agricultural applications of bioscience. University faculty, for example, bring in $500 million per year in sponsored research funds, and their work drives the development of new technologies, which in turn create the need for laboratory incubator space.

Star Tribune Editorial Board- October 2004

My, what short memories we have. The two above quotes in 2004 referred to the construction of the University Enterprise Laboratories, a 120,000 square foot laboratory and office facility in St. Paul that was supposed to incubate promising startup companies based on research originating from the University of Minnesota.

Today, do you know how many of the 25 or so companies at UEL come from the U? Zero. None. Zilch.

I don’t know what’s more upsetting: that we can spend $20 million on a building that, despite the name, has little to do with the U or that our state government has repeatedly failed to pass an angel investor tax credit that could provide crucial, hard to find, early stage funding to high tech startups.

Hmmm….building or money, building or money, building or money. I’m going to say money.

The state didn’t actually spend anything on UEL. The non profit group that oversees the facility took out a $13.8 million bond that it might not be able to pay back when the principal comes due in 2012. The U chipped in $2 million, and corporate titans Medtronic and Xcel also contributed funds. St. Paul is also on the hook for a $6 million loan.

In hindsight, the brains behind the project admit that UEL didn’t go exactly to plan. For one thing, in 2004, the U’s Office of Techonology Commercialization, which is responsible for licensing U technology and spinning off companies, was, at best, ineffectual, and at worst, dysfunctional. You can’t incubate U-bred companies when they don’t exist. Either someone didn’t do this due dilligence back in 2004 or really didn’t really care.

UEL officials note the building is 95 percent occupied by some promising startups like Syntiron and Cima Nanotech. They also say the building’s attractive, spacious design is a plus when investors and companies visit.

Okay. But UEL supporters back in 2004 didn’t exactly say the goal was to build what’s suspciously looking like a $20 million real estate showpiece.

For some reason, Minnesota just likes the idea that building buildings will somehow create a biotech industry.The U, perhaps learning nothing from this experience or maybe would just like to forget UEL all together, is moving forward with a $292 million project to build four bioscience buildings behind its new football stadium. The state will pay the debt service on $233 million of that bond.

Minnesota is also providing millions of dollars in infrastructure improvements to the planned Elk Run biosciences project in Pine Island. At least that project has the backing prominent biotech investor Steve Burrill. But there’s been little information so far about how such a business model is going to work.

I don’t want to be a complete hater but I think it’s important to acknowledge our mistakes and learn something from it. To stimulate a biotech industry, one needs things that can’t easily be seen or touched-a risk taking enterpreneurial culture, backed by strong state support and a robust pool of venture capital.

But that requires the type of reasonable, strategic thinking that seems to be lacking in Minnesota.

Jay Miller, the former top executive at Vital Images, is the new CEO of Kappametrics Inc., a a Virginia-based start up that focuses on MRI-related software. He will remain in Minnesota.

Miller, a 11 year veteran of Minnetonka-based Vital Images, was replaced as CEO early last year by then chief operating officer Mike Carrel. Vital, which makes software that helps doctors analyze CT scans, has struggled to grow sales as hospitals cut large capital purchases like CT scanners to cope with the country’s worst economic recession since the Great Depression.

Since leaving Vital, Miller has been a consultant to ten health care companies.

Kappametrics, which spun off from consumer products giant Unilever in 2004, is developing technology that will clean out excessive radio frequency, electrostatic, and magnetic noise MRIs generate during brain scans. The result, the company says, is more accurate real time data that enables doctors to create detailed maps of brain activity.

Minneapolis ranked ninth in the top metropolitan life science clusters in the country, according to a recent report by the Milken Institute. The city previously finished eighth in the 2005 study.

Minneapolis earned a 78.2 out of 100 based on factors like  employment, research and development capacity, output, work force, investment and dozens of other measures.

Top spot went to Boston (no surprise there) while San Diego finished just ahead of Minneapolis at eight (big surprise there). The Southern Californian city, known for its thriving biotech industry, scored just a 78.7, down from 90.7  four years ago. Ouch.

The Milken Report defines life sciences as biotechnology, pharmaceuticals, life sciences R&D, medical devices and health-care services. Given the presence of Medtronic and UnitedHealth, it’s not hard to see why Minneapolis made the list.

But it will be interesting to see how the rankings will look in 2013, given Steven Burrill’s efforts to create a $1 billion investment fund to attract biotech companies to the Elk Run Biosciences Center outside of Rochester.