French radio-ID firm moves to Cambridge

A company that makes radio-frequency identification tags for everything from library books to prescription drug vials is moving its global headquarters to Cambridge from Marseille in the south of France.

Tagsys will join a small cluster of Boston area firms that specialize in the technology, known as RFID. Initially, however, it will only move about a dozen employees, including chief executive Eli Simon , to its new offices in Kendall Square near the Massachusetts Institute of Technology. While it will keep about 80 workers in France, the company expects to have about 25 employees here by August and between 50 and 60 within a year, Simon said.

``I look at Boston, and I see it is to RFID what Silicon Valley was to information technology," Simon said yesterday. ``Our competitors are [in Boston]; our potential partners are there; the whole ecosystem is there."

The company also seeks to be closer to the US market, which already accounts for more than half of its revenues, said Bernard E. Vogel , the Tagsys chairman who is also managing partner of Endeavour, a Swiss venture capital firm that is the largest investor in Tagsys.

``It was clear to us that we should relocate the operation to the US," said Vogel. ``The adoption of RFID technology has been going faster in the US than in the rest of the world. And we wanted to have access to the greatest engineers, which we think will come from MIT."

In addition to RFID tags, which send out radio frequency signals, Tagsys makes readers, interrogator devices that receive the signals, and software that manages and interprets the data. Unlike companies that make tags for crates and shipping pallets in trucks and warehouses -- currently the most widespread RFID applications -- Tagsys has focused on using the technology to tag individual items.

The privately held company, which does not disclose financial data, won a contract from pharmaceutical giant Pfizer Inc. in January to equip Viagra bottles with postage stamp-size tags that will be positioned behind the labels, Vogel said. In anticipation of more drug companies using the technology, Tagsys is readying smaller tags, roughly the size of shirt buttons, that can be stamped on bottle tops.

Simon estimated that the tagging of individual drug bottles could be a $2.4 billion-a-year business by the end of the decade.

Tagsys also has begun supplying RFID tags for books at the Seattle's Public Library and others , and for rental garments such as tuxedo shirts. But the practice of tagging individual retail items is still in its infancy, and standards groups are debating whether to employ the high frequency, called HF, used by the Tagsys systems or the ultra high frequency, called UHF, commonly used on cartons and pallets in the supply chain.

Item-level tagging also has drawn the most scrutiny from RFID critics, who have been lobbying states to require retailers to identify products with RFID tags for consumers. ``That's definitely the line we're drawing," said consumer privacy advocate Katherine Albrecht . ``We've said go ahead and do it in the warehouse, but the buck has to stop on the retail floor."

Other local RFID companies said they welcomed the arrival of Tagsys. ``Right now we see them as friendly rivals," said Kevin Ashton , vice president of marketing at ThingMagic Inc., a Cambridge maker of RFID readers that operate on UHF technology.

He said ThingMagic will compete for talented engineers with Tagsys: ``It's nice to have another RFID company right across the street from us."

Boston has emerged as one of the three US centers for RFID technology, along with Dallas and the San Francisco Bay area. As the technology evolves, and expands into item-level applications such as apparel and luxury goods, state technology officials are hoping the area's RFID cluster could blossom into a new high-tech industry. One encouraging sign has been federal Food and Drug Administration pressure on pharmaceutical companies to use RFID to combat drug counterfeiting.

``There's a lot of interest in RFID in the healthcare area, in the retail area," said Joyce Plotkin , president of the Massachusetts Technology Leadership Council. ``The markets are developing, and our companies are trying to take advantage of the market opportunity."

RFID pioneer Sanjay Sarma , chief technology officer for OATSystems Inc., an RFID software company in Watertown, said he views Tagsys as a potential partner. ``It looks like there's a chain reaction for RFID here," he said. ``It's terrific for Massachusetts."

Robert Weisman can be reached at weisman@globe.com.