A Greenwood-based pharmaceutical company is close to reaching a deal that would keep it in business after the city found it in default on $8.4 million in incentives, city officials said.
The city has been in talks with private investors who are willing to provide funding to Elona Biotechnologies so that it can stay open, Mayor Mark Myers said. The company needs private investment so it can continue to pursue U.S. Food and Drug Administration approval for the generic low-cost insulin that it hopes to sell worldwide.
Elona, the city and a group of investors have been negotiating a deal to keep the company afloat. An agreement is expected to be reached as soon as today, said attorney Wendy Brewer, who’s representing the city in the matter.
Elona and its attorney did not return messages Thursday.
City officials would not go into details about the arrangement that’s being negotiated. In general, an investment group would invest millions of dollars into Elona in exchange for an ownership stake in the company, Brewer said.
Greenwood would not foreclose on the company’s almost-finished production facility or seize its manufacturing equipment and patents for generic drugs, Brewer said.
The city would restructure the repayment plan for the incentives, which included a $6.4 million loan for the new plant, a $1.5 million zero-interest loan to help with the costs of the FDA approval process and $500,000 to buy manufacturing equipment.
The city potentially could push back loan repayment dates and deadlines to meet obligations, such as one on hiring. The redevelopment commission would need to approve any restructuring of the deal Elona and the city reached in 2010, Brewer said.
Any deal also would be tentative until the private investors could do more research into Elona over the next few weeks, Myers said.
Greenwood has been in talks with two competing investment groups about keeping Elona viable. City officials would not disclose details about either investment group, but Myers said one has experience with similar pharmaceutical ventures.
Both investment groups asked the city to make concessions on the original incentive package, such as giving Elona another year before it would have to start making payments on its taxpayer-funded loans, Myers said.
One of the investors also wanted to know if Greenwood would be willing to forgive a $1.5 million loan to assist with costs related to getting FDA approval and $500,000 for equipment, Myers said.
Delaying when repayments would begin would not be an issue, but the city must be cautious about what and how much it agrees to, Myers said.
The city wants to be able to salvage the company if possible but also must protect its interests, Brewer said.
“We’re in talks about restructuring, but the company wouldn’t walk away from all its obligations,” she said.
In 2010, Greenwood gave the company $8.4 million in incentives. The company promised to invest $25.7 million in the city and hire 70 workers at an average salary of $55,000 a year.
Elona was supposed to start repaying a $6.4 million loan for its new building next year, but the Greenwood Redevelopment Commission declared the company in default last month because of concerns about whether it could stay in business. Company officials told the city that Elona was running out of money and struggling to find the investors needed to pursue approval for a generic drug, including the insulin that diabetics depend on to regulate their blood sugar.
The city and its attorneys have been in discussions every day with Elona and private investors, Brewer said. The hope is that private investment would fund the company so that Greenwood wouldn’t have to seize and sell off Elona’s assets to recover whatever it could.
The company, founded by former Eli Lilly and Co. scientists in 1997, is currently a small lab with about 10 employees. Elona works on contract to make batches of biological matter that other drug-makers use in tests, and it needs investment to get FDA approval to start selling a new form of insulin in the United States.
Elona’s goal is make low-cost generic drugs, make insulin more accessible in developing nations and tap into a multibillion-dollar global market.