Greenwood officials are trying to get back $8.4 million in incentives from a pharmaceutical company that had promised to invest millions, hire 70 employees and sell a new form of insulin worldwide.
Elona Biotechnologies officials came to the city this week and said the company was running out of money and was having trouble finding private investors to keep the business going, said attorney Wendy Brewer, who’s representing the city.
The Greenwood Redevelopment Commission called a special meeting Friday and voted to find Elona in default on the city’s incentives, which included a $6.4 million loan for a new production facility. The city will try to recover all of the money that has been given to Elona, including the construction loan, $500,000 for equipment and $1.5 million to help the company get U.S. Food and Drug Administration approval for the insulin it wanted to make, Brewer said.
Greenwood plans to work with the company over the next few months to figure out how the city can be repaid as much of the incentive money as possible. One option would be to foreclose on the 50,000-square-foot production facility that Elona built on the city’s east side.
At a glance
Who: Elona Biotechnologies
What is it: Research and biotechnology firm formed by two former Eli Lilly and Co. biochemists.
Where: The company is based in the Sierra Business Center off Emerson Avenue in Greenwood. The 50,000-square-foot Zimmerman Biotechnologies plant was constructed in the Precedent South Business Center east of Interstate 65.
Its work: The company was working on a way to make a new, less expensive insulin and other generic drugs. The company created subsidiaries R&D Enterprises to develop new products and Zimmerman Biotechnologies to make generic insulin and other drugs.
What it received: The Greenwood redevelopment commission gave Elona a $6.4 million loan for a new production facility, $500,000 for equipment, and $1.5 million to help the company get U.S. Food and Drug Administration approval for the insulin it wanted to make.
Investment: The company planned to invest $28 million and to hire 70 workers after finishing construction on a manufacturing facility.
“I’m really disappointed that it hasn’t worked out and that they didn’t come to us sooner,” Greenwood Mayor Mark Myers said.
Elona Chief Operating Officer Ron Zimmerman Jr. said he wasn’t aware of what the city was doing and couldn’t comment until he had more information.
The redevelopment commission also voted to authorize staff members to take all necessary steps to preserve and protect the city’s collateral. Greenwood has liens on the mortgage for the new production facility, which is almost complete, and for patents Elona holds for pharmaceutical drugs, Brewer said.
Greenwood potentially could recover its incentive money if the building and the patents were sold, but officials haven’t determined what to do and what has value, Brewer said. An investor or investors also could save Elona so the company could still try to mass-produce a cheaper generic form of insulin.
The business was founded by two former Eli Lilly and Co. biochemists and has been based in Greenwood since 1997.
For years, Elona provided researchers at other pharmaceutical companies with the refined biological material they need to find cures and develop new drugs. But the company also developed a generic insulin and other genetic bioengineered drugs.
Elona had hoped that a lower-cost way of making the insulin that diabetics need to regulate their blood sugar would let them gain a share in a multibillion-dollar market. The company planned to invest $25.7 million in the new operation and hire 70 more employees at an average salary of $55,000 a year.
As a reward for the job creation, Greenwood gave the company $8.4 million in incentives, including the money needed to build the production facility.
Elona was supposed to start making payments on the loan next year but this week told city officials that it was facing serious financial difficulty, Brewer said.
The company does not yet have the FDA approval needed to sell its insulin, has no product to sell and has no income, Brewer said. Elona has been depending on investment money to get up and running but has been having trouble lining up investors, she said.
One potential investor would invest only if the city restructured its incentives and lifted the requirement to hire 70 workers at $55,000 a year, Brewer said. The city rejected that offer because it would have eliminated guarantees of job creation and the other benefits the city originally hoped for.
Instead, Greenwood decided to have Elona immediately repay incentive money it otherwise would have repaid over the next two decades.
Any money Greenwood can recover will go to the city’s eastside tax-increment financing district fund, Brewer said. The TIF district collects most property taxes from new development in a specific geographic area and channels the money into road and other infrastructure projects.
Greenwood does not believe that Elona’s default will affect future projects that would be paid for with money from the TIF district, such as a new aquatic center, or that it would result in any property tax increase for residents, according to a news release from the city.