Now that a judge has approved giving Greenwood nearly $2 million from the sale of a failed pharmaceutical company’s building and other assets, we can finally put this sorry episode behind us. But the lessons were painful and costly.
About $500,000 will go back to the redevelopment commission, and any other money the city gets must be used to pay off loans for the Elona Biotechnologies land and building. Former Elona employees also may need to be paid, if that’s what a judge decides.
About $100,000 will go to pay a receiver appointed by a judge last year to control Elona’s property. A receiver is a specialist in determining if businesses can continue functioning or whether the property and assets should be sold.
Greenwood had loaned or given Elona Biotechnologies about $8.5 million to build a new facility in the city and get federal approval to manufacture and sell a generic version of insulin worldwide. The company ran out of money last year and closed after constructing the building and buying equipment but never getting approval to sell the insulin.
To recoup some of its losses, the city pushed for selling the defunct company’s assets at auction. The Elona building, generic insulin patents and equipment were auctioned for $2.17 million in September. A Johnson County judge recently awarded the city $1.725 million of the money.
In 2010, Greenwood lent Elona $6.4 million for a new facility to produce its low-cost insulin and other generic drugs, $500,000 for production equipment and $1.5 million for costs related to obtaining U.S. Food and Drug Administration approval to sell its flagship insulin in the United States. The company was supposed to repay most of that money over the next 17 years.
In exchange, the company promised to hire 70 employees, mostly highly educated scientists, and invest more than $25 million in Greenwood.
But none of those promises materialized. The company ran out of money long before it got FDA approval. It wasn’t able to pay its rent on its old space in an eastside business park, employee salaries or even its phone bill.
The city placed a bet on an idea rather than an established company. It’s a risk venture capitalists take, but governments shouldn’t. Officials got caught up in heady prospects and failed to properly protect the public’s interest.
That’s the primary lesson all government officials should carry away from this sad episode. Be cautious and deliberative before committing support to any project.