Greenwood seeks funds back from drugmaker with big plans

Greenwood-based Elona Biotechnologies Inc., which has been trying to bring a generic version of insulin to market, is running out of cash and struggling to find new investors.

The company told Greenwood officials of its financial troubles last week, according to the Daily Journal newspaper in Franklin. That information prompted the Greenwood Redevelopment Commission to vote Friday to declare Elona in default on $8.4 million worth of economic development incentives the city gave the company in 2010.

The city loaned $6.4 million to help Elona build a new 50,000-square-foot, $28 million insulin production plant in Greenwood and hire 70 workers. The city also gave Elona $1.5 million to help it win approval for its insulin from the U.S. Food and Drug Administration and $500,000 for equipment.

Elona was seen as a rising star, and Gov. Mike Pence even visited the company in March 2012 as part of his “jobs tour,” which was a key element of his gubernatorial campaign.

Elona, which was founded by a former Eli Lilly and Co. scientist, has made its business doing contract drug manufacturing for other firms.

But its growth plans hinged on making a generic version of insulin, something that was not allowed in the United States until the 2010 passage of the Patient Protection & Affordable Care Act.

That law called for a pathway for “biosimilar” versions of biotech drugs, including insulin. As it stands now, a drug such as Lilly’s Humulin insulin faces no generic competition even though its patent expired in 2001.

One problem for Elona has been that making generic versions of biotech drugs will be much more complicated—and much more expensive—than it is for making generic versions of chemical drugs.

Nearly a year ago, the FDA issued draft guidance on “biosimilar” drugs that indicated it would require additional clinical trials of a biosimilar drug. That means a company like Elona would have to spend significant money to test its drug in patients before the FDA would declare it similar to an existing insulin.

Because of that high standard, which the FDA has yet to finalize and put into effect, most pharmaceutical analysts do not expect Lilly and other makers of branded insulins to see their sales decline even after patent expiration.

For example, Lilly will see its U.S. patents on its insulin Humalog expire in 2014. But most analysts predict sales of the drug will keep growing after that time.

Calls to Elona’s founders Ron and Donna Zimmerman were not returned Tuesday morning. A call to Wendy Brewer, who is representing the Greenwood Redevelopment Commission, was not immediately returned Tuesday.

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7 Comments

Scammed

IndyMikeMay 20, 2013 10:27 AM
Greenwood was scammed. Somebody didn't do due diligence in checking out the claims of this company. The manufacturing of insulin can't be done on the cheap. If it could be done, some big generic company would already have it on the market. The founder was either a scammer or a wild-eyed dreamer who made people believe that his Lilly experience was what they needed to make millions of dollars. Greenwood fell for a get-rich-quick scheme but smarter investors didn't make the same mistake.

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Were taxpayers mislead?

Scott StrumelloJanuary 26, 2013 10:51 PM
For the record, you quote FDA spokeswoman Sandy Walsh in saying "No generic biological drugs have been approved yet for sale in the United States". This is a categorically false statement. Most notably, since 2006, Sandoz has been selling a biosimilar version of Pfizer's brand-name human growth hormone named Genotropin which Sandoz sells under the brand name Omnitrope. There is a lengthy and somewhat sordid history of biosimilars in the U.S., and the U.S. Food and Drug Administation has yet to release final guidance for biosimilar manufacturers, although draft guidance was released following the passage of the Affordable Care Act and subsequent Supreme Court decision upholding that legislation. In early 2007, I wrote about the various reasons biosimilar (the FDA calls them "follow-on" versions of biosynthetic human insulin weren't sold in the U.S. (see http://blog.sstrumello.com/2007/01/business-of-diabetes-real-story-behind.html and http://www.stopnyca1ctracking.org/downloads/generic_insulin.pdf for details) in spite of patent protection which expired years ago. What biosimilars are already approved in the U.S.? Notably, a biosimilar version of recombinant human growth hormone known as Omnitrope. In July 2003, the Sandoz unit responsible for generics of pharmaceutical giant Novatis filed, and the FDA accepted, an Abbreviated New Drug Application (ANDA) for a biosimilar version of Pfizer's brand-name human growth hormone named Genotropin that that Sandoz called Omnitrope using section 505(b)(2) the of the Federal Food, Drug, and Cosmetic Act. Like insulin, human growth hormone is governed Federal Food Drug and Cosmetics Act which just so happens to also be a biotechnology medicine. It is grandfathered under the Food Drug and Cosmetics Act (instead of the Public Health Services Act) because it was already on the market when subsequent legislation governing most other biotech medicines was passed into law. In any event, Sandoz sued the FDA in U.S. District Court in Washington, D.C., citing a statutory requirement that the FDA is required by law to act on drug applications within 180 days. On May 30, 2006, Judge Ricardo Urbina ruled in favor of Sandoz on the Omnitrope case in a very strongly worded opinion, calling the FDA's repeated delays "egregious" noting there was absolutely no excuse for a delay that was nearing 1,000 days, and effectively ordered the FDA to give the company a response. Following the lawsuit, the FDA approved Omnitrope. In approving the Sandoz drug, the FDA said that it found that the active ingredients in Omnitrope and Genotropin were "highly similar," therefore the Agency could rely on its previous findings that the Pfizer product was safe and effective in addition to Sandoz's own studies. But the FDA also noted that its approval did not rest exclusively on proprietary information from the original Genotropin application as it does with ordinary chemical drugs. Sandoz told the press that it had submitted an "abbreviated" version of the typical clinical trials (the abbreviated trials were done on just 51 people vs. thousands normally required to prove the efficacy of a brand new medicine), as well as safety studies and a detailed document outlining how the company planned to manufacture Omnitrope to ensure its quality. Finally, the FDA stated that the law governing generics permits approvals like Omnitrope's because they aren't technically forbidden, "as long as the current state of science allows the evaluation necessary to support approval," the FDA wrote in its response to Pfizer's petition against Omnitrope's ANDA. To be sure, the FDA has yet to determine that follow-on biopharmaceuticals are interchangible with the originals, something which many hope that the final FDA guidance will address. As for Greenwood-based Elona Biotechnologies Inc., it is unclear whether the company sought outside investors (venture capital funding, private equity, etc.), but Ron and Donna Zimmerman's chief point of differentiation was advances in the final high pressure liquid chromatography purification process. However, bringing the product to market takes more than advances to existing manufacturing processes. Indeed, sales to pharmacy benefits managers (PBMs) to get the product on the insurance formularies which pay for an estimated 80% of all prescriptions in the U.S. requires salespeople and other businesspeople. Right now, Elona hasn't even tried to apply for approval using the 505(b)(2) route, something which rival Sandoz (which could emerge as a competitor with biosimilar insulin) did a decade ago for Omnitrope. Greenwood and Indiana officials were sold little more than a promise, not dissimilar to many municipalities for building costly new sports arenas which numerous studies have proven do not generate new jobs. It is still possible Elona will find a buyer for it's intellectual property. Whether they get enough to repay $6.4 million remains to be seen.

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Regulators

L_ConquistadrJanuary 23, 2013 3:04 PM
I think the FDA and the monstrous federal government is to blame here as well. One of the reasons why drugs and medical devices are so expensive here in the U.S. is that the approval process is long and expensive. If it takes 10 years to bring a new invention to market, it's no wonder that prices are high to recoup the money that's been invested without any return during that time. Once a drug is approved, and the likes of Lilly are earning money on it, don't think that they don't discourage approvals of their rivals' competitive drugs which follow, either.

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Oops, we did it again

An OutsiderJanuary 22, 2013 6:35 PM
This story isn't about insulin. It's not even about Elona. No, the real story here is the absolute gross negligence and incompetence of state and local officials when it comes to taxpayer money. Economic development boondoggles like this almost ALWAYS cost the taxpayer far more than they bring in, yet it appears that most Indiana taxpayers aren't bright enough to figure that out. They keep on lining up to get fleeced. There are certain states where companies want to be. Their economies are growing organically. Some are low cost states. Others, not so much so. Intelligent people would see what they're doing and copy it, but this is Indiana. We stick to a model that the winners in the new economy abandoned decades ago. My goodness, it's time to leave. You simply cannot fix stupid.

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HENDERSON AGAIN?

fkgazaJanuary 22, 2013 6:21 PM
I know it is probably unfair to blame former mayor Henderson for this failure, but were there any successes under his administration outside of the Walmart? Sometimes it is things like this that make me question the whole mayor / city council form of government as I am not sure a professional risk management team would have advised providing this level of money to such a venture. The other thing is up in Zionsville they had a successful bio-venture where a European firm got funding from a US Bank (yes, one of the ones we bailed out) to move the entire operation to Panama. This only happens in the United States. So maybe next time get some collateral for failure and some legal guarntees for success? It is a jungle out there. Hopefully the new Mayor is wiser. So far it looks that way, but then Henderson didnt put up a very high bar.

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Thanks

J K WALLJanuary 22, 2013 12:57 PM
Thanks, Mike. I'll keep watching this company. I think most folks figured there would be more certainty by now (3 years after passage of the ACA) from FDA on the biosimilar pathway. It must be hard to find an investor in this environment, even with a big opportunity in insulin and diabetes. -- J.K.

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Good coverage

Mike HoskinsJanuary 22, 2013 12:49 PM
Thanks for your work on this, J.K. This generic insulin is so needed, but smaller companies such as Elona just can't get past the FDA burdens and costs at this point. Hopefully this landscape will change in the coming years, because patients living with diabetes and taking insulin really need this as an option.

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