HomeMy WebLinkAbout1984-05-08 Publi hearingNP�ICE OF PUBLIC HEARING OF INTENTP=' TO
I. INDUSTRIAL DEVELOPMENT REVEN._._BONDS
(PHARMACEUTICAL DEVELOPMENT SYSTEMS, INC.
PROJECT)
Notice is hereby given that a public
hearing will be conducted before the
Council of the City of Iowa City, Iowa, in
the Council Chambers at the Civic Center,
Iowa City, Iowa, at 7:30 P.M. on June 5,
1984, on the proposal to issue not to
exceed $3,000,000 in aggregate principal
amount of the City's Industrial Develop-
ment Revenue Bonds (Pharmaceutical
Development Systems, Inc. Project)
pursuant to the provisions of Chapter 419
of the Code of Iowa and Section 103(k) of
the Internal Revenue Code of 1954, as
amended, for the purpose of assisting
Pharmaceutical Development Systems, Inc.
(the "Company"), an Iowa corporation, in
financing all or a portion of the cost of
acquiring, constructing, improving and
equipping a new approximately 30,000
square foot industrial facility for the
purpose of manufacturing, storing and
distributing pharmaceutical products,
located on approximately 7.9 acres of land
at 320 Heinz Road, Iowa City, Iowa (the
"Project"). The proposed Project will be
owned and operated by the Company. It is
contemplated that a Loan Agreement will be
entered into between the City and the
Company under which the City would loan to
the Company the proceeds from the sale of
the Bonds in return for loan payments from
the Company sufficient to pay the princi-
pal of, interest and premium, if any, on
such Bonds as the same shall fall due.
Such Bonds, if issued, and the interest
thereon will be payable solely out of the
revenues derived from the said Loan
Agreement and shall never constitute an
indebtedness of said City within the
meaning of any state constitutional
provision or statutory limitation, and
shall not constitute nor give rise to a
pecuniary liability of said City or a
charge against its general credit or
taxing powers.
All local residents who appear at said
hearing shall be given an opportunity to
express their views for or against the
proposal to issue said Bonds and, at said
hearing or any adjournment thereof, the
Council of said City shall adopt a
resolution determining whether or not to
proceed with the issuance of said Bonds.
By Order of the City Council.
I
al 14
Mar an K. Karr, C erKof the
City of Iowa City, Iowa $ya
Section 3. The City recognizes that regulations promulgated
under Section 103 of the Internal Revenue Code of 1954, as
amended, may require the taking by this City Council of official
action or "some other similar official action", if interest on
Industrial Development Revenue Bonds issued by the City and used
to acquire, construct, improve and equip such project is to be
exempt from federal income taxes. In order to preserve such
exemption, this Resolution is intended to constitute, solely for
federal income tax purposes, official action or "some other
similar official action" with respect to the issuance of such
Bonds.
Section 4. That in order to assure the acquisition, con-
struction, improving and equipping of the proposed Project in the
City of Iowa City, Iowa, with the resulting public benefits which
will flow from the operation thereof, it is deemed necessary and
advisable that the Memorandum of Agreement, in the form attached
hereto as Exhibit "A", be approved and that the Mayor of the City
be and hereby is authorized and directed to execute said
Memorandum of Agreement and the City Clerk of the City be and
hereby is authorized to attest the same and to affix the seal of
the City thereto and said Memorandum of Agreement is hereby made
a part of this Resolution.
Section 5. In order that the Project will not be unduly
delayed, Company is hereby authorized to make such commitments,
expenditures and advances toward payment of the costs of the
Project as it considers appropriate, subject to reimbursement
from the proceeds of the Bonds when and if delivered, but
otherwise without liability on the part of the City.
Section 6. That officials of the City are hereby authorized
to take such further action as may be necessary to carry out the
intent and purpose of the Memorandum of Agreement.
Section 7. All Resolutions and Orders or parts thereof in
conflict herewith are, to the extent of such conflict, hereby
repealed, and this Resolution shall be in full force and effect
immediately upon its adoption.
Adopted and approved May 8, 1984.
City of Iowa City, Iowa
(SEAL) By
ohn McDonald, Mayor
Attest:
7ftan J � Cit J
Ma 'an K. Karr, City Clerk
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CLERK'S CERTIFICATE
I, Marian K. Karr, being first duly sworn, do hereby depose
duly qualified, and acting
7
and certify that I am the appointed,
City Clerk of the City of Iowa City, in the County of Johnson,
State of Iowa; that as such I have in my possession, or have
of said City and of
aceess to, the complete corporate records
its Council and officers; that I have carefully compared the
9
transcript hereto attached with the aforesaid corporate
records; and that said transcript hereto attached is a true,
all the corporate records showing
correct and complete copy of
the taken by the City Council of said City at a meeting
action
open to the public on May 8, 1984, regarding the issuance of
S
not to exceed $3,000,000 in aggregate principal amount of
Industrial Development Revenue Bonds (Pharmaceutical
City,
Development Systems, Inc. Project) of the City of Iowa
t
Iowa, directing publication of notice of intention to issue,
issue Bonds
calling a public hearing on the proposal to said
of a Memorandum of Agreement; that
A
and authorizing execution
said proceedings remain in full force and effect and have not
been amended or rescinded in any way; that said meeting and all
the
action thereat was duly and publicly held, with members of
notice of meeting
f
public in attendance, in accordance with a
which was timely served on each
and tentative agenda, a copy of
of the Council and posted on a bulletin board or other
member
prominent place easily accessible to the public and clearly
the
designated for that purpose at the principal office of
agenda being attached
Council (a copy of the face sheet of said
hereto) pursuant to the local rules of the Council and the
provisions of Chapter 28A, Code of Iowa, and upon reasonable
;
advance notice to the public and media at least twenty-four
the meeting as required by
hours prior to the commencement of
said law.
Witness my hand and the Corporate Seal of said City hereto
affixed this R�11 day of May, 1984.
a
(SEAL) Marian K. Karr, City Clerk
State of Iowa )
SS:
County of Johnson )
Subscribed and sworn to before me this day, the date last
above written.
for the
Notary Pu011c ;n ancY
(SEAL) State of Iowa
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(This Notice to be Posted)
NOTICE AND CALL OF COUNCIL MEETING
Governmental Body: The City Council of
Iowa City, Iowa.
Date of Meeting: May 8, 1984
Time of Meeting: 7:30 P.M.
Place of Meeting: Council Chambers
Civic Center
Iowa City, Iowa
PUBLIC NOTICE IS HEREBY GIVEN that the above-mentioned
governmental body will meet at the date, time and place above
set out. The tentative agenda for said meeting is as follows:
1..A Resolution Regarding the Issuance of Not To
Exceed $3,000,000 in Aggregate Principal Amount of
Industrial Development Revenue Bonds (Pharmaceutical
Development Systems, Inc. Project) of the City of
Iowa City, Iowa, Directing Publication of Notice of
Intention to Issue, Calling a Public Hearing on the
Proposal to Issue Said Bonds and Authorizing
Execution of a Memorandum of Agreement.
2. Such additional matters as are set forth on
the additional. 18 paqe(s) attached hereto
(attach copy of agenda).
This notice is given at the direction of the Mayor,
pursuant to Chapter 28A, Iowa Code, as amended, and the local
rules of said governmental body.
Marl,an K. Karr, Clerk of the
City of Iowa City, Iowa
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EXHIBIT "A"
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT is between the City of
Iowa City, in Johnson County, Iowa, party of the first part
(hereinafter referred to as the "City"), and Pharmaceutical
Development Systems, Inc., an Iowa corporation duly organized
and existing under the laws of the State of Iowa, party of the
second part (hereinafter referred to as "Company").
1. Preliminary Statement. Among the matters of mutual
inducement which have resulted in the execution of this
Agreement are the following:
(a) The City is an incorporated municipality of the State
of Iowa, authorized and empowered by the provisions of Chapter
419 of the Code of Iowa (the "Act"), to issue Industrial
Development Revenue Bonds for the purpose of defraying all or a
portion of the cost of acquiring and improving land, buildings
and improvements suitable for industrial projects, as defined
therein; and
(b) In order to provide for industrial development and
maintain and improve employment opportunities for the inhabit-
ants of the City and to add to the welfare and prosperity of
the City and of such inhabitants, the City proposes to loan to
the Company funds to assist in financing all or a portion of
the cost of acquiring, constructing, improving and equipping a
new approximately 30,000 square foot industrial facility for
the purpose of manufacturing, storing and distributing
pharmaceutical products, located on approximately 7.9 acres of
land at 320 Heinz Road, Iowa City, Iowa (hereinafter referred
to as the "Project"); and
(c) It is considered essential that acquisition and
construction related to the Project commence at the earliest
practicable date, and that orders be placed for acquiring the
necessary improvements and equipment. However, before
commencing the Project, the Company desires satisfactory assur-
ances from the City that the proceeds from the sale of the
City's Industrial Development Revenue Bonds which, when issued,
will be used to finance the Project, will be made available in
an amount sufficient to finance all or a portion of the cost of
the Project. The amount of the Bonds requested to be issued is
presently estimated not to exceed $3,000,000.
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(d) Representatives of the City have indicated the will-
ingness of the City to proceed with and effect such financing
as an inducement to the Company to locate the Project in the
City and the City has advised the Company that, subject to due
compliance with all requirements of law and the obtaining of
all necessary consents and approvals and to the happening of
all acts, conditions and things required to exist, happen and
be -performed precedent to and in connection with such financing
in due time, form and manner as required by law, the City, by
1 virtue of such statutory authority as may now exist or may
hereafter be conferred, will issue and sell its Bonds in an
amount sufficient to finance all or a portion of the cost of
the Project.
(e) The City considers that the undertaking of the Project
will promote industrial development of the City, provide
employment opportunities for the inhabitants of the City,
enhance the tax base of the City and overlapping taxing
jurisdictions, increase the City's commerce and add to the
welfare and prosperity of the City and that of its inhabitants.
2. Undertakings on the Part of the City. The City agrees
as follows:
(a) That it will authorize, or cause to be authorized, the
issuance and sale of an issue of its Bonds to be issued and
sold for the purpose of financing the Project, pursuant to the
terms of the Act as then in force, in an aggregate principal
I
amount presently estimated not to exceed $3,000,000.
(b) That it will cooperate with Company to sell the Bonds
upon mutually agreeable terms and it will adopt, or cause to be
• adopted, such proceedings and authorize the execution of such
documents as may be necessary or advisable for the autho-
rization, issuance and sale of the Bonds and the financing of
the Project as aforesaid, and the entering into a Loan Agree-
ment with the Company with respect to the Project, all as shall
be authorized by law and mutually satisfactory to the City and
the Company.
(c) That the aggregate basic payments (i.e., the payments
to be used to pay the principal of, premium, if any, and
interest on the Bonds) payable under the Loan Agreement shall
be such sums as shall be sufficient to pay the principal of,
interest and redemption premium, if any, on the Bonds as and
when the same shall become due and payable.
(d) That it will take or cause to be taken such other acts
and adopt such further proceedings as may be required to
implement the aforesaid undertakings or as it may deem appro-
priate in pursuance thereof.
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3. Undertakings on the Part of the Company, The Company
covenants and agrees as follows:
(a) That it will cooperate with the City to sell the Bonds
in an aggregate principal amount as above stated; provided,
I however, that the terms of the Bonds and of the sale and
delivery thereof shall be mutually satisfactory to the City and
the Company.
(b) That it has not, prior to the execution of this agree-
ment and the taking of "official action" toward the issuance of
the Bonds by the City, acquired or commenced construction of
the Project, or any part thereof, and has not entered into any
contracts or paid or incurred any costs related thereto, which
will be paid or reimbursed from the proceeds of the Bonds, when
and if issued. The Company does, however, represent that it
now intends to enter into a contract or contracts for the
acquisition, construction, improvement and equipping of the
Project and take, with reasonable diligence, the other
necessary steps toward the realization of the Project.
(c) That contemporaneously with the sale of the Bonds it
will execute a Loan Agreement with the City under the terms of
which the Company will obligate itself to pay to the City sums
sufficient in the aggregate to pay the principal of, interest
and redemption premium, if any, on the Bonds as and when the
same shall become due and payable, such instrument to contain
other provisions required by law and such other provisions as
shall be mutually acceptable to the City and the Company.
(d) That it will take such further action and adopt such
II further proceedings as may be required to implement its
aforesaid undertakings or as it may deem approRriate in
pursuance thereof.
j 4. General Provisions.
(a) All commitments of the City under paragraph 2 hereof
and of the Company under paragraph 3 hereof are subject to the
condition that on or before December 31, 1986 (or such other
date as shall be mutually satisfactory to the City and the
Company), the City and the Company shall have agreed to
mutually acceptable terms for the Bonds and of the sale and
delivery thereof, and mutually acceptable terms and conditions
of the documents referred to in paragraph 3 and the proceedings
referred to in paragraphs 2 and 3 hereof.
(b) Whether or not the events set forth in (a) of this
paragraph take place within the time set forth or any extension
thereof, the Company agrees that it will reimburse the City for
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all reasonable and necessary direct out-of-pocket expenses
which the City may incur, including, but not limited to, legal
fees, printing and publication costs and filing fees arising
from the execution of this Agreement and the performance, or
preparation to perform by the City of its obligations here-
under, or done at the request of the Company.
(c) It is expressly understood by both parties to this
Memorandum of Agreement that its execution by the City is
intended both as an expression of the City's current intention
to proceed with the issuance of the Bonds and to constitute
"some other similar official action" for purposes of the
Treasury Regulations promulgated under Section 103 of the
Internal Revenue Code of 1954, as'amended. The execution of
this Memorandum of Agreement by the City is not intended to nor
does it create a binding commitment of the City to proceed with
the issuance of the Bonds. It is further understood that the
issuance of the Bonds is subject to further review by the City
Council of the City and is conditioned upon, among other
things, full compliance of all provisions of the Industrial
n .. ..e n.. A n„i;r., and Procedures For The City Of Iowa_Cit ,
(d) All commitments of the City hereof are further subject
to the conditions that the City, and its elected and appointed
officials, shall in no event incur any liability for any act or
omission hereunder, and that the Bonds described herein shall
not constitute an indebtedness of the City within the meaning
of any constitutional or statutory provision and shall not
constitute nor give rise to a pecuniary liability of the City
or a charge against its general credit or taxing powers.
IN WITNESS WHEREOF the parties hereto have entered into
this Agreement by their representatives thereunto duly
authorized as of the 8th day of May, 1984.
C' y of Iowa City, Iowa
(Seal of City)
By
ohn Mc onald, Mayor
Attest:
1 1Yn n X / �1�--
M�rian K. Karr, City Clerk
Pharmaceutica Deve ent Systems, Inc.
Charles E. Newhouse , Executive Vice -President
ame i e
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City of Iowa Cit=es
f - MEMORANDUM
Date: May 3, 1984
To: City Council p
From: Rosemary Vitosh, Director of Finance
Re: Pharmaceutical Development Application for Industrial Revenue Bonds
Pharmaceutical Development Systems, Inc, submitted an application for
Industrial Revenue Bonds to be used for financing the construction and
equipping of a new 30,000 square foot facility for the purpose of manufac-
turing, storing and distributing a pre -mixed liquid bicarbonate concen-
trate solution. Eventually the company anticipates manufacturing a full
line of pharmaceutical products. The facility will be constructed on an
eight acre site in B.D.I. More detailed information on the products to be
manufactured by the company is attached to this memo.
The staff has reviewed the application and finds no legal problems. The
financial analysis shows that all funding sources for the project are
still pending. Funding is to come from the IRBs, the.sale of equity stock
and venture capital from the Iowa Product Development Corporation (appl-
ication has been submitted but has not yet been approved). In addition,
the Company will be securing a bank loan for working capital to cover
initial operating costs.
The Company now needs the City's initial support for the bond issue in
order to proceed with the finalization of their total financing package.
Since approval of the Memorandum of Agreement does not legally bind the
City to issue the bonds, staff recommends that Council approve the
Memorandum of Agreement. Staff will continue to monitor the progress on
the other financing sources and does recommend that their status be
reviewed by Council prior to future action on the bonds for this project.
The next formal Council action is scheduled for June 5, 1984, at which
time a public hearing will be held and Council will decide whether to
approve a resolution which authorizes proceeding with the issuance of the
bonds.
The application states that the following will be added to the project as
a result of using IRB financing: "Reduced interest will allow Pharmaceu-
tical Development Systems to of Per product pricing which is competitive
with firms in other geographic areas, whose cost of capital is comparable
to the Industrial Revenue Bond rate. Without this lower interest,
Pharmaceutical Development Systems would not be competitive and would
either have to locate elsewhere or abandon the project entirely."
The attached five pages are excerpts taken from the application received
from Pharmaceutical Development. This information provides further
explanation of the products to be manufactured by this Company.
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EXHIBIT F
Background and Rationale
At present approximately 14 million gallons of hemodialysis
dialysate concentrate solutions are used annually (for artificial
kidney treatment) in the United States. Of this amount, four
million gallons are hand mixed bicarbonate solutions.
Bicarbonate -containing dialysate is recognized as therapeutically
superior to sodium acetate dialysate. The dialysate needs to be
produced in a concentrated form to be compatible with dialysis
machines. The concentration requirement has made it impossible
to manufacture a liquid bicarbonate solution. As a consequence,
the only usable bicarbonate dialysate is a two-part kit
containing powdered chemicals which must be hand mixed prior to
use. The mixing must be done in a painstaking and lengthy manner.
At best, the accuracy and reliability of this inconvenient
product form is marginal. This accounts for the relatively small
percentage of bicarbonate dialysate currently used.
Almost four years ago a premixed liquid bicarbonate concen-
trate solution was perfected by Dr. John Lach, Jerry Fangman and
Charles Newhouse. The solution has undergone careful study and
has been successfully used for patients treated at the University
of Iowa Dialysis Center and the Veterans Administration Dialysis
Center during the last three and one-half years.
Although no previous attempt to market the solution was
made, news of its existence led to countless phone calls from
gyp
Exhibit F
Page 2
dialysis programs across the country requesting its sale. In
addition, the world's largest dialysis products company, Gambro,
Inc., has expressed a desire to market the concentrate and
negotiations are presently underway, (see Marketing Analysis,
Section XII).
Pharmaceutical Development Systems, Inc., (PDS), was formed
on October 19th, 1983, to manufacture and distribute this
premixed liquid bicarbonate concentrate. On November 15th, 1983,
Pharmaceutical Development Systems was incorporated under the
laws of Iowa. An office at 10.27 Hollywood Boulevard was opened
on November 21st, to facilitate the planning needed to implement
the formation of the firm.
It appears certain that a firm manufacturing the liquid
bicarbonate concentrate would capture the majority of current
sales and would greatly expand the use of bicarbonate dialysate
by providing a safe, reliable, convenient form of a product which
is already known to be therapeutically superior. The company
would be an exclusive source for this superior product and have
immediate expansion capabilities. This, combined with the
balanced expertise of the persons involved, their established
relationship with The University of Iowa Hospitals, the College
of Pharmacy and the current favorable climate for new "high-tech"
industries in Iowa present a most optimistic forecast for the
future of Pharmaceutical Development Systems.
$4101
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Exhibit F
Page 4
Additional Products
Although the production of dialysate solutions is a sound
enterprise in itself, it is a means to an end. The end being a
full line pharmaceutical manufacturing facility working in
conjunction with the University of Iowa College of Pharmacy,
governmental agencies and major manufacturers of pharmaceuticals.
We anticipate that dialysate production will provide.
sufficient revenue to allow construction and equipping of the
small volume parenterals (S.V.P.'s), and solid dose formulation
(tablets, capsules), production areas. Sales of SVP's and solid
dose formulations are expected to soon eclipse the revenue from
dialysate solution.
The decision to develop a small volume parenteral (SVP) and
solid dose formulation area and subsequent phases of the
pharmaceutical development system facility is predicated on the
fact that there is currently no facility in the United States
that can provide mid range manufacturing of sophisticated
investigational new drugs or novel dosage forms. There is
however, a verifiable need for such a facility to enable large,
established pharmaceutical firms to produce quantities of drugs
and compounds for large scale clinical trial. At present, these
firms must set up their own pilot production lines for these
products which greatly increases their cost.
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Exhibit F
Page 5
Pharmaceutical Development Systems will not compete with
large manufacturers. our ability to contract with them for the
relatively low cost production of Investigational New Drugs
(IND), novel dose forms and new pharmaceutical products for large
scale clinical trial, will be a source of support to these firms.
In addition, we will pursue contracts through the Food and
Drug Administration and other governmental agencies, for the
production of "orphan drugs." These are drugs which are
diagnostically or therapeutically required for disease entities
which are uncommon but_severe.enough to warrant research into
their causes and treatments. At the present time, major
pharmaceutical producers are unwilling to produce these drugs due
to the relatively low volume of potential sales. In short, they
do not wish to diminish their large scale production capacity by
fragmenting it into lower volume products, even though these
products are salable at a substantial profit. For a mid range
size manufacturer such as PDS however, these drugs would be very
profitable.
Both the executive and legislative branches of the federal
government have indicated their awareness and concern over the
"orphan drugs" problem. Steps have been and are being taken to
allow companies such as PDS to acquire the IND (Investigational
New Drug) number for these products at no cost and with minimum
red tape so that their testing and production can more easily
I
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Exhibit F
page 6
begin. In addition, the granting of the IND number allows the
manufacturer to retain production rights to these drugs
indefinitely. As a consequence, a high degree of product
protection is achieved and a long term profit situation would
develop.
Pharmaceutical Development Systems plans to construct
SVP and solid dose areas (see attached plan), sizable enough to
generate approximately 10 to 15 million dollars in gross sales if
operating at capacity.
The industry standard for profit in this type of production
is 408. Thus, if full capacity is achieved, a profit of four to
six million dollars per annum would be possible.
Dr. John Lach, Director of Pharmaceutical Manufacturing
Services at the University of Iowa college of Pharmacy; presently
contracts for small scale production of the types of drugs and
compounds described above. Based on his 30 years experience in
this production, he estimates that PDS should realize
approximately $500,000 net profit the first year of operation of
the SVP and solid dose facility. He further estimates that the
second 12 months of operation should generate in excess of one
million dollars in net profit. Subsequent years would approach
the four to six million dollar profitability range.
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