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March 21, 2007

County Council approves $4.515M TIF bond for Pfizer

By Howard Greninger

TERRE HAUTE — Pfizer has cut a temporary work force and reduced its total production days as it stockpiles Exubera, a powdered form of insulin.

The pharmaceutical company already has hired nearly 400 full-time workers over the past year to produce Exubera and Vigo County officials this week approved an incentive package as part of an economic development incentive to Pfizer.

The County Council on Tuesday approved the issuance of a $4.515 million tax increment finance, or TIF, bond. Taxes paid by Pfizer will fund the TIF bond payments, with the county’s income tax serving as a backup to secure the 15-year bond through 2021. The TIF could generate sufficient funds to redeem the bond by January 2019, two years earlier.

The total debt on the bond issue, with more than $2.9 million in interest, would be more than $7.4 million over 15 years.

However, Steve Witt, president of the Terre Haute Economic Development Corp., said Wednesday he thinks “it would just be good business for the county to meet with Pfizer to get an update on the status of the Exubera project before completing the sale of the TIF bond. We plan to contact

Pfizer officials to arrange

that meeting.”

Rick Chambers, Pfizer spokesman, said Wednesday that Pfizer last year brought in temporary contract workers to “help us build inventory for Exubera. Once we reached that inventory level that we needed to support the product, then the assignments for those temporary workers were concluded. That happened two weeks ago.

“That was always intended to be a temporary assignment,” he said.

In addition, Pfizer has stopped production of Exubera on Sundays.

In any manufacturing, Chambers said, “you base your production schedule in large part on need for the product.”

“We are at the inventory levels that we need and we are still in the process of pursuing the [Exubera] rollout, which began last fall. We’re at the place that we need to be and we have the inventory of Exubera that we need. We’re expecting that this product will continue to gain attention among physicians and patients,” Chambers said.

Brandweek, a publication that covers marketing of drugs, reported this month that Friedman, Billings, Ramsey analyst Jim Reddoch published numbers that suggest Pfizer has paid more to acquire and market the bong-like diabetic device used to inhale the powdered insulin than it can make back in sales.

Brandweek reported that in a note covering Nektar Therapeutics, the San Carlos, Calif., manufacturer of the Exubera device, Reddoch wrote: “With lackluster demand so far, Pfizer has built up nearly $800 million in Exubera inventory this year and, based on guidance, will have more than $1.5 billion in inventory by the end of this year (nearly three years’ worth of demand, based on our estimates). Pfizer will re-launch the product in April; this is probably the last chance to get traction with physicians and stimulate demand.”

Chambers said Pfizer has invested more than $300 million in the past five years on its Vigo County plant, south of Terre Haute, and over the past year has hired about 400 people, making its work force at nearly 800 there.

“We are still very much enthusiastic about the product and our future in Terre Haute,” Chambers said.

Pfizer has expanded its Exubera education rollout to primary physicians and has started to increase advertising, with direct-to-consumer advertising to start in the next couple of months, Chambers said. The company already is advertising in trade journals, Chambers said.

Robert Hellmann, president of the Vigo County Council, said the county is keeping its commitment made to Pfizer to provide at least $3.2 million in improvements. Even if Pfizer’s revenue forecast for Exubera sales is below initial estimates, the revenue generated from the established TIF district “is substantially more than the obligation on the TIF bond,” Hellmann said.

The TIF is projected to generate more than $11.7 million from Pfizer over a 15-year period, larger than the total debt on the bond of more than $7.4 million, he said.

The County Council plans to use $450,000 from the County Economic Development Income Tax, commonly called EDIT, to extend a waterline to Pfizer as well as establish a bond debt service reserve of $451,500 on the TIF bond.

Danisco Sweeteners now has use of several water wells formerly used by Pfizer, Witt said. The debt reserve will cover bond payments for a year should Pfizer’s taxes not be enough to cover payments.

In addition, another $552,125 of economic development income tax will be used to pay interest on the bonds through July 15, 2010. “It will be a few years before the Pfizer project is completed, yet interest will still be due on the bonds, so the county will pay that out of EDIT,” said Vigo County Auditor Jim Bramble.

The bond issue would cover $640,000 for a new intersection at Carlisle/Dallas roads; $562,000 for a new intersection at Carlisle/Pfizer roads; $700,000 for a new Carlisle/Harlan roads intersection; $725,000 for improvements to Harlan Road; $480,000 for a rail crossing signal on Harlan Road; and $550,000 for resurfacing Dallas Road from U.S. 41 to Carlisle Road.

It also includes $860,000 as a 20 percent match to resurface Harlan Road from Carlisle Road to Sullivan Place. The project’s total projected cost is $1.07 million, with the county seeking an 80 percent federal match.

Also, $1.6 million as a 20 percent match to resurface Harlan Road from Sullivan Place to Indiana 63. That project’s total projected cost is $2 million, also with the county seeking an 80 percent federal match.

Howard Greninger can be reached at (812) 231-4204 or howard.greninger@tribstar.com.

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