Showing posts with label Commerce-Greedy. Show all posts
Showing posts with label Commerce-Greedy. Show all posts

April 30, 2020

It was Not Just ShakeShack to Get Money They Did Not Need But 94 Publicly Held Companies Went For It


 



Companies with thousands of employees, past penalties from government investigations and risks of financial failure even before the coronavirus walloped the economy were among those receiving millions of dollars from a relief fund that Congress created to help small businesses through the crisis, an Associated Press investigation found.
The Paycheck Protection Program was supposed to infuse small businesses, which typically have less access to quick cash and credit, with $349 billion in emergency loans that could help keep workers on the job and bills paid on time.  
But at least 94 companies that disclosed receiving aid since the program opened April 3 were publicly traded, the AP found, some with market values well over $100 million. And about 25% of the companies had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question. 
By combing through thousands of regulatory filings submitted through Monday, the AP identified the 94 companies, or their subsidiaries, as recipients of a combined $365 million in low-interest, taxpayer-backed loans. 
Nine of the loans were for the maximum $10 million possible, including one to a California software company that settled a Securities and Exchange Commission investigation late last year into accounting errors that overstated its revenue. 
The firms getting maximum loans are likely just a tip of the iceberg: Statistics released last week by the U.S. Small Business Administration showed that 4,400 of the approved loans exceeded $5 million. Overall, the size of the typical loan nationally was $206,000, according to the statistics. The SBA will forgive the loans if companies meet certain benchmarks, such as keeping employees on payroll for eight weeks. 
The list of recipients identified by the AP is a fraction of the 1.6 million loans that lenders approved before the program was depleted last week, but it is the most complete public accounting to date. Neither the Trump administration nor the lending industry has disclosed a list of Paycheck Protection Program beneficiaries.
On Tuesday, the White House referred questions to the SBA and Treasury Department.
The SBA did not respond directly to AP’s findings. Instead, the agency emailed a list of bullet points including that “loans cited by recent media reports going to large companies comprise less than 10% of the loans made.”
Treasury Secretary Steven Mnuchin addressed the issue at Tuesday evening’s White House briefing, saying, “The intent of this money was not for big public companies that had access to capital.”
The department has said in written materials that that 74% of the loans were for less than $150,000, demonstrating “the accessibility of this program to even the smallest of small businesses.” 
The AP analysis comes as lawmakers reached an additional relief package that would replenish the Paycheck Protection Program with more than $300 billion. The Senate approved the deal Tuesday and the House was scheduled to vote Thursday.
In the wrangling ahead of Tuesday’s vote, several lawmakers expressed urgent need to get more money to Main Street.
“I am troubled by reports of publicly traded companies with access to capital & bank relationships receiving money quickly while many ma & pa shops can’t even get a call back or $1,” Sen. Martha McSally, R-Ariz., tweeted. “The next round of funds must be focused on small businesses, with better oversight & transparency.”
Democratic House members implored that the new package “equitably prioritize small, minority, veteran, and women-owned businesses” in the future.
“If we let the applications for the largest entities consume those one and two person operations, we have failed our constituents and paved the way for national economic decline,” the leaders of the Congressional Asian Pacific American Caucus, the Congressional Black Caucus and the Congressional Hispanic Caucus said in a written statement. 
In its review, AP also found examples of companies that had foreign owners and that were delisted from U.S. stock exchanges, or threatened with removal, because of their poor stock performance before the coronavirus hit. Other companies have had annual losses for years. 
Wave Life Sciences USA Inc., a Boston-area biotechnology company that develops new pharmaceuticals, received a $7.2 million loan. Weeks earlier, Wave Life Sciences, whose parent company is based in Singapore, disclosed in its annual report net losses of $102 million, $147 million and $194 million during the last three fiscal years. 
“We currently have no products on the market and expect that it may be many years, if ever, before we have a product candidate ready for commercialization,” it wrote.
In an emailed statement, the company said: “The livelihood of our U.S. employees and their families would be severely disrupted if they were to lose their jobs or be furloughed. We are doing everything we can to support them.”
Michael Minnis, who has studied the SBA program as an accounting professor at the University of Chicago Booth School of Business, said he understood the frustrations of smaller businesses that have not received funding when publicly listed companies have. But he said it would be hard to go into the program and change the parameters now.
“There’s a fundamental trade-off here between speed and targeting this in the absolute best way,” said Minnis, who estimates the program might need to dispense $720 billion to meet demand. 
Since launching, the relief package has faced criticism about slow loan processing, unclear rules and limited funding that left many mom-and-pop businesses without help.
News that the $1.6 billion Shake Shack burger empire had received a maximum $10 million loan ignited public anger. Company executives said late Sunday they would return the money after finding other sources of capital. 
By design, the Paycheck Protection Program was meant to get money out quickly to as many small businesses as possible, using a formula based in part on workforce and payroll size. Some of the eligibility criteria was expanded, making it possible for some businesses with more than 500 employees to qualify if, for example, they met certain size standards for their industries or other conditions.
The owners behind large restaurant chains like Potbelly, Ruth’s Chris Steak House and Taco Cabana were able to get the maximum $10 million in loans despite employing thousands of workers.
Some other big companies that received loans appeared to have enough cash on hand to survive the economic downturn. New York City-based Lindblad Expeditions Holdings, for example, a cruise ship and travel company with 650 workers and a branding deal with National Geographic, got a $6.6 million loan. At the end of March, the business reported having about $137 million in cash on its balance sheet.
“When this crisis hit, we had two business planning cases: 1) substantial layoffs and furloughs or 2) receiving these funds and not impacting our employees,” spokeswoman Audrey Chang wrote in an email. “Lindblad is the very rare travel company that has not imposed any layoffs, furloughs or salary reductions to date.”
Five of the companies that the AP identified were previously under investigation by financial and other regulators, including firms that paid penalties to resolve allegations, records show.
Quantum Corp., a data storage company based in San Jose, California, that has a workforce of 800, paid a $1 million penalty last December over allegations that accounting errors resulted in overstated revenues. Quantum received a $10 million loan.
Without that loan, “we would most certainly be forced to reduce headcount. We owe it to our employees — who’ve stuck with us through a long and difficult turnaround — to do everything we can to save their jobs during this crisis,” company spokesman Bob Wientzen wrote in an email.
Marrone Bio Innovations, a biopesticide company in Davis, California, that has about 50 workers, agreed to pay $1.8 million in 2016 after the SEC alleged its chief operating officer had inflated financial results to hit projections that it would double revenues during its first year as a public company. Marrone received a loan worth $1.7 million.
Pam Marrone, the chief executive, said the company “shouldn’t be punished” for what happened with the SEC because it has had clean audits for years now. She described the investigation as a “body blow” that cost it investors and drove its stock price under $1. She said it has had to take on $40 million in debt and is still digging itself out of the financial hole.
“People don’t realize how tough it is to be a small public company like us that’s not yet profitable,” she said. “We can’t just go to investors and say, ‘OK, open up your wallets.’ “
The AP analysis found that 23 of the 94 companies had warned investors months ago that they or their auditors had significant doubts about their ability to remain viable and meet their financial obligations despite the booming economy at the time. 
One was Helius Medical Technologies, a company located near Philadelphia that develops technology to help injured brains heal themselves.
The company has 19 employees and received a $323,000 loan amid a tough stretch. Its most recent annual report warned, “We may be unable to continue to operate without the threat of liquidation for the foreseeable future” and did not expect to have enough cash to go beyond May.
In an interview, president and chief executive Phil Deschamps said the company was able to raise enough capital earlier this year that, when paired with the loan, it can survive to early summer — when it expects to have filed for U.S. Food and Drug Administration approval for its device. Without the federal money, he said, the company would have lost scientists and attorneys who help prepare regulatory submissions. 
Deschamps said his company followed the same rules and applied like any other, and that its device could help thousands of people in the future. But he also understands why some people might question giving money to publicly traded firms.
“If we didn’t qualify for whatever reason, we would have walked away and figured out another way to do it,” he said.
Another company that was facing financial issues before the virus was Enservco Corp., a Denver-based oil and gas firm. In its annual report filed last month, the company noted: “We do not generate adequate revenue to fund our current operations, and we incurred significant net operating losses during the years ended December 31, 2019, and 2018, which raise substantial doubt about our ability to continue as a going concern.”
Chief executive Ian Dickinson said he welcomed the $1.9 million loan because he would’ve had to let go more employees than he has without it. Enservco currently has 95 employees, he said.
Dickinson said he did not believe concerns about how long the company could survive were raised in the application process with its bank.
“At the end of the day, our employees are really no different than the employees of a nonpublic company,” Dickinson said. “These are funds being used to keep folks on payroll and keep food on their tables.”
That companies listed on stock markets, some with questionable records, received precious aid during the chaotic last few weeks frustrates Zachary Davis, a Santa Cruz, California, businessman who runs two artisanal ice cream shops, a beachside café and a taco bar with partner Kendra Baker.
Before a shelter-in-place order in mid-March, the two were expecting their best year and were on track to pay off in May the $250,000 loan from the federal government that 10 years ago helped open their original shop.
“We were feeling pretty good about where we were in the world. Now it’s just all turned upside down,” said Davis, who had to lay off 70 workers. 
Davis says they were recently able to obtain a different $10,000 disaster loan from the federal government to pay off vendors, but he says that it “evaporated within seconds.” Davis and Baker submitted a Paycheck Protection Program application with supporting documents on April 2 — but are still waiting.
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Associated Press writers Michael Liedtke in Berkeley, California; Darlene Superville, Lisa Mascaro, Zeke Miller and Jeannie Ohm in Washington; and researcher Rhonda Shafner in New York contributed to this report.
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Contact AP’s global investigative team at Investigative@ap.org.

November 9, 2019

Because Gilead Has No Money and Have Not Made Enough on HIV It Doesn't Want To Release The PREP Patent




                                                Image result for gilead and prep


The Department of Health and Human Services is suing Gilead Sciences over the patent rights to Truvada, Gilead’s HIV prevention drug better known as PrEP, or pre-exposure prophylaxis.
PrEP is a pill taken once daily that is 99 percent effective at preventing HIV transmission, according to the Centers for Disease Control and Prevention.
The lawsuit, filed Wednesday in U.S. District Court for the District of Delware, alleges that CDC researchers began studying the preventive use of HIV treatment drugs — like tenofovir, or TDF, and emtricitabine, FTC, the two compounds in a Truvada tablet — as early as 1998, before Gilead sought a patent.
Crucially, the lawsuit alleges that the government owns the PrEP patent for both Truvada and Descovy, Gilead’s next generation PrEP approved last month, setting up the possibility that both HIV prevention drugs could see drastic price reductions. 
“HHS recognizes Gilead’s role in selling Truvada and Descovy to patients for prevention of HIV. Communities have put these drugs to use in saving lives and reducing the spread of HIV,” HHS Secretary Alex M. Azar II said in a statement. “However, Gilead must respect the U.S. patent system, the groundbreaking work by CDC researchers, and the substantial taxpayer contributions to the development of these drugs. The complaint filed today seeks to ensure that they do.”
In response, Gilead said the government’s patent claims were “invalid.”
“We are surprised that the government has requested that a district court judge and jury look at the same issues of patent validity that the Patent Office will be deciding,” Gilead said in a statement Thursday. “We will be asking the district court to stay the litigation until the Patent Office has an opportunity to undertake the review that we already have requested.”

AN AUSPICIOUS PHONE CALL

The PrEP4All Collaboration was formed in summer 2018 to advocatethat the U.S. government “break the patent” by exercising its “march-in rights” and requisition Truvada for emergency public health purposes.
James Krellenstein, another member of the collaboration, said that shortly afterward the group’s founding he received a phone call from one of the doctors who discovered PrEP.
“He gave me a ring and said, ‘You should know that in addition to the government having march-in rights on the patents that protect Truvada, the federal government actually owns independent patents that protect the use of Truvada and Descovy as PrEP.” That led Krellenstein and others to research the various patents that apply to the compounds, formulations and uses of these drugs for prevention purposes. “He was advocating very, very strongly because he was appalled about the price gouging that Gilead was doing with his invention and the massive barriers that caused for uptake,” Krellenstein said of the doctor who called him.
Christopher J. Morten, an NYU researcher and a lawyer for the PrEP4All Collaboration, said, “Gilead knew at least from 2008 that it was at risk of liability of patent infringement if it sold Truvada or Descovy as PrEP.”
The lawsuit lays out a timeline that alleges Gilead contributed nothing more than donated Truvada tablets to multimillion-dollar human trials that were funded by the U.S. government and philanthropic donors.

DISCOVERING PREP

On Aug. 2, 2004, Gilead Sciences received FDA approval for Truvada as a drug to treat, not prevent, HIV. At the time, Truvada was considered one of the least toxic combination HIV-treatment tablets. But in 2004, research was already underway on whether the drugs contained within Truvada tablets could also be an effective way to prevent transmission of HIV.
That is because, “in the mid-1990’s, high doses of subcutaneous tenofovir alone had been shown to have prophylactic activity in macaques exposed intravenously to simian immunodeficiency virus (SIV), a virus similar to HIV,” the lawsuit states.
A report published in 2004 by the AIDS Partnership California and Center for HIV Prevention and Treatment Services shows that in the same year that Gilead’s Truvada received FDA approval for use in treating HIV, five separate human trials were planned in countries around the world to test the efficacy of tenofovir alone as PrEP. According to that report, the studies were sponsored by the CDC, the National Institute of Allergy and Infectious Diseases and the Bill and Melinda Gates Foundation. But those studies failed to show that tenofovir, or TDF, alone could protect against sexual transmission; protests in Cambodia led the government to shut down the trials
“While two-drug regimens would generally be considered more toxic, the CDC researchers hypothesized that the inclusion of FTC — as an effective antiretroviral drug with relatively low toxicity — could add more protection than seen with TDF alone. The CDC researchers were the first group to take the innovative FTC/tenofovir prodrug combination path in PrEP preclinical or clinical studies,” the lawsuit states.
The lawsuit also states that CDC researchers discovered the proper dosage, used proprietary animal modeling techniques, and painstakingly recreated the environment of sexual transmission in macaques.
2008 report on the results of a CDC primate trial by government-funded researchers showed that a combination of the two drugs found in Truvada worked better than TDF alone. That study states that the authors have a competing interest: They “are named in a U.S. Government patent application related to methods for HIV prophylaxis.” That study said that the promising results of the macaque trial “support PrEP trials for HIV prevention in humans and identified promising PrEP modalities.” According to the lawsuit, those patent applications were filed in 2006 and 2007 and approved in 2015.
After the 2008 study showed that a dual drug regime worked better than a single drug, ongoing human trials were modified to include TDF and FTC, instead of TDF alone. The 2010 results of one of those modified trials, the iPrEX study, effectively proved that Truvada worked as PrEP in men who have sex with men and transgender women.
According to a 2017 AVAC report, these human trials received commercial funding from Gilead of up to $2 million per year — largely the cost of donating the drug — while combined public and philanthropic funding was $29 million to $62 million per year. 
“While Gilead’s public statements emphasize the amount of money it has spent to ‘support the clinical trials that led to the approval of Truvada for PrEP,’ that claim is disingenuous,” HHS wrote in a press release. “Its support of early clinical trials was typically limited to only the donation of study drugs. Only after the commercial success of Truvada for PrEP did Gilead increase its funding of PrEP clinical trials, and in particular, trials related to Descovy for PrEP.”
Following the successful results of the iPrEX and other studies, in July 2012 the FDA approved a second use for Truvada: as a HIV prevention pill for high-risk populations like gay men and injection drug users. Gilead did not advertise Truvada for prevention because it was still controversial. Prescribing guidelines for clinical providers were not published until 2014. Television ads only began in May 2018. In the meantime, Gilead earned billions from sales of Truvada — $3 billion in 2018 alone.

ROYALTIES OWED

The HHS press release states that the Patent and Trademark Office granted four patents to HHS for PrEP. “These patents entitle HHS to license CDC’s PrEP regimens and receive a reasonable royalty for their use. Two other companies that manufacture generic equivalents of Truvada for PrEP in foreign countries have agreed to licenses with HHS.”
Krellenstein said the PrEP4All Collaboration’s next task is ensuring that whatever royalties the U.S. government may obtain from its lawsuit against Gilead — which could be in the billions — are spent on ensuring the drug gets to the estimated 900,000 at-risk people who are still not taking it.
“The government must ask to both simultaneously increase access to the drug” by lowering the price, allowing an earlier generic, or providing the drug for free to clinics, Krellenstein said, and use any royalties obtained “to fund a national prevention program that guarantees anyone in the country who wants it can get it.” 

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