Shares of Kodak were up more than 400% in trading earlier this week--a phenomenon that had nothing to do with photography, even though the 132-year-old American company is synonymous with the traditional camera.
It’s a massive boost for a once-loved American brand that has long been a symbol of family memories but whose stock has been languishing for decades as the digital revolution forced Kodak into bankruptcy.
The COVID-19 pandemic has changed all of that overnight, when U.S. President Donald Trump announced that the company would receive a $765-million loan from the government to shift gears into manufacturing ingredients used in pharmaceuticals. The loan, which will come from the newly created International Development Finance Corp., will be paid back over 25 years.
“It's a great name when you think about it. Such a great name. Was one of the great brands of the world. Then people went digital and Kodak didn't follow, but now under very extraordinary leadership they are following and they are doing something that's a different field,” Trump said
Indeed, in 2012 the company filed for bankruptcy protection as the shift to digital cameras devastated the business and has since sold off assets amid a plodding attempt at reinvention that never paid off. Disposable cameras weren’t enough--so why not a completely different raison d’etre.
Now, Kodak will start producing drug ingredients under the Defense Production Act, the first of its kind and part of Trump’s administration push to bring production back to the U.S.
White House trade adviser Peter Navarro told Fox Business that the partnership with Kodak would help bring medical manufacturing back to the U.S.
“It started with the president months ago telling my office, hey we need to bring those supply chains back,” Navarro said.
Since the global pandemic let loose, Washington has been searching for ways to strengthen the country’s ability to produce drugs and raw materials and reduce reliance on other countries--manly China--for its supply chain.
The vast majority of hospitals in the US are reporting shortages in drug treatments for Covid-19 patients as the supply chain from China was disrupted due to factory shut-downs amid the pandemic. A recent study warned that the shortages could be worsened.
So, Kodak comes in as the savior, while the Trump administration in turn throws the camera company a lifeline it would not otherwise have had.
The loan will lead to the creation of Kodak Pharmaceuticals, a new arm of the company that will produce critical pharmaceutical components. According to the company’s officials, Kodak's role will be to produce “starter materials” used to make generic drugs for medical purposes. The company expects its pharmaceutical ingredients to make up 30% to 40% of its business over time.
The U.S. administration's deal with Kodak is the first of this magnitude using the powers of the 1950 Defense Production Act.
Previously, the administration used these powers to demand that Ford Motor begin manufacturing respirators and masks and that General Motors make ventilators.
In May, the government also awarded $812 million to the drug manufacturing corporation Phlow to start producing active pharmaceutical ingredients.
By Fred Dunkley for Safehaven.com
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