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Kodak Forays Into Pharmaceutical Manufacturing After $767m Loan from the US Government

Editor, TRANSFIN.
Jul 30, 2020 1:31 PM 4 min read
Editorial

Kodak used to be one of the best-known names in the photography industry. The phrase “Kodak moment” used to be synonymous with capturing a moment on camera. 

But now, the Eastman Kodak Company would be donning a new hat - as a pharmaceutical manufacturer.

The Mechanism

The New York-based firm has secured a $767m loan from the US government to boost domestic drug manufacturing.

The loan was sanctioned under emergency provisions of the Defense Production Act, under which the Donald Trump administration previously accelerated the manufacturing of face masks, ventilators and other medical equipment. It will be provided by the US International Development Finance Corporation, which is effectively a government bank, and would be required to be paid off over 25 years.

Kodak will launch a new arm of the company - Kodak Pharmaceuticals - and expand production at its New York and Minnesota facilities to make ingredients that have “lapsed into chronic national shortage”. It will produce the starting ingredients for generic drugs (“Active Pharmaceutical Ingredients or APIs), including the antimalarial drug hydroxychloroquine, which Trump has repeatedly touted as a treatment for the coronavirus.

All of this happens at a time when global supply chains are facing pandemic-sparked disruptions, trade tensions between Washington and Beijing are at an all-time high, and several pharmaceutical companies are racing against time to develop a COVID-19 vaccine.

 

The Purpose

The goal, President Trump said at a press conference yesterday, is to cut America’s dependence on global pharmaceutical supply chains and to bring “pharmaceutical manufacturing back to the United States”.

Presently, China holds the distinction of being the biggest supplier of APIs. And India is the largest manufacturer of generic drugs and vaccines in the world.

However, as Kodak CEO Jim Continenza himself admitted, it could take three to four years to reach large-scale production. But once the facilities are up and running, Kodak estimates they could make “up to 25% of APIs used in non-biologic, non-antibacterial, generic pharmaceuticals”.

 

Rise and Fall...and Rise

Kodak used to be a dominant player in photography since it was founded by George Eastman in 1888. Its iconic Brownie box camera introduced the snapshot to the masses and helped photography take off in a big way. 

In its heydays, Kodak employed over 145,000 people the world over; today it has a workforce of around 5,000. The company began to struggle in the 1990s as the market shifted from films to digital. 

BTW: Kodak’s death-by-digital was highly ironic because the company invented the first digital camera in the first place...but killed it out of fear that it could jeopardise its photographic film business. Its competitors seized the opportunity, and left the former innovator in the dust.

In 2012, Kodak filed for bankruptcy protection and sold many of its businesses and patents to shed liabilities. Since then, its focus has been on printing and professional services for companies...until now.

 

Jack of All Trades?

CEO Continenza estimates that the company’s pharma vertical will end up comprising 30-40% of its overall business.

Also, this isn’t the first time that the company has ventured into pharma. Kodak bought drug-maker Sterling Drug for approximately $5.1bn in 1988 (before selling it in pieces in 1994). It began manufacturing drug ingredients four years ago, but it was never a major venture.

Fun Fact: Kodak isn’t the only photography firm to dip its toes in drug manufacturing amidst the ongoing pandemic. Japan’s Fujifilm is currently working on a potential coronavirus vaccine, and hopes to begin human trials soon.

The question on everyone’s minds right now is this: Can a photography firm manufacture crucial drug ingredients?

Of course, the economic chaos inflicted by the pandemic has seen governments everywhere tap into the resources of non-medical industries like fashion, alcohol and dairy. But this was generally done to boost the production of equipment like face masks, hand sanitizers and ventilators. Not to produce actual drug components.

Another question is: Why Kodak? Not only are there arguably more qualified and relevant candidates, but loaning such a huge amount to a failing company seems a lot like a bail-out. 

That said, the Trump administration had also awarded a $812m contract to a drug-manufacturing company called Phlow, but even this deal was met with skepticism since Phlow was a little-known company with hardly any manufacturing facilities.

Kodak Forays Into Pharmaceutical Manufacturing After $767m Loan from the US GovernmentIn the meantime, one group of people is not complaining - Kodak shareholders. The company’s formerly lacklustre stock jumped 203% on Tuesday as news of it joining the battle against COVID-19 broke.

FIN.

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