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Eastman Kodak Co. is getting another shot at redemption.
The 131-year-old company that once dominated the market for photographic film and made an ill-fated foray into cryptocurrencies is pivoting again. This time, Kodak plans to make ingredients for generic drugs, aided by a $765 million U.S. government loan, the first fruits of a Trump Administration program aimed at bolstering American drug-making capabilities in the age of Covid-19.
News of the arrangement fueled a rally of as much as 2,760% for Kodak stock this week, with legions of day traders snapping up shares through the Robinhood Markets Inc.’s trading app. The stock was up 14% Thursday at 11:05 a.m. in New York to $37.67.
But some financial analysts and economic development experts greeted the proposal with skepticism. Kodak filed for bankruptcy in 2012 after getting lapped by rivals in digital photography and failing to make good on an earlier multibillion-dollar acquisition of a pharmaceutical company. It also has little to show for the planned introduction of a cryptocurrency two years ago. Why, then, would the government pick Kodak to spearhead efforts to reinvigorate a pharmaceutical production supply chain in the U.S.?
“We are puzzled by the Trump Administration’s decision,” analysts at SVB Leerink wrote in a research note. “In particular, we find it puzzling why generic pharmaceutical companies who have the capabilities and know-how for this have not yet been awarded such contracts.”
Production of active pharmaceutical ingredients for generics is a “Herculean task,” they wrote. Ami Fadia, a senior analyst at SVB Leerink, said Kodak is “not even on the list” of companies she would have envisioned for such a loan. One of the drugs Kodak would manufacture materials for is hydroxychloroquine, the controversial antimalarial drug touted by President Donald Trump in the treatment of the coronavirus.
Trump administration officials and New York Governor Andrew Cuomo lauded the planned loan, administered by the U.S. International Development Finance Corporation under the auspices of the Defense Production Act. “It’s going to be the renaissance of the great state of New York as an industrial power,” Peter Navarro, President Trump’s trade adviser, said in a Tuesday interview with Fox Business. “And it’s going to give the people of our country some assurance that when push comes to shove in pandemics like this we won’t see what we’re seeing right now is over 75 countries restricting the sale of pharmaceuticals, or something, to us, like face masks.”
Cuomo said the arrangement would result in the creation of 300 jobs. “Kodak has a long storied history in New York State, and we’ve been working with them to develop an even brighter future,” he said in a video presentation.
Plans for the loan got underway soon after May 14, when Trump signed an executive order calling for the expansion of “the domestic production of strategic resources needed to respond to the Covid-19 outbreak, or to strengthen any relevant domestic supply chains.”
Navarro said in the Fox Business interview that one of his staff, Christopher Abbott, a recent graduate of American University, identified Kodak as a prospect. Navarro’s office then brought Kodak to the attention of Adam Boehler, a former health care entrepreneur who heads the International Development Finance Corporation, Boehler said in an interview.
From there, DFC reviewed Kodak’s application, with Trump and Navarro keenly tracking progress, according to David Glaccum, who oversees the domestic investment effort. Navarro’s office didn’t return a request for comment.
The camera company officially filed an application for the new program in mid-June, Glaccum said. The group began to review the application with assistance from the Department of Health and Human Services and the Department of Defense. “They provide us with questions on the technical sides,” Glaccum said. “We’re finance folks, so we really rely on our interagency colleagues.”
The DFC saw two strengths to the deal: One, it believes that Kodak already has the equipment to produce the drug materials. Currently, 1%-3% of Kodak’s revenue comes from manufacturing materials for drugs. “The second thing is they had an advanced purchase order lined up,” Boehler said. He and Glaccum declined to identify the company that agreed to purchase drug materials. Kodak said it has a letter of intent for the deal.
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