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Kodak is back from the dead as a generic drug maker

The former photography industry giant has a 'Kodak moment' after more than a decade as the company's shares soar 60 percent following Trump's announcement.

July 29, 2020 / 11:10 AM IST
Kodak

Kodak

The Eastman Kodak Company, best known for making cameras, has forayed into the pharmaceutical business after US President Donald Trump announced that the fallen giant of the photography industry will produce ingredients used in generic drugs to help in the fight against coronavirus.

As per media reports, the US government has granted Kodak a $765-million loan to start producing drug ingredients under the defense production act.

"Our 33rd use of the defense production act will mobilise Kodak to make generic, active pharmaceutical ingredients. We will bring back our jobs and we will make America the world’s premier medical manufacturer and supplier," Trump said in a press conference.

The President called the decision one of the most important deals in the history of US pharmaceutical industries.

The government loan will help support startup costs needed to repurpose and expand Kodak’s existing facilities in Rochester, New York, and St Paul, Minnesota.

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The Kodak unit will have the capacity to produce up to 25 percent of the active pharmaceutical ingredients (APIs) needed to make generic drugs in the United States, Trump said.

The move is aimed to reduce US' dependency on foreign countries for medical supplies.

“We must never be reliant on a foreign nation for America’s medical or other needs," Trump said at the White House.

"If you look at drugs, 90 percent of the drugs that we take today are generics, and they are almost all made overseas,” Adam Boehler, who heads the US International Development Finance Corp, said in an interview on CNBC.

"The dominant manufacturer of ingredients for generics is China, and Number 2 is India. And so, we said if we’re going to re-shore and bring things back and we’re going to have safety and security going forward, we need to change that."

Following the announcement, shares of Kodak surged over 60 percent. The stock jumped threefolds during the trading session and extended gains in the aftermarket hours.

Kodak's slowness in transitioning to digital photography, despite developing the first self-contained digital camera, led to financial struggles for the company in the late 1990s.

In 2012, the company filed for Chapter 11 bankruptcy protection in the US and shifted its focus onto printing and professional services for companies

According to reports, Japan's Fujifilm is another photography firm that has joined hands in the fight against the deadly virus. The company is reportedly working on a potential COVID-19 vaccine and hopes to start human trials soon.

After multiple years of underperformance due to regulatory and pricing issues, the pharma sector came to the forefront since the outbreak of the novel coronavirus, which has so far claimed more than 6.5 lakh lives across the world.

The US has the reported the highest infections and deaths in the world.

In India, the Nifty Pharma is up over 27 percent on a year-to-date basis. Despite the sharp rise, experts feel the rally may still have some fuel left.

"Pharma stocks have witnessed a brief halt/pullback towards short-term moving averages, however, the trend is still positive. Some of the players are starting their next up leg," Umesh Mehta, Head of Research, Samco Group told Moneycontrol.

(with inputs from AP)
Moneycontrol News
first published: Jul 29, 2020 10:43 am

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