Kodak Pharmaceutical Pivot
Update: Kodak Pharmaceuticals Deal on Hold
US Loans $756M to Launch Kodak Pharmaceuticals
The US International Development Finance Corporation (DFC) is loaning Eastman Kodak Company $756 million to support the launch of Kodak Pharmaceuticals. This loan is the first use of the DFC’s new authority to support the domestic response to COVID-19.
“Kodak is proud to be a part of strengthening America’s self-sufficiency in producing the key pharmaceutical ingredients we need to keep our citizens safe,” said Kodak Executive Chairman Jim Continenza. “By leveraging our vast infrastructure, deep expertise in chemicals manufacturing, and heritage of innovation and quality, Kodak will play a critical role in the return of a reliable American pharmaceutical supply chain.”
This historic loan is intended to “accelerate Kodak’s time to market by supporting startup costs needed to repurpose and expand the company’s existing facilities in Rochester, New York and St. Paul, Minnesota.”
When operating at full capacity, the new arm of Kodak is projected to produce “up to 25% of active pharmaceutical ingredients used in non-biologic, non-antibacterial, generic pharmaceuticals while supporting 360 direct jobs and an additional 1,200 indirectly.”
Stocks Soar 300% After Kodak Pharmaceutical News
Kodak was indisputably the stock to watch the next day. While the OEM was valued under $2 a share, prices soared 318% to $25.26 a share by close Wednesday. During that time, Kodak’s value peaked at $60 a share (an increase of 570%) – volatility was so great, trading was halted 20 times throughout the day.
This surge in stock value has also attracted SEC attention, launching an investigation into Kodak a few days later. In particular, Fortune reports the SEC will be “scrutinizing Kodak’s handling of the announcement to determine whether it fell afoul of disclosure requirements for publicly traded companies.” The July 28th announcement reportedly began to leak the day before from local Rochester, NY news sources. These rumors started the rise in Kodak’s stock value before the official announcement the following day.
Forbes reports the SEC will also look into “allegations of insider trading, specifically involving $1.75 million in stock options granted to CEO Jim Continenza the day before the official loan announcement, though the company has said those were regularly scheduled purchases and SEC filings indicate that Continenza has not yet cashed in by selling off any shares.” CNBC reports, however, that Continenza also purchased roughly 46,700 additional shares on June 23rd while board member Philippe Katz purchased 5,000 shares on the same date.
Why Kodak?
This isn’t Kodak’s first time in pharmaceuticals. According to CNBC, the camera and film producer turned its hand to over-the-counter medications like Aspirin in the 1990s before selling the business to SmithKline Beecham in 1994 for $2.925 billion. The BBC reports that Kodak had resumed drug ingredient production four years ago.
Experience in manufacturing film and other imaging and copying components apparently translates well into pharmaceutical production. Kodak competitor Fujifilm began a similar shift to medical products in the mid-80s and has two major players in COVID-19 research under its umbrella. Fujifilm specifically cites their “expertise in photographic film” for its many medical innovations.
Continenza is confident that their “long, long history in chemical and advanced materials” will enable Kodak Pharmaceuticals to “get up and running quickly.”
Kodak has also disclosed an expenditure of $870,000.00 lobbying US Senate and House in regards to the HEROES and CARES Acts. Kodak was out of the lobbying game since 2019 but registered anew April 1st of this year, as the US COVID crisis was rapidly escalating.
Deal Now on Hold
The SEC investigation into the Kodak deal prompted the DFC to tweet on Friday, August 7th: “Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.”
The following Monday, Kodak shares fell about 40% at the lowest before closing at a little under 28% drop. Trading was halted once during the morning due to volatility.