A photography giant at one time, Kodak was synonymous for capturing memories. Before digital cameras arrived, Kodak gave people beautifully printed photographs on 35mm slides and the satisfying feeling of holding a physical picture. What an amazing feeling it was when you’d get your photos back from the shop and sometimes, you didn’t even remember what photos you had taken, which made it all the more exciting. Kodak was a long time leader in the world of photographs until it filed for bankruptcy in 2012. Since then, Kodak had been underground for a while until it made the news this week. Everyone was stunned when they saw a momentous spike in Kodak’s share price and soaring stocks by as much as 1900% since Tuesday.
This sharp rise in their share price came after the company announced a $765 million loan from the U.S. government on Tuesday to produce pharmaceutical ingredients for generic drugs in response to the coronavirus pandemic. Yes, that’s right the company you remember the pioneer of cameras is now going to produce medicine.
Kodak’s share price rises as investors rush to buy shares
In the wake of Kodak’s big win, investors have made the most of this opportunity and made it by far the most traded company on the New York Stock Exchange on Wednesday, leading to a rise in the share price of Kodak.
According to the Fortune, Kodak’s stock had gained more than 300% yesterday and closed at $33 per share after hitting an intraday high of $60 at one point compared to Kodak’s share price on Monday - $2.13 per share. On Monday, it had closed at less than $115 million but since the deal was made, it has witnessed an astronomical growth as its market capitalization has grown to nearly $1.5 billion.
The link between Kodak’s share price and deal with the US government
President Donald Trump on Tuesday described the Kodak agreement as “one of the most important deals in the history of US pharmaceutical industries.” This is part of the US government’s efforts to reduce American drug producers’ reliance on foreign raw materials as they did on India for importing large quantities of the anti-malarial drug - Hydroxychloroquine. If you remember, President Trump has been a huge advocate of the drug since the beginning of the crisis.
Peter Navarro, White House spokesman, commented, “If we have learned anything from the global pandemic, it is that Americans are dangerously dependent on foreign supply chains for their essential medicines,” He continued, “This is not about China or India or any one country. It’s about America losing its pharmaceutical supply chains to the sweatshops, pollution havens and tax havens around the world that cheat American out of its pharmaceutical independence.” On the surface, this seems like a quest of self-reliance but could these comments be targetted at China - on their bad working conditions and high pollution?
Especially considering the US and China’s wavering international relations, their desire to move away from China isn’t surprising. However, it will require hard work to reach China’s level as it is known to be one of the biggest suppliers of active pharmaceutical ingredients that form the basis of medicines.
According to IHS Markit, in the past few years, China’s dominance in the pharmaceutical sector is increasing, as in 2017, the US imported $3.9 billion worth of pharmaceutical raw materials from China; an increase of one-quarter since 2016.
Kodak will take 3-4 years for large-scale production of medicines
The loan has been offered by the U.S International Development Finance Corporation, a government agency similar to a bank. The CEO of the company, Jim Continenza said that Kodak’s loan has terms similar to commercial loans and must be repaid in 25 years, as reported by the Wall Street Journal. He also said, “Kodak will produce ‘starter materials’ and ‘active pharmaceutical ingredients’ used to produce generic medicines.”
Continenza claimed that the company has a long history in chemical and advanced materials, “well over 100 years” and that Kodak’s existing infrastructure allows the company “to get up and running quickly.”
In the interview with the Wall Street Journal, Continenza said that this development has sent the company’s stock to levels it had not seen since early 2014. He spoke to the BBC about the deal, “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,” it would, however, take three to four years to reach large-scale production as he mentions at the launch of Kodak Pharmaceuticals.
Kodak, the fallen company rises again
It’s still strange to see Kodak getting itself involved in pharmaceutical ventures because its name still resonates with photography. In fact, Kodak had stopped its involvement in the camera business in 2012. The history of the company goes back by centuries, as Eastman Kodak Company was founded by George Eastman in 1888!
In the 1900s, the company was the leader in imaging technology and photography and became wildly popular for their catchy ‘Kodak moment’ tagline, but as new competitors entered the market with more appealing digital cameras, Kodak started to lose its market share. Adding salt to their wounds, came the smartphones, like the iPhone, that people preferred for cameras to click photos quickly, which completely ravaged the demand for Kodak devices. While I appreciate the ease with which I can capture pictures on my phone, it definitely pains to know that the physical aspect of photography is gone.
However, now Kodak is ready to change gears and move on to the pharmaceutical sector, Continenza tells the Wall Street Journal that he expects the pharmaceutical part of the company to take over 30%-40% of its business over time. Other benefits of the loan could be job creation that will continue to grow as production expands. He said that he expects the loan to create around 300 jobs in the Rochester, and 30 to 50 jobs in Minnesota.
It seems like Kodak is finally having its moment.
However, it’s not just Kodak that is entering the race for producing drugs for Coronavirus, Japan’s Fujifilm is also working on a potential Covid-19 vaccine and may start performing human trials soon.