Kodak Pharmaceutical deal under scrutiny Posted 11/09/2020

In late July 2020, US President Donald Trump announced that the Federal Government would be loaning Eastman Kodak Co US$765 million to develop generic drugs. This is the first loan to be granted under the US Defense Production Act that was passed in response to the global COVID-19 pandemic. Now, amid allegations of insider trading, the House of Representatives will review the Kodak Pharmaceutical deal and there will be a Securities and Exchange Commission (SEC) investigation.

Kodak, once famed for being a giant of the photography industry, has failed to keep up with the digitalization of photography. In 2012, the company filed for Chapter 11 bankruptcy protection in the US. However, it continued making some products and shifted its focus onto printing and professional services for companies.

The COVID-19 pandemic awakened the US Government to its dependency on foreign countries for medical supplies. In launching Kodak Pharmaceuticals to make the ingredients for generic drugs, it hopes to reestablish a reliable American pharmaceutical supply chain. The company started making pharmaceuticals four years ago, and with the help of the current government loan there will now be large-scale production expansion at sites in Rochester, New York State and in Minnesota.

However, three Democratic committee chairs have now requested information into the federal loan made to Kodak. Following the loan approval, Kodak stock skyrocketed, including options approved for Kodak Executive Chair Jim Continenza. Representatives leading the loan review say it is required due to these gains made by Continenza and other Kodak executives, together with Kodak's lack of experience in pharmaceuticals development and manufacture. The SEC inquiry, called for by Senator Elizabeth Warren, will also look into the timing of the executive’s stock transaction and the leaking of information prior to the formal announcement.

Although the Kodak Pharmaceuticals expansion is set to create upwards of 300 jobs, it has been speculated that this move is likely to increase the price of generics available in the US.

Meanwhile, in Japan, the photographic company Fujifilm, is also working on developing pharmaceuticals and a COVID-19 vaccine.

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