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Personal comments-Onetime photography leader is shifting into production of drug ingredients using a loan provided under the Defense Production Act
Eastman Kodak Co. has won a $765 million government loan under the Defense Production Act, the first of its kind. The purpose: to help expedite domestic production of drugs that can treat a variety of medical conditions and loosen the U.S. reliance on foreign sources. Kodak’s loan has terms similar to a commercial loan and must be repaid over 25 years.
The loan is from the U.S. International Development Finance Corporation, a government agency akin to a bank, the officials said. The loan is the first of its kind under the Defense Production Act, which the Trump administration has previously invoked to speed the production of Covid-19 related supplies such as ventilators.
The onetime leader in photography sales is gearing up to produce ingredients for a number of generic drugs, including the antimalarial drug hydroxychloroquine that President Trump has touted in the treatment of coronavirus. Meanwhile, the U.S. is aiming to shift from relying on countries such as China and India, Kodak Chief Executive Jim Continenza and U.S. officials said. Mr. Trump in May issued an order allowing the DFC to financially support the “domestic production of strategic resources” for the coronavirus pandemic and “to strengthen any relevant domestic supply chains.”
Kodak will produce “starter materials” and “active pharmaceutical ingredients” used to produce generic medicines. “We have a long, long history in chemical and advanced materials—well over 100 years,” Mr. Continenza said. He added that Kodak’s existing infrastructure allows the company “to get up and running quickly.” Kodak is effectively changing gears, expecting its pharmaceutical ingredients to make up 30% to 40% of its business over time, and expects the loan to create around 300 jobs in Rochester, and 30 to 50 jobs in Minnesota.
For the U.S., the benefit of providing the loan to Kodak is to reduce reliance on other countries, particularly China, for drugs, DFC head Adam Boehler said: “We don’t ever want to be in a position, because of a pandemic, because of any reason,” that a foreign entity could upend U.S. access to medicines or pharmaceutical products".
China is the world’s biggest supplier of the raw materials—known as active pharmaceutical ingredients—that form the basis of medicines. That dependence on China makes shortages more likely should Chinese manufacturing be shaken, according to a 2019 U.S. government report. China’s dominance is growing: The U.S. imported $3.9 billion worth of pharmaceutical raw material from China in 2017, an increase of nearly one-quarter from the prior year, according to IHS Markit.
Rear Adm. John Polowczyk, who heads the White House’s supply-chain task force, said domestic drug production began shifting away from the U.S. in the 1970s, largely for reasons related to cost savings.
Peter Navarro, the White House trade adviser, said “This is not about China or India or any one country. It’s about America losing its pharmaceutical supply chains to the sweat shops, pollution havens, and tax havens around the world that cheat America out of its pharmaceutical independence.”
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1. Even if Kodak has the infrastructure to manufacture chemicals for films, is it equivalent to manufacture pharmaceutical-grade ingredients? This is a complex matter and the patient as end users can die. Even China and India experienced challenges from time to time in order to following FDA protocols. A year ago, China made a minor change in their process. One of the ingredient turned out to be carcinogenic and the drug has to be recall.
2. Does Kodak really has the know-how ? It is not that simple...
3. Will this be sustainable and profit in order for Kodak to stay in business? The cause is notable but the outstanding challenges in manufacturing are significant to overcome.
Little known today, Kodak also had a large health care division that it sold off in the late 90's early 2000's to Care Stream and Johnson and Johnson. J&J actually still has manufacturing facilities inside Kodak Park now. Kodak owned Bayer Aspirin and manufactured vitamins for other companies for a long time also. They definitely did have the know-how but a lot of those research chemists and engineers are now retired. I know that because I golf with a few of the them. But I would guess their 100's of patents remain and they will start hiring people in the pharmaceutical field, hopefully some new grads from the University of Rochester.
Not simple but likely less complex than what they already do now and have done in the past.
And the facility... once the largest manufacturing industrial park in the eastern US. A city within a city. But now with buildings torn down and others now vacant, it's not as formidable as it once was But it's still one of the biggest industrial facilities in the region.
The answer to all your questions from my experience working there is yes, yes, yes and yes.... Am I bias? Yes, but I truly believe it's a good fit. Your not looking for a health care company to do this. You're looking for a highly skilled chemical process manufacturing company, which Kodak once was.
Must be 25 years ago, we requested Kodak prepare a small batch of a potential API for investigational use.
In due time, a large bottle arrives. But, WTF ??? I've never heard of the stuff the label says it is.
I call Kodak. "Oh, it's the right stuff, we just put on the wrong label. We'll send you a new label."
WTF !!! This is for use in a human clinical trial. YOU ARE TAKING THIS STUFF BACK !
Just because a company has a certain expertise does not mean it has the required expertise. Worse, they may think they have the expertise, when they do not.
Yes, you can get it done more cheaply.
But more important, you can get it done.
Many times there has been more eagerness, a sense of urgency to collaborate.
Especially for small quantities, as for a minor player in generics, US companies tend to think it is not worth their time.
Many APIs are nasty, toxic things. (Where do you think all those side effects come from?) And, we are talking about pure API, not all diluted out, like would be given to a patient. And the raw materials used to manufacture the API ? Oh, yeah, they can be far worse. Are foreign countries likely to be more receptive than, say, California to processing which might have potential danger to the workers and the environment? You bet.
Thanks for your posts- you've made some very interesting points which should not be taken lightly. I have absolutely no background knowledge in this area, so all of this is quite new and interesting. From your perspective, what would it take to bring production of these Active Pharmaceutical Ingredients (APIs) safely back to the US so that we will not be dependent on a semi-hostile political entity?
I find your comments interesting. In addition, I find it interesting that a couple of my funds are holders of Kodak stock. And, they have been up nicely over the past couple of days. Cheers, Old_Skeet
Government intervention is usually wrong-headed and counterproductive.
I know it sounds ridiculous, given the long-term focus of pharmaceutical R&D, but once the product is flopped over the fence to manufacturing, there is great pressure to minimize costs, maximize speed, and keep the quarter-by-quarter revenue rolling.
There is no doubt it would be in the long-term interest of a company to source API from a source in a stable political environment, with solid intellectual property protection. But, how do you get a company to focus on the long term to make increased costs acceptable?