Kodak shares triple after securing government loan to produce drugs to fight Covid-19

The company will produce various drug ingredients, including those used in the antimalarial medicine hydroxychloroquine

Erstwhile photo giant Eastman Kodak will launch a new business manufacturing pharmaceuticals amid the coronavirus pandemic, using a $765 million government loan. AFP

Eastman Kodak shares more than tripled Tuesday on a $765 million (Dh2.8 billion) government loan to help produce ingredients used in key generic medicines to fight the coronavirus.

The development bank loan is the first of its kind under the Defense Production Act in collaboration with the US Department of Defence. It’s intended to speed production of drugs in short supply and those considered critical to treat Covid-19, including hydroxychloroquine, the controversial antimalarial drug touted by president Donald Trump.

The money could provide a lifeline to Kodak, the storied photography giant whose business and shares were devastated by the switch to filmless cameras. Once a stalwart of American industry with a market capitalisation above $30bn, the company declared bankruptcy in 2012, forcing it into a series of attempted reinventions including forays into printers, film for movies and, briefly, cryptocurrencies.

Now, the 132-year-old company will be reorienting part of its factory structure to produce drug ingredients, including at sites in Rochester, New York, and St. Paul, Minnesota, under a new Kodak Pharmaceuticals arm.

Founded in upstate New York, the financing could be a boon for its home base that has more recently become a part of the “rust belt” after decades of key blue chip companies moving their operations and jobs overseas.

Mr Trump, speaking Tuesday afternoon in a news conference at the White House, said the deal was “a breakthrough in bringing pharmaceutical production back to the United States” that will create 360 new jobs at the Rochester location. About 10 per cent of the national generic drug supply is manufactured in the US.

The shares rose another 50 per cent in extended trading after Trump’s remarks. The stock had closed the regular trading session with a gain of 203 per cent, bringing it to its highest price in two and a half years.

“Americans are dangerously dependent on foreign supply chains for their essential medicines,” White House adviser Peter Navarro said in a statement earlier.

Kodak is now expected to produce several drug ingredients, including those used in hydroxychloroquine. The antimalarial medicine has been touted by President Trump as a treatment for the virus responsible for the pandemic, although scientists like the national virus expert Anthony Fauci have said it is not effective against Covid-19.

The stock had fallen 44 per cent this year before Tuesday’s trading and had a market value of about $115m. Kodak ended the first quarter with a cash balance of $209m.