Kodak is turning into a pharma company

Kodak is turning into a pharma company

Kodak, the once-iconic photo company that’s been deteriorating for years, amazed the world this week by introducing a pivot into the pharmaceuticals business with a $765 million head start from the government of the United States. This was enough to send out the stock rising more than 1,000% and add more than $1 billion to the firm’s market rate.

The Defense Production Act loan, revealed Tuesday, is part of a Trump administration effort to bring the manufacture of drug ingredients back to United States shores to decrease dependence on other countries and to make sure of a consistent supply of products. Whatever day traders and Robinhood investors may say, the new business line and the loan for Eastman Kodak Co. aren’t, however, anything close to a reason for its massive share-price profits.

Kodak is trying to enter a low-margin asset market with no certain benefit beyond the existing management’s industrial policy. It’s tough to imagine the company ever living up to its soaring valuation unless the government money faucet maintains flowing.

Most of the globe’s pharmaceutical ingredients come from India or China. In recent years, this has become a concern because of the current specter of pandemic-related shortages and quality-control problems. But, moving the supply chain back to the U.S. isn’t the work of a few years or a few findings.

Even though re-shoring sounds appealing, yet it’s challenging to efficiently break into a business from a standing start even with an increase from the government. And drug ingredients manufactured in America by an inexperienced new entrant are most likely to be more costly than those readily available abroad in the absence of extreme and rare supply shocks.

For several years, many large generic drugmakers that also make as well as use drug ingredients have actually been encountering significant pricing pressure and slashing expenses; few are most likely to consistently buy American from a new source unless the government compels. What’s more, higher ingredient prices would potentially filter through to higher drug rates, which is not exactly a preferred concept.

Excitement might stem from the fact that Kodak supposedly intends to make drug ingredients used in the battle against COVID-19, including hydroxychloroquine, a medicine that President Donald Trump continues to tout as a possible therapy despite the fact that it has consistently failed to reveal a benefit in clinical trials.

Source

Kodak is turning into a pharma company

Author: Sruthi S

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