Kodak’s shares triple when the company announces a pandemic plan to start manufacturing pharmaceutical ingredients.

The Trump administration’s $ 765 million loan to Eastman Kodak Co. for the launch of a business that makes pharmaceutical ingredients caused the actions of the iconic camera company to skyrocket.

Kodak’s stock KODK,
+ 203.05%
More than 200% recovered on Tuesday after the Trump administration announced the news. The company emerged from a 2011 bankruptcy in 2013, and its shares fell from a 10-year high of $ 37.20 on January 9, 2014, to a low of $ 1.55 on March 23 of this year.

Kodak, which has a long history of manufacturing chemicals used in photographic film, now plans to support “America’s self-sufficiency in producing the key pharmaceutical ingredients we need to keep our citizens safe,” said Kodak Chief Executive Jim Continenza in a statement. .

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The Trump administration said the Kodak deal is the first of its kind and uses the powers that the Defense Production Act gives it. The administration previously used these powers to require that Ford Motor Co. F,
+ 1.15%
start making respirators and masks and that General Motors Co. GM
+ 2.45%
make fans

It awarded $ 354 million to Phlow Corp. in May to begin producing active pharmaceutical ingredients, or APIs, among other chemical ingredients, used in certain essential drugs. A Phlow spokesman said the company cannot disclose the list of drugs, but that it includes treatments for pain and blood pressure that patients hospitalized with COVID-19 can use. The total contract is worth up to $ 812 million. Phlow cites a shift towards API production in China and India as the reason behind her business model.

“The threat of pandemics like COVID-19 has exposed the United States’ heavy dependence on foreign pharmaceutical supply chains,” Phlow said in a statement at the time.

Drug makers largely don’t make APIs in the U.S., and many have instead sourced APIs from lower-cost countries like China and India.

Before the COVID-19 pandemic, there was growing concern in the US about where APIs were manufactured, largely driven by a shortage of generic drugs and questions about the integrity and stability of supply chains for China and India, especially as tensions with China have accelerated during an election year in the United States.

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According to the Food and Drug Administration (FDA), only 28% of manufacturing facilities that manufacture ingredients used in drugs sold in the US were produced in the country. Most of the remaining facilities that produce ingredients for American pharmaceuticals are located in China (13%), the European Union (26%), and India (18%). However, when it comes to ingredients used in American drugs deemed “essential” by the World Health Organization, US-based facilities produce only 21% of those ingredients, while China produces 15%.

“The number of Chinese API-producing facilities for the US market has increased in the past decade, as part of a massive movement for offshore pharmaceutical production,” said FDA official Dr. Janet Woodcock before a hearing. from the House committee last year. “This move is being fueled by the pharmaceutical industry’s desire to save costs and less stringent environmental regulations.”

Sandoz, the generic drug business of the Swiss pharmaceutical company Novartis NVS,
It recently promoted the fact that less than 2% of its products have APIs from China and India, a decision that “highlighted the strength of its supply chain,” Ami Fadia of SVB Leerink told investors in April. The company also signed an agreement on Tuesday with the Austrian government to manufacture APIs there, including ingredients to supply penicillin to Europe for the next decade, “despite fierce global price competition, particularly from China,” he said.

But then came the pandemic. The coronavirus spread across China and other parts of Asia, closing factories and clinical trials and creating concern for drug manufacturers and investors who are aware of the United States’ dependence on Chinese API producers.

The virus outbreaks in China presented “primary short-term commercial risks in the pharmaceutical sector, particularly with respect to sourcing associated active and intermediate pharmaceutical ingredients from countries at the epicenter of the crisis, primarily China,” Raymond James analysts said. investors in mid-March.

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Premier Inc. PINC,
Providing group purchasing and other healthcare data services, it has advocated for stronger national API manufacturing for more than 15 years. He applauded the Kodak news: “Announcements of this nature are a step in the right direction,” but he also pointed to the challenges in building an API manufacturing process from scratch.

“Premier is hopeful that the United States will also see how it can leverage the country’s existing API manufacturing capacity to help create global diversification and stabilize the drug supply chain in a faster and more cost-effective manner,” Soumi Saha, Premier’s senior director of defense said in a statement.

After Tuesday’s 205% increase, Kodak shares rose 72% during the year. The S&P 500 SPX,
it fell 0.4% in 2020.