Kodak (KODK) — which vaulted back into the spotlight via a multi-million deal with the federal government to make medical ingredients — associates itself more with chemicals than the cameras and photos that made it famous, CEO Jim Continenza told Yahoo Finance on Wednesday.
The company’s stock skyrocketed by over 500% intraday, taking Wall Street by surprise after mostly flatlining in recent years. Kodak was once a household name, but the digital revolution that turned smartphones into cameras rendered it an antiquated brand to most.
All that changed suddenly this week, when the Trump Administration furthered their commitment to ending reliance on global supply chains for pharmaceutical drugs — granting Kodak a $765 million loan to manufacture active pharmaceutical ingredients (APIs) domestically.
According to Continenza, Kodak’s shift shouldn’t be a surprise. “We really didn’t make cameras, we made film. We’ve always been a chemical and chemistry (company),” he told Yahoo Finance in an interview.
In fact, Kodak has already been producing APIs for the past two years, and could not have increased their output with existing capital alone, he explained. The loan from the government has a three-year timeline, and is a step towards increased output.
‘We are not against the supply chain’
The Trump administration has frequently called for more domestic manufacturing as a result of the disruption to the global supply chains, taking square aim at China. Although Kodak’s chief backed the status quo, he underscored the need for critical ingredients to be manufactured on U.S. shores.
“We are not against the global supply chain,” Continenza said. “What we are for is making sure and ensuring America has all the drug they need, especially critical drugs, to sustain life in America."
Continenza said the company’s robust manufacturing infrastructure reduces the startup time. And since the contract is for Kodak to take on 25% of the U.S. needs for APIs, it will require an upgrade in the process with more reliance on technology.
“We’re going to move from batch manufacturing to continuous manufacturing, to keep that cost down,” Continenza said, adding the shift in processes, and lower hiring needs — less than 400 new jobs as a result— will help keep the company competitive.
In addition, Kodak is going to be entering several supply agreements with other companies that can take on other parts of the drug manufacturing process. But where those others are, and how much input the government has in the process, remains to be seen.
And the timeline won’t be immediate, with Continenza underscoring it will be “phased in over the next three-and-a-half years.”
Stock activity
Kodak shares spiked Wednesday, hitting a session high of $53 after mostly trading around $2 per share in the past year.
Despite the good news, there have already been concerns about suspicious trading prior to the announcement. The news was public Tuesday, but Kodak’s shares began to creep higher on Monday.
Continenza told Yahoo Finance the company did their best to keep things confidential.
“(The stock) only went up 20-30 cents on Monday, that wasn’t the leak of the century,” he quipped. The executive added that the stock moved more dramatically after the announcement with the U.S. International Development Finance Corporation (DFC).