US’s Defense Production Act Kicks Kodak Into Gear

After having been comprehensively steamrolled by the move to digital cameras in recent years, the once-great American icon  has been thrown an epic lifeline. After having filed for bankruptcy in 2012, the White House on Tuesday announced that Kodak had been awarded a loan of $765million USD as part of the government’s move to reshore critical pharmaceutical production. The announcement has seen Kodak (KODK) shares rocket more than 300% in previous trading sessions, as the renewed hopes of a government sponsored pivot to critical drug manufacture will help boost its financial viability into the future.

The loan to Kodak was the 33rd use of the Defense Production Act, which previously saw massive government loans to automakers such as Ford (F) and General Motors (GM) for the production of ventilators and respirators, designed to assist in the planned treatment of COVID-19 cases. There is an increasingly concerted push by elements with US government to rapidly begin onshoring of critical manufacturing and medicine supply, with fears of escalating tensions with China leading many to fear that, in the event of escalation of tensions, critical supply chains will be constrained, causing major domestic disruption.

We expect to see continued use of the Defense Production Act, or similar ‘non-legislative’ intermissions by the US government, relative to securing strong, reliable and high-quality medicinal ingredients above all else. Concerns about the viability of having concentrated supply of critical drugs sourced from geopolitically and environmentally risky regions, such as China’s Yangtze Delta are clearly a strategic interest to  Western governments.

Until then, we will watch with interest the trajectory of Kodak’s share-price, as it repositions itself as a freshly minted pharma company. Read more…

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