US Democrats probe Trump administration’s $765 million loan to Kodak to produce drug ingredients
pharmafile | August 6, 2020 | News story | Business Services |
Democratic members of Congress are set to investigate the Trump administration’s $765 million federal loan awarded to Kodak as it takes steps into the pharmaceutical industry.
The members of Congress want to see the exact details into how Kodak obtained such a large amount of support from the government and have requested documents related to Kodak executive stock transactions. The deal was met with a surge to Kodak’s share price, possibly enriching the executives at the company.
Jim Continenza, the company’s Executive Chairman, was awarded 1.75 million stock options the day before the US government announced the loan. The company defended this action, saying it was taken to protect his stocks against dilution which would lower the value of his and other outstanding equity holdings if the investors ever convert the debt into stock. The company also said it gave him this option because it was the first meeting of the board’s compensation committee after the company received shareholder approval to use more shares for executive compensation. Continenza himself defended the move, saying it had been planned two months prior. As of late March, he owned 5.8% of Kodak’s shares.
The Trump administration approved the deal under the Defense Production Act, which surprised many due to Kodak primarily being a camera company. However, it has been involved in manufacturing chemicals in the past. The terms of the deal are that Kodak is to make essential drug ingredients that are currently in short supply according to the FDA. This will include making the ingredients of the drug hydroxychloroquine.
This deal represents a larger plan to bring drug manufacturing back to the US due to the fragilities of the supply chain that have been exposed by the coronavirus pandemic. Currently, China and India produce 70% of the world’s pharmaceutical ingredients but during the pandemic they stopped exporting the usual amount to shore up their own supplies to help combat the pandemic. This put pressure on the US’s own stockpile. Trump’s larger antagonistic stance towards China also factors in, as he seeks to reduce the amount of control the country has on America’s pharmaceutical industry.
Kodak has said it will comply with the investigation, while The Wall Street Journal has reported that the Securities and Exchange Commission are also investigating the government loan to the company.
Trump has tried to distance himself from the deal and told the press: “The concept of the deal was good, but I’ll let you know. We’ll do a little study on that … If there is any problem, we’ll let you know about it very quickly. But I wasn’t involved in it. It’s a big deal. It’s a way of bringing back a great area, too, in addition to pharmaceuticals. Kodak has been a great name but obviously pretty much in a different business. So, we’ll see what that’s all about.”
Conor Kavanagh
