House Dems launches investigation into unexpected $ 765 million Kodak drug loan loan

0

The Trump administration’s surprising $ 765 million deal that would allow former photography giant Kodak to start manufacturing drug ingredients has yet to be finalized, and it has already sparked much controversy. First, allegations of insider trading from the US Senate and now an investigation by House Democrats.

A group of powerful Democrats led by Representative Jim Clyburn, chairman of the House Coronavirus Crisis Subcommittee and Majority Whip, seek documents and information from Kodak and the US International Development Finance Corporation, an agency bank type providing the loan of $ 765 million.

Lawmakers wonder why the government chose Kodak, which has little experience in manufacturing pharmaceuticals, for such a big deal, as well as suspicious stock transactions by corporate executives.

“DFC’s decision to grant this loan to Kodak despite your company’s lack of pharmaceutical experience and the windfall you and other company executives have gained with this loan raises questions that need to be addressed. in depth, ”the House members wrote in a letter to Kodak. Executive Chairman Jim Continenza.

Continenza previously touted Kodak’s “deep expertise in the manufacture of chemicals” as a good basis for moving into pharmaceuticals. But lawmakers have questioned that logic, as has the CEO of America’s largest generic producer, Teva.

“Borrowing money to start manufacturing per se doesn’t make manufacturing sustainable,” Kare Schultz, CEO of Teva, told the Wall Street Journal. “Even if you get the principal at zero interest, that doesn’t mean you can be cross-competitive… I don’t see how that is plausible.”

RELATED: Camera Maker Kodak Goes into Drug Manufacturing with $ 765 Million Federal Loan

The Kodak deal follows another Trump administration pact for domestic drug manufacturing, with a startup called Phlow. This company is working in concert with Civica Rx, a group of hospital buyers who have set out to manufacture their own drugs in response to persistent shortages and steep price increases. Phlow secured a $ 345 million loan from HHS ‘Biomedical Advanced Research and Development Authority (BARDA) to manufacture drugs threatened with shortages.

In addition to Kodak’s ability to receive the loan, Democrats also pointed to “significant amounts” of Kodak Continenza and board member Philippe Katz shares ahead of the July 28 loan announcement. These include around 46,700 shares that Continenza bought on June 23 and 1.75 million stock options that the board of directors of the company allotted to it the day before the loan became public.

RELATED: How Civica Helped Phlow, Under The Radar, Secure $ 354 Million COVID-19 Manufacturing Deal

Kodak said in a July 29 securities filing that the option grant to Continenza was “generally designed to put Mr. Continenza in the same economic position that he would have been” in the face of potential dilution if investors convert. debt in common stock.

The company defended the move, saying Continenza did not sell any shares and did not intend to, and therefore did not realize the share price gains, according to the WSJ. Kodak shares jumped at the news of the loan.

In a separate letter to DFC CEO Adam Boehler, lawmakers requested all communications related to the Kodak deal, as well as all communications the agency had with other private entities for potential funding.

RELATED: Did Insiders Trade Illegally Prior to Kodak’s Manufacturing Deal? Senator Warren wants to know

The investigation follows a call for an investigation into Kodak insider trading by Democratic Senator Elizabeth Warren at the Securities and Exchange Commission. The WSJ later reported that the SEC has launched an investigation.

The $ 765 million grant would be the agency’s first under the Defense Production Act in response to the COVID-19 pandemic. For now, the deal is still in the form of a letter of interest and will only be finalized after standard due diligence by the agency, according to DFC.

The Trump administration has been pushing for the relocation of drug manufacturing as its animosity grows against China, the world’s largest producer of drug ingredients. Trade disruptions caused by the ongoing COVID-19 pandemic have only highlighted the United States’ dependence on foreign supplies of drugs. The president is reportedly preparing a decree on the domestic manufacture of drugs, with the intention of signing it on Thursday afternoon.

Share.

About Author

Leave A Reply