Catalent reports profit dip; FDA probes sterile site

For its third fiscal quarter, the US contract manufacturer saw its operating profit decrease by 9.2 per cent to $56.5m, compared to the same period for 2007. Revenue for the quarter increased 3.5 per cent to $453.3m, primarily due to the effect of the weaker US dollar, which favourably impacted revenue growth by six percentage points. Excluding this, revenue actually decreased by 2.3 per cent, largely due to lower North American volumes in printed components and commercial packaging within its Packaging Services segment, Catalent said. Correspondingly, operating profit decreased by $5.2m, or 31.3 per cent. However, these decreases were partially offset by the firm's Sterile Technologies segment which performed well, with revenues rising by 12.6 per cent due to strong demand from the company's new pre-filled syringe facility in Brussels, as well as from growth in its blow-fill-seal business. Overall segment operating profit rose by $6.5m. At the same time, the company's Oral Technologies unit was also a strong performer, with operating profit increasing by $3.2m, led by Zydis, which experienced a nearly 22.5 per cent growth in sales, said the firm. Catalent's president and CEO John Lowry said: "We continue to invest in our manufacturing network, our advanced technologies, and our capabilities. Our continued focus on operational excellence is helping us to improve performance and results, particularly in our Sterile Technologies segment​". "Our Packaging Services segment has performed below our expectations, particularly in the North American market. We have taken initial actions to address this issue, and expect to show improved performance over the next few quarters. We continue to see strong demand in the market for our offerings overall, and believe that industry fundamentals will continue to drive outsourcing growth for the near term​." The company has also just announced the completion of the purchase of the sale of its Albuquerque, New Mexico sterile injectables manufacturing business, which provides good manufacturing practice (GMP) glass vial filling and lyophilisation services for injectable drugs and biologics, to Oso Biopharmaceuticals Manufacturing. Financial terms of the deal, which became effective May 17, were not disclosed, although it is known that Oso will retain all employees and continue to serve all existing customers in North America and Europe. Richard Yarwood, group president of Sterile Technologies for Catalent, said: "We are pleased to have completed this planned step in the evolution of our Sterile Technologies business​." FDA probe​ Meanwhile, Catalent is in the midst of an ongoing issue with the US Food and Drug Administration (FDA) over apparent deviations from GMP procedures at its North Raleigh Sterile Technologies facility. According to the FDA's inspectional observations of the plant, the firm's quality control unit failed to "investigate thoroughly any unexplained discrepancy or the failure of a batch or any of its components to meet any of its specifications​", along with inadequate keeping of detailed records of inspections. In addition, the FDA said that the firm "failed to maintain separate or defined areas for its operations as necessary to prevent contamination during the course of aseptic processing​", as well as the failure to establish and follow written procedures designed to prevent microbial contamination of sterile drug products. Further alleged violations include the failure to establish the accuracy, sensitivity, specificity and reproducibility of test methods, as well as the failure to establish and follow "scientifically sound and appropriate​" specifications, standards, sampling plans and test procedures, or have them reviewed by the quality control unit. The FDA inspection was carried out last year and pertains to the period of July to November. Catalent initially responded to the FDA's audit notice in December 2007, detailing proposed corrective actions, and provided updates to the initial response in January and February 2008. However, on March 28, the company received a warning letter from the FDA, which has recently been posted on the agency's website. In it, the watchdog wrote: "We believe that your responses did not provide sufficient detail to fully assess the adequacy of the corrective actions​". Catalent submitted its written response to the warning letter on April 17 and a formal meeting with the FDA was held on May 6. According to Securities & Exchange Commission (SEC) filings made by Catalent, the Company said it "intends to cooperate fully with the FDA in response to the warning letter and will be regularly briefing the FDA on the corrective actions that have been and will be implemented at the facility in order to address the issues raised​." The firm also said that while it is "currently under no restrictions by the FDA regarding the commercial operations at the North Raleigh site​", it is "unable to determine precisely the short-term economic impact of instituting the required corrective actions and there can be no assurance that the FDA will not take further action, if the necessary corrective actions are not completed on a timely basis​. "Until all corrective actions required under the warning letter have been taken, the FDA will not consider new commercial products for approval at the North Raleigh site​," the firm said.