Despite revenues increasing from $15.6m (€11.8m) to $20m the unit recorded an operating loss of $2.5m, compared to a $0.8m deficit a year ago. Ampac suffered from higher than anticipated costs for validating a core product’s process change and general manufacturing inefficiencies.
These difficulties caused gross margin to decline ten points, offsetting gains made through manufacturing improvements in the first six months. Operating loss for the first nine months was $0.7m, compared to $0.4m in the corresponding period of 2009.
Worsening operating loss is partially attributable to declining revenues in 2010. In the first nine months of 2010 revenues have declined year-on-year from $67.8m to $63.1m. Ampac attributes this decline a drop in demand for antiviral products.
The impact of declining antiviral sales was partially offset by improved demand in the third quarter for developmental products. This upturn drove revenue improvements in the quarter and, with this business being the source for future core products, could support future sales growth.
Ampac also operates units focused on speciality chemicals and aerospace equipment. Combined revenue for all its businesses was up 18 per cent to $37.2m. Despite this upturn overall operating loss remained fairly flat, dipping slightly year-on-year from $3.7m to $3.6m.
The US Food and Drug Administration (FDA) has criticised Ampac’s response to manufacturing issues found during an inspection, stating “it lacks sufficient corrective actions”. Ampac sent the response after inspectors raised concerns about its plant in Rancho Cordova, California, US.
In a warning letter the FDA said Ampac had failed to properly maintain buildings used for active pharmaceutical ingredient (API) production. This resulted in dirt, blistering paint and rust being near to manufacturing equipment. Paint chips were seen in, later rejected, temozolomide API.
Furthermore, the FDA said Ampac failed to identify and quarantine returned APIs. For example, a drum of returned temozolomide API was stored, without being properly identified, next to other drums of the same material which were labelled as accepted and ready for release, said the FDA.
The agency also said Ampac failed to ensure documentation of cleaning of major equipment after each batch is processed. In addition, the FDA said Ampac failed to clean non-dedicated equipment between the manufacture of different APIs to prevent cross-contamination.
Ampac responded to these issues but in each case the FDA deemed the company’s actions to be inadequate. The FDA has requested a second response detailing specific steps taken to correct deviations.