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C&EN profiles Ampac Fine Chemicals, West Coast company with a new Gulf Coast site

Plant opening marks new phase in contract manufacturing firm’s plans for growth

by Ann M. Thayer
May 30, 2016 | A version of this story appeared in Volume 94, Issue 22

Plant opening marks new phase in contract manufacturing firm’s plans for growth.
Credit: Ampac Fine Chemicals
Workers inspect raw materials at Ampac Fine Chemicals’ La Porte, Texas, facility before making a customer’s product.

La Porte, Texas, outside Houston, is a long way from Rancho Cordova, Calif. But the contract manufacturer Ampac Fine Chemicals (AFC) is happy to have added a site there to complement its home base near Sacramento.

Ampac Fine Chemicals at a glance

Headquarters: Rancho Cordova, Calif.

Business focus: Custom manufacturing of active pharmaceutical ingredients and intermediates

Plants: Rancho Cordova, Calif., and La Porte, Texas

Capabilities: Hazardous/energetic chemistries, high containment, controlled substances, simulated moving bed chromatographic separations

Employees: 483

Parent company: H.I.G. Capital, a private investment firm

The La Porte plant supports many of the same challenging, energetic chemistries that AFC practices in California to make pharmaceutical ingredients from clinical trial quantities to commercial scale. These include hydrogenation, alkylation, and chlorination, along with the use of azide, cyanide, and phosgene reagents. Special features at the California site include commercial-scale simulated moving bed (SMB) chromatography for chiral separations, continuous processing, and the ability to produce controlled substances.

At an event to celebrate the successful restart of operations in La Porte, Aslam Malik, AFC’s chief executive officer, said the firm had wanted to buy the plant as early as 2007 but was not able to close a deal. Instead, PPG Industries, which had built the multipurpose facility in 2001, sold it to Zambon as part of the $65 million sale of its entire fine chemicals business.

AFC got another chance in 2010 and bought the Texas facility for just $1.2 million, winning the access to infrastructure and personnel in the heart of the Texas chemical industry that it desired. Although the plant didn’t work out for the Italian firm, AFC saw a great opportunity.

“Building new capacity to accommodate future growth just did not make sense to us with excellent facilities sitting relatively idle and available on attractive terms,” said AFC Chairman Joe Carleone at the time.

AFC made the purchase knowing that it would take a while to fill the plant, which added 30% to the firm’s manufacturing capacity. The company was convinced, however, that drug industry customers would continue to outsource production of active pharmaceutical ingredients.

In 2010, AFC needed to be optimistic. The economy was still recovering from the recession, and the firm’s own revenues had fallen to $70 million from a high of $124 million in 2008. AFC, then a division of American Pacific, was also operating at a loss.

The challenge was to find new business or at least persuade existing customers to replicate their production processes at the La Porte plant. Having two plants with overlapping capabilities allows AFC to ensure customers security of supply, Malik said at the event. But pharma companies are reluctant to move their processes because it requires revalidating them and refiling paperwork with regulators.

“No one wanted to be first,” Malik said. With the La Porte plant running again under regulatory standards, AFC started making chemical intermediates. By 2014, things were rolling at the plant.

One major customer induced to make the move was Gilead Sciences, which has worked with AFC for nearly 20 years. Over that time, Gilead has grown from a modest-sized biotech firm to a market leader with $33 billion in 2015 sales.

“AFC has provided manufacturing support for three commercial projects, and aided by the strong collaboration between our two companies, we were able to launch multiple products faster and earlier than anyone could have expected,” said Ken Larsen, Gilead’s head of outsourced manufacturing, who spoke at the event.

Thanks to the support of companies such as Gilead, AFC is now making multiple products in La Porte, according to Malik. “The facility is going full tilt, and we have invested quite a bit of capital and plan on investing more,” he promised local community leaders in attendance.

Seeing strong customer demand for its specialized capabilities, AFC intends to invest more than $40 million in 2016 to expand capacity and improve infrastructure. The expansion is supported by H.I.G. Capital, a private equity firm that has owned the company since February 2014.

Since becoming privately held, AFC no longer reveals detailed financial figures. After reporting another small loss in 2011, the company turned around in 2012. By 2013, the last year AFC released results, revenues had rebounded to $125 million. Malik said growth in 2014 was greater than 20%.

AFC’s revenues last year were probably more than $160 million, which would rank it among the top 20 fine chemicals contract manufacturers, according to Jan Ramakers, an industry consultant. In contrast to many larger competitors that are adding finished-dose drug operations to create one-stop shops for their customers, AFC remains “a bit of niche player,” with its focus on specialized chemistries, he added.

Yet it’s these capabilities—including SMB chromatography and continuous synthesis using hazardous compounds—that position AFC well, Ramakers said. Very few firms can actually handle such technologies and chemistries. Because know-how, safety expertise, and facilities are high barriers to entry, competitors can only enter the market “by buying into it” with an acquisition, he added.

AFC does overlap with a few leading contract manufacturers. Novasep, for example, has capabilities for highly potent compounds, SMB chromatography, and energetic reactions. Cambrex, which also claims Gilead as a major customer, can handle potent compounds and energetic chemistry as well. But AFC is the only one of the three that does it all in the U.S., Ramakers pointed out.

Along with technology advantages, several factors have contributed to AFC’s growth in recent years. As the company predicted, drugmakers have been outsourcing more. Some projects have moved back to the U.S. from Asia. And the number of drug approvals has risen while molecules in development have become increasingly complex and call for specialized chemistries and handling.

With AFC’s Texas facility running and the business environment looking strong, “all we can think about is the future,” Malik said.  



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