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Donald E. Morel, Jr., Ph.D.
Chairman and Chief Executive Officer
William J. Federici
Vice President and Chief Financial Officer
Investor Relations Contact:
Michael A. Anderson
Vice President and Treasurer
mike.anderson@westpharma.com
UBS Global Life Sciences Conference
New York, New York
September 23, 2009
NYSE: WST
westpharma.com
All trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., unless noted otherwise.
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This presentation contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that are based on management’s beliefs and
assumptions, current expectations, estimates and forecasts. Statements that are not
historical facts, including statements that are preceded by, followed by, or that
include, words such as “estimate,” “expect,” “intend,” “believe,” “plan,” “anticipate”
and other words and terms of similar meaning are forward-looking statements. West’s
estimated or anticipated future results, product performance or other non-historical
facts are forward-looking and reflect our current perspective on existing trends and
information.
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that are based on management’s beliefs and
assumptions, current expectations, estimates and forecasts. Statements that are not
historical facts, including statements that are preceded by, followed by, or that
include, words such as “estimate,” “expect,” “intend,” “believe,” “plan,” “anticipate”
and other words and terms of similar meaning are forward-looking statements. West’s
estimated or anticipated future results, product performance or other non-historical
facts are forward-looking and reflect our current perspective on existing trends and
information.
Many of the factors that will determine the Company’s future results are beyond the
ability of the Company to control or predict. These statements are subject to known or
unknown risks or uncertainties, and therefore, actual results could differ materially
from past results and those expressed or implied in any forward-looking statement.
You should bear this in mind as you consider forward-looking statements. A non-
exclusive list of important factors that may affect future results may be found in
West’s filings with the Securities and Exchange Commission, including our annual
report on Form 10-K and our periodic reports on Form 10-Q and Form 8-K.
ability of the Company to control or predict. These statements are subject to known or
unknown risks or uncertainties, and therefore, actual results could differ materially
from past results and those expressed or implied in any forward-looking statement.
You should bear this in mind as you consider forward-looking statements. A non-
exclusive list of important factors that may affect future results may be found in
West’s filings with the Securities and Exchange Commission, including our annual
report on Form 10-K and our periodic reports on Form 10-Q and Form 8-K.
You should evaluate any statement in light of these important factors.
Forward Looking Statements
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Who We Are
• Founded in 1923
• Global Headquarters near
Philadelphia
Philadelphia
• Market capitalization $1.3 billion
• World’s premier manufacturer
of components and systems
for injectable drug delivery
of components and systems
for injectable drug delivery
– Closure systems and prefillable
syringe components
syringe components
– Components for disposable
systems
systems
– Devices and device sub-
assemblies
assemblies
– Safety and administration
systems
systems
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Diverse, Stable Customer Base
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West’s Competitive Advantage
• Unmatched experience/expertise: drug - material interface
– Global regulatory and technical support
• Protected IP: Proprietary materials and technology
• Regulatory barrier to entry: US NDA and ANDA filing must
include reference to packaging/components in contact
with the drug
include reference to packaging/components in contact
with the drug
1. West Drug Master File (DMF) 1546 is confidential
2. West DMF includes functionality data (multi-year studies)
3. All primary package changes require new stability/functionality
studies for new filing
studies for new filing
• Global manufacturing footprint
• Engineering expertise in high-volume manufacturing, assembly
and vision inspection
and vision inspection
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Sales and Income from Continuing Operations
($ in millions)
($ in millions)
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• Global economic conditions remain soft
• U.S. government focus on healthcare structural reform and cost
containment
containment
• Within our customer base:
– Changing operating priorities à changing order patterns
– Working capital / supply chain / inventory management
• Delivering against rising expectations
• Value (price in their world)
• Quality
Business Environment
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Second Quarter and Year-To-Date Results
($ in millions, except per share data)
($ in millions, except per share data)
Quarter 2 | Year-to-date | |||
2009 | 2008 | 2009 | 2008 | |
$261.0 | $279.3 | Net Sales | $503.4 | $550.0 |
30.2% | 29.9% | Gross Margin | 29.4% | 30.4% |
$4.7 | $4.9 | R&D | $8.9 | $10.3 |
$45.1 | $40.9 | SG&A | $88.0 | $81.0 |
$29.0 | $37.4 | Operating Profit (Non-GAAP) * | $51.0 | $75.2 |
$19.9 | $25.4 | Net Income (Non-GAAP) * | $34.1 | $50.4 |
$0.58 | $0.73 | Diluted EPS (Non-GAAP) * | $1.00 | $1.45 |
*2009 Q2 and YTD operating profit, net income and diluted EPS excludes a ($0.01) and ($0.02) per share impact, respectively, of Tech
restructuring charges and a $0.05 per share YTD impact of discrete tax benefits.
restructuring charges and a $0.05 per share YTD impact of discrete tax benefits.
*2008 Q2 and YTD operating profit, net income and diluted EPS excludes a $0.11 and $0.14 per share net gain, respectively, on the Nektar
contract settlement, a ($0.02) and ($0.04) per share impact, respectively, of Tech restructuring charges and a $0.03 per share YTD impact of
discrete tax benefits.
contract settlement, a ($0.02) and ($0.04) per share impact, respectively, of Tech restructuring charges and a $0.03 per share YTD impact of
discrete tax benefits.
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Asset Management
($M) | 6/30/09 | 12/31/08 | 6/30/08 |
Cash | $84.3 | $87.2 | $102.3 |
Accounts Receivable | $143.4 | $128.6 | $159.2 |
Days Sales Outstanding (DSO) | 51.6 | 44.8 | 52.7 |
Inventory | $130.0 | $115.7 | $127.3 |
Days Inventory Outstanding (DIO) | 46.7 | 40.3 | 42.1 |
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Capital Management
($ Millions) | 6/30/09 | 12/31/08 |
Total Debt | $390.2 | $386.0 |
Total Equity | $533.0 | $487.1 |
Net Debt to Total Capital | 36.5% | 38.0% |
Capital Expenditures: | ||
YTD Spending | $45.2 | |
Full Year Forecast / Actual | $110.0-$120.0 | $131.8 |
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• Pharma remains under substantial pressure
• Global growth projected at 2.5-5% (down from 5-7%)
• North America down 1-2%
• Europe 0-1%
• Emerging economies 5-7% (India, China, Brazil)
• Fundamental underlying industry change - consolidation - focus
on large molecule therapies
on large molecule therapies
• Pfizer - Wyeth
• Roche - Genentech
• AstraZeneca - Medimmune
• Lilly - Imclone
• Merck - Schering Plough
• How does West continue to grow in this challenging environment?
Business Environment
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Drug Packaging (How it is contained) |
Primary Container Solutions |
Prefillable Syringe Systems |
Drug Delivery (How it gets into the patient) |
Administration Systems |
Advanced Injection Systems |
Development
Primary Package
Administration
Our Growth Opportunities
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Market Dynamics Support Future Growth
• Increasing number of patients
with chronic illnesses
with chronic illnesses
• Many of these are treated with
biologic drugs
biologic drugs
• Biologic drugs demand ultra-
clean delivery systems
clean delivery systems
• Point of care shift: Hospital to
specialty clinic to home
specialty clinic to home
• Safe, accurate dosing needs
are pushing the market toward
integrating the container/
closure system into the delivery
system
are pushing the market toward
integrating the container/
closure system into the delivery
system
• Generic growth
Autoimmune Disease
Vaccines
Oncology
Diabetes
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Pipeline Drug Formulations
34%
42%
10%
4%
4%
3%
3%
Source: IMS, Tufts CSDD
Over a third of all pipeline drugs will be in injectable formulation
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Global Biotech Blockbusters
(Annual Sales >$1Billion)
(Annual Sales >$1Billion)
Total
39
39
Total
106
106
2007’s 22 Biotech Blockbusters |
Enbrel (Amgen/Wyeth) |
Aranesp (Amgen) |
Remicade (J&J/SP) |
Rituxan (Roche) |
Neulasta (Amgen) |
Erypo/Procrit (J&J) |
Herceptin (Roche) |
Epogen (Amgen) |
Avastin (Roche) |
Humira (Abbott) |
Lantus (Sanofi-Aventis) |
Avonex (Biogen Idec) |
Neorecormon (Roche) |
Gardasil (Merck) |
Rebif (Serono) |
Neupogen (Amgen) |
Novorapid (Novo Nordisk) |
Erbitux (Imclone/Merck KGaA/BMS) |
Lucentis (Roche/Novartis/Genentech) |
Synagis (MedImmune) |
Humalog (Lilly) |
Betaferon (Bayer/Schering AG) |
Sources: IMS 2008 Global Biotech Perspective report and Company
Estimates
Estimates
West supplies components for all
current Biotech Blockbuster products
current Biotech Blockbuster products
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Drug Packaging (How it is contained) |
Primary Container Solutions |
Prefillable Syringe Systems |
Drug Delivery (How it gets into the patient) |
Administration Systems |
Advanced Injection Systems |
Our Growth Strategy
• Build market share in multi-
component systems for drug
administration
component systems for drug
administration
• Expand proprietary product portfolio
through innovation and strategic
technology acquisitions
through innovation and strategic
technology acquisitions
• Market segmentation to generate
organic growth
organic growth
• New product innovation
• Lean manufacturing
• Strategic acquisitions
• Geographic expansion
• Capacity build - Europe, Singapore,
North America
North America
• China plastics
• India rubber site selection
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Primary Drug Packaging
West FluroTec®
Components
Components
Seal - Stopper - Vial
Daikyo Crystal Zenith® Vials
Estimated Market Size - $1.5 billion
CAGR - 4%
Source: Company estimate for vial systems only
West Spectra™ Seals
Crystal Zenith is a registered trademark of Daikyo Seiko, Ltd.
FluroTec and Crystal Zenith technologies are licensed from Daikyo Seiko, Ltd.
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Core Strategy - Adding Incremental Value per Unit
Uncoated 4432/50 V35
$50
$200
4432/50 S2 FluroTec®
Westar RS
Westar RS
$250
4432/50 S2 FluroTec®
Westar RS B2-40 Port Bag
Westar RS B2-40 Port Bag
$300
4432/50 S2 FluroTec®
Westar® RS B2-40
(1000 packs)
Westar® RS B2-40
(1000 packs)
$465
4432/50 Sterile S2 W
(RU) Ready PackÔ
(1000 packs)
(RU) Ready PackÔ
(1000 packs)
$2,900
RU Ready PackÔ System
(small volume sourcing only)
(small volume sourcing only)
$3,500
$360
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China Plastics Facility
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Drug Packaging (How it is contained) |
Primary Container Solutions |
Prefillable Syringe Systems |
Drug Delivery (How it gets into the patient) |
Administration Systems |
Advanced Injection Systems |
Our Growth Strategy
• Build market share in multi-
component systems for drug
administration
component systems for drug
administration
• Expand proprietary product portfolio
through innovation and strategic
technology acquisitions
through innovation and strategic
technology acquisitions
• Market segmentation to generate
organic growth
organic growth
• New product innovation
• Lean manufacturing
• Strategic acquisitions
• Geographic expansion
• Capacity build - Europe, Singapore,
North America
North America
• China plastics
• India rubber site selection
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Delivery Systems - Key Programs
Vial2Bag™
Mix2Vial®
MixJect®
NovaGuard™ Safety
Needle Device
Needle Device
(luer-lock syringe)
ConfiDose®
Auto-injector
Auto-injector
Daikyo Crystal Zenith®
éris™
Safety Needle Device
(fixed-needle syringe)
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Packaging & Delivery Systems for Large Molecules Key Driver
• Currently all large molecule drugs are delivered
by injection
by injection
• West components are preferred and used for
the top selling biotech therapeutics
the top selling biotech therapeutics
• Used predominantly to treat chronic diseases
– Diabetes
– Cancer
– Auto-immune
• Fastest growing segment of our business
• Strong profit driver
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• Polybutadiene
Flurotec® liner
Flurotec® liner
• Low temperature
resistance
resistance
• Ease of handling
First-in-Human Containers
Bulk Containers
Inserted Needle Syringes
• Stored frozen in
Phase 1
Phase 1
• Ideal cleanliness
• Low adsorption
properties
properties
• Ideal for auto-injectors
• No tungsten, glue or
silicone
silicone
• Ease of handling
Total Life Cycle Containment
Daikyo Crystal Zenith®
Daikyo Crystal Zenith®
Daikyo Crystal Zenith® and Flurotec® are registered trademarks of Daikyo Seiko,
Ltd.
Ltd.
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Critical Stability Issues for Biotechnology Drugs
• Aggregation
– Silicone, tungsten, glue, mfg. processing
• Adsorption - vials and syringes
– Impacts potency of large molecules
• Immunogenicity/Neurogenicity
• Polysorbate 20 and 80
– Detergents used for mitigating aggregation
– Highly unpredictable
• Too much creates aggregation
• Potential for peroxide creation
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Comparison of protein aggregation in glass versus CZ for
a model antibody
a model antibody
Daikyo Crystal Zenith®
Glass
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Our Long-term Focus
• The fundamentals matter
– Superior quality and service win business
• Margin improvement - lean manufacturing, OEE
• Continued investment for the future
– Innovation
– Geographic expansion
– Technology & product acquisitions
• Financial discipline
– Maintain strong operating cash flow
– Prudent spending: discretionary SG&A, R&D and Capex
– Maintain a strong balance sheet
– Return on Invested Capital > Weighted average cost of capital
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Drug Packaging (How it is contained) |
Primary Container Solutions |
Prefillable Syringe Systems |
Drug Delivery (How it gets into the patient) |
Administration Systems |
Advanced Injection Systems |
Five-Year Growth Opportunity
$2 billion combined markets for safety,
prefilled and autoinjectors:
prefilled and autoinjectors:
• Unit growth 6-12%, varies depending
on segment
on segment
• West 2008 sales: $170 million
• 2008 OP margin: 7%
Strategic Planning Goals - Systems:
• Projected 2013 sales of $550 million
• Projected 2013 OP margin 20%
$1.5 billion market for components
• Unit growth 0-8% per year depending
on segment
on segment
• West 2008 sales: $800 million
• 2008 OP margin: 17.5%
Strategic Planning Goals - components:
• Projected 2013 sales of $1.05 billion
• Projected 2013 OP margin 20%
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Summary
• Market leader
• Proprietary technology
• Regulatory expertise
• Customer base
• Global footprint
• Partnerships
– Daikyo
– Mexico
• New product pipeline
• Financial position
– Cash flow
– Balance sheet
• People
Injectable Container Solutions
Advanced
Injection
Systems
Injection
Systems
Prefillable Syringe
Systems
Systems
Safety and Administration
Systems
Systems
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Each and every day,
more than 80 million
West products are used
to enhance the quality of
healthcare around the world.
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Donald E. Morel, Jr., Ph.D.
Chairman and Chief Executive Officer
William J. Federici
Vice President and Chief Financial Officer
Investor Relations Contact:
Michael A. Anderson
Vice President and Treasurer
mike.anderson@westpharma.com
NYSE: WST
westpharma.com
All trademarks and registered trademarks are the property of West Pharmaceutical Services, Inc., unless noted otherwise.