WST - Earnings call 3 2023 | West Pharmaceutical Services, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Third Quarter 2023 West Pharmaceutical Services Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Quintin Lai, VP of Investor Relations. Please go ahead.

Quintin Lai

Michelle. you, Thank welcome and Third XXXX Quarter Good to Call. Conference morning, West's website morning, financial Investors release company's our issued and section at results the the We in this the westpharma.com. posted has on located been

on and we presentation a our and Investors outlook slide accompanies on the for presentation morning, an our year is full call, update business will results, that present financial This our provide a our of XXXX. that update website. the on available an copy of financial review section There today's is

and On factors Statements meaning Slide forecasts. and presentation this beyond company. in harbor on securities many X future assumptions, contain company's is influenced our the The by beliefs statements U.S. accompanying of the made call are current safe statement. These expectations, the the of on by based law. management estimates within control results federal forward-looking statements are and our

past XX-Q in here. those materially by as subject results, our the disclosures differ well could made to refer reports. company as Please forward-looking results any as any today's press other XX-K, the it to from is Actual X-K which well as including risks release, implied and statement regarding or expressed made

CEO, results the measures, of management the non-GAAP reference call, Reconciliations now and our financial in turn margin call release. Green. will this I profit, to to During prepared today's morning's Eric adjusted profit conformity provided limitations in over sales to measures including most non-GAAP make growth, financial organic operating operating GAAP EPS. financial earnings comparable adjusted adjusted to and are the diluted

Eric Green

like us Bernard Quintin begin an family good by the today. appreciate cannot and situation emergency in We'd you, back ongoing addressing to understanding. joining thank Quintin, everyone. to Ireland, Israel. morning, unexpected step Bernard. your Thanks in participate I for in will Due Great, today. for

in the focus their priority that region. safety work remains and and members on families of live our top team and the and Our well-being

let's am solid and that the QX Now I delivered X a quarter. turn third performance. report to team pleased Slide to our

Our which take be demand advantage base to capacity ongoing well-established our to solid of us customer growth our strategy, success expansions. full attributed and can market-led recent allows

the thank who an make sales and our West us the team, COVID-XX-related it to -- that In components approximate One is deliver of have meaningful we of organic to drugs ensuring difference $XX net patients. our like make decrease I'd of had solid strength X.X% a necessary And reliable supply sales. year-over-year with third quarter, to customers growth million to

exceeded Products growth Enterprise XX% both for our sales organic and base Proprietary the Our segment.

Shifting to components Slide devices. proprietary X. HVP we base products, strong and of In had demand

our see their their certain increase experiencing double-digit our business in led drugs greater sales. replenishment quarter, strong by they than accelerate base The XX% continue customers We growth growth orders which again in as was impact COVID-XX-related and of market Biologics uptake strong unit, us. very excluding with the to of had the

to also our growth produce And, capacity as restocking pharma This the from through able we've seen time market had generics long HVP we accelerated that through much fueled year, we have of lead and units. in been components, growth our expansions.

the especially September stocks for increase trends safety pharma remainder their During year. standard an management by we manage see for have they certain generic inventory to as October, in and and large products, customers, the started of our

quarter X%. to to temper sales organic These X% led growth us our issues fourth have to

of and to ability And we to sales COVID-related for continue the the double-digit Excluding monitor organic sales currently sales, double-digit country. in on overall expect and Israel product and out ship impact situation the expect our quarter. proprietary manufacture any do we growth not growth

we X% are a X% construct to operating sales we years, will expansion. of customers, to preview, call. on some deliver inventory In financial expect our by our margin guidance XXXX upcoming prior February of seeing a QX of management of our organic bit to points provide in and As we growth basis formal despite large our continue the XXX

that point, anticipate to sales where pandemic-related we no addition, performance longer XXXX. have at will a are we base in our separate In our

Lastly, products. a our with for valuable key West's is advance strategy of thought complex of changing scientific and and market insights aspect more customers, leadership needs to experts. the the leaders They through address care team and technical molecules to growth combination patients of continue our

sustainable conference experts of For insightful several and PDA Conference, on our of the and example, presentations emphasis delivered CPHI Worldwide the regulatory standards at the West products. about development recent revised

to the I'll quarter. Quintin? into the will Quintin, more go who Now call over turn detail from

Quintin Lai

you, and morning. good Eric, Thank

as the review profits, XXXX. will also EPS at drivers in where finally, look quarter takeaways. increase we And an balance organic revenues QX quarter, and through first decline third I an increase to more diluted and in net of impacting mid-single-digit well a Let's sales XXXX update the we'll numbers in some in saw as our growth, margin detail. to guidance. operating the take in provide sales and XXXX sheet compared We'll profit you a the

First up QX.

representing in on reconciliation X.X%. We of net of a $XX are revenues sales Our to non-U.S. are have measures year. been last XX period the X in the described financial growth to and net million decline results of $XXX.X $XX of GAAP million quarter, compared same XX. sales a reported approximately are organic to Slides COVID-related million, estimated Slide summarized

components reduction approximately for X. Taking the led organic COVID-XX-related market growth, of X.X%. Products sales market proprietary pharma Proprietary and High-value impact delivered customer digits, of including the generics made net at and experienced unit products Systems. the a a and the sales high Admin led Slide up single-digit segment units, increased grew devices. at by low growth components mid-single market which from by single-digit QX products, look XX% demand sales, of HPV unit Looking Westar negative the performance both by

sales by single-digit driven of market Biologics Flurotec and unit devices. The delivery growth components low self-injection also saw

growth sales, components Contract double-digit of in Our health components organic sales an care increase by sales devices. devices and to injection-related diagnostic Manufacturing segment and experienced related led net

last point from the was decrease same adjusted Our XXX margin a profit period year. operating of basis XX.X%

QX, Finally, adjusted last diluted to X.X% EPS EPS benefit, compared excluding diluted increased stock-based adjusted compensation, increased by year. tax X% for

the On X, let's our Now drivers performance. in points quarter. sales we the in the review Slide price to contributed $XX.X show or organic contribution percentage profit X.X the increases Sales and both revenue of growth in quarter. growth million

Overall from mix non-COVID $XX.X our was demand, positive by COVID-XX-related mix includes partially tailwind million percentage an of net sales Foreign volume reduction approximate currency business. $X.X and points million. in growth. by million offset base X.X impacted negatively $XX or approximately contribution volume and This

third gross performance. consolidated XX.X% profit profit in our the of margin shows XX.X% last XX basis points Proprietary margin quarter XX.X% down at XX Looking from Slide year. period achieved of gross for key in offset Products was margin margin lower QX, than in last same Proprietary profit pressures Products driver our mix period an The inflationary offset by in sales increases for gross same that sales in plants. year. the from unfavorable COVID-XX was reduction to price vaccines, cost a decline the related margin

of offset points third sale the was year, quarter pressures to costs. margin last XXX on basis quarter inflationary by achieved higher third gross increased the favorable Contract prices than due products labor profit of our mix of a in margin XX.X% and plant sold, Manufacturing,

listed the review generating have we've key improvement cash million let's done how flow in flow On working terms Now primarily a business. was look of sheet balance for XX, $XX.X cash and Operating capital. increase of at cash of we compared same months X% An period in the some Slide $XXX.X year, for our to due to X XXXX. increase first the million metrics. last

third year-to-date Our capital spending quarter than million year. period was $XXX.X higher same million, last the XXXX $XX.X

capacity. to continue product our leverage our high-value We to increase CapEx manufacturing

current $X.XX an increased million by XX, XXXX, XX, due assets, XXXX, Working September offset capital current billion in $XX.X growth from increase to portion of by of debt. at December long-term in our primarily our approximately

cash XX, our higher and higher was operating driven positive increased increase The cash XXXX, is under December results, than was our offset Our CapEx. primarily repurchases at in by share balance. September repurchase and $X.X program small million $XXX.X by XXXX balance million

to Slide of guidance. billion $X.XX a Turning sales billion year net expect prior to year to $X.XXX prior on estimated guidance. $XX billion of provides net million XXXX summary. sales guidance full unchanged billion. high-level $X.XX full tailwind our based $X.XX There We're range is an of guidance compared be to current from and a range a to FX XX updating XXXX in rates,

to X%. approximately expect to of X% organic be year, to We the to full X% sales guidance for prior compared the range X%

key diluted our year, raising elements prior are compared our $X XXXX bring range $X.XX. $XXX Also, full be from There some guidance. to to attention. a $X.XX range to in are a adjusted CapEx to million your EPS guidance prior is unchanged of the of year guidance I to $X.XX want We for to

reflect inventory and generic the pharma head our of recent to year. with increased management the as of customers, lowered have we the We end inventory certain trend revenue restocking slowing into guidance their and

COVID-XX We expect to full $XX approximately million, $XX guide be to sales million. prior related compared of year

year $X.XX. range includes Products, $X.XX, a standard unchanged XXXX EPS million, FX reduction to Full Proprietary based diluted includes of that $X a guidance compared from a also a European approximately guidance. rates, guidance current exchange adjusted of prior facility from Net FX of sales tailwind of resulting tailwind of prior an divestiture is and produce on this

XXXX from The stock associated updated tax comp. year-to-date guidance also $X.XX includes base EPS of with benefits

growth benefits stock-based tax I XXX points. operating within of we've same over compensation. annual highlight COVID-XX And the expansion growth, years, been our over construct like margin has future Our that organic of the revenue excluding our guidance would to over basis from our last above business base excludes X%. time to X averaged period, -- annual X% of or

on our operating As organic margin look XXXX. that be sales demand, growth financial West Eric providing profit a expansion. in long-range current to we and will trends again preliminary within are Based anticipate we construct earlier, mentioned of

we'll guidance on I'd like Eric. to call in XXXX As more to call. the turn over usual, February our back provide detailed

Eric Green

track Quintin. you, summarize base are had growth sales solid Thank double-digit QX. a on and performance in XX. on for organic To We QX Slide

durability remains foundation business we testament base time. built to is have a Our strong, the the which over of

health you. as proud to future. and patient trusted play Michelle, forward a in we're the Thank look valuable into to ready delivering for support are customers critical to well care questions. to a health partner We take serve role to continue

Operator

line the Markets. going Capital [Operator from of is Paul come to Instructions] first KeyBanc with Our Knight question

Paul Knight

you business? CapEx what numbers, could of facilities or If talk big on You that issue mentioned are -- the obviously products high-value was category of leads in you're you know are stocking in the supplying this will. products. category, you side is lastly, next to kind if and open But GLP the the you which these how can capacity we -- X, question product issue that standard -- then constrained of to GLP-X And year?

Eric Green

you Thank the Great. Paul. for question,

with Let's start the question. GLP-X

If see Proprietary components you in at both areas space, -- serve our HVP we of specifically that our in plungers. elastomer space look with you'll business, Products that

and Contract GLP-Xs we the that in the support Manufacturing then And our space, with customers auto-injectors.

would place we put network. assets perspective, I constrained. lot today, some We're that that leverage global had, of we So that COVID, and releverage to say we we're not our technology, our capacity from able of the in for a also

see the we'll plungers on particularly able we'll molecules are support new as so -- And be to able globe. HVP elastomer launched and ramp, to approved to across our to the customers be space, drug continue

to quarters XXXX. It we're and call and On several auto and side, expand place currently the actually that we've we've is Michigan. And they're Rapids, it, will also capacity, completed throughout, producing to, Dublin which ongoing. market, take those we throughout into are and expansions Paul, to been CM sites put asked have referring in particularly, Grand get the -- we let's validated injectors

X significant So those areas. in investments

focus customers -- space will not a the a their expectations. of continue that we're can in years you that the number we bottleneck, But I we don't will We ensure on they would to we that a to we for come. perspective, not, I from -- we our with assure say commented. that to grow volume communicate as them how of size and working are not On be still market would GLP-X, perspective haven't from from

our you're to to the to divert not It's It's around restocking, elastomer XXXX. devices. components. of disposable those asked really In the being into products. This regards And be around HVP standard it area. It medical absolutely tends tends categories some we're as standard much in correct. orders be in to the -- is

share, biologics. of healthy the a cadence. to a that's of continue win So It's loss ratio have not new molecules, and approved particularly we very in

management just of And with a inventory customers. a but so market hasn't timing few our select position position changed it from is the

Operator

to from going is the with come Our Securities. line Solow next CJS question of Larry

Lawrence Solow

of just first I were guess slowdown a and guys question, just capacity. Proprietary increasing know bit in you is I seasonally, products a little Eric,

curious, a just of years you're I So kind are well? that better goes a some maybe window. somewhat bit little I thought I'm our in up. little return of to been slower. of going I to have there the to bit and are we inventory few a ability customers pre-COVID of been now to as seasonality kind historically too, where we the kind know QX just getting trend some think Is were that's obviously chains seeing? kind was have more of -- the back of The last of But kind larger hand throughout some inventory maybe that with management supply normalized, so of manage

Eric Green

Larry, thanks question. for Yes, the

on In not pass Bernard inventory seeing -- what not it's -- the really your to around management, to more timing of all, I'll bit First regards remarks a it's it's seasonality, later. orders. little we're of

about it, our if X/X And I of and let's our about around most is investments So we're of CapEx we call different X/X, investments, Paul in about think orientation. capital growth earlier know plants. investments the specific making, asked

it's on we're launches so already sites major the HVP, some than there's coming around But of those at the larger sites to of HVP are in CM. investments going new for on down a side, be road. And bit -- also the now, the emphasis some particularly and and because commented a supporting the, plungers. heavy little CM drug our typical I Right seeing been of which

it's In and regards customer seasonality. of It not to the timing schedules. timing the also orders of is production

the obviously success in -- is and don't give molecules components is new existing I'm number, that So in and of the with market would molecules That comments I what it's look above. QX at so base XX% already. the was biologics, led growth but organic sorry, the really those that, market

be very to of able situation the XXXX in the in area through as capacity QX, up we to by fastest of our to continues new demand backorder the relieve that layered customers we'll a on we've -- good we'll year, effectively an the top. been We've We QX be able to be installed in plungers. and that this NovaPure so should And throughout example, Kinston and through site for do service position end be also and ramping growth.

of around in the gives that hopefully, products product what -- seeing So you standard some Larry, market. we're context,

Lawrence Solow

you. Got Great.

it Just good hasn't that shifting getting one any on just follow-up, just be gears, slowdown [indiscernible] to been driver, the continues a Obviously, there like and leeway into much the sounds there. that.

of I in in us quarter terms on was still minority on it it revenue. us a and potentially piece that, a think like it you And will forward. is Can remind going what importantly, give be a lot a where year? was imagine than you just just volume last a kind NovaPure on -- piece greater you said I the and of sounds more guesstimate Can growing fastest that's Just it's basis the for remains XX% just know I -- volume. approximately and of that lower

there great. color any be So would

Quintin Lai

Larry, to can't I'll it have on back or get Yes, XX% was somewhere you a minus. I around year, percent plus to of recall, or sales as last what

year-on-year growth. of end and our has it's of like that a And volume the that driven drug NovaPure. typically of think when have about have We the And you mentioned, year-on-year. HVP combination successes, at mix drugs of some price, growth those that it, volume, seen higher come incremental Eric if new

impact. And so bigger therefore, it has a

for much it as impact mix volume as a as not us. have So may big

Eric Green

about comment, XXX that Larry, of the algorithm, the digits in about HVP points for of requires double you growth think of one volume basis year-over-year And increase HVP. the additional

So a we're because overall Quintin margins, perspective. significant still on ASP in -- it's volume the that from the quite actually way But portfolio. XX%, XX% a articulated corridor the impact the

Operator

Johnson the of with And line come our from to going question Jacob Stephens. next is

Jacob Johnson

a well. restocking would the the it management. as call in popular next customers first Or restocking to you expected? as the in long high -- Is you should in trends. destocking Maybe I'll My caught vernacular that going slowdown this? safety and inventory not we despite here. get curious How mentioned how is we about as it subject other Bernard is lack not restocking should that persisting? then you have to out this a about best the to as morning. just, kind Eric, stock just think up the some as what I'm I year to surprised too And going growing you dynamic dynamic piece of of of it with stick back just guess

Eric Green

to first part? want the cover You

Quintin Lai

Sure.

ability We our So on our an year, to you at were of Jacob, where next customers the that issue capacity lead mean, example. to it those we type I'll for orders we we to based we of time deliver, have the -- discussions. we going had had and give year. in said we're that and that's had I QX, to you the putting start in get

the in able our As of built We've last in have a of the job of increasing fantastic the on our had that facilities in -- sites. processing were we capacity, Kinston added capacity got that start year, backlog. terms the issues new other installing of some some clear and done to of one that of we getting issues to in and areas. some teams HPV We over of

said, to it schedules. those like instead. manufacturing you to our And to going We've we're now for and originally they end take the And customers of We're "Hey, said, deliver already we're and just back then said going the what year. we to in XXXX to able able now were here reset go be us came good. to

be going we do of because and them, and to we restock thought matter to able now now were that And so additional capacity just we've timing. got it's handle a it help what

gives So you that the years some progress. an Eric? things of of example the that just as seen we've

Eric Green

And what is think lines we're speaking of of Absolutely. product. is you think I dynamics production the with on aspect about the rescheduling the the need and it their around if term, that this the of this long really customers last is

of growth So by we're led COVID that been it's given giving we're the by -- we're the today, guidance being are not and but led top we've an we X% line Biologics. -- that's full And given indication indication we've and not the corridor number. giving and HVP, why is into -- X%, putting

gives kind now. that you So that of seeing right dynamics we're

So -- temporary this should we situation. a is

Jacob Johnson

bottleneck That's XQ. Okay. back and heard Eric, the as some you helpful. to of the would mentioned think ramping like something and And that, for capacity were up just we solutions orders then, And relates you just these year? of market, ramp to you I if I'm have of correctly. do you that into Kinston is up Kinston well maybe drugs? you next a this pretty something in that on expect ramp about been you And on early kind containment or XQ in maybe as talking it that caught XQ some catch should curious, get

Eric Green

Yes. to we're not say, be clear. I the no, bottleneck would

able and would NovaPure plungers it's have out through. to review are And of state was these kind -- a the for quite that doing of launches, of Kinston some customers we another and plant drug that just navigate few were been just particularly call, I that coming manage this customers. of before we we

customer. not campaigns. and one for up not ramping it's multiple it's one they're XXXX So molecule, It's

would we own But It's the right better own these -- goes -- at spoke that their of we other stronger we see would that's pipeline. not about to So for like we what are. of discuss stocks launches. safety about -- like their do would know see, that bottleneck. but to some is we're say there's we earlier I to us that now, some to -- it But not they in issues just we're back where excited

with Kinston the areas for frankly, capacity biologic and areas we're say are think around facility, customers bottleneck. put got well us. of not It's to The I grow these these And of And continue positioned the We've investments support out I very I place. have are to are the the would product mean and launches. the the satisfied our autoimmune, future, oncology, validated. for exciting that particularly quality we from in immunology, plant. the But we're

Operator

is line next John to UBS. the of our And question Sourbeer from going come with

John Sourbeer

additional best oral And Bernard. maybe any And see GLP-Xs off just even starting and transition broader more I between thoughts products you but this biologics maybe just any to guess multi-dose color market auto-injectors specifically, on maybe or more evolving there? just do pens. how on potential to GLP-Xs,

Eric Green

here. -- it's to on putting got I my No, speaking don't be -- be customers, Yes. of want we've behalf to careful

auto prepared for to the them other primary, what elastomer of be into That of modalities. to we're and continue key go components. several is manufacturer injectors So do the these will

with And on so able the from capabilities. and them elastomer encouraged stay of support HVP with position, plunger to actually demand we're we're And manufacturing portfolio. then the our ahead our very demand

little mentioned today, are this, assets in earlier of GLP-X that some in We put we general. fungible COVID not HVP for the for actually but a just for for bit

view, But And in I we think I to we injectable multi-use our all. medicines. refer are of the participate that our discussion. regards in in point in pens, would from market customers leader again, to

our uptake you oral. it is customers those Now are we that all really of don't I that effectiveness of on to discussions oral, participate speak oral the directly. And with in encourage -- the would

But through we are support very always our to CM GLP-X, as clear, a the other participation the as just we're demand. aspect Proprietary is side, I'll be network one support enjoy have where and and the visibility molecules investments the -- grow space a launched, both the side, we on continues good cadence rate. to of new of on global being we're asked what build high to and injectable making in approved Proprietary

at and On that we're one support customers them, been side, our them. the looking to of we've are suppliers clear CM multiple very

we're business. very sides So the you of gives we're seeing. well Hopefully, that what context both some of on positioned

John Sourbeer

color the And Appreciate Yes. framing year. just next around the also, looking there. to high-level

strong pretty the to had X% this X% range. year, pricing You've I in think,

color on you could -- XXXX? for to think any what pricing shake Just look out

Eric Green

I working details, have still Yes. point this with been at discussions and through won't exact are because we give our in we customers.

think communicating we I to you're between X% right. were about year, X% This net realization. think to thing price one

I are positive think And corridor, we in end we're about us inflationary clearly of think faced that pressures, world upper which and that all on offset when with. you around majority is the the that the of were able to pressure.

of We inflation, that are if taking would year. consideration next like what look additional for

you going a we or price forward. historic, capture just that say we our position between decision context years X% can of this. But how more what here So in. -- to talking to be we're better I'm few We a I about give at when I believe a we're little in sub-X% at going I think exactly that say us help inform would look will that's to corridor and ago, the X%, us. were behind do And

John Sourbeer

one, just pandemic then to going the on on level On And going what guidance that just increase Any end. think out break There the is next way was COVID, sounds year. you're like forward? about my for longer this to no in it last an COVID there year.

Eric Green

Yes.

$XX for million guidance, Bernard the year. been Quintin on just this -- at the on about is based and have clear I think Quintin both We're about. think articulated, looking I

it's million would $X quarter. -- fourth do the about in the if it basically So you delta,

a that previous $XXX compare we that million means that and of year, than to bit -- more little that. Just year to had prior and

we've million $XX quarter. $XX And hard -- and -- in between we're basically but It's the predict. X to a been we million quarters, last

is, the this -- headwind, to very evolves. But right it administered a the and on way it if whole, becoming a West. yes, are small more there's depending so put look point, just potentially And if -- there's pandemic portion into a business a we be doses less that to could thinking it's at this because or now, it how be doses that overall at we're could we're run is going the as of base our tailwind

then we'll is think eliminate balance thinking this right clarity that. if yes, we of February, for need we be to better So do it give our out, if we'll clear year, call to the now still but but in

Operator

Our next of Matt to William with going question is from Larew Blair. come line the

Matthew Larew

Obviously, more obviously, around but there's Manufacturing think, the Contract investments broadly and now auto-injector GLP-Xs, focus delivery just, growing you in in and SmartDose new I your terms right have of is modalities the are platform.

if can us So what of the more investing either are just like funnel with curious update you've category in? that the device on interest, or the discussions been you generally, more in pipeline customers maybe

Eric Green

Matt, thank you for Excellent the do question. to start? question. Quintin, you want

Quintin Lai

Yes.

So Matt, me let clarify.

has participate good contract it. manufacturing not there, will where So We're behalf only can injection think about One, is. the that's ways. at that then We're platforms, can delivery IP, ones really our we we when customer at X the And though. West if the in customer. we manufacture be on of that

it if players. X said a typically the to As X. the we've project, will very in with customers outsource it's to to to could IP up X X And different be past, the big

often, very also customers be we to those proprietary So product elastomer key And that's customers. participate. happen how

is therapy. combination that to drug the a SmartDose with to design, in spec uptake. to And side, there, active then when our on there, us us. customers drug device is with and And device we're really that's make their proprietary come us, and seeing That that work to

are the pipeline approvals And active that of We very are to have up now customers evaluating X platform. we platform. a SmartDose our using drug

Eric Green

you, Quintin. Thank Excellent.

Matthew Larew

capacity, Okay. next then full on capacity. ramping Kinston sort And to of is obviously,

I think you referenced maybe adding to the Waterford site in 'XX.

in particular help that can is you've an investment newer doing time are more next ramp or perspective? So other benefit sites Is moving at about categories where just know from you're we are that, I think I or building referenced it as things additional And steady there to into automation guess mind? capital to as those state? you Waterford, builds, have speed

Eric Green

the in build the looking around between heavily around, we'll and and so little where additional that the HVP. support the to washing, growth in pharma and HVP has we're U.S. Yes, Singapore the Jersey capital, that Shore But But we're vision, it's experiencing helping sterilization interesting market. to and first X points, expansion bit with particularly Europe, about our Eschweiler. And the in Asia also one in we're is support the Kinston, you and think when Europe, drive us Waterford It concentrated on invest. about really investing the conversion. been HVP at It's to priority continue it's it's really Pennsylvania. is up build -- regards the in think network that. to And a to

So also we What are, and flight. investments about the the expect. in the us we give I'm uplift that but demand do give and where us are will additional to ability excited also that that

The efficient, it's up support actually, about It to I'm automation auto-immune, on on when about it's areas, made we looking always progress also the some the technology or mind, to how West, allows I support do scale mentioned biologics, allows but start ways of faster, scale-up recent pleased we that to ongoing. also us to new earlier whether immunology thinking be at us thinking safety. with improve oncology, improve about various GLP-X. In we more for I'm is And my quality.

higher-quality Europe give it's couple that us doing, a throughput. that of recently more -- we'll That's automation engineering continues scale differentiates ability partners, provide is that a get team place. will automation faster. product differentiate with investments the for we'll I to better reality get some to see West in has excited and what to this in we going a the But so focus external about. more we're I'm need And marketplace. to that been over Yes, the I I'm to the on Yes, the But product get market. is our what efficiencies. put to main working excited really new think importantly,

Operator

question come of next the our David And is going to Jefferies. with from Windley line

David Windley

think, Best I mostly understand standard. within that his stocking I today that or wanted family. and components, a parts to moving understanding, talking just little to I'm the on well, some better. to is bit destocking elastomers start Bern you're and

post pandemic allocation had capital that and early Westar understood post I not catching maybe allocation, the in growth the we were some gotten pandemic, understocked think year, had you example, areas that and for up. had the

been understand guess offsetting wanted try feeling. I like year what in the parts and I maybe the and standard the both and both through moving or there better It we're so quarter directions, destocking I at wanted just those X have of feels them. Westar cadence if already now therefore and in were factors the was those play to the And to understand is done to

Eric Green

David. good a It's question,

Quintin Lai

Dave.

stock. having a not issue definition think as like certainly you in year-over-year and COVID-XX, of or is we're stock So it's reordering. declines. that's doing their that safety destocking, we a happening seeing taking maybe And safety maybe just they're it demand consuming are say And just they're down what COVID-XX which and more customers when they're their in

well generics is we've you've been impact fact construct. of we behind and other to restock, as then able above base in financial our is the The have of that And pharma seen in that because been capacity the growth delivering terms the constraints.

on QX. for It's just to it's not going in base it going been has this that, seeing growth What to going is to not is as the of as temper, be be declining. going was we're year. that now part high that thought first we So

given the That's said, are calling lot be clearing deliver -- a of really year it that rather to situation. our good a have "Hey, fact restock. a manufacturing a "No, we've delivered year, We've QX. would of we that gone where done are, instead product. where of next And schedules why capacity said, in is again, our We we're customers. to the they we we not And given It's backlog. we've necessarily slowing destock been of job a the it happens

David Windley

construct. your in In your that that, lot admittedly, 'XX. that appreciate so about And as thinking a be in know to are probably long-term paying overwrought. very I I of Helpful. all is your for perhaps that can -- to of you, particular there's we question that attention the on in strong attention for on comments -- West answer there believe class, GLP-Xs. initial the your much And I folks think Okay. Paul's driver a enthusiasm to start excess But think

as offsetting business that parts the range? which X% as too target are that at the we not quick it that that, Or enthusiastic? is of that other assessment to net those is Or perhaps on us you tell that Would and our is that comes you pace think? is X% that is things -- into it of

Quintin Lai

I here's So understand question, for us. from ready need your again, to be our customers philosophy. We whatever the need

why we great such teams the have And that's communication so have our customers. -- with

their customers reorders. have doing are and are increasing we that really that cited well have We

In those positive, to the that change where network ready. our is things the global that's event

in are We that. do We've for network the position to we're that. -- global got so

class customers. say got and what we projects Eric? now. we continuing that's now to really ready, capital our by so right on much of addressed that's be And going to is be better that drug, ready and so we'll why happens that All can

Eric Green

with that speak So of not when is to -- for the GLP-X if really about Dave, really in about to right. strong. think the Quintin addition And bringing you continues into conversations that, It's mix. we're growth biologics, -- confident we're we growth be in biologics,

the -- X% And the part it to X% has led isn't by so really be growth talk HVP, to of be to by that about Biologics, it conversation. GLP-X construct, we're has we led

of a Exact there our launches to aspect, and longer would is in get comes is we more ready effectively the will are be on able approved validate GLP-X, to elastomer efficiently, what that refer cadence investments chain absorb and further also supply very side support drugs addition the we're position in scale little to demand that We'll Dave. But good probably positioned take the be time and when buildings As whole we're have the be some customers to working that up bit in and we're for But that. term. to address -- making. already that, exact timing, to I a is we'll up. that and CM to well the

David Windley

When does are I GLP-Xs Or could you're appreciate the that biologics? on in that not to just that just notwithstanding bringing pipeline. GLP-Xs pharma, what say, you statement, do are on say categorized, just Eric, you enthusiastic clarify, you said. whatever If I biologics that you're in answer. about that pipeline, saying mean not GLP-Xs that

Eric Green

on biologics -- or market, to space. Yes. It's about focus it's the and what's latter. approved in I to that's get tend the -- really approved around It's

in of diverse like be and to launches organization participation, and are drugs going fully We customers, market front to have be have. and excited as about and diverse we'll approved. a support today. portfolio of we And in that support approved portfolio of the -- we an we to the available ready any that We're be to what beyond see are part lead GLP-X yes,

frankly. we assets, same reason no why we there's their like leveraging about of that number you deliver we think It's driven model, can And I COVID. that very number clear, to be just of would the about can't did When We're I operations. SKUs, want existing biologics around saying without we're really say, the But growth this confident excited GLP-X. be I'm deliver. by could very

Operator

next of come our And Bank. Deutsche with question Justin from to is going the Bowers line

Justin Bowers

million into number X% this it's the the $XX wanted clarify there top from skittish can Are visibility you project the year, the to very all And customers? visibility. for appreciate. around help space now $XX Just of for growth? does sort the Is a of XXXX, that on planning just X% like outlook that that sort next you investors on level talking understand COVID. of commitments of pipeline you the have I about then two, in us to -- already we of I organic on been the think include X-parter have million COVID, a and which

So be helpful. any would framing there

Eric Green

Yes. No, questions. great

when we is talk top XXXX COVID for in one X% number. X% the that line, basis about first that the The XXX point -- clear. of guided pretty is inclusive that expansion Yes, we to margin $XX million

February, if is But drastic and of based So yes, it's seeing, -- equation. that. the communicate now change that part a we'll we're there's between what answer on and

The business it's part. order second is make most just part to to visibility, for -- about interesting our the

So or every each campaigns, support -- able variability drug and quarters, X and there's X on whether are us to quarters giving launches our it's coming them launches. existing always new X whether on molecule. us to some customers going drug to be it's and quarters, we're And

we but on aggregate, investments And what need for pretty so SKUs have good lens -- our and make. type we need to of what we volume

will we day. day assets the be side, On will take that we're time over very contracts to operating, ramp. installed long the little capacity CapEx it with tends what much a know output be in to pretty CM once specific But and

depends variability. it the The again, elastomer And volatility, more are is -- in successful marketplace. on there the drugs how the on side, more

a move to bit up able down and we're therefore, so And quarter-to-quarter. little

visibility. repeat launches, not very it But annuity-like but customers. XXX%, can -- call has gives growth Is do it's year-over-year. high. our but also No. this we business plan existing how it, of have that So we XXX%? future us confidence It's with amount working And on tremendous

a that So bit there answer. little there's of in both in

Justin Bowers

CM. Got then quick a it. And on follow-up just

visibility quarter, sort the good this sort of great, of the forward, is year go margins or commentary on a that of just longer Sort the of this that given business?

Quintin Lai

Yes.

think contracts. pricing I XX% some to term, of looking think that at through our we benefit did that take this did We quarter, have some longer from we XX%. some we're

Operator

is line Derik question going the De Bank Bruin of with to next of our America. And from come

Derik De Bruin

to implied of it sort step Is that's we between that -- why in this assume you mean, guide put of to fourth Even your to for I that big margin on? any what's just quarters? EPS QX so going such going is curious lines? the using to to sort is quarter. implied of down the year. So everything validation number revenue Why going your if that basically organic guides there stock-based there it get looks number big for pretty you're EPS the sort you're to get compensation, down step of to of get a the like margin the sequentially don't is and QX. I'm take

Quintin Lai

we for our it's that to have the We're Derik, going want the that's our gross but fourth swag especially margin and just be reasonable the given we really continue sure have at to so make quarter. reflected, we're margin. to products thanks costs on R&D lower going volumes that where impact in probably Really, just a facilities line then just -- question. through in quarter. for -- is absorption to manage And -- the the proprietary and to margin we're SG&A going utilization

Derik De Bruin

Got it.

just utilization? to down products So be sequentially the gross margin expect given Proprietary on you

Quintin Lai

right. That's range. Yes. to to that of kind then CM That's to back down XX% XX.X% right. And get

Derik De Bruin

Got it.

Okay.

long so our out long And estimates year? I for that how -- like products, does sort quarterly models about how does building or Proprietary as like mean, sort drag thinking we of on next of start that quarterly

Quintin Lai

we're XXXX. I the we But get in of see it line look, mean, going look margins process year, top improve gross you're year-on-year. the kind no. growth the at that to by HVP, led we with for No, I mean, as next plans of formalizing

Derik De Bruin

Got it.

to better? doing great. why pushed we've got I and I That's next at I I you've for to wouldn't, right. or just wouldn't Okay. X% why mean, year. mean, I know this you've have COVID talked guide, high the been do year are you orders got got least I mean, that why asked. just And next covered the you're the mean, wouldn't be X% from about the going that better know than that normalizing, like But -- be about year? mean -- a it's of demand, we've wouldn't mean got back, historically is why pricing, some I end -- you've stock reasonable a given construct. you talked range I've that I while, your X% questions and

Quintin Lai

the about we're in science trying We're softness tools hearing give putting talk cognizant our times. kind look, sitting of that upstream next also And we're Well, companies, we're tougher fact Derik, preview it we're you life a here October doing to of where other us and plans of year. together. of

bio that to we emerging out there acknowledge want high some We like be like and don't again, areas exposure certain just of we that want be companies that. -- have are they But have things pre-commercial we the there. and still, in uncertainties to

come in and that lot sit more lot we'll a that's provide with then. guide. up have to a information all back So And then February. and that Because as and happy we preliminary talk you detail there put more we'll and come we're in, we how to

Eric Green

we on I think -- or consistent And hit that's to us, to that, we've exceed. been the want Yes. just continuously message

we where we sit with visibility that's now have. the So right

Operator

Thank like back hand further to the you. I over Quintin Lai remarks. would any to conference And for

Quintin Lai

on of website Thank archive will An westpharma.com today's conference our be you us section. for the in online joining Investors at the on call. Thanks, Michelle. broadcast available

you the Have presentation Additionally, release. a for days of following That by using conference may this provided day. dial-in call. earnings numbers today's end XX the the and the access a concludes replay ID, at nice

Operator

This concludes participating. you for today's conference call. Thank

You may now disconnect.

West Pharmaceutical Services (WST) 26 Oct 232023 Q3 Earnings call transcript