West Pharmaceutical Services Q1 2023 Earnings Call Transcript

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Provided by Quartr
April 27, 2023

Key Takeaways

  • In Q1, West reported organic sales growth of 2.3% (high-teens excluding COVID) and raised its full-year net sales and adjusted EPS guidance while maintaining a 3–4% organic growth outlook.
  • Excluding COVID vaccine sales, the Biologics market unit grew double-digits, and both generics and pharma segments achieved strong double-digit organic growth alongside robust contract manufacturing demand.
  • The company is investing in HVP capacity expansion, including a new R&D lab in Radnor, PA, and additional plunger and finishing equipment installations to come online in 2023–2024.
  • Q1 gross profit margins declined on a mix shift away from COVID-related products and inflationary headwinds, leading to a 3.4-point drop in adjusted operating margin to 23% and a 13.9% EPS decrease.
  • West continues bolstering its ESG profile through awards for sustainable packaging and a partnership with the Philadelphia Eagles, with more details in its upcoming Corporate Responsibility report.
AI Generated. May Contain Errors.
Earnings Conference Call
West Pharmaceutical Services Q1 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

Conference call. We issued our financial results this morning and the release has been posted in the Investors section on the company's website located at westpharma.com. This morning, Eric Green and Bernard Birkett will review our financial results, to provide an update on our business and present an update on our financial outlook for the full year 2023. There's a slide presentation that accompanying today's call and accompanying that presentation is available on the Investors section of our website. On Slide 4.

Operator

This is our Safe Harbor statement. Statements made by the management on this call and in the company's presentation containing forward looking statements within the meaning of U. S. Federal Securities Law. These statements are based on our beliefs and assumptions, current expectations, estimates and forecasts.

Operator

The company's future results are influenced by many factors beyond the control of the company. Actual results could differ materially from past results as well as those expressed or implied in any forward looking statements made here. Please refer to today's press release as well as any other disclosures made by the company regarding the risks to which it is subject, including our 10 ks, 10 Q and 8 ks reports. During today's call, management will make reference to non GAAP financial measures, including organic sales growth, adjusted operating profit, adjusted operating profit margin and adjusted diluted EPS. Reconciliations and limitations of the non GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in this morning's earnings release.

Operator

I now turn the call over to our CEO, Eric Green. Eric?

Speaker 1

Great. Thank you, Quintin, and good morning, everyone. Thanks for joining us today. We will start on Slide 5. On April 14, West turned 100 years old.

Speaker 1

This is a major milestone that we're very proud of. Over the course of our 100 year history, the West name has come to mean so much to so many people. I would like to recognize our Founder, Herman O'West and the past generations of leadership that have built West to who we are today. In addition, I want to especially thank our 10,000 plus team members who are motivated by our purpose of improving patient lives and making a difference in the communities in which we work and live. Moving to Slide 6.

Speaker 1

I am pleased to report that we delivered a solid Q1. This was driven by overall organic sales growth of over 2%. Excluding COVID-nineteen, our base organic sales grew high teens. Our end markets remained stable even in this uncertain macroeconomic environment. As expected, we saw a drop in COVID-nineteen related sales compared to last year.

Speaker 1

That said, our Biologics market unit, excluding COVID, again grew double digits and we expect this trend to continue for the rest of the year. With a focus on reprioritization of longer lead time components, our generics and pharma market units delivered an especially strong quarter of double digit organic growth. In addition, our contract manufacturing had solid growth while delivering of components for injection related devices. This overall performance is a result of our team members across the globe as they remain focused on our strategic initiative of execute, innovate and Grow. The resiliency of the business continues to be a reflection of our team members and I want to acknowledge these efforts to say thank you.

Speaker 1

Turning to Slide 7. In addition to our financial performance, there were several other significant accomplishments in our quarter. I would like to highlight a few. In February, we opened our new R and D lab in Radnor, Pennsylvania. This investment supports are capability enhancements, while meeting the growing needs of customers in the changing regulatory environment across the globe.

Speaker 1

The lab's applied research will include containment and systems for advanced therapies and biomaterials along with advanced design and engineering for drug delivery. In addition, the lab will also test and develop of Elastomer Glass Systems and the work done here will support our future R and D ambitions for new containment and Packaging Solutions. Our product innovations have been recognized with several notable awards, including the Best Technologies award at InterFX for our WES Ready Pack with Corning's Valor ready to use vials. And as we continue to make tremendous strides in ESG, we have announced the stability partnership with the Philadelphia Eagles who are recognized as environmental stewards across all areas of their business. We look forward to sharing more detail on our ESG efforts in our Corporate Responsibility report to be published shortly.

Speaker 1

Shifting to Slide 8. Our robust capital investments through expansions and optimizing productivity across our global operations remain on track. We continue to drive forward the expansion of additional HVP capacity with the anticipated growth of our customers' biologic portfolios and drug launches. This includes the installation and validation of new manufacturing equipment for HVP of Plunger's and Finishing Capabilities, which will continue to come online throughout 2023 and into 2024. Moving to Slide 9.

Speaker 1

We are reiterating our full year 2023 organic sales growth outlook of 3% to 4% and are raising our 2023 financial outlook for overall net sales and adjusted diluted EPS. While Bernard will go over more details in his remarks, I want to make a few high level comments. We continue to see a decline in overall COVID-nineteen sales and now expect $60,000,000 for the full year 2023 instead of $85,000,000 Even with this change, we are reaffirming full year 2023 overall organic sales guidance. We continue to expect mid teens Proprietary Products Base Organic Sales Growth for the year. Contract Manufacturing is now expected to be double digit growth compared to prior high single digit outlook as we expect to see continued demand for certain injection devices as seen in Q1.

Speaker 1

Now I'll turn the call over to Bernard. Bernard?

Speaker 2

Thank you, Eric, and good morning. We'll first look at Q1's 2023 revenues and profits, where we saw low single digit organic sales growth and a decline in operating profit and diluted EPS compared to the Q1 of 2022. I will take you through the drivers impacting sales and margin in the quarter as well as some balance sheet takeaways. And finally, we will provide an update to our 2023 guidance. First up, Q1.

Speaker 2

Our financial results are summarized on Slide 10 and the reconciliation of non U. S. GAAP measures are described in Slide 17 to 20. We recorded net sales of $716,600,000 representing organic sales growth of 2.3%. COVID related net revenues are estimated to have been approximately $23,000,000 in the quarter, an approximate $88,000,000 reduction compared to the prior year.

Speaker 2

These net revenues in 2022 included our assessment of components associated with vaccines, treatment and diagnosis of COVID-nineteen patients, offset by lower sales to customers affected by lower volumes due to the pandemic. Looking at Slide 11, Proprietary Products organic net sales remained flat in the quarter. High value products, which made up more than 70% of proprietary product sales in the quarter declined by low single digits due to the reduction in COVID related net revenues. Looking at the performance of the market units, the generics market units delivered high double digit growth led by sales of Westar Components, while the pharma market unit experienced low double digit growth led by Envision and Westar Components as well as admin systems. And the Biologics market unit saw double digit saw a double digit decline due to a reduction in sales related to COVID-nineteen vaccine.

Speaker 2

Our Contract Manufacturing segment experienced double digit net sales growth in the Q1, primarily driven by an increase in sales of components related to injection related devices. Our adjusted operating profit margin of 23% was a 3 40 basis point decrease from the same period last year. Finally, adjusted diluted EPS declined 13.9% for Q1. Excluding stock based compensation tax benefit, EPS decreased by approximately 16.1%. Now let's review the drivers in both our revenue and profit performance.

Speaker 2

On Slide 12, we show the contributions to organic sales growth in the quarter. Sales price increases of $21,300,000 primarily due to a reduction in COVID-nineteen related net demand and the foreign currency headwinds of approximately $20,100,000 Looking at margin performance, Slide 13 shows our consolidated gross profit margin of of 37.9 percent for Q1 2023, down from 39.5% in Q1 2022. Proprietary Products' 1st quarter gross profit margin of 42.5 percent was 90 basis points lower than the margin achieved in the Q1 of 20 22. The key drivers for the decline in Proprietary Products gross profit margin were unfavorable mix from a reduction in sales related to COVID-nineteen vaccines and continued inflationary pressures on our plant costs, including labor, raw materials and overheads. These factors were partially offset by sales price increases and production efficiencies.

Speaker 2

Contract Manufacturing 1st quarter gross profit margin of 17.6% was 250 basis points below the margin achieved in the first quarter of 2022, primarily due to mix of products sold. Now let's look at our balance sheet and review how we've done in terms of generating more cash. On Slide 14, we have listed some key cash flow metrics. Operating cash flow was $138,100,000 for the 3 months ended March 2023, a decrease of $13,100,000 compared to the same period last year, a 8.7% decrease, primarily due to a decline in operating results. Our Q1 of 2023 year to date capital spending with $82,100,000 $16,300,000 higher than the same period last year.

Speaker 2

We continue to leverage our CapEx to increase our high value product manufacturing capacity within our existing facilities in the U. S, Germany, Ireland and Singapore. Working capital of approximately $1,400,000,000 at March 31, 2023 remained consistent from December 31, 2022. Our cash balance at March 31 of $886,300,000 with $8,000,000 lower than our December 2022 balance. The decrease in cash is primarily due to our share repurchase program and higher CapEx, offset by operating cash flow for the Q1.

Speaker 2

Turning to guidance, Slide 9 provides a high level summary. We are updating our full year 2023 net sales guidance and expect net sales to be in a range of $2,965,000,000,000 $2,990,000,000 compared to a prior guidance range of $2,935,000,000,000 to $2,960,000,000 There is an estimated full year 2023 tailwind of $15,000,000 based on current foreign exchange rates compared to prior guidance of the 2023 headwind of $30,000,000 We expect organic sales growth to be approximately 3% to 4%, unchanged from prior guidance. We expect our full year 2023 adjusted diluted EPS guidance to be in a range of $7.50 to $7.65 compared to a prior range of $7.25 to 7.40 Also, our CapEx guidance is $350,000,000 for the year, unchanged from prior guidance. There are some key elements I want to bring your attention to as you review our guidance. We expect full year COVID-nineteen related sales to of approximately $60,000,000 compared to prior guidance of approximately $85,000,000 Net sales guidance also includes a reduction of $8,000,000 resulting from an expected divestiture of a European facility that produced standard proprietary product components.

Speaker 2

Full year 2023 adjusted diluted EPS guidance range includes an estimated FX tailwind of approximately $0.02 based on current foreign currency exchange rates compared to prior guidance of a headwind of $0.11 The updated guidance also includes EPS of $0.15 associated with Q1 2023 tax benefits from stock based compensation. Our guidance does not include potential future tax benefits from stock based compensation. I would now like to turn the call back over to Eric.

Speaker 1

Thank you, Bernard. To summarize on Slide 15, the solid financial performance and execution in Q1 continues to reaffirm We have a strong base business and are delivering unique value to our customers. While there may be instability in some small cash of dependent biotechs, these customers are not a substantial portion of our business. Our end markets remain stable and there continues to be a promising pipeline of new drugs that could have meaningful launches and or expansions over the next few years, which means more HVP sales opportunities for West. Our global operations team is efficiently manufacturing and delivering products in this complex environment with a focus on service and quality.

Speaker 1

And we're continuing to progress capital spending across our operations to meet current and anticipated future growth. With great pride, we realize this criticality of our products for healthcare across the globe, which is why our purpose to improve patient lives propels us each and every day. Norma, we're ready to take questions. Thank you.

Speaker 3

Thank you. Our first question comes from the line of Larry Solow with CJS Securities. Your line is now open.

Speaker 4

Great. Thanks. Good morning, guys. Congrats on another good start to the year. Eric, just sort of, I guess, a little bit of a Quick question on the quarter and a little more high level.

Speaker 4

Just obviously a little bit of a step up and acceleration in sort of core growth. I think you mentioned mid teen to high teens growth this quarter in proprietary products and I think your guidance kind of points to sort of mid to high teens growth for the year. And obviously, it's a little bit of a shift away from COVID for you guys. Are your customers From their perspective, has that helped too in terms of less focus on some of your customers on COVID treatments and more back to their core? I'm just trying to bucket sort of the drivers of the acceleration growth between COVID, perhaps a little bit waning COVID impacts and Just more growth, I guess, in NovaPure and other high value products.

Speaker 4

And I guess the third thing is just the overall growth in biologics. But I'm just trying to get a Feel for how those three drivers sort of line up, if you will.

Speaker 1

Yes, great. Thank you, Larry, and good morning. We're seeing obviously as COVID demand decreases, we've been able to through the reprioritization of the long lead time items. We're able to bring them back in line what we expect for the market. And therefore, you've seen us very strong growth in both the pharma and the generics market units, which is significantly higher than what you would see from a market volume demand perspective.

Speaker 1

So that's where you see the benefit specifically on generics is really due to the long lead times that are being brought in. We did see a little bit better performance in our contract manufacturing. And as we've been making investments specifically in that area, very targeted investments. Those are coming online and we're starting to see the benefit and that's the reason why we've moved up the full year Look, on the biologics side, I have to be I'm very proud on how we continue to do very well in that area, not just on current drugs in the market, but also new drug launches and our participation rate remains very high. And so we were excited to carry on that growth.

Speaker 1

But you're absolutely correct, the COVID reduction mutes that overall number. And that's why we're trying to be very more transparent about the quarter itself. So we're very pleased across the board on the execution and overall it's a very strong start to the year.

Speaker 4

And in terms of capital projects, expansion plans, obviously, you've guys, I think, you've more than probably doubled capacity over the last couple of years or the last 3 years. As you go out into 2024, do you see I Suppose at some point we'll have a slowdown or pause in the expansion. Do you View this or how do you sort of view that your longer term plans out beyond sort of next 12 months?

Speaker 1

Yes, Larry, it's you're right. We had Some significant capital investments over the last couple of years. One was to fuel or build to support the vaccines during the pandemic. And fortunately, the team was very focused on helping our customers with these solutions around the higher end of high value products. So this equipment is fungible.

Speaker 1

We're still leveraging that existing equipment for base business growth, particularly on the biologics area. And we're continuing to add layer in more capital. The capital that we are layering in right now is shifting a little bit away from what I would call The vial configuration to more prefilled syringes and I. E. Our plunger manufacturing capabilities, which are coming online this year and then in 2024.

Speaker 1

But that is based on demand that we have in our hands today and into the next couple of years. So we will continue to layer in capital when the growth profile remains as we're seeing today. But you're right, Larry, if there's opportunities to continue to leverage existing assets more effectively, that's the first thing we look at. How do we leverage what we currently have, creating efficiencies, higher automation before we start investing more and that's just our daily framework as we think about capital investments. So the long story short would be if we continue to invest as we are, it's because the growth of the business is greater than we anticipated.

Speaker 4

Got you. And then just lastly, a quick question for Bernard. On the on proprietary products, gross margin down a little, I think 90 bps year over year, but I think it absorbed like a $90,000,000 or so drop in COVID sales, right? So or something around I don't think you gave the actual quarter number, but somewhere around So I'm just trying to going forward, gross margin, it feels like most of the COVID benefit is out of Right. So should we kind of expect proprietary products gross margin to be maybe a good number, a good starting point And maybe we can grow a little bit off of this gross margin base?

Speaker 2

Yes. Just on the COVID, we did You kind of said that we did $88,000,000 I think in Q1 2022 and it was about $23,000,000 in this quarter. So the drop was pretty significant. But we have been really focused on increasing the level of efficiency through our plants, really understanding the Cost base and as we were progressing through 2020, we're already lining up some of the Changes, we're starting to see the impact there. Also, the price that we've been able to get, which is above what we normally see that 5% that's also helping with that margin and to absorb some of the inflationary costs.

Speaker 2

So I would expect it to it is a good start for the year. There's obviously a lot of puts and takes, Larry, given what's going on within the Macro environment and both we're confident on a little bit more guidance.

Speaker 4

Got it. Okay, great. Thanks. I appreciate the color guys.

Speaker 3

Thank you. One moment for our next question. Our next question comes from the line of Paul Knight with KeyBanc Bank Capital Markets. Your line is now open.

Speaker 1

Hi, Eric. When on the CapEx side. Is Michigan now online? And then when you do deploy this CapEx, when does that start to Deliver revenue, is it a 1 year, is it a 2 year lag? And then my last question would be, Where do you benefit from this growth in GLP-1s?

Speaker 1

Thanks. Yes. Thanks, Paul, and good morning. So in the capital, Fortunately, we're in a good position where we're layering in the capital once we install and then validate Revenues are coming up rather quickly. So you mentioned about Grand Rapids, Michigan is one of our contract manufacturing sites.

Speaker 1

When the lines are ready to go, we're turning them on and to build to meet the demand requirements. And that's very consistent across proprietary and also see them in today's environment. I would say if you look back historically, while we made the right investments, sometimes we do greenfield, those are the ones that take longer period to get the demand to fill those plants. But the investments we're making today are really about more near term demand requirements. In some cases, we're trying to catch up.

Speaker 1

On the GLP-one, there's it's an interesting dynamic that is occurring, as you can imagine, West, as we did with the vaccines in the pandemic. You can imagine that our participation in GLP-one with multiple customers, multiple components, both in the proprietary area, but also in the contract manufacturing from a injectable device perspective. So we are obviously participating in that area. We're seeing the demand. We don't call out specific drugs or customers and but we are investing particularly around plungers and also in the contract manufacturing area about injectors, auto injectors.

Speaker 1

So you're seeing that in both camps as we speak today. And then last question would be for Bernard. Bernard, what's your implied operating margin for the or guide for the year?

Speaker 2

Approximately 23%.

Speaker 1

Okay. Thanks.

Speaker 2

And just on Larry's question, I Want to clarify one thing. The difference is on the COVID revenue between Q1 2023 and 2022 is 88,000,000 Just to clarify that, the drop was 88,000,000

Speaker 3

Thank you. One moment for our next question please. Next question comes from the line of Matt Larew with William Blair. Your line is now open.

Speaker 5

Hi, good morning. For the space more broadly, destocking has been an issue and obviously that's Further upstream and not something that's really effective for your business.

Speaker 3

But just on the subject

Speaker 5

of visibility, can you maybe speak to Your visibility into customer demand right now, particularly around HVP and maybe how that compares to your historical visibility over the last 3 to 5 years or so?

Speaker 1

Yes, Matt. I think before COVID, we were continuously building the capabilities to have better visibility with our customers in the markets around demand. And we have been building that. I would say during the COVID period, it's been a little more volatile, but now we're back into that environment, Have better visibility, better as we do make to order, our customers are giving us visibility, other demands over the next several quarters. And then we plan accordingly in our global operations to be able to support them on existing drugs but also new launches.

Speaker 1

In regards to any movements of stocking or working capital. We do see some of that in certain parts of the business. We take that in consideration and then when we think about our forecast or guidance for the full year. There are certain areas, I would say, probably more in our non HVP area that might have more volatility. On the high value product area that is going back to our capital investments.

Speaker 1

We need to continue to feel that to Try to get ahead of the curve versus trying to maintain where we are right now. So the demand is greater then we have capacities that are for the consumer and as we speak. So it's just seen blend right now, Matt, and we have better visibility, but it's not consistent across the whole portfolio, but I think we're responding appropriately.

Speaker 5

Okay. And then decommissioning a plant in Europe making both products amidst significant investment in HV Key capacity, I guess that speaks to the changing order book. But maybe if you could just say, kind of give us a sense for as we think about order book Incurring today and what's sort of what's in your order pipeline over the next 6 months, 12 months. How that compares to 3 to 5 years ago? And that's specifically on You mentioned on the GLP-1s you participate on the plunger side.

Speaker 5

Are those NovaPure plungers, Eshan?

Speaker 1

Well, Matt, a couple of points there. One is, You're right, the decommissioning of the plant, that's a plant that is a single product, single customer and We're very pleased on how that is now that was a standard product. So it wasn't that in relation to high value products. Right. It's a standard product.

Speaker 1

It's basically we've had this discussion for a long time. It doesn't fit our growth strategy. So therefore, we've made the decision with our customer and also another party to make sure they can continue on producing those products for our customers, but in someone else's hands. I think from an order book perspective, if you think about where our growth Profile is it really is around the biologics. We obviously have high growth right now in generics and pharma.

Speaker 1

We'll continue to see that over the course of 2023. But really as you think about the future longer term, it is around the biologics in multiple therapeutic categories and it tend to be the higher end of our high value products. The plungers specifically, it's a range of different types of plungers within high value products. So it ranges anywhere from LoRaTek all the way up to Novopur depending on the customers' needs. So it is kind of a range.

Speaker 1

But our the optics of our order book continues to be strong, but this portion of that tends to be more around the high value products and the higher end of that.

Speaker 5

Okay. Thanks, Eric and Bridget.

Speaker 3

Thank you. One moment for our next question. Next question comes from the line of Jacob Johnson with Stephens. Your line is now open.

Speaker 6

Hey, thanks. Good morning. Maybe first just sticking on the GLP-one topic and as it relates to contract manufacturing, I think that's a business that at times kind of the work you do with customers can vary year to year. Obviously, strong start You're increasing expectations there. Is this something that is kind of sustainable growth For you all or is there something about 2023 that maybe we shouldn't carry this forward into 2024 and beyond?

Speaker 2

Yes, Jacob. We typically would see the growth rate in contract manufacturing around mid single digits within our longer term construct. Last year, we had declines in the contract manufacturing business, so now we're seeing a bit of a rebound. So if I'm looking out past 2023, it will be kind of more of the mid single and high single digit growth rate.

Speaker 6

Okay. Thanks for that. And then just a couple kind of cleanups on some of the commentary around the outlook for this year. If I'm not mistaken, I think you said mid teens ex COVID growth in proprietary products, but I think that was high teens last on the last call. And then also 23% op margins, I think that was 23% to 24 last quarter.

Speaker 6

Is this something to do with kind of the stronger contract manufacturing growth in the for the EDR? Just anything you can kind of flush out In terms of that commentary?

Speaker 2

Yes. On the operating margin, a little bit of it is around contract manufacturing. And then they're having less of that COVID business coming through versus what we expect us. So they're the primary drivers there.

Speaker 1

On the revenue side, when we talk about the proprietary outlook, it's relatively it's pretty consistent to the FOBE guidance in February without COVID. So the all three units will be very strong throughout the full year and relatively consistent so far as performance in that area.

Speaker 6

Okay. Got it. I'll leave it there. Thanks for taking questions.

Speaker 3

Thank you. One moment for our next question please. Our next question comes from the line of Derik De Bruin with Bank of America. Your line is now open.

Speaker 7

Hi, good morning. Good morning, Derek. Hey, a couple of questions. Is there a good rule of thumb to think about your CapEx in terms of revenue generation. For every dollar you spend in CapEx, it can generate X amount of revenues.

Speaker 7

I'm just really trying to think about future opportunities and just sort of thinking about all the spend and how this will build it out.

Speaker 2

Yes, we haven't communicated that in the past. I think really what we have communicated is to say that A larger portion of our CapEx spend over the last number of years has been focused on growth and that growth is really within high value products. So the investment in CapEx is driving obviously both revenue improvement, but also delivering on that operating margin improvement. So it's Encompassed in

Speaker 7

that. So going to the mix shift next, because obviously that has accelerated recently. When you think about your forward model construct, does that margin sort of What more like 150 basis points? Are you still thinking about 100 basis points is where you should come out on the off margin expansion on an annual basis, just given the mix.

Speaker 4

Yes, Derek, I'm not going to give you

Speaker 1

a number, but we've said that we will achieve 100 Plus basis point margin expansion year over year for a number of years. And but as an organization, as a team, we're really focused on how can we continue to beat that. Looking at through automation, looking at the mix shift effect that's happening, really when you think about the biologics, just reviewing our participation in Biologics more recently continues to remain extremely strong. I'm very proud of that. And so We believe we're going to commit to the 100 plus basis points in operating margin, but we do believe there's opportunity to continue that and stay aggressive.

Speaker 7

Great. And just one more. So I'm Thinking about some of the newer drug opportunities, I mean, obviously, there's a lot of interest in discussion on GLPs. But You've had to build capacity for a number of I mean, this isn't like COVID where it suddenly popped up overnight. I mean, you've been building capacity for a while.

Speaker 7

You've known there were trials coming. So I'm just So curious, it's like what do we need to see in sort of some of the GLP trends in the market, prescription trends to sort of like think about what the upside driver of that could be to your business because there's clearly something already embedded in, it isn't like a virgin market where you are. So I'm just curious on how you're thinking about that market as it expands?

Speaker 1

Yes. There's 2 areas. One area specifically around our product portfolio, unlike what we've seen in other types of configurations like vial configuration, we get multiple doses of vial. In this particular area of single dose, right? And so as prefilled syringes continue to grow, We're going to need to continue to invest in plungers and that's what we're seeing and that's where our areas of investments are going.

Speaker 1

And we'll continue to respond to our customers' forecasted demand. And again, it's more than just one customer, it's multiple customers. So that's one. It's one of the conversations with our customers planning ahead, not on just existing solutions in the market, but future drug launches that they're planning, that's where our conversation is. If we're waiting to the commercialization of them, we're too late, They're too late.

Speaker 1

Yes. So that's one area. On the contract manufacturing side, a little different, where As you know, we've been very clear about this. And that part of our business, unlike our proprietary business, where if you're on the molecule, you're pretty much the main provider of those components. In the contract manufacturing, our customers tend to diversify with multiple companies to be able to produce those, I.

Speaker 1

E. Auto injectors. So while that volume goes up, I wouldn't say it's 1 to 1 for us. It's clear in the proprietary side, but not as much on the contract manufacturing side. So hopefully it gives you a little bit of kind of visibility, and particularly around the GLP-one specific area.

Speaker 7

Great. Thank you. Thank you.

Speaker 3

One moment for our next question. Question comes from the line of John Sarabier with UBS. Your line is now open.

Speaker 8

Hi, thanks for taking the questions. So I think it sounds like you said that contract manufacturing that that could grow from mid single digits, I think was a previous long term target there to mid single to high single digits. Is that increase over the long term. Is that all GLP-1s or are there other drivers there that would be driving that upside?

Speaker 1

Well, I would say it's just a mixture of multiple a few different customers into Few different products, GLP would be one area, but not the only area of growth. So the investments that we've been layering in, Contract Manufacturing have been coming on board end of last year into this year, and we'll continue to layer that in if and when necessary With our customers. So yes, the portion of it is due to GLP-one.

Speaker 8

Just when you look, I think the company's frame the long term revenue target in that high single digit range. But now you're seeing strong trends throughout the portfolio, some increases in contract manufacturing. Just any thoughts on how that revenue growth could look like beyond 2023?

Speaker 1

Yes, I think the same focus on a long term construct, we have always said 7% to 9% organic sales growth. We're excited that obviously we do have a role to play with the GLP-one as that evolves. I'm excited because as an organization, we can support our customers in multiple fronts, I. E, multiple different components of advisory. That to me has a higher economic profile for us and then the contract manufacturing while we play in both higher dependency on the proprietary side.

Speaker 1

But I would say that our growth, when we say the 7% to 9% organic growth outlook is not solely reliant on that category. We have numerous customers with different types of launches that are occurring and an uptake of current drugs in the market that we need to keep fueling. So it's a mixture of All drugs, multiple customers and multiple therapy classes. Yes, we participate in GLP-one, but I want to make sure that It's the growth of this business is very diversified.

Speaker 8

Great. Appreciate the color. Thanks for taking the questions.

Speaker 1

Yes, thank you, John.

Speaker 3

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the conference back over to Quentin Lai for closing remarks.

Operator

Thank you, Nova, and thank you all of us for joining us on today's conference call. An online archive of the broadcast will be available on our website at westbarman.com in the Investors section. Additionally, you may access a replay for 30 days following this presentation by using the instructions at the end of today's earnings release and an acknowledgment of our sustainability partnership with the Philadelphia Eagles. It gives me a unique opportunity to conclude the call with Fly Eagles Fly.

Speaker 1

Have a nice day.

Speaker 3

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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