NYSE:WST West Pharmaceutical Services Q2 2022 Earnings Report $253.50 -10.24 (-3.88%) Closing price 09/12/2025 03:59 PM EasternExtended Trading$253.52 +0.02 (+0.01%) As of 09/12/2025 06:08 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast West Pharmaceutical Services EPS ResultsActual EPS$2.47Consensus EPS $2.19Beat/MissBeat by +$0.28One Year Ago EPS$2.46West Pharmaceutical Services Revenue ResultsActual Revenue$771.30 millionExpected Revenue$754.25 millionBeat/MissBeat by +$17.05 millionYoY Revenue Growth+6.60%West Pharmaceutical Services Announcement DetailsQuarterQ2 2022Date7/28/2022TimeBefore Market OpensConference Call DateWednesday, July 27, 2022Conference Call Time8:11PM ETUpcoming EarningsWest Pharmaceutical Services' Q3 2025 earnings is scheduled for Thursday, October 23, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by West Pharmaceutical Services Q2 2022 Earnings Call TranscriptProvided by QuartrJuly 27, 2022 ShareLink copied to clipboard.Key Takeaways West delivered 13.1% organic sales growth in Q2, including 18.3% growth in proprietary products, driven by high-value components across biologics, pharma and generics. The company has completed its 2020 capital expansions and is installing its 2021 projects to boost capacity, shorten lead times and support rising demand, particularly in biologics and generics. West launched the Daikyo Crystal Zenith 2.25 mL insert-needle syringe system with a combination drug approved for a targeted 2023 launch and now has three FDA-approved biologics using its SmartDose OnBody platform. Full-year net sales guidance was lowered by $100 million to $2.95–2.975 billion, reflecting a $75 million FX headwind and an $85 million decline in COVID-related demand, partially offset by stronger base business growth. Adjusted diluted EPS guidance was cut to $9.00–$9.15 from $9.30–$9.45, incorporating an increased FX headwind (~$0.55/share) and reduced COVID sales, while maintaining $380 million in capex. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallWest Pharmaceutical Services Q2 202200:00 / 00:00Speed:1x1.25x1.5x2xThere are 10 speakers on the call. Operator00:00:00Day and thank you for standing by. Welcome to the Q2 2022 West Pharmaceutical Services Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Quintin Lai, Vice President, Investor Relations. Operator00:00:31You may begin. Speaker 100:00:34Thank you, Towanda. Good morning and welcome to West's Q2 2022 conference call. We issued our financial results This morning, Eric Green and Bernard Birkett will review our financial results, provide an update on our business and present an update on our financial outlook for the remaining full year of There is a slide presentation that accompanies today's call and a copy of that presentation is available on the Investors section of Speaker 200:01:08our website. Speaker 100:01:11On Slide 4 is our Safe Harbor statement. Statements made by management on this call and in the accompanying presentation contain forward looking statements within the meaning of U. S. Federal Securities Laws. These statements are based on our beliefs and assumptions, current expectations, estimates and forecasts. Speaker 100:01:30The 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 statement 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. Speaker 100:02:21I now turn the call over to our CEO, Eric Grate. Speaker 200:02:24Thank you, Quintin, And good morning, everyone. Thanks for joining us today. We will start on Slide 5. I'm pleased to report That we delivered an excellent second quarter. We grew 13% organically with over 18% organic sales growth In our Proprietary Products segment, our base business continues to have solid demand across all three market units, biologics, pharma and Generics, which more than offsets a slight decline in COVID-nineteen related sales. Speaker 200:02:58And again, Our high value products led the way to this impressive growth. Our continued success highlights the strength The resilience of our proven strategy of execute, innovate, grow, which continues to set us apart as a trusted market leader. It is the strength of our OneWest team guided by our purpose that makes a meaningful difference in ensuring our customers have reliable supply of the components necessary to deliver drugs to patients. An example of our One West culture in action is our team members in China, Who I would like to thank for their inspiring efforts and commitment to our customers during the lockdowns in April May. The relentless focus and our purpose enabled us to reopen our sites and continue to serve our customers with minimal impact. Speaker 200:03:50Now moving to Slide 6. We made great progress in the Q2. Let me briefly share a few highlights. We continue to deliver the key drivers of growth in Q2, primarily driven by our HVP components, including NovaPure, Envision, Daikyo Crystal Zenith and self injection devices, with a strong order book For our Biologics and Generics customers, along with pharma demand ramping up, we are seeing the benefits of our capital spending investments as we optimize productivity across our global operations. Our 2020 capital expansion is now complete And we're driving forward to complete the installation of our 2021 expansion. Speaker 200:04:38Turning to Crystal Zenith. We have been expanding capacity of our 1 ml syringe as our customer uptake has been robust. At the 2022 BIO International Conference, We launched the Dykild CrystalZenith 2.25 ml insert needle syringe system. With the market trend for larger dose injections, We're able to answer the needs of more patients with a safe and reliable containment solution. The new CZ Syringe System will help our customers bring a larger volume of product to patients with fewer or less frequent injections, enabling an easier patient experience. Speaker 200:05:19As we continue to advance the standard of care for patients with our customers, I'm pleased to share that we have a combination drug approved using our newly launched CZ2.25 ml system with targeted customer launch in 2023. In addition, We're seeing good progress with our SmartDose OnBody subcu delivery system and now have 3 FDA approved biologic drugs using our technology. Shifting to Slide 7 and an update on ESG. At the end of June, we published Our 2021 corporate responsibility report on the company website. We are tracking well towards our 5 year targets, And I'm proud of how our organization has connected our OneWest culture with our ESG initiatives. Speaker 200:06:09We know To fulfill our purpose effectively, we must progress our environmental sustainability goals, diversity and inclusion and success around our charitable efforts. Together, this makes for a better performing company today and into the future. I'm also pleased To share that yesterday, we announced that our Board of Directors has elected Doctor. Stephen Lockhart as our newest member. As the former Chief Medical Officer of Sutter Health in California, his expertise will be a valuable addition to our Board. Speaker 200:06:44Before I turn it over to Bernard, I want to provide some high level thoughts on our updated full year outlook and implied second half twenty twenty two guidance. We have 2 headwinds, FX and slowing COVID-nineteen demand. On the positive, not only has our base business been strong in the first half of the year, but we also expect The generics and pharma market units to perform even better in the second half of the year with additional resources to address the demand dynamics. For guidance, we're taking our overall sales down by $100,000,000 for the full year. Incremental FX There's going to be a $75,000,000 headwind. Speaker 200:07:29In addition, we're seeing a decline in COVID-nineteen demand as compared to our April outlook that assumed modest growth over 2021. While we're seeing some orders For staffers for smaller vials to hold fewer doses, we do not assume a meaningful sales impact in 2022 and expect an overall decline of COVID-nineteen sales of 20% or $85,000,000 from 2021 sales levels. To sum it up, changes in FX and COVID are causing headwinds, well in excess of our 100,000,000 Dollar negative change to full year sales guidance. On the positive side, we're expecting even stronger base business growth In the second half of this year from all three market units of biologics, pharma and generics that is helping to moderate the guidance impact. Now, I'll turn it over the call to Bernard. Speaker 300:08:27Thank you, Eric, and good morning. Let's review the numbers in more detail. We'll first look at Q2 2022 revenues and profits, where we saw another strong quarter of sales growth, led by performance in our Biologics and Generics market units. Speaker 200:08:43I will take you through the Speaker 300:08:44profit drivers in the quarter as well as some balance sheet takeaways. And finally, we will provide an update to our 2022 guidance. First up, Q2. Our financial results are summarized on Slide 8 and the reconciliation of non U. S. Speaker 300:08:59GAAP measures are described in Slide 17 to 20. We recorded net sales of 771 $300,000 representing organic sales growth of 13.1%. Looking at Slide 9, Proprietary product sales grew organically by 18.3% in the quarter. High value products, which made up approximately 73% of proprietary product sales in the quarter, grew double digits and had solid momentum across biologics and Generics market units in Q2. Looking at the performance of the market units, the Biologics market unit delivered strong Double digit growth. Speaker 300:09:42We continue to work with many biotech and biopharma customers who are using West and Daikyo high value product offerings. The generics market unit also experienced strong double digit growth led by sales of FluroTek and Westar Components. Our pharma market unit saw mid single digit growth with sales led by high value products, including NovaPure Components. And contract manufacturing declined 8.9% for the Q2 due to a reduction in sales of components for diagnostic device. We recorded $321,500,000 in gross profit, dollars 6,400,000 are 2% above Q2 of last year. Speaker 300:10:26And our gross profit margin of 41.7% was a 180 basis point decline from the same period last year. We saw improvement in adjusted operating profit with $227,000,000 recorded this quarter compared to $211,200,000 in the same period last year for a 7.5% increase. And our adjusted operating profit margin of 29.4% was a 20 basis point increase from the same period last year. Finally, adjusted diluted EPS grew 0 point Excluding stock based compensation tax benefit of $0.01 in Q2, EPS grew by approximately 4%. So let's review the drivers in both revenue and profit. Speaker 300:11:15On Slide 10, we show the contributions to sales growth in the quarter. Volume and mix contributed $71,700,000 or 9.9 percentage points of growth And sales price increases contributed $23,400,000 or 3.2 percentage points of growth in the quarter. Looking at margin performance, Slide 11 shows our consolidated gross profit margin of 41.7 percent for Q2 2022, down from 43.5 percent in Q2 2021. Proprietary Products 2nd quarter gross profit margin of 46.2 percent was 360 basis points lower than the margin achieved in the Q2 of 2021. The decline in Proprietary Products gross profit margin was caused by inflationary pressures impacting all plant costs, including raw materials, labor and overheads. Speaker 300:12:14Partially offsetting these inflationary headwinds was improvement in our product mix, price increases and pass through surcharges and approximately 90 basis points of benefits associated with one time fees from COVID supply agreements. Contract Manufacturing 2nd quarter gross profit margin of 16.3% was 40 basis points below the margin achieved in the Q2 of 2021. The decrease in margin is largely attributed to mix of products sold in the period. Now let's look at our balance sheet and review how we've done in terms of generating more cash. On Slide 12, we have listed some key cash flow metrics. Speaker 300:12:58Operating cash flow was $324,300,000 for the 6 months ended June 2022, An increase of $91,200,000 compared to the same period last year, a 39.1% increase. Our operating cash flow in the period benefited from increased earnings, our working capital performance and timing of income tax payments. Our Q2 2022 year to date capital spending was $131,900,000 $20,300,000 higher than the same period last year. Working capital of approximately $1,200,000,000 at June 30, 2022 increased by $58,100,000 from December 31, 2021, primarily due to increases in accounts receivable and inventory offset by reductions in our cash. Our cash balance at June 30, dollars 718,500,000 was $44,100,000 lower than our December 2021 balance. Speaker 300:14:03The decrease in cash is primarily due to our share repurchase program and higher CapEx, offset by our strong operating cash flow in the period. Turning to guidance. Slide 13 provides a high level summary. We are updating our full year 2022 net sales guidance and expect net sales to be in a range of $2,950,000,000 $2,975,000,000 Compared to our prior guidance range of $3,050,000,000 to $3,075,000,000 there is an estimated headwind $190,000,000 based on current foreign exchange rates, compared to a prior estimated headwind of 115,000,000 We expect organic sales growth to be approximately 11% compared to prior guidance of approximately 11% to 12%. We expect our full year 2022 adjusted diluted EPS guidance to be in a range of $9 to 9.15 compared to a prior range of $9.30 to $9.45 This revised guidance includes our first half $0.13 EPS positive impact of tax benefits from stock based compensation. Speaker 300:15:22Also, Our CapEx guidance remains at $380,000,000 for the year. There are some key elements I want to bring your attention to as you review our guidance. Estimated FX headwind on EPS has an increased impact of approximately $0.55 based on current foreign currency exchange rates compared to a prior estimated headwind of $0.38 We expect full year COVID-nineteen related sales to be approximately $85,000,000 lower than 2021 sales, and our guidance excludes future tax benefits from stock based compensation. To summarize the key takeaways for the quarter, strong top line growth in proprietary, Growth in operating profit, solid adjusted diluted EPS despite FX and inflationary headwinds and growth in operating cash flow, delivering in line with our pillars of execute, innovate and grow. I would now like to turn the call back over to Eric. Speaker 300:16:25Thank you, Bernard. Speaker 200:16:27To summarize on Slide 14, our performance in Q2 has positioned us well for the second half of the year. We continue to have a strong base business, which is a testament to the foundation we have built over time with the right strategy and execution, Leveraging the benefits of our global operating model to deliver the robust book of committed orders and continue to accelerate capital spending across our operations to meet current and anticipated future growth. Towanda, we're ready to take questions. Thank you. Operator00:16:59Thank Speaker 400:17:08you. Operator00:17:16Our first question comes from the line of Derik De Bruin with Bank of America. Your line is open. Speaker 500:17:24Hi, good morning everyone. Thanks for taking the question. Speaker 200:17:28Good morning, Derek. Speaker 500:17:29Hi. So could you be a little bit more specific on the COVID Headwind, I mean, you called out $85,000,000 versus prior, but your prior guidance included some growth with it. Basically, I'm just trying to make sure Trying to back into a more specific number for the organic revenue growth boost To the core business. It looks like I'm backing into roughly a 3% increase from your prior guide just sort of just like to work the math out a little bit better if you give us a little bit more guide. Speaker 200:17:59Yes. Derek, let me give you a little more color on that. If we think about 2021, our revenues for COVID was approximately $460,000,000 What we're seeing in 2022 based on the current Visibility and discussions with customers, we're looking at about a 20% reduction of that number, which is about $85,000,000 And if we kind of look at and this again is based on the variability that we're seeing in the industry right now. If you think about moving forward for 2023, we do believe by another 30% or Maybe up to 50% reduction of the 2022 number. So that's kind of the glide path we see with COVID 'nineteen demand right now. Speaker 200:18:49This is you are correct. There is an implied base business increase And that's what we're seeing with particularly around biologics and a stronger pharma and generics in the second half. So the ex COVID business, If we would look at the proprietary, it was roughly around 23% growth in proprietary for the 2nd quarter That's robust and that we're seeing that continue for the balance of the year. Speaker 500:19:16Great. Well, thanks for preempting my 2023 COVID question, which is going to be the follow-up to that. So thanks for that. And so I guess the question, but then that also goes to one like have you de risked the number enough for 2022, right? Is there further downside to that, 85,000,000 Speaker 300:19:37Well, based on the information that we have right now, we believe we have derisked it enough. Based on the facts that we see again, COVID is there's always this changing landscape with it depending on what's going to happen this year and probably into 2023, but we have taken a conservative view, I would think around COVID. Speaker 400:20:02Got Speaker 500:20:02it. And it looks like you called out a 90 basis point margin boost to PPE. Was that related to a cancellation fee That might have come in the quarter from COVID projects? Speaker 300:20:14Yes. That's correct. Speaker 500:20:16Okay. And Any issues in terms of I mean, this comes up this is coming up frequently in terms of my incoming questions in terms of customer inventory stocking, Just sort of any signs of anything, I guess, in the supply chain? Speaker 200:20:33And now it's Derek. If you think about Yes. No, Derek, we look at the order book today. One area that we're focused on is the are our lead times. As you can imagine, the last couple of years with the COVID demand, we had to pivot and prioritize in certain parts of our product portfolio. Speaker 200:20:53So our focus right now is reduce lead times back to where they should be. And that's why you You hear us talk about we have capacity that is being installed as we speak, but also into 2023, which will give us More capability to support our customers on the increasing demand we're seeing in particular around biologics And in particular on the higher end of high value products. So that's the focus we have. We don't see Based on the demand and discussions with customers, it's not a large restocking Concept going on right now with the underlying core business. Speaker 500:21:36Great. And just a question from a client, can you just qualify the cancellation fee? How big a number that was? Speaker 300:21:46Approximately Speaker 200:21:48$12,000,000 Speaker 500:21:50Great. Thank you very much. Speaker 200:21:54Thank you, Derek. Operator00:21:57Thank you. Please standby for our next question. Our next question comes from the line of Paul Knight with KeyBanc. Your line is open. Speaker 600:22:16Hi, Eric. Thanks for the time. Regarding the 23% proprietary growth, obviously, we are seeing Biologic approval strong, but one area that seems to be able to get numbers around is Biosimilars, how big is biosimilar benefit in the market and to West? Can you have a Quantitative or qualitative read on the biosimilar tailwinds? Speaker 200:22:52Yes. No, thank you, Paul, for the question. No, we're seeing the benefits of the biosimilar approvals and entry into the marketplaces all over although I I'd say it's relatively small in the scheme of the entire biologics portfolio and there's a High value product adoption. So when you think about the packaging configurations with our biologic customers, It's near identical to what we see with the biosimilars. Speaker 600:23:23And is the trend to single dose syringe Pretty dramatic or changing in your view? Speaker 200:23:32That's one area where we're investing heavily Specifically, give you really specific areas around NovaPure plungers. And that is it Supports what you're saying is that there's a tremendous movement towards prefilled syringes. And in the biologic space and biosimilar space, they're looking for It's a high adoption of Velvepeer. So that's where our investments are going. We have installations going on in 2022, but also in 2023 To start getting ahead of the curve with our customers. Speaker 600:24:04Okay. And then last, Bernard, the FX Guide was $115,000,000 for this year and now it's minus $190,000,000 for the full year. Is that the way we What you said earlier? Speaker 300:24:19That's correct. Speaker 200:24:21Okay. Thank you. Thank you, Paul. Operator00:24:33Our next question comes from the line of Larry Solow with CJS Securities. Your line is open. Speaker 700:24:40Hi, good morning. Thanks for taking the questions. I'm bouncing through on a couple of other calls. Can you just review so for the guidance, so the currency impact is $75,000,000 And then the net sales impact, I guess, is $25,000,000 Did I get that right? It's $85,000,000 less COVID And then you're adding back essentially $60,000,000 plus from the base business. Speaker 700:25:04Is that am I capturing that? Speaker 200:25:07That's correct, Larry. You have that accurate. Speaker 700:25:09Okay, great. And then on the and then you just mentioned you kind of called out, in terms of COVID related sales, vaccine related sales dropping this year, like you said, 20%. And then you think there may be another 50% drop in volume demand in 'twenty three. I think I caught that right. And then the offset to that, obviously, hopefully some offset there would be a move to more to the Pre filled syringes or less doses per vial. Speaker 700:25:37It sounds like a little bit is happening in that in 2022. Can you just give us sort of an update On how you see that transforming in 2023 and as we go on? Are you still confident that we'll see a pretty good The transformation on the COVID side on to single dose? Speaker 200:25:57Yes. Larry, you summarized that well. I just want to add one comment though. The 2023, we do think More of a range, 30% to 50%. Again, there's a lot of variability. Speaker 200:26:07So we're trying to be conservative on our Your point is valid that there is a shift that is starting to occur with less doses per vial. So that configuration is obviously in some cases, in some customers, it's moved from a 20 millimeter down to a 13 millimeter stopper. What we're seeing right now is more in the vial configuration versus prefilled syringe. We see that more into 2023 and beyond. I do want to just state, you're right, there's less doses per vial, which is a net benefit to West. Speaker 200:26:42But the key variable that is very unpredictable right now is the number of patients Taking the dose. And the data is widely available in the market and you're seeing a low uptake as we speak right now, but Yes, to be determined as we get through 2022 and also into 2023. Speaker 700:27:00Yes, please. Speaker 300:27:02I'll add to that. The prefilled syringe uptake that Eric just mentioned when answering the other questions is really within our core business Within biologics, that's where we're seeing a lot of increased demand We move in move through 2022 and into 2023, and that's where we're layering in capacity. So that's for core business. Speaker 700:27:28Right, right. So that big sort of that switch on a macro level, prefilled syringes are certainly It's increasing across the biologic space and not just specifically the COVID vaccine, we're hopeful that will happen and there's certainly some talk of that I'm sure with your But you're talking in general that trend, that multiyear trend, which you've talked about for a while. And then on NovoCure itself, can you just give us like an idea, it I know you don't break out percentages and penetration, but it seems like we're still relatively in the early stages. Can we just can you just like maybe qualitatively Compare like the penetration of NovoPure to say FluroTek or Westar, one of your more highly penetrated HVPs? Speaker 200:28:13Yes, I would say what's commercial in the market right now, the NovaPure is a lower percentage Than the other parts of the high value product portfolio. When you look at the pipeline and or newly approved drugs That are ramping up in the marketplace. There's a higher percentage that's utilizing the NovaPure, particularly around the plungers. And that lines up very nicely to the investments we're making this year and next year that we committed to already to have installation and capacity Expanded quite significantly. So that's where we are in that journey. Speaker 200:28:51While it's a lower percentage, it has Tremendous value proposition to our customers and that's why we see the pipeline is very attractive, particularly in the biologic space. Speaker 400:29:03Great. Speaker 700:29:04And then just lastly, Eric, you spoke a lot about and sounds like you're really enthusiastic about sort of the outlook for The self injectables, and you mentioned, can you just give us sort of an update I know you talked a lot about the CZ and the new 2.25 milliliter insert. Could you just give us sort of an update on SmartDose, where we stand with that and how you see that unfolding over the next few years? Thanks. Speaker 200:29:28Larry, this is an area that we've been working on for a number of years. And what we talked about more recently is our customers are Looking at ways of taking new molecules, but also current molecules in the market reformulate And move it from an IV to a subcu delivery mechanism and particularly around lifecycle management. And that is actually quite exciting. And hence, when you think about I mentioned on the call in the prepared remarks that we now have 3 Combination device approvals with biologics. And so we're starting to gain momentum To start moving products into the commercial environment versus still in development. Speaker 200:30:15When I look at the development Projects we're working on with a number of customers, it is now more gravitating towards the larger volumes, Existing molecules in the marketplace and it's around life cycle management. So it's exciting. I believe we are In a good point in time, there are more work investments needed to occur. And it's going to take some time to get into really Large meaningful revenues, but we're definitely in the right direction with that part of the portfolio. Speaker 700:30:49Great. Excellent. Appreciate all the color. Thanks. Speaker 200:30:52Thank you, Larry. Operator00:30:55Thank you. Please stand by for our next question. Our next question comes from the line of Justin Lin with William Blair. Your line is open. Speaker 400:31:06Hi, good morning. Congrats on the quarter. I'll just start off with Simple One. I guess, do you have any plan I'll just start off with a simple one. I guess, do you have any plans for any further price increases for the rest of the year? Speaker 400:31:25Just trying to get a sense of what's Speaker 300:31:31Well, right now it's continuing with the pricing strategy that we've had As we progress through 2022, where we've done some specific price increases for customers, general price increases, And then we continue to monitor if there are further surcharges that we need to implement as these inflationary costs continue to It does as we move through the second half of the year. And it's something we review On a monthly basis, nothing to announce to say there's any specific increase at the moment. Again, but we are tracking it pretty closely and offsetting As much of that cost increase as we can. And as we've talked about before, there's sometimes a lag as to when we experience the cost Increase itself and then when we can pass it on and again that's something we're working through. But again it's fluid. Speaker 400:32:28Got it. Can you remind us how we should think about margin cadence for the rest of the year? And I guess what are the underlying assumptions around raw material cost, Great. And overall supply chain? Speaker 300:32:40Yes. So we see that margin continue to Step up as we move through the remainder of the year. Again, that's based on what we have been communicating since We gave guidance in February of this year and we will continue to see that happening as we improve our levels of efficiency and layer in extra capacity. Some of the things that we're having to do right now is to replace the COVID Demand that we've just called out that's decreasing with other products and other demand within our network. And we've been started doing that as we progress through Q2 that will continue to Q3 and Q4. Speaker 300:33:29And the demand is there essentially to fill many of our facilities and that growth is reflected in the guidance, it's embedded. Speaker 400:33:38Got it. That's very helpful. And just one last one for me. So longer term, that 100 bps of margin improvement each year, I guess is that predicated on inflation and supply chain pressure easing in 2023? Or can you achieve that without The situation improving. Speaker 400:33:57In other words, will the continued uptick in high value products alone help drive that, obviously, along with sort of That continued increase in efficiency. Speaker 300:34:07Our expectation is that that would be the case. Our target is to Continue to expand margins by 100 basis points. And that's based on what we can see today now, some Black Swan event or something happens, That's outside of our control. That's a different story. But based on what we have in front of us today, the intention is to continue that 100 basis point expansion. Speaker 400:34:34Sounds good. Thank you. Speaker 200:34:36Thank you, Justin. Operator00:34:38Thank you. Please standby for our next question. Our next question comes from the line of Jacob Johnson with Stephens, your line is open. Speaker 800:34:51Hey, good morning. Just one quick housekeeping question first. On the COVID revenue in 2Q, you talked about 23% growth ex COVID in proprietary products. That seemed to imply that the COVID revenues were maybe $110,000,000 in the quarter. Is that in the ballpark? Speaker 300:35:10Yes, it's pretty close. Speaker 800:35:13Okay. Thank you. And then Eric, you mentioned the potential for pharma and generic demand to pick up in the second half of the year and You also mentioned adding some resources there. Can you just talk about the resources you're adding there and were you somewhat capacity constrained for those end markets in the first half of this year? Speaker 200:35:35Yes. So the resources more around the demand, Bill, to deliver on the demand That has been given to us specifically in generics and pharma. And there are discrete customer projects. So we're feeling good about The work that's ahead of us, but we do need to allocate resources appropriately to deliver those demands For the second half of this year, that was the intent of that comment, particularly with Pharma and Generics. So if you take the first half of the year Compared to the second half, those two units will be growing a lot faster than they were in the first half. Speaker 200:36:14So that's I just want to make sure that was clear. That was that's going to be occurring from our plants both in Europe and the United States. Speaker 800:36:24Okay. That's helpful. And then last question for Bernard. Just on R and D expense, they're kind of flattish sequentially. I think if I remember correctly, there are going to be some investments Flowing through the R and D line, maybe around the Corning relationship and some other efforts. Speaker 800:36:39Just how should we think about R and D expense maybe back half of this year into 2023? Speaker 300:36:46Yes, we would expect it to take up in the second half of the year and that there are going to be 2 drivers around that. One is The level of DAs that we're seeing coming through our pipeline and then that's Really on our delivery devices and then also looking at the Corning Glass partnership that we have in place, we'll be adding additional Cost. Again, it's all embedded in the guidance and it's been planned for the year, but that will happen in the second half of the year, more so in Q4 than in Q3. Speaker 800:37:21Okay, perfect. Thanks for taking the questions. Speaker 200:37:24Thank you, Jacob. Operator00:37:27Thank you. Please stand by for our next question. Our next question comes from the line of Dave Windley with Jefferies. Your line is open. Speaker 900:37:39Hi, thanks for taking my question. Good morning, gentlemen. I was hoping to try to shine a little bit more light on the comments around bias toward prefilled syringe, NovaPure Stoppers that or excuse me, NovaPure Plungers that you mentioned, CZ Uptick and work around syringes there, like how much of that is related? Like so As clients want prefilled syringe, is that still predominantly glass and you're supplying what you traditionally have, but in Nova Pure high value or is that also driving uptick in CZ resin Syringes, just anything you can add there would be much appreciated. Speaker 200:38:36Yes. So Dave, good morning. It's CZ is a great application when you start thinking about silicon free. But from what the preference is, is still glass, hence the investments and the work we're doing with partnering with Corning. So there are certain molecules, certain applications that CZ is particularly well positioned for And we're able to capture some of that demand. Speaker 200:39:02Now when it comes to, novapyr plungers, Really the comment is around the glass PFS solution and also more around the biologics and biosimilars Anything else? Speaker 900:39:19Okay. And then Eric, in your comments around addressing shortening lead times, I want to make Sure. I mean, it sounds like the base business is accelerating to I think it was Larry's Bridge or maybe Paul's bridge around the $60,000,000 of the base that makes up for some of the weakness. How much of that is, I'll say, pulling forward activity Cause, space and productive capacity is freed up by the lowering of COVID And to help to shorten lead times for your clients versus kind of underlying steady state flow of demand. Can you help To understand the difference there? Speaker 200:40:10Yes, Dave. Long term construct, we still believe in the 7% to 9%. So when we start talking about 23% in the quarter for proprietary, excluding COVID, That is obviously outsizing that long term construct. There's 2 elements to that. One is we do believe The freeing up some of the capacity, which is obviously not just dedicated to COVID, it will be able to support our core business And to bring some of those lead times in line, it's not the entire portfolio, but specific area and probably more around the high value products. Speaker 200:40:48When you think about the market units, biologics is still really strong. What I mean by that is we think about our order confirmed order book, It continues to increase from the end of last year. And one of the major drivers of that is biologics. And we dig a little bit further. It's a combination of recently launched molecules that are having a very strong success in the marketplace. Speaker 200:41:18And secondly, as new preparing for the pipeline for newly approved drugs that are will be approved or have been approved recently. There is always inventory management going on with our customers. But I would say in the last 2 or 3 years, we were not in a position to be able to oversupply any one particular customer. So we're trying to bring the lead times back in line. That's constant work that we're focused on. Speaker 200:41:42But I want to state that the underlying growth of the business is extremely healthy across all markets, especially biologics. Speaker 900:41:50Got it. Thanks. So I guess to rephrase that last point that you just made. So you're confident that Customers are not, say, stocking because you basically couldn't produce enough for them to overstock. Maybe to flip the question, were they under stocked or I guess a version of that would be Kind of dependent on longer lead times than are comfortable and so you're kind of catching up and getting them shored back up to what normal should be. Speaker 900:42:25It sounds like this is what you're saying. Speaker 200:42:28Yes. Dave, you are correct. There are some cases not across the whole portfolio, but there's some cases Where we with the relationships we've had with our customers is to establish very robust schedules or tight schedules Make sure that we're not creating any issues of availability of material, but there was some of that and we're working through those as we And that's one of the reasons why we highlighted that some of the capital investments that we made committed to That are rolling in this year and also into next year, particularly around NovaPure, is to really alleviate To support the growth in the biologics space and that's definitely needed to get in there to stay ahead of the curve. Yes. Speaker 900:43:17Got it. Speaker 300:43:18The way I would frame it is to bring lead times back to where they are pre COVID and then it's to be able to maintain those lead times As the business is actually growing rather than having the lead times go back out, so that's where we have to layer in the So it's actually managing 2 things at once. It's not just one. So we're seeing this acceleration and growth in some areas of our business and plus Trying to get customers to stop levels where they feel comfortable if that's the case, but that's going to take A period of time, that's not an instantaneous thing. Speaker 900:43:55Sure. And Bernard on your point on layering in the capacity, just to confirm, This change in your or does this change in your COVID expectations change The amount of CapEx investment or the pacing of those projects at all relative to bringing on additional capacity? Speaker 300:44:19The projects that we have right now, it does not change any of those. And the projects that Eric mentioned about, Particularly on the plunger side, we're continuing to layer in that capacity and that's Specifically around growth that's inherent in the market right now and the changes that we're seeing. So there is no change there. And if could actually accelerate that onboarding. That would be more beneficial for us if we could do that because the demand is there today. Speaker 900:44:52Yes. It seems like a strong sign. Last question for me. In regard to Stoppers versus plungers and components that you supply For prefilled syringe, I think you've answered in the past that you're relatively economically agnostic to form factor. Is that True or is there any nuance that we should think about there? Speaker 300:45:21No, That holds true. The economics aren't that vastly different between the 2. Speaker 900:45:29Okay. Thanks. I appreciate you answering all my questions. Speaker 200:45:33Thank you, David. Thank you. Operator00:45:35Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Quintin Lai for closing remarks. Speaker 100:45:45Thanks, Towanda, and thank you for joining us on today's conference call. An online archive of the broadcast will be available on our website at westpharma.com in the Investors section. That concludes this call. Speaker 200:45:58Have a nice day. Operator00:46:00Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) West Pharmaceutical Services Earnings HeadlinesShould You Be Optimistic on West Pharmaceutical (WST)?September 10, 2025 | msn.comWest Pharmaceutical Services, Inc. (WST) Presents At Wells Fargo 2025 Healthcare Conference (Transcript)September 3, 2025 | seekingalpha.comIs Elon's empire crumbling?The Tesla Shock Nobody Sees Coming While headlines scream "Tesla is doomed"... 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Sign up for Earnings360's daily newsletter to receive timely earnings updates on West Pharmaceutical Services and other key companies, straight to your email. Email Address About West Pharmaceutical ServicesWest Pharmaceutical Services (NYSE:WST) is a global leader in the design and manufacturing of drug packaging and delivery solutions for the pharmaceutical and biotechnology industries. The company specializes in elastomeric and polymer components that ensure the integrity and safety of injectable medicines, including vial stoppers, syringe plungers, cartridge-based delivery systems and complete safety-engineered administration devices. With a product portfolio that spans containment and delivery platforms, West supports both traditional small-molecule injectables and advanced biologics. Its offerings include prefillable syringe systems, custom-engineered polymer components and integrated safety systems designed to reduce needlestick injuries and enhance patient compliance. The company also provides design, testing and regulatory support to help customers accelerate development timelines and meet stringent global quality standards. Founded in 1923 and headquartered in Exton, Pennsylvania, West has grown into a multinational enterprise serving more than 200 customers in over 50 countries. The company operates manufacturing facilities, R&D centers and technical service laboratories across North America, Europe and Asia-Pacific. This global footprint enables close collaboration with leading pharmaceutical and biotech firms at every stage of drug development and commercialization. Under the leadership of President and Chief Executive Officer Eric P. Green, West continues to invest in innovation, quality assurance and sustainability initiatives. The company’s long-standing relationships with top global drug makers, combined with its emphasis on engineering excellence and regulatory compliance, have positioned West as a trusted partner in advancing injectable therapies worldwide.View West Pharmaceutical Services ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Celsius Stock Surges After Blowout Earnings and Pepsi DealWhy DocuSign Could Be a SaaS Value Play After Q2 EarningsWhy Broadcom's Q3 Earnings Were a Huge Win for AVGO BullsAffirm Crushes Earnings Expectations, Turns Bears into BelieversAmbarella's Earnings Prove Its Edge AI Strategy Is a WinnerWhat to Watch for From D-Wave Now That Earnings Are DoneDICKS’s Sporting Goods Stock Dropped After Earnings—Is It a Buy? 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There are 10 speakers on the call. Operator00:00:00Day and thank you for standing by. Welcome to the Q2 2022 West Pharmaceutical Services Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Quintin Lai, Vice President, Investor Relations. Operator00:00:31You may begin. Speaker 100:00:34Thank you, Towanda. Good morning and welcome to West's Q2 2022 conference call. We issued our financial results This morning, Eric Green and Bernard Birkett will review our financial results, provide an update on our business and present an update on our financial outlook for the remaining full year of There is a slide presentation that accompanies today's call and a copy of that presentation is available on the Investors section of Speaker 200:01:08our website. Speaker 100:01:11On Slide 4 is our Safe Harbor statement. Statements made by management on this call and in the accompanying presentation contain forward looking statements within the meaning of U. S. Federal Securities Laws. These statements are based on our beliefs and assumptions, current expectations, estimates and forecasts. Speaker 100:01:30The 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 statement 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. Speaker 100:02:21I now turn the call over to our CEO, Eric Grate. Speaker 200:02:24Thank you, Quintin, And good morning, everyone. Thanks for joining us today. We will start on Slide 5. I'm pleased to report That we delivered an excellent second quarter. We grew 13% organically with over 18% organic sales growth In our Proprietary Products segment, our base business continues to have solid demand across all three market units, biologics, pharma and Generics, which more than offsets a slight decline in COVID-nineteen related sales. Speaker 200:02:58And again, Our high value products led the way to this impressive growth. Our continued success highlights the strength The resilience of our proven strategy of execute, innovate, grow, which continues to set us apart as a trusted market leader. It is the strength of our OneWest team guided by our purpose that makes a meaningful difference in ensuring our customers have reliable supply of the components necessary to deliver drugs to patients. An example of our One West culture in action is our team members in China, Who I would like to thank for their inspiring efforts and commitment to our customers during the lockdowns in April May. The relentless focus and our purpose enabled us to reopen our sites and continue to serve our customers with minimal impact. Speaker 200:03:50Now moving to Slide 6. We made great progress in the Q2. Let me briefly share a few highlights. We continue to deliver the key drivers of growth in Q2, primarily driven by our HVP components, including NovaPure, Envision, Daikyo Crystal Zenith and self injection devices, with a strong order book For our Biologics and Generics customers, along with pharma demand ramping up, we are seeing the benefits of our capital spending investments as we optimize productivity across our global operations. Our 2020 capital expansion is now complete And we're driving forward to complete the installation of our 2021 expansion. Speaker 200:04:38Turning to Crystal Zenith. We have been expanding capacity of our 1 ml syringe as our customer uptake has been robust. At the 2022 BIO International Conference, We launched the Dykild CrystalZenith 2.25 ml insert needle syringe system. With the market trend for larger dose injections, We're able to answer the needs of more patients with a safe and reliable containment solution. The new CZ Syringe System will help our customers bring a larger volume of product to patients with fewer or less frequent injections, enabling an easier patient experience. Speaker 200:05:19As we continue to advance the standard of care for patients with our customers, I'm pleased to share that we have a combination drug approved using our newly launched CZ2.25 ml system with targeted customer launch in 2023. In addition, We're seeing good progress with our SmartDose OnBody subcu delivery system and now have 3 FDA approved biologic drugs using our technology. Shifting to Slide 7 and an update on ESG. At the end of June, we published Our 2021 corporate responsibility report on the company website. We are tracking well towards our 5 year targets, And I'm proud of how our organization has connected our OneWest culture with our ESG initiatives. Speaker 200:06:09We know To fulfill our purpose effectively, we must progress our environmental sustainability goals, diversity and inclusion and success around our charitable efforts. Together, this makes for a better performing company today and into the future. I'm also pleased To share that yesterday, we announced that our Board of Directors has elected Doctor. Stephen Lockhart as our newest member. As the former Chief Medical Officer of Sutter Health in California, his expertise will be a valuable addition to our Board. Speaker 200:06:44Before I turn it over to Bernard, I want to provide some high level thoughts on our updated full year outlook and implied second half twenty twenty two guidance. We have 2 headwinds, FX and slowing COVID-nineteen demand. On the positive, not only has our base business been strong in the first half of the year, but we also expect The generics and pharma market units to perform even better in the second half of the year with additional resources to address the demand dynamics. For guidance, we're taking our overall sales down by $100,000,000 for the full year. Incremental FX There's going to be a $75,000,000 headwind. Speaker 200:07:29In addition, we're seeing a decline in COVID-nineteen demand as compared to our April outlook that assumed modest growth over 2021. While we're seeing some orders For staffers for smaller vials to hold fewer doses, we do not assume a meaningful sales impact in 2022 and expect an overall decline of COVID-nineteen sales of 20% or $85,000,000 from 2021 sales levels. To sum it up, changes in FX and COVID are causing headwinds, well in excess of our 100,000,000 Dollar negative change to full year sales guidance. On the positive side, we're expecting even stronger base business growth In the second half of this year from all three market units of biologics, pharma and generics that is helping to moderate the guidance impact. Now, I'll turn it over the call to Bernard. Speaker 300:08:27Thank you, Eric, and good morning. Let's review the numbers in more detail. We'll first look at Q2 2022 revenues and profits, where we saw another strong quarter of sales growth, led by performance in our Biologics and Generics market units. Speaker 200:08:43I will take you through the Speaker 300:08:44profit drivers in the quarter as well as some balance sheet takeaways. And finally, we will provide an update to our 2022 guidance. First up, Q2. Our financial results are summarized on Slide 8 and the reconciliation of non U. S. Speaker 300:08:59GAAP measures are described in Slide 17 to 20. We recorded net sales of 771 $300,000 representing organic sales growth of 13.1%. Looking at Slide 9, Proprietary product sales grew organically by 18.3% in the quarter. High value products, which made up approximately 73% of proprietary product sales in the quarter, grew double digits and had solid momentum across biologics and Generics market units in Q2. Looking at the performance of the market units, the Biologics market unit delivered strong Double digit growth. Speaker 300:09:42We continue to work with many biotech and biopharma customers who are using West and Daikyo high value product offerings. The generics market unit also experienced strong double digit growth led by sales of FluroTek and Westar Components. Our pharma market unit saw mid single digit growth with sales led by high value products, including NovaPure Components. And contract manufacturing declined 8.9% for the Q2 due to a reduction in sales of components for diagnostic device. We recorded $321,500,000 in gross profit, dollars 6,400,000 are 2% above Q2 of last year. Speaker 300:10:26And our gross profit margin of 41.7% was a 180 basis point decline from the same period last year. We saw improvement in adjusted operating profit with $227,000,000 recorded this quarter compared to $211,200,000 in the same period last year for a 7.5% increase. And our adjusted operating profit margin of 29.4% was a 20 basis point increase from the same period last year. Finally, adjusted diluted EPS grew 0 point Excluding stock based compensation tax benefit of $0.01 in Q2, EPS grew by approximately 4%. So let's review the drivers in both revenue and profit. Speaker 300:11:15On Slide 10, we show the contributions to sales growth in the quarter. Volume and mix contributed $71,700,000 or 9.9 percentage points of growth And sales price increases contributed $23,400,000 or 3.2 percentage points of growth in the quarter. Looking at margin performance, Slide 11 shows our consolidated gross profit margin of 41.7 percent for Q2 2022, down from 43.5 percent in Q2 2021. Proprietary Products 2nd quarter gross profit margin of 46.2 percent was 360 basis points lower than the margin achieved in the Q2 of 2021. The decline in Proprietary Products gross profit margin was caused by inflationary pressures impacting all plant costs, including raw materials, labor and overheads. Speaker 300:12:14Partially offsetting these inflationary headwinds was improvement in our product mix, price increases and pass through surcharges and approximately 90 basis points of benefits associated with one time fees from COVID supply agreements. Contract Manufacturing 2nd quarter gross profit margin of 16.3% was 40 basis points below the margin achieved in the Q2 of 2021. The decrease in margin is largely attributed to mix of products sold in the period. Now let's look at our balance sheet and review how we've done in terms of generating more cash. On Slide 12, we have listed some key cash flow metrics. Speaker 300:12:58Operating cash flow was $324,300,000 for the 6 months ended June 2022, An increase of $91,200,000 compared to the same period last year, a 39.1% increase. Our operating cash flow in the period benefited from increased earnings, our working capital performance and timing of income tax payments. Our Q2 2022 year to date capital spending was $131,900,000 $20,300,000 higher than the same period last year. Working capital of approximately $1,200,000,000 at June 30, 2022 increased by $58,100,000 from December 31, 2021, primarily due to increases in accounts receivable and inventory offset by reductions in our cash. Our cash balance at June 30, dollars 718,500,000 was $44,100,000 lower than our December 2021 balance. Speaker 300:14:03The decrease in cash is primarily due to our share repurchase program and higher CapEx, offset by our strong operating cash flow in the period. Turning to guidance. Slide 13 provides a high level summary. We are updating our full year 2022 net sales guidance and expect net sales to be in a range of $2,950,000,000 $2,975,000,000 Compared to our prior guidance range of $3,050,000,000 to $3,075,000,000 there is an estimated headwind $190,000,000 based on current foreign exchange rates, compared to a prior estimated headwind of 115,000,000 We expect organic sales growth to be approximately 11% compared to prior guidance of approximately 11% to 12%. We expect our full year 2022 adjusted diluted EPS guidance to be in a range of $9 to 9.15 compared to a prior range of $9.30 to $9.45 This revised guidance includes our first half $0.13 EPS positive impact of tax benefits from stock based compensation. Speaker 300:15:22Also, Our CapEx guidance remains at $380,000,000 for the year. There are some key elements I want to bring your attention to as you review our guidance. Estimated FX headwind on EPS has an increased impact of approximately $0.55 based on current foreign currency exchange rates compared to a prior estimated headwind of $0.38 We expect full year COVID-nineteen related sales to be approximately $85,000,000 lower than 2021 sales, and our guidance excludes future tax benefits from stock based compensation. To summarize the key takeaways for the quarter, strong top line growth in proprietary, Growth in operating profit, solid adjusted diluted EPS despite FX and inflationary headwinds and growth in operating cash flow, delivering in line with our pillars of execute, innovate and grow. I would now like to turn the call back over to Eric. Speaker 300:16:25Thank you, Bernard. Speaker 200:16:27To summarize on Slide 14, our performance in Q2 has positioned us well for the second half of the year. We continue to have a strong base business, which is a testament to the foundation we have built over time with the right strategy and execution, Leveraging the benefits of our global operating model to deliver the robust book of committed orders and continue to accelerate capital spending across our operations to meet current and anticipated future growth. Towanda, we're ready to take questions. Thank you. Operator00:16:59Thank Speaker 400:17:08you. Operator00:17:16Our first question comes from the line of Derik De Bruin with Bank of America. Your line is open. Speaker 500:17:24Hi, good morning everyone. Thanks for taking the question. Speaker 200:17:28Good morning, Derek. Speaker 500:17:29Hi. So could you be a little bit more specific on the COVID Headwind, I mean, you called out $85,000,000 versus prior, but your prior guidance included some growth with it. Basically, I'm just trying to make sure Trying to back into a more specific number for the organic revenue growth boost To the core business. It looks like I'm backing into roughly a 3% increase from your prior guide just sort of just like to work the math out a little bit better if you give us a little bit more guide. Speaker 200:17:59Yes. Derek, let me give you a little more color on that. If we think about 2021, our revenues for COVID was approximately $460,000,000 What we're seeing in 2022 based on the current Visibility and discussions with customers, we're looking at about a 20% reduction of that number, which is about $85,000,000 And if we kind of look at and this again is based on the variability that we're seeing in the industry right now. If you think about moving forward for 2023, we do believe by another 30% or Maybe up to 50% reduction of the 2022 number. So that's kind of the glide path we see with COVID 'nineteen demand right now. Speaker 200:18:49This is you are correct. There is an implied base business increase And that's what we're seeing with particularly around biologics and a stronger pharma and generics in the second half. So the ex COVID business, If we would look at the proprietary, it was roughly around 23% growth in proprietary for the 2nd quarter That's robust and that we're seeing that continue for the balance of the year. Speaker 500:19:16Great. Well, thanks for preempting my 2023 COVID question, which is going to be the follow-up to that. So thanks for that. And so I guess the question, but then that also goes to one like have you de risked the number enough for 2022, right? Is there further downside to that, 85,000,000 Speaker 300:19:37Well, based on the information that we have right now, we believe we have derisked it enough. Based on the facts that we see again, COVID is there's always this changing landscape with it depending on what's going to happen this year and probably into 2023, but we have taken a conservative view, I would think around COVID. Speaker 400:20:02Got Speaker 500:20:02it. And it looks like you called out a 90 basis point margin boost to PPE. Was that related to a cancellation fee That might have come in the quarter from COVID projects? Speaker 300:20:14Yes. That's correct. Speaker 500:20:16Okay. And Any issues in terms of I mean, this comes up this is coming up frequently in terms of my incoming questions in terms of customer inventory stocking, Just sort of any signs of anything, I guess, in the supply chain? Speaker 200:20:33And now it's Derek. If you think about Yes. No, Derek, we look at the order book today. One area that we're focused on is the are our lead times. As you can imagine, the last couple of years with the COVID demand, we had to pivot and prioritize in certain parts of our product portfolio. Speaker 200:20:53So our focus right now is reduce lead times back to where they should be. And that's why you You hear us talk about we have capacity that is being installed as we speak, but also into 2023, which will give us More capability to support our customers on the increasing demand we're seeing in particular around biologics And in particular on the higher end of high value products. So that's the focus we have. We don't see Based on the demand and discussions with customers, it's not a large restocking Concept going on right now with the underlying core business. Speaker 500:21:36Great. And just a question from a client, can you just qualify the cancellation fee? How big a number that was? Speaker 300:21:46Approximately Speaker 200:21:48$12,000,000 Speaker 500:21:50Great. Thank you very much. Speaker 200:21:54Thank you, Derek. Operator00:21:57Thank you. Please standby for our next question. Our next question comes from the line of Paul Knight with KeyBanc. Your line is open. Speaker 600:22:16Hi, Eric. Thanks for the time. Regarding the 23% proprietary growth, obviously, we are seeing Biologic approval strong, but one area that seems to be able to get numbers around is Biosimilars, how big is biosimilar benefit in the market and to West? Can you have a Quantitative or qualitative read on the biosimilar tailwinds? Speaker 200:22:52Yes. No, thank you, Paul, for the question. No, we're seeing the benefits of the biosimilar approvals and entry into the marketplaces all over although I I'd say it's relatively small in the scheme of the entire biologics portfolio and there's a High value product adoption. So when you think about the packaging configurations with our biologic customers, It's near identical to what we see with the biosimilars. Speaker 600:23:23And is the trend to single dose syringe Pretty dramatic or changing in your view? Speaker 200:23:32That's one area where we're investing heavily Specifically, give you really specific areas around NovaPure plungers. And that is it Supports what you're saying is that there's a tremendous movement towards prefilled syringes. And in the biologic space and biosimilar space, they're looking for It's a high adoption of Velvepeer. So that's where our investments are going. We have installations going on in 2022, but also in 2023 To start getting ahead of the curve with our customers. Speaker 600:24:04Okay. And then last, Bernard, the FX Guide was $115,000,000 for this year and now it's minus $190,000,000 for the full year. Is that the way we What you said earlier? Speaker 300:24:19That's correct. Speaker 200:24:21Okay. Thank you. Thank you, Paul. Operator00:24:33Our next question comes from the line of Larry Solow with CJS Securities. Your line is open. Speaker 700:24:40Hi, good morning. Thanks for taking the questions. I'm bouncing through on a couple of other calls. Can you just review so for the guidance, so the currency impact is $75,000,000 And then the net sales impact, I guess, is $25,000,000 Did I get that right? It's $85,000,000 less COVID And then you're adding back essentially $60,000,000 plus from the base business. Speaker 700:25:04Is that am I capturing that? Speaker 200:25:07That's correct, Larry. You have that accurate. Speaker 700:25:09Okay, great. And then on the and then you just mentioned you kind of called out, in terms of COVID related sales, vaccine related sales dropping this year, like you said, 20%. And then you think there may be another 50% drop in volume demand in 'twenty three. I think I caught that right. And then the offset to that, obviously, hopefully some offset there would be a move to more to the Pre filled syringes or less doses per vial. Speaker 700:25:37It sounds like a little bit is happening in that in 2022. Can you just give us sort of an update On how you see that transforming in 2023 and as we go on? Are you still confident that we'll see a pretty good The transformation on the COVID side on to single dose? Speaker 200:25:57Yes. Larry, you summarized that well. I just want to add one comment though. The 2023, we do think More of a range, 30% to 50%. Again, there's a lot of variability. Speaker 200:26:07So we're trying to be conservative on our Your point is valid that there is a shift that is starting to occur with less doses per vial. So that configuration is obviously in some cases, in some customers, it's moved from a 20 millimeter down to a 13 millimeter stopper. What we're seeing right now is more in the vial configuration versus prefilled syringe. We see that more into 2023 and beyond. I do want to just state, you're right, there's less doses per vial, which is a net benefit to West. Speaker 200:26:42But the key variable that is very unpredictable right now is the number of patients Taking the dose. And the data is widely available in the market and you're seeing a low uptake as we speak right now, but Yes, to be determined as we get through 2022 and also into 2023. Speaker 700:27:00Yes, please. Speaker 300:27:02I'll add to that. The prefilled syringe uptake that Eric just mentioned when answering the other questions is really within our core business Within biologics, that's where we're seeing a lot of increased demand We move in move through 2022 and into 2023, and that's where we're layering in capacity. So that's for core business. Speaker 700:27:28Right, right. So that big sort of that switch on a macro level, prefilled syringes are certainly It's increasing across the biologic space and not just specifically the COVID vaccine, we're hopeful that will happen and there's certainly some talk of that I'm sure with your But you're talking in general that trend, that multiyear trend, which you've talked about for a while. And then on NovoCure itself, can you just give us like an idea, it I know you don't break out percentages and penetration, but it seems like we're still relatively in the early stages. Can we just can you just like maybe qualitatively Compare like the penetration of NovoPure to say FluroTek or Westar, one of your more highly penetrated HVPs? Speaker 200:28:13Yes, I would say what's commercial in the market right now, the NovaPure is a lower percentage Than the other parts of the high value product portfolio. When you look at the pipeline and or newly approved drugs That are ramping up in the marketplace. There's a higher percentage that's utilizing the NovaPure, particularly around the plungers. And that lines up very nicely to the investments we're making this year and next year that we committed to already to have installation and capacity Expanded quite significantly. So that's where we are in that journey. Speaker 200:28:51While it's a lower percentage, it has Tremendous value proposition to our customers and that's why we see the pipeline is very attractive, particularly in the biologic space. Speaker 400:29:03Great. Speaker 700:29:04And then just lastly, Eric, you spoke a lot about and sounds like you're really enthusiastic about sort of the outlook for The self injectables, and you mentioned, can you just give us sort of an update I know you talked a lot about the CZ and the new 2.25 milliliter insert. Could you just give us sort of an update on SmartDose, where we stand with that and how you see that unfolding over the next few years? Thanks. Speaker 200:29:28Larry, this is an area that we've been working on for a number of years. And what we talked about more recently is our customers are Looking at ways of taking new molecules, but also current molecules in the market reformulate And move it from an IV to a subcu delivery mechanism and particularly around lifecycle management. And that is actually quite exciting. And hence, when you think about I mentioned on the call in the prepared remarks that we now have 3 Combination device approvals with biologics. And so we're starting to gain momentum To start moving products into the commercial environment versus still in development. Speaker 200:30:15When I look at the development Projects we're working on with a number of customers, it is now more gravitating towards the larger volumes, Existing molecules in the marketplace and it's around life cycle management. So it's exciting. I believe we are In a good point in time, there are more work investments needed to occur. And it's going to take some time to get into really Large meaningful revenues, but we're definitely in the right direction with that part of the portfolio. Speaker 700:30:49Great. Excellent. Appreciate all the color. Thanks. Speaker 200:30:52Thank you, Larry. Operator00:30:55Thank you. Please stand by for our next question. Our next question comes from the line of Justin Lin with William Blair. Your line is open. Speaker 400:31:06Hi, good morning. Congrats on the quarter. I'll just start off with Simple One. I guess, do you have any plan I'll just start off with a simple one. I guess, do you have any plans for any further price increases for the rest of the year? Speaker 400:31:25Just trying to get a sense of what's Speaker 300:31:31Well, right now it's continuing with the pricing strategy that we've had As we progress through 2022, where we've done some specific price increases for customers, general price increases, And then we continue to monitor if there are further surcharges that we need to implement as these inflationary costs continue to It does as we move through the second half of the year. And it's something we review On a monthly basis, nothing to announce to say there's any specific increase at the moment. Again, but we are tracking it pretty closely and offsetting As much of that cost increase as we can. And as we've talked about before, there's sometimes a lag as to when we experience the cost Increase itself and then when we can pass it on and again that's something we're working through. But again it's fluid. Speaker 400:32:28Got it. Can you remind us how we should think about margin cadence for the rest of the year? And I guess what are the underlying assumptions around raw material cost, Great. And overall supply chain? Speaker 300:32:40Yes. So we see that margin continue to Step up as we move through the remainder of the year. Again, that's based on what we have been communicating since We gave guidance in February of this year and we will continue to see that happening as we improve our levels of efficiency and layer in extra capacity. Some of the things that we're having to do right now is to replace the COVID Demand that we've just called out that's decreasing with other products and other demand within our network. And we've been started doing that as we progress through Q2 that will continue to Q3 and Q4. Speaker 300:33:29And the demand is there essentially to fill many of our facilities and that growth is reflected in the guidance, it's embedded. Speaker 400:33:38Got it. That's very helpful. And just one last one for me. So longer term, that 100 bps of margin improvement each year, I guess is that predicated on inflation and supply chain pressure easing in 2023? Or can you achieve that without The situation improving. Speaker 400:33:57In other words, will the continued uptick in high value products alone help drive that, obviously, along with sort of That continued increase in efficiency. Speaker 300:34:07Our expectation is that that would be the case. Our target is to Continue to expand margins by 100 basis points. And that's based on what we can see today now, some Black Swan event or something happens, That's outside of our control. That's a different story. But based on what we have in front of us today, the intention is to continue that 100 basis point expansion. Speaker 400:34:34Sounds good. Thank you. Speaker 200:34:36Thank you, Justin. Operator00:34:38Thank you. Please standby for our next question. Our next question comes from the line of Jacob Johnson with Stephens, your line is open. Speaker 800:34:51Hey, good morning. Just one quick housekeeping question first. On the COVID revenue in 2Q, you talked about 23% growth ex COVID in proprietary products. That seemed to imply that the COVID revenues were maybe $110,000,000 in the quarter. Is that in the ballpark? Speaker 300:35:10Yes, it's pretty close. Speaker 800:35:13Okay. Thank you. And then Eric, you mentioned the potential for pharma and generic demand to pick up in the second half of the year and You also mentioned adding some resources there. Can you just talk about the resources you're adding there and were you somewhat capacity constrained for those end markets in the first half of this year? Speaker 200:35:35Yes. So the resources more around the demand, Bill, to deliver on the demand That has been given to us specifically in generics and pharma. And there are discrete customer projects. So we're feeling good about The work that's ahead of us, but we do need to allocate resources appropriately to deliver those demands For the second half of this year, that was the intent of that comment, particularly with Pharma and Generics. So if you take the first half of the year Compared to the second half, those two units will be growing a lot faster than they were in the first half. Speaker 200:36:14So that's I just want to make sure that was clear. That was that's going to be occurring from our plants both in Europe and the United States. Speaker 800:36:24Okay. That's helpful. And then last question for Bernard. Just on R and D expense, they're kind of flattish sequentially. I think if I remember correctly, there are going to be some investments Flowing through the R and D line, maybe around the Corning relationship and some other efforts. Speaker 800:36:39Just how should we think about R and D expense maybe back half of this year into 2023? Speaker 300:36:46Yes, we would expect it to take up in the second half of the year and that there are going to be 2 drivers around that. One is The level of DAs that we're seeing coming through our pipeline and then that's Really on our delivery devices and then also looking at the Corning Glass partnership that we have in place, we'll be adding additional Cost. Again, it's all embedded in the guidance and it's been planned for the year, but that will happen in the second half of the year, more so in Q4 than in Q3. Speaker 800:37:21Okay, perfect. Thanks for taking the questions. Speaker 200:37:24Thank you, Jacob. Operator00:37:27Thank you. Please stand by for our next question. Our next question comes from the line of Dave Windley with Jefferies. Your line is open. Speaker 900:37:39Hi, thanks for taking my question. Good morning, gentlemen. I was hoping to try to shine a little bit more light on the comments around bias toward prefilled syringe, NovaPure Stoppers that or excuse me, NovaPure Plungers that you mentioned, CZ Uptick and work around syringes there, like how much of that is related? Like so As clients want prefilled syringe, is that still predominantly glass and you're supplying what you traditionally have, but in Nova Pure high value or is that also driving uptick in CZ resin Syringes, just anything you can add there would be much appreciated. Speaker 200:38:36Yes. So Dave, good morning. It's CZ is a great application when you start thinking about silicon free. But from what the preference is, is still glass, hence the investments and the work we're doing with partnering with Corning. So there are certain molecules, certain applications that CZ is particularly well positioned for And we're able to capture some of that demand. Speaker 200:39:02Now when it comes to, novapyr plungers, Really the comment is around the glass PFS solution and also more around the biologics and biosimilars Anything else? Speaker 900:39:19Okay. And then Eric, in your comments around addressing shortening lead times, I want to make Sure. I mean, it sounds like the base business is accelerating to I think it was Larry's Bridge or maybe Paul's bridge around the $60,000,000 of the base that makes up for some of the weakness. How much of that is, I'll say, pulling forward activity Cause, space and productive capacity is freed up by the lowering of COVID And to help to shorten lead times for your clients versus kind of underlying steady state flow of demand. Can you help To understand the difference there? Speaker 200:40:10Yes, Dave. Long term construct, we still believe in the 7% to 9%. So when we start talking about 23% in the quarter for proprietary, excluding COVID, That is obviously outsizing that long term construct. There's 2 elements to that. One is we do believe The freeing up some of the capacity, which is obviously not just dedicated to COVID, it will be able to support our core business And to bring some of those lead times in line, it's not the entire portfolio, but specific area and probably more around the high value products. Speaker 200:40:48When you think about the market units, biologics is still really strong. What I mean by that is we think about our order confirmed order book, It continues to increase from the end of last year. And one of the major drivers of that is biologics. And we dig a little bit further. It's a combination of recently launched molecules that are having a very strong success in the marketplace. Speaker 200:41:18And secondly, as new preparing for the pipeline for newly approved drugs that are will be approved or have been approved recently. There is always inventory management going on with our customers. But I would say in the last 2 or 3 years, we were not in a position to be able to oversupply any one particular customer. So we're trying to bring the lead times back in line. That's constant work that we're focused on. Speaker 200:41:42But I want to state that the underlying growth of the business is extremely healthy across all markets, especially biologics. Speaker 900:41:50Got it. Thanks. So I guess to rephrase that last point that you just made. So you're confident that Customers are not, say, stocking because you basically couldn't produce enough for them to overstock. Maybe to flip the question, were they under stocked or I guess a version of that would be Kind of dependent on longer lead times than are comfortable and so you're kind of catching up and getting them shored back up to what normal should be. Speaker 900:42:25It sounds like this is what you're saying. Speaker 200:42:28Yes. Dave, you are correct. There are some cases not across the whole portfolio, but there's some cases Where we with the relationships we've had with our customers is to establish very robust schedules or tight schedules Make sure that we're not creating any issues of availability of material, but there was some of that and we're working through those as we And that's one of the reasons why we highlighted that some of the capital investments that we made committed to That are rolling in this year and also into next year, particularly around NovaPure, is to really alleviate To support the growth in the biologics space and that's definitely needed to get in there to stay ahead of the curve. Yes. Speaker 900:43:17Got it. Speaker 300:43:18The way I would frame it is to bring lead times back to where they are pre COVID and then it's to be able to maintain those lead times As the business is actually growing rather than having the lead times go back out, so that's where we have to layer in the So it's actually managing 2 things at once. It's not just one. So we're seeing this acceleration and growth in some areas of our business and plus Trying to get customers to stop levels where they feel comfortable if that's the case, but that's going to take A period of time, that's not an instantaneous thing. Speaker 900:43:55Sure. And Bernard on your point on layering in the capacity, just to confirm, This change in your or does this change in your COVID expectations change The amount of CapEx investment or the pacing of those projects at all relative to bringing on additional capacity? Speaker 300:44:19The projects that we have right now, it does not change any of those. And the projects that Eric mentioned about, Particularly on the plunger side, we're continuing to layer in that capacity and that's Specifically around growth that's inherent in the market right now and the changes that we're seeing. So there is no change there. And if could actually accelerate that onboarding. That would be more beneficial for us if we could do that because the demand is there today. Speaker 900:44:52Yes. It seems like a strong sign. Last question for me. In regard to Stoppers versus plungers and components that you supply For prefilled syringe, I think you've answered in the past that you're relatively economically agnostic to form factor. Is that True or is there any nuance that we should think about there? Speaker 300:45:21No, That holds true. The economics aren't that vastly different between the 2. Speaker 900:45:29Okay. Thanks. I appreciate you answering all my questions. Speaker 200:45:33Thank you, David. Thank you. Operator00:45:35Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Quintin Lai for closing remarks. Speaker 100:45:45Thanks, Towanda, and thank you for joining us on today's conference call. An online archive of the broadcast will be available on our website at westpharma.com in the Investors section. That concludes this call. Speaker 200:45:58Have a nice day. Operator00:46:00Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by