Q4 2020 West Pharmaceutical Services Inc Earnings Call
Call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need the press star one on your telephone please be advised that today's conference is being recorded.
The acquired any further assistance press Star Zero I would now like to hand, the conference over to your speaker of today, Mr. Quintin Lai Vice President of Investor Relations. Please go ahead Sir.
Thank you Catherine good morning, and welcome to West fourth quarter, and full year 2020 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 West pharma Dot com.
This morning, CEO, Eric Green and CFO, Bernard Birkett will review our financial results.
Provide an update on our business and present, our financial outlook for the full year of 2021.
There's a slide presentation that accompanies today's call and a cup of tea and a copy of that presentation is available on the investors section of our website.
On slide for US 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 law.
These statements are based on our beliefs and assumptions current expectations estimates and forecasts the cash.
These future results are influenced by many factors beyond the control of the company.
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 the.
Disclosures made by the company regarding the risks to which of the subject, including our 10-K.
10-Q, and 8-K 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 of the limitations of the non-GAAP financial measures to the most comparable financial results prepared prepared in conformity to GAAP.
Are provided in this morning's earnings release.
Now I'll turn the call over to our CEO and President Eric Green.
Thank you Quintin and good morning, everyone. Thank you for joining us today.
West had an extraordinary year of success in the face of the biggest health care challenge of our generation of record setting year of sales and margins were driven by base business demand of our components devices and solutions as well as the accelerating demand for components associated with COVID-19 back.
Scenes in therapeutics.
This was accomplished by our dedicated team members across the globe working tirelessly to show up each day at our facilities, our labs and remotely at their homes to make a meaningful difference the customers and patients.
I want to begin by acknowledging is incredible efforts and say thank you.
Yeah.
Starting on slide five of the presentation. The past year has truly brought to life of the importance of our mission and values that guides of work each day out west.
We remain steadfast in our purpose to serve society and lead by example for the communities in which we live and work.
Importantly, we continued to manage through these unprecedented times by focusing on two key priorities, one keeping our team members safe and to ensuring uninterrupted supply of high quality containment and delivery devices required by our customers and the patients the jointly serve.
The criticality of our business today as shown in the character and the perseverance of our team members to delivering on our commitments as the trusted partner for our customers and the.
The strength of our performance this past quarter and throughout 'twenty 'twenty demonstrates the forward momentum that we have built over time with our market led strategy globalization of our manufacturing network and one west team approach to satisfy market demand.
Moving to slide six.
These charts show a breakdown of the 'twenty 'twenty sales and the impact of our high value products that we bring to numerous customers around the world.
The base business continues to grow and as we saw growing demand for components associated with COVID-19, we leveraged our global infrastructure and teams agility to meet the increased demand.
Now turning to slide seven.
Proudly west components are on a majority of the vaccines on the market and in development to combat COVID-19 the.
The process for selecting the best high quality packaging components for use with injectable medicines, including vaccines is the complex one driven by years of science, which west has pioneered.
It became clear to us in early 'twenty 'twenty that would we would need to accelerate production capacity for certain high value products.
As I previously shared many of our customers of selecting floor of polymer coded stoppers from vial configurations made by both west and our partner day Q D.
These are the industry standard for packaging sensitive molecules and have an outstanding track record of quality and reliability.
Some of our customers have selected Nova peer.
They have made the decision to use his best in industry component to ensure the highest degree of quality and safety.
In addition, we're involved the many therapeutic approvals and our contract manufacturing business is supporting the COVID-19 diagnostic requirements of our customers.
In Q4, we accelerated our capacity expansion and began the installation of additional equipment with the modular approach to expand floor of tech and Novo pure capacity.
This included the installation of several of 45 ton hydraulic presses and additional H P. P manufacturing processes to produce components for COVID-19 vaccines at several sites I'm proud to say that the first presses were installed and validated at the end of 'twenty 'twenty.
And we're now producing products.
And we're not done yet we are more presses debt will be installed in the first half of this year.
It should be noted that these investments were already included in the five year plan. We just brought them forward to support the pandemic efforts.
Moving to slide eight.
While COVID-19 was much of the focus in 'twenty 'twenty. There are a few other notable highlights I would like to share west was named to the S&P 500, and recently joined the S&P 500 dividend aristocrats.
We continue to make significant progress with our environmental social and governance priorities and have received many accolades in 2020 and for these efforts.
We launched several innovative products such as our 20 millimeter by all of the Big advanced products.
Sell through of component of line extensions and a flip of sealed container closure system compatible with day killed Crystal Zenith vials.
Our team of scientific and technical experts continue to educate and share insights from biologics combination products and container closure integrity, which are priority areas. Some pharmaceutical packaging and necessity. During this pandemic to ensure patient safety.
At the end of the year West Digital Technology Center successfully implemented a new ERP system SAP P. S for Hana, which during this pandemic is quite an accomplishment as we continue to improve our internal systems as for of Hornet brings enhanced analytics to improve response.
Of this operating efficiencies and greater service levels for our customers.
Turning to slide nine.
The opportunity ahead of us centers around three core pillars execute innovate and grow.
The first pillar execute is about continuing to build from the strength and success of the market led strategy for.
Further globalization of our operating model and lastly, a shift from analog to a digital environment across the west.
We continue to drive the market led strategy for further defining unique value propositions to address specific customer needs and biologics generics and pharma is a very attractive robust markets for the future of injectable medicines.
For the benefit of our customers, we have been able to leverage our global manufacturing network by enabling the right capabilities scale and flexibility to keep up with the increased demand with the ability to leverage existing assets more effected the cross our global network, we can respond to the demand of our base business and importantly, the debate.
For COVID-19, while maintaining our global leadership position.
We will continue to deliver digital tools, such as the Dallas Center, and the west virtual along with enhancements to improve plant productivity with the automation and advanced manufacturing systems.
The second pillar is innovating with the focus on R&D efforts with from concept to commercialization.
Our newly aligned R&D team is focused on several areas. The first area of the new products and platforms to connect the dots across science and technology for potential value creation.
The second area is technology Scouting and new go to market and enablement, which explores the adjacent technologies and disruptors to realize new opportunities.
And the third area is product lifecycle management with the execution of development agreements and product extensions. We are confident that these R&D efforts will have us well positioned to deliver a unique innovations and future improvements to existing portfolios for our customers.
The third pillar is growth capital deployment in free cash flow as mentioned earlier, we have increased capital expenditures on specific equipment focused on floor of tech and Nova peer to enable us to respond to the core business growth growth in vaccine requirements.
And is that the vaccines are being approved making sure we can respond and meet the customer demands.
And we continue to look for external technology opportunities to complement our business. We are working from a position of strength as we believe we have a long horizon of continued organic sales growth and margin expansion.
Our focus within these three pillars execute innovate and grow and allows us to be more responsive leverage our assets more effectively and support the trends are happening in the industry today.
Turning to slide 10, and our performance in the fourth quarter and full year.
Our financial results are strong we had approximately 20% organic sales growth in the fourth quarter and 16% for the full year, driven again by robust biologics growth high value products sales and contract manufacturing.
And our base business delivered significant growth with solid gross and operating profit margin expansion.
This resulted in a strong adjusted EPS and free cash flow for the fourth quarter and with that I'll turn it over to our CFO Bernard Birkett, who will provide more detail on our financial performance and guidance a burner.
Thank you Eric and good morning.
Let's review the numbers in more detail. The first look at Q4 2020 revenue the profits, where we saw continued strong sales and EPS growth.
Strong revenue performance, primarily in our biologics and generics market units and contract manufacturing.
I will take you through the margin growth we saw in the quarter.
Well as some balance sheet takeaways.
And finally, we will review our 2021 guide.
First of Q4 financial results are summarized on slide 11 and the.
Reconciliation of non U S. GAAP measures for described in slide 20% to 23.
We recorded net sales of $580 million, representing organic sales growth of 19, 8%.
Covid related net revenues are estimated to have been approximately $46 million in the quarter.
These net revenues include our assessment of components associated with vaccines treatments and diagnosis of COVID-19 patients.
Set by lower sales to customers the effected by lower volume due to the pandemic.
Looking at Slide 12 proprietary products sales grew organically by 25, 1% in the quarter.
I value products, which made up more than 65 per cent of proprietary products sales in the quarter grew double digits and had solid momentum across all market units throughout Q4.
Looking at the performance of the market units the biologic market unit delivered strong double digit growth.
We continue to work with many biotech and Biopharma customers, who are using west and Ikea of high value products offering.
The generics market units also experienced strong double digit growth led by sales of Westar for tech component.
For pharma market unit saw low single digit growth with sales led by high value products, including Westar from Florida Tech component.
And contract manufacturing had mid single digit organic sales growth for the fourth quarter net.
Led once again by sales of diagnostic and health care related of injection device.
We continue to see improvements in gross profit.
We recorded $211 $1 million in gross profit.
$57 9 million or 37, 8% above Q4 of last year.
And our gross profit margin of $36 four per cent with a 390 basis point expansion from the same period last year.
We saw improvements in adjusted operating profit.
With $119 $1 million of quoted this quarter.
Compared to $73 1 million from the same period last year for.
The 62, 9% increase.
Our adjusted operating profit margin of 25% with a 500 basis point increase from the same period last year.
Finally, adjusted diluted EPS grew 63 per cent for Q4.
Excluding stock tax benefit of nine cents in Q4, EPS grew by approximately 55 per cent.
The let's review the growth drivers in both revenue and profit.
On slide 13, we show the contributions of sales calls in the quarter.
Volume and mix contributed 87 points $8 million of $18 seven percentage points of growth.
<unk> approximately $46 million of volume driven by COVID-19 related net demand.
Sales price increases contributed $5 5 billion of 1.2 percentage points of gross and.
And changes in foreign currency exchange rate increased sales by $16 3 million or an increase of three five percentage points.
Okay net margin performance slide.
Slide 14 shows our consolidated gross profit margin of $36 four per cent for Q4 2020.
Up from 32, 5% from Q4 2019.
Proprietary products fourth quarter gross profit margin of 41, 7% with 370 basis points of bulk the margin achieved in the fourth quarter of 2019.
The key drivers for the continued improvement in proprietary products gross profit margin for favorable mix of products sold driven by growth in high value products.
The adoption efficiencies and sales price increases.
Partially offset by increased overhead costs.
Contract manufacturing fourth quarter gross profit margin.
17, 2% was 80 basis points of both the margin achieved in the fourth quarter of 2019.
This is the result of improved efficiency plan for utilization.
Now, let's look at our balance sheet and review, how we've done in terms of generating more cash.
On slide 15, we have list of some key cash flow metrics.
Operating cash flow was $472 5 million for 2020, an increase of $105 3 million compared to the same period last year and.
28, 7% increase.
Our 2020 capital spending was $174 4 million dollar 48 million higher from the same period last year in line with guidance.
Working capital of $873 million at December 31, 2020 was $153 2 million higher than at December 31, 2019.
Primarily due to an increase in accounts receivable of $66 million.
Due to increased sales activity and an increase in inventory of $85 $6 million.
To position us to support the increasing needs of our customers.
The cash balance at December 31 of $615 5 million.
With $176 4 million more than our December 2019 balance primarily due to our positive operating results.
Turning to guidance slide.
Slide 16 provides a high level summary.
Full year 2021, net sales guidance will be in a range of between $2 5 billion and $2 two.
By 252 5 billion. This includes estimated net COVID-19 incremental revenue of approximately $260 million.
There is an estimated benefit of $75 million based on current foreign exchange rates, we expect organic sales growth to be approximately 13% to 14%.
We expect our full year 2021 reported diluted EPS guidance to be in a range of $6 to $6 15.
We continue to expand our H V P of manufacturing capacity at our existing sites to meet anticipated core growth and Covid vaccine demand.
Accordingly, we have said capex guidance of $230 million to $240 million.
There are some key elements I want to bring your attention to as you review our guidance.
Estimated FX benefit on EPS has an impact of approximately 23.
Based on current foreign currency exchange rates.
It excludes future tax benefits from stock based compensation.
To summarize the key takeaways for the fourth quarter.
Strong topline growth in both proprietary and contract manufacturing.
Gross profit margin improvement growth in operating profit margin gross and adjusted diluted EPS.
And growth in operating of free cash flow.
Levering in line with our pillars of execute innovate and grow I'd now like to turn the call back over to Eric.
Great. Thank you Bernard to summarize on slide 17, we have of critical role the to support our customers as we work to resolve this global pandemic.
The participation rate remains very high and our products are being used in this battle, we have strength in the underlying core business and long term growth our focus on execute innovate and grow allows us to be more responsive to the changes in the industry.
Our market led strategy is delivering the right products and solutions to our customers. Our global operations. The network continues to flex and respond the increased demand and capacity requirements and our investments to fuel R&D and innovation and digital technology will continue to keep us on the forefront of the industry.
<unk>.
The future is promising but most importantly, we remain grounded by our mission and values each day at West because every component has the patient's name on it.
Katherine we're ready to take questions. Thank you.
Thank you as a reminder, task of question you'll need the press star one on your telephone.
Our first question comes from Larry Solow with CJS Securities. Your line is open.
Great. Good morning, guys and congrats on the great quarter and year tough environment. Thanks for taking my questions as well.
Maybe first question.
Could you maybe just give us a little more color on just on the Covid expectations.
Did about 100 million if I'm not mistaken the 2020, maybe a little less.
The 250 or $2 60 is your guidance for this coming year can you just give us a breakout is it you're seeing more on the vaccine side you mentioned some customers are using.
It sounds like most of the goes in Florida on the vaccine side some of our looking at Nova North of your could you give us just sort of a.
Ohio of level, maybe just the mix and any color you can add to that would be great. Yes.
Thank you Larry and I appreciate the question when we started this journey, let's say in the end of Q1 early Q2.
Of 2020, the primary of focus at that point from a from revenue was more around the diagnostics.
And in a few of therapeutics that are being approved.
For the kind of the COVID-19, and if you look at the tail end of 2020, it started to flip more towards vaccines and as we move into 2021, you'll see most of you going from as you said the little bit less than $100 million of of revenue.
The revenues associated to COVID-19 in 2020, and we're guiding towards 260 million of approximately for 2021 majority of that will be vaccines related.
And our participation is very high and the types of solutions that we're bringing to the customers tend to be around the floor of tech and in some cases that novo here.
In addition to products like the sales. So that's the transition that you'll see in the in the mix of type of revenues to support the COVID-19 solutions and that it lines up very nicely to the investments we've made.
With the additional capital equipment in our facilities to support the increase in demand that we have visibility of for a several quarters ahead of us.
Okay and it sounds like I know you said you have accelerated you talk just for a couple of quarters the investment into Novo tour and Westar the.
The floor of tech is that.
The acceleration of the continued acceleration of that looks like going into 2022.
So on the 'twenty one excuse me is that sort of ahead of where you thought you might have been even a quarter ago in terms of the outlook for next year for this year spending was.
Well no. We're actually slightly ahead of schedule of implementation because of the team's done a phenomenal job working with our suppliers.
And being innovative and getting the materials into our sites are the the equipment and then obviously the validation process. So they've been working literally around the clock as many companies are doing.
To get these lines up and running and validated but the reality is with the new equipment. We install we didn't have a lot of revenues associated to those in.
In 2020, that's starting to pick up in 2021. There is additional equipment that is scheduled in the first half of this year, which is an on track.
And then also what's in line that we originally talked about pars capital expenditures. So we're comfortable where we are and further conversations with customers gives us confidence that our that we're planning accordingly, looking at current demand and potentially future demand.
And it looks like if I do the the back of the envelope math, it's about 10% growth excluding.
It's like we take out of Covid from 2020 in 2021, and I guess that's.
Excluding the currency benefit I guess that sort of puts you in line with your sort of 6% to 8%.
Organic growth targets, excluding the COVID-19 related sales is that about the ballpark.
Yeah.
Correct Larry.
We still see it.
A lot of strength within the core business and you know as Eric book kind of alluded to in his comments also.
All of that debt throughout 2020, and we continue to see that as we move through 2021.
And then you have the Covid vaccine revenue on top of that.
So you are in the ballpark there so that continues to be pretty much in line with our long term construct.
Thank you. Our next question comes from one of <unk>.
Moving Donald with Bank of America. Your line is open.
Hello, gentlemen.
And congrats on the quarter.
Great. Thank you.
According to my calculations.
The there was any customer reclassifications of among the customer segments.
Generics grew about 42% year over year, and I would suppose that all of the versus non COVID-19 related can you confirm with me whether or not this is correct and what drove the significant step up.
John Generics was.
I think high single digits or the double digits.
Where youre getting did you say, 42%.
Oh, yeah, Okay got it I'll check my math on value.
At this time.
Okay.
Good and then.
Can you give us an idea about the backlog of committed orders as of the end of 2020.
Yes.
When we looked at the backlog we have.
I'll say, the it's stronger than it was the prior year in the mix of it is more towards the high value products. The other aspect of the order.
Order book is that where we're having great success with the customers having longer visibility.
So we have better opportunities to plan accordingly, and our manufacturing processes. So yes, it's a stronger order book the.
Of the mixes more towards are of high value product components.
And we do have longer.
Our outlook and obviously on top of that that's our core business on top of that you had the vaccines and in addition, the visibility of what we are responding to over the next several quarters.
Thank you and I guess theres been some evolving changes that could happen on the COVID-19 vaccine packaging configurations, I mean Pfizer.
You know, Matt squeeze in the fixed doses out of the five dose vial and Mcdarrah now might be considering putting for two doses.
As opposed to the 10.
By doing some configurations have you have you taken into account this potential changes.
The packaging configuration in your COVID-19.
Revenue guidance.
Yes, that's all that's all been taken into consideration with our guidance and so there's two ways of looking at it.
It's great that we're able to get.
The the more doses per per vial to bill too to respond.
Globally as quickly as possible, but as you think about long term.
Theres, obviously future opportunities as you think about moving down to a single use vials and or pre filled syringes, which will potentially could become a preferred solution long term.
So we've taken all of that into consideration we feel good about where we are with our capacity and our capabilities.
And also where we're engaged with the dialogue about what does this look like long term.
Okay. Thank you and then before I get back into the queue I guess under contract manufactured products.
The plan to add capacity in 2021.
And is there a chance for that segment not to actually deliver.
The double digit growth in 'twenty and 'twenty, one or most of you have capacity.
Yeah well.
We've been talking about the growth in contract manufacturing for a while as the saying that it will grab of tweak tour towards mid single digit growth.
It wouldn't be at the double digit growth rates, we've seen over the last number of years, just given the nature of that business.
We continue to invest in it as part of our Capex forecast for 2021, and there's a number of growth initiatives in that area.
In book, but we have been communicating that the gross rate will become more in line with our overall of construct but I think if you look at Q4 of the Q4 number.
The absolute dollars was pretty consistent throughout the year with contract manufacturing that just came up against the really big comp in Q4, so the percentage growth rate looked a little bit of lighter than the previous quarters.
But from a dollar perspective, it's pretty much in line with where we have expected it to be from where we have communicated will be.
But we continue to invest in the part of our business.
Okay got it thank you.
Thank you. Our next question comes from Paul Knight with Keybanc. Your line is open.
Hi.
Could you talk to.
<unk>.
Bernard you had mentioned that there was a negative COVID-19 effect could you qualify that and is it possible, but even quantify how much.
Headwind you had.
In your past results.
Well, we haven't really broken it out.
We're concentrating on given the the net impact to our business both of its really been.
In animal health.
And some in dental which those two areas are within our follow the market unit, that's where we saw some slowing down it wasn't overly material for US and then I think there was some elective surgeries as well that will impact us but nothing.
Drastic debt that we would have to call out.
Right and then Eric if you look at these capital the band it expenditures.
John.
Do you have a footprint that you can turnaround and done quickly or do you have to go from <unk>.
Greenfield sites.
I guess ultimately how quickly does this come on line.
Quickly Paul the work that has been done by the team over the last couple of years.
The globalizing the operations and and as you know we moved from 29 plants to 'twenty five plants.
<unk> has enabled us to think about future growth.
The leverage our existing assets. So it's a very short turnaround the the longest part of the lead time is around getting the equipment built and then Theres obviously.
Validation process associated to that but.
All of the equipments being put into existing facilities.
And then lastly, Eric for you in your your progress on your goal of.
John.
Fixed Sigma if I can call it that.
From when you started are you halfway there or third of the way there or what's your view on.
What you wanted to accomplish when you arrived.
Yes.
There's a lot more to do Paul.
I honestly believe we're in a very good position to leverage not just what we do today, but what we can do tomorrow for our customers were pulled into conversations or beyond.
Our current portfolio we have.
More work to do on globalization of the enterprise, we have a great opportunity to move towards more digital I'm extremely pleased on how the team implemented as for Hana during this pandemic and the virtual environment.
Globally, and that's quite a test and that was done with our internal digital technology center out of our Bangalore site. So you can the ear by my tone of theirs I think there's a lot of opportunity for us to really have a more meaningful impact on patients.
And the bill support our customers as the as they move towards new innovative solutions and particularly around the biologics space.
Okay. Thank you.
Thanks, Paul.
Thank you. Our next question comes from Jacob Johnson with Stephens. Your line is open.
Hey, Thanks, maybe first following up on Paul's headwind question as things hopefully reopen kind of falling of vaccine people are turning to the doctor and dentist I guess, taking their pets.
So to the veterinarian have elective surgeries could there be upside to your expectations around growth in 'twenty and 'twenty, one kind of ex COVID-19.
When that opened in the question of if those things happened, yes, David get let's say there will be some level of upsides.
But we're focused on delivering.
Within the cost structure and state guidance that we've given now and making sure that we're able to deliver on that vaccine demand to get everything back to normal and then if the markets open up yes, we will have the capacity in place to be able to serve those also.
Got you and then.
Covid work can you talk about where youre seeing demand.
From the these COVID-19 vaccines and therapeutics by geography is this largely focus on kind of an opportunity in the U S and Europe or is this the situation where there could be opportunity in kind of Asia Pacific as well.
Global so.
So some of the firms obviously the the.
The ones that are proven in the market right now for emergency use.
They are not just from the United States, but the partners in other regions of the world.
And so we unfortunately know because of our position and our assets are global we're able to support them. So if the they decided to do it internally or externally with the partner, we're there to support them with their primary containment solutions.
So we're seeing.
If you think about it in the Asia, Theres, probably a little more pre filled syringe.
The demand in the market, particularly in China.
And in Europe, and in Asia is pretty consistent on the vial configurations, but its and its consistent products that we provide throughout all of these customers. The Florida Tec coating is primarily the main driver.
Got it thanks for taking the questions and congrats on the quarter. Thank.
Thank you for you.
Thank you. Our next question comes from John Kreger with William Blair. Your line is open.
Hey, guys. The question, obviously at the beginning of 'twenty, you Werent thinking about.
Covid demand.
How have you been able to handle your non Covid work have you had to sort of defer that underlying order flow or have you been generally able to keep up with the sort of typical non COVID-19 orders.
In general we've been able to keep up however, I would say there are times, where we had to engage with our customers to identify.
If we had to pivot and respond to a particular of Covid order.
How we work with our customers since we're make to order.
And our customers have been very supportive.
The supportive, but the most part we've been able to respond.
Just to put it in context, just sort of a proprietary business, we do over 30 billion components of the year.
So when you think about the demand that we're putting other operations with the additional day.
Demand for for for.
Covid solutions.
It's meaningful but it's not over.
The tax and the the global operations.
Thanks, Eric that's helpful and then maybe the corollary to that.
As you work with clients kind of upstream in the pipeline work are you getting the sense that.
Some of that work has been back Bernard is the <unk>.
As they sort of sprint to meet the Covid challenges or again has the normal flow of non COVID-19 work been pretty pretty stable in terms of the development process its interest in.
We're finding if you kind of look in the mirror a little bit what has been approved by the FDA in 2020 versus 1918, what youll find is pretty somewhat consistent.
And which is interesting because we do work with certain customers there might be of particular delay in clinical trials and so forth, but we're seeing a relatively rare.
The relatively stable consistent.
The pattern as we speak today.
And on top of that we look at our participation rate.
It remains equal if not better if you just and that's taking the vaccines out of the equation on the core business. We're seeing a very strong participation rates. So we're not we're not seen too much of a deviation of what we've seen in the last couple of years.
Great. Thanks, and then one last one can.
Can you just remind us why generics tends to grow notably faster than pharma and as you look out.
122 does it do you think youll see the same trend or a little bit more of the normalization of those two buckets.
Yes.
The two comments, maybe Bernard if you want to add but the first one is if you think about where we started with on this market led approach. It became apparent when we started a few years ago that the generic market. You know it was the lower market share amongst the three so we had better we had a greater opportunity to.
Two to capture more share of just by simply repositioning new portfolios like et cetera that are very attractive to that segment.
So and the other aspect just remind mind you of is the pharma business includes dental includes that includes other ancillary segments outside of just branded small molecule and therefore, you'll see a little bit more of a softness.
And in that in that business, but we're seeing the number of Andas continued to be very strong which is what drives the generics business.
For for West Bernard if you want to add any comment to that.
I'm thinking of encapsulated. It's yes, it's all market share is different within those two market units and theirs.
More room for us to grow within generics as Eric said we.
When you put the market units in place it allows us to focusing on that area and start to grow our business within generics and that continues to be the case.
And we still have a pathway forward to continue that.
The accelerated growth and then we're introducing new products also to help us too.
We'll get more entrenched with engine the generics market space.
Great. Thanks, and maybe just one last one of the Cove.
Of the contribution that you've quantified for 'twenty, one as you think about longer term planning do you view that as sort of durable or more of a kind of bolus that will likely decline in 'twenty, two and 'twenty three.
The other one of the things that we've looked at is the mix of our of Covid related business and as Eric said earlier started out more on the diagnostics and therapeutic site as we went through.
The first half and the first of call it three quarters of 2020 and that of more.
It had become larger within vaccines and we have been communicating that we call. It the vaccine will be where Westwood see the biggest.
Opportunity for us and that's reflected in our 2021 guidance. So it's really how does the vaccine play average over the next number of years, what sort of booster shots will be required.
So that's the that's.
That's how we're.
Trying to frame and building that into our planning.
So it's obviously.
How does that vaccine.
Market develop over the next number of years of will boosters be required, but thats, primarily where we're participating right now.
Understood. Thanks, guys. Thank.
Thank you.
Thank you. Our next question comes from Dave Windley with Jefferies. Your line is open.
Hi, good morning, Thanks for taking my questions and thanks to your your team as well I hope to get a vaccine soon so I'm one of the we're all one of the patients. So thanks for their hard work.
I was hoping you probably have a series of clarifications. So.
In in.
In your Covid vaccine or your excuse me your Covid contribution.
221.
<unk>.
As I'm listening to you describe how that has has kind of evolved in the last quarter or so should I interpret that the 100 million.
Of kind of base in 'twenty stays in that same mix and the vaccine is the 160 contribution on top of that or does most of the $2 60 actually then become vaccine as we move into 'twenty one.
Yes, it's primarily.
The growth we see the within the vaccine segment and as we said the there was a lot of them. The therapeutics is.
Within 2020 in the early part from people, who are trying to figure out how to.
Treat this thing.
And then that that shift is the.
As we got into the latter part of the year and so now more of the focus is around vaccines for US there is some within therapeutics little bit in diagnostics, but it's primarily vaccine related okay got it and then too.
Sorry.
Go ahead.
To Jacob's question on global on your answer there it.
It sounds like your clients are making high value product choices globally did I understand that correctly or.
Or are you seeing them kind of down shift to standard in say developing economies things like that.
We're seeing consistency, Dave around our high value products, particularly around the floor of tech.
Just because of the characteristics of the of the vaccine their molecule itself. So we're.
We're not seeing any.
Reduction I guess, if you want to call out from from the the high value products.
Portfolios. So it truly is H P P globally.
Sure that sounds great and in terms of then broadening out from Covid.
Or is is this experience as the last year and the ability to kind of I mean I'm sure clients are familiar with these products, but your ability to kind of respond quickly the clients to ramp up your capacity for these high value products is that.
Stimulating.
Higher adoption of high value in the non COVID-19 opportunities with these clients I'm, just wondering what kind of knock on effect that might create in your conversations with clients yes.
Yes, if you look at our biologic portfolio as you know we are of very high participation rate there so that tends to be.
Primarily around our Florida.
Platform.
But to your point, we are seeing an acceleration of the conversations around all of them here.
Because now because of the scale and.
A greater understanding of the of the characteristics of the primary packaging containment so as they look at vaccine, but sort of.
That will spill over to more of a platform approach going forward, that's how we see it.
That's why we're continuously building and pushing for.
Helping our customers get to that notebooks here of conclusion with their new molecules that they're working on.
Interesting so that kind of segways into my last question, which is.
Can you give us some sense I mean, I think two or three years ago.
And really throughout this period of time, we've talked about high value products as a percentage, but within the high value products. You. You. Obviously have many tears no of appear at the higher end can you give us a sense of how the mix has shifted within the high value products from kind.
Kind of Westar and at the entry level and Nova peer at the high level, how does how does that evolution look if we could see that detail.
Yes, we don't we don't give out the exact numbers for each area, but what you would see if you look at if you recall that a while ago. We show the kind of a spectrum of all of the high value products from as you were at least sudden west are already up to Nova peer of what Youre seeing is the higher growth and now as you know of higher Delta on revenue is in the upper right hand.
Side versus the lower rate lower left side.
So to your point, we are seeing that adoption, we're starting to see the volume.
And as you know with our business the thing as well for getting to get that adoption.
And then build it into the port of the platform of our customers. So the the higher growth is in the upper of hand side of that of that spectrum.
Okay I'll leave it at that thank you.
Thank you.
Thank you and I'm showing no further questions at this time I would like to turn the call back to Quintin Lai.
For any closing remarks.
Thank you Catherine and <unk>.
Thank all of you for joining us today on <unk>.
Today's conference call an online archive of the broadcast will be available on our website at west pharma Dot com in the investors section. Additionally, you can get a replay through Thursday February 25th.
Using the dial in numbers and conference I'd provided at the end of todays release that concludes this call have a nice day.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Okay.
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Bill.
The.
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