Q3 2022 West Pharmaceutical Services Inc Earnings Call
Good day and thank you for standing by welcome to the Q3 2022 West Pharmaceutical services earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a.
Question during the session you will need to press star one one on your telephone.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Quintin Lai Vice President of Investor Relations. Please go ahead.
Thank you Gigi good morning, and welcome to US third quarter 2022 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, Eric Green and burning Briquette will review our financial results provide an update on our business provide an update on our financial outlook for the full year of 2022, and an introduction to a preliminary 2023 outlook.
There is a slide presentation that accompanies today's call and a copy of that presentation is available on the investors section of our website.
On slide four is our safe Harbor statement statements made by management on this call and in the accompanying presentation 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 company's future results are influenced by many factors beyond the control of the company actual results could differ materially from past results as well as those expressed or implied in any forward looking statements made here. Please.
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-K 10-Q and 8-K reports.
During today's call management will make reference to non-GAAP financial measures, including organic net sales adjusted operating profit adjusted operating profit margin and adjusted diluted EPS.
Conciliations and limitations of the non-GAAP financial measures to the most comparable financial results.
<unk> in conformity to GAAP are provided in this morning's earnings release I will now turn the call over to our CEO Eric Green.
Thank you Quintin and good morning, everyone. Thanks for joining US today, we will start on slide five.
I'll begin by covering three main topics first examined and the drivers of lower than expected Q3 results.
Examining the impact to Q4 and third providing color on our current view of market demand and projecting a preliminary sales outlook for 2023.
Let's begin with Q3 as expected we had a few drivers in the quarter that materialized, we had headwinds from FX, we had declining sales in contract manufacturing and we had a decline in COVID-19 related sales of about $20 million from last year.
If we exclude the headwinds from Covid proprietary organic sales grew over 11%.
This performance was below our expectations for the quarter.
When we provided guidance on the two Q2 earnings call. We projected that we would be able to shift resources, formerly dedicated to pandemic related production to other <unk> products that are experiencing increased demand specifically.
Specifically, we plan to successfully address this transition by accelerating customer orders for Nova peer Plunger's and fulfilling customer AWP orders originally requested for this year, but pushed to 2023 because of longer lead times.
These two factors were the underlying drivers to our guidance of strong double digit base organic net sales.
In Q3, and Q4 instead as the quarter progressed, we underestimated the complexity of the transition and we're impacted with a series of setbacks related to capacity constraints and mix shift productivity.
Much of our vaccine stoppers, we're going to fewer customers with fewer skus. This enabled high productivity and throughput with our <unk> network when transitioning to Nova peer Plunger's. We're now are addressing demand coming from numerous customers addressing drugs across numerous diseases.
More skus. The end result is lower throughput through our existing HCP manufacturing sites and compounding the situation further as the quarter progressed, we had a reduction in capacity and our HCP operating network through a combination of equipment downtime in Prague.
<unk> delays rated related to the installation of HCP processing equipment, we have.
Estimate that the total negative impact to Q3 was $30 million.
While we see these issues as temporary and expect full resolution in 2023, they will continue to impact us in Q4.
As we look at the capacity constraints, we project that additional HCP processing capacity will come online early next year based on the timeline to install and validate the newer technology.
Since we are already running at full capacity. We're also are unable to address the additional demand coming from long lead time items in Q4.
Altogether, while we still expect our base business ex COVID-19 to grow more than 10% in Q4, we will not be able to offset the expected $80 million reduction in COVID-19 sales, while I'm disappointed that we're lowering our forecast for the rest of 2022 I want to stress.
S that these issues are all supply related and then not demand related.
Moving to slide six.
Our robust order book of committed orders, excluding declining COVID-19 related demand grew 20% year over year.
Our customers have reiterated that they're looking to us to deliver the critical components and devices to address the growing injectable drug demand and we are we have several customers that have notified us a potential upside demand, especially for Nova peer plunger's beyond our current order book based on future drug launch.
<unk>.
As we look at 2023, we are confident and expect most of the capacity issues will be resolved early in the year.
Taken a reasonable view on capacity expansion and customer delivery timing. Our preliminary look at 2023 includes the following projections first we now assume that COVID-19 sales will decline to a full year 2023 sales of approximately $90 million or a <unk>.
75% decline from 2022.
This is based on current customer forecasts, which we believe assumes the continuation of current trends and covert booster demand.
We expect non COVID-19, overall base business to grow in the double digits.
And in excess of our financial construct of 7% to 9%.
Based proprietary products are expected to grow in the low teens led by biologics and we expect <unk> sales to rebound to growth next year.
Our participation rate and recently approved new molecular entities in the U S and Europe remains strong our components by west or our partner <unk> are specced in almost all the biologics and Biosimilars approved so far in 2022 and majority of small molecules approved.
Adding it all together our preliminary view is that we will have positive organic sales growth in 2023, despite an anticipated decline of approximately $280 million of COVID-19 sales.
We will provide more detailed guidance on our Q4 call in February of next year.
Now shifting to slide seven and some highlights from the quarter.
An example of this dedication resiliency was evident in the recent response to the Hurricanes that devastated Puerto Rico, and Florida, Despite the personal impact to our team members to ensure that our plants continued to produce and ship product with minimal impact.
We continue to make good strides with the opportunity to improve at home management of diseases.
I am pleased to share that earlier this month, our customer <unk> Pharmaceuticals received FDA approval for <unk> delivered via on body Infuser utilizing west Smart <unk> antibody drug delivery technology.
This brings us to four FDA approved drugs using our smart dose technology.
Our strategic collaboration with Corning is moving along we anticipate that in Q1 2023, west ready Pac system with Valor glass vials, a ready to use sterile packaging system for use with Nova peer stoppers will be available to customers.
Lastly, our west experts are pleased to be back in person at recently held PDA conference in upcoming CPA Chai worldwide showcasing our leadership with new scientific insights and technical developments across our portfolio of high quality drug delivery and devices.
Moving to slide eight.
With our capital spending investments initiated in 2020 for the larger capacity expansion. We continued to drive forward to complete the installation of our 2021 expansions and initiated the next tranche of investment earlier this year.
They do not happen overnight, we are making good progress and expect all of these investments will result in several billion units of increased capacity for our AWP components now I'll turn our call over to Bernard.
Thank you Eric and good morning, So let's review the numbers in more detail.
First look at Q3, 2022 revenues and profits, where we saw mid single digit organic sales growth led.
Led by performance in our biologics and generics market units.
I will take you through the profit drivers in the quarter as well as some balance sheet takeaways.
And finally, we will provide an update to our 2022 guidance.
First up Q3, our financial results are summarized on slide nine and the reconciliation of non U S. GAAP measures are described in slides 18 to 21.
Looking at Slide 10 proprietary products sales grew organically by five 5% in the quarter.
High value products, which made up approximately 72% of proprietary product sales in the quarter grew mid single digits and had growth across our biologics and generic market units in Q3.
Looking at the performance of market units, the biologics market unit delivered mid single digit growth.
We continue to work with many biotech biopharma customers, who are using western <unk> high value products.
The generics market unit also experienced mid single digit growth led by sales of Westar components.
Our pharma market unit saw low single digit growth with sales led by high value products, including Nova pure Westar components.
And contract manufacturing declined one 2% for the third quarter due to a reduction in sales of components for diagnostic devices.
We recorded $268 million.
And gross profit $20 2 million or 7% below Q3 of last year.
And our gross profit margin of 39% was a 180 basis point decline from the same period last year.
We saw a 2% increase in adjusted operating profit was $186 4 million recorded this quarter compared to $182 8 million in the same period last year.
Our adjusted profit and profit margin of 27, 1% was 120 basis point increase from the same period last year.
Finally, adjusted diluted EPS declined <unk> <unk> for Q3, excluding stock based compensation tax benefit.
<unk> increased by approximately <unk>.
And foreign currency negatively impacted our EPS by approximately <unk> 16 in the quarter.
Let's review the drivers in both our revenue and profit performance on.
On slide 11, we show the contributions to sales decline in the quarter.
Volume and mix decreased by approximately $1 million in the quarter net of approximate $20 million decrease in cobot sales sale.
Sales price increases contributed $31 1 million or four four percentage points in the quarter.
Foreign currency generated approximately $49 $8 million headwind on our revenue in the quarter looking at margin performance Slide 12 shows our consolidated gross profit margin of 39% for Q3 2022 down from 48% in Q3.
'twenty one.
Proprietary products' third quarter gross profit margin of $43 six was 270 basis points lower than the margin achieved in the third quarter of 2021.
The decline in proprietary products gross profit margin was caused by a few key factors.
Delays in equipment expansion projects, which led to production bottlenecks in certain.
Cluster and meeting certain customer demand.
Customer demand mix shift led to a greater than anticipated impact due to the delays mentioned above.
Partially offsetting these headwinds on our margin where sales price increases.
180 basis points of benefit benefit.
Associated with onetime fees from Covid supply agreements.
Contract manufacturing third quarter gross profit margin of 17, 3% was 120 basis points above the margin achieved in the third quarter of 2021.
The increase in margin is largely attributed to price increases in the period and production efficiencies.
Now, let's look at our balance sheet and review, how we've done in terms of generating more cash for the business.
On slide 13, we have listed some key cash flow metrics.
Operating cash flow was $493 2 million for the nine months ended September 2022, an increase of $70 million compared to the same period last year, a 16, 5% increase our operating cash flow in the nine months period benefited from our working capital performance.
<unk>.
Our third quarter 2022 year to date capital spending was $189 7 million $12 8 million higher than the same period last year.
Working capital of approximately $1 $2 7 billion of timber.
Timber 32022 increased by 129 million from December 31, 2021, primarily due to increase in inventory and reductions in our accounts payable.
Our cash balance at September 30 of $729 million.
It was $33 6 million lower than our December 2021 balance.
The decrease in cash is primarily due to our share repurchase program of.
$43 $7 million scheduled payments of debt principle and interest in the third quarter and higher capex offset by our operating cash flow in the period.
Turning to guidance Slide 14 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 83 billion to eight 4 billion.
Compared to our prior guidance range of $2 95 billion to $2 97 5 billion.
There is an estimated fourth quarter headwind $60 million based on current foreign exchange rates.
We expect organic sales growth to be approximately 7% compared to prior guidance of approximately 11%.
We expect our full year 2022, adjusted diluted EPS guidance to.
And be in a range of $8 15 to $8 20.
Compared to our prior range of $9 $9 15.
This revised guidance includes our 16 EPS positive impact of tax benefits from stock based compensation during the nine months period.
Also we are updating our capex guidance to $300 million to $320 million.
Compared to our prior estimate of $380 million 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 in the fourth quarter with an approximate approximately 17 headwinds.
We expect full year COVID-19 related sales to be.
Approximately $85 million lower than 2021 sales unchanged from our prior guidance.
Our guidance excludes future tax benefits from stock based compensation.
I would now like to turn the call back over to Eric.
Bernard.
As summarized on slide 15, looking ahead with a sharpened focus we continue to ensure our growth strategy is bringing value to our customers. Our committed order book remains robust we continue to capture the benefits of the globalization of our operating network and delivering products in this complex environment and we.
We're continuing to drive forward the capital investments across our operations to meet current and anticipated future growth.
Gigi we're ready to take questions. Thank you.
One moment please for our first question.
Our first question comes from the line from the line of Paul <unk> from Keybanc.
Hi, Eric on the Capex, It's now 300 to 320 versus $3 80 prior.
Is that a signal that.
You see lower demand is difficulty getting equipment, what's behind that lower capex guidance.
Yes, Paul the lower Capex guidance is really.
Two things one is delivery of equipment has been delayed.
For instances in also.
Longer duration of capital buildup projects.
So we're seeing that as the <unk>.
Not not demand, we still need the capital in place to really get caught up to the demand we have in our hands today.
And then you mentioned that the transition from Covid in a few customers too many customers on the plunger side or are there also some we've also seen some huge.
Prescriptions out of recent approvals.
Are those also surprising you in terms of some of these large prescription trends that are being seen in the market.
Yes, Paul Thats, one of the drivers of that are healthy.
Order a committed order book.
And that is particularly in the biologics area, we're seeing.
Upsize growth than we anticipated working with our customers.
And last on the on the plunger side, where will that product being made.
While we have really five key high value product plants. The two that have probably the most constraints right now are here in the United States Kinston in Jersey shore and we're currently working to have that resolved as we speak.
Okay. Thanks.
Thank you.
Yes.
Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Our next question comes from the line of Larry Solow from CJS Securities.
Good morning, guys. Thanks for taking the questions I guess first question Eric.
I know you normally I guess to give some a little preliminary outlook at this time of year, but.
Just sort of trying to gauge your confidence level, obviously, a little bit of a surprise or in terms of it looks like customer inventory management.
Skewing the numbers a little bit.
And obviously that some of the capacity issues just curious like your confidence level today.
To give pretty good guidance for next year.
Some clarity there on the revenue side.
Is it just you felt you had to put that out today or what kind of gives you that extra confidence sort of it looks.
It looks like a little bit of a challenging short term period.
Yeah, Larry Thanks for the questions to know this too.
Two two.
To give you insights on one as we think about the inventory management is the only part of our business, where there is fluctuation I would say is around the COVID-19 vaccines.
That has been quite volatile in the last several months.
And I would argue that transition to lower.
Volume has been a little bit faster than we anticipated.
But when it comes to demand for our other products, particularly the base thinking about our high value products, we're not seeing that inventory management in fact, just meeting with customers more recently they are.
Very keen for us to give the installed equipment. That's currently being worked on and validated and up and running to really alleviate some of the bottlenecks that we have today.
So we don't we don't see that large.
Any major movement, we did however for clarity I did say in his script that as we went through 2022, our lead times were extended because of the demand we had uncovered at the time and therefore, we had orders that we were committed to customers in early 2023.
But that wasn't driven by any inventory management that was driven by our visibility to make the order in a timely fashion.
No.
Sure.
Larry the second part on the giving guidance, we're giving visibility of sales I think it was <unk>.
To give context with what we just describe about installation of capacity and the current demand give visibility to what we're seeing that's going into 2023 with a high degree of confidence.
Got it okay, no I appreciate that color.
And then it sounds like you're just no real change it sounds like in terms of customer demand and you guys are continuing obviously.
To build out capacity it doesn't feel like it just feels like it's.
Completely our supply.
Issue is that.
Fair to say no ambiguity.
Yes, Larry that's fair to say so as we transition from very long runs of Nova appears stoppers to shorter runs of Nova peer Plunger's. As an example, the equipment that we had intended to be ready to go halfway through this year, which is that's the delay that we've been discussing.
Has caused.
That mix shift lack of productivity and so once that's up and running we will be in a good position to both fulfill those orders in a timely fashion.
Okay, Great and just last question, perhaps for Bernard and I know you guys are not ready.
Giving full guidance.
But in terms of just high level margin outlook, what needs to kind of go right.
Wrong.
It could happen.
Could you could you keep margins flat.
With overall revenue growing Novo Youre COVID-19.
Probably a little higher margin revenue coming down is that from a very high level is that.
You think feasible.
Yes, just on the margin will provide more color on the margins and earnings on our usual timing on our Q.
For a call here in February .
But there are a number of things that we are <unk>.
<unk> really closely just like everybody else at the moment.
We're looking to figure out.
How FX is going to settle in for early 'twenty two 'twenty three.
And it's really it's too early to make a call on that given the volatility that we're seeing today.
And then secondly, we're looking at and monitoring the inflationary costs right across the spectrum from materials energy labor and again.
It's early to make a call on many of those.
And then thirdly, we're in the process of preparing our price increases for next year, especially in light of that second topic around the in place rate costs.
Evolving and.
And so then the fourth points will examine again, how fast we can get that extra capacity online to generate those.
Demand is currently demanded H VP sales. So if we can do it sooner and our guidance.
Outside there to our sales and associated profits with us.
<unk>.
The growth in our phase <unk> VP.
VP basis, an H VP margins that will come with that.
<unk>.
We're looking to offset that decline around C 19, but again, we have to manage.
Through a lot of these.
Issues at the moment, so but they.
Thats, a big positive for us.
Demand is there and we're seeing increasing demands around high value products, and particularly around Plunger's that Eric just mentioned.
So as soon as we are on that call, we'll give you more update.
That's fair enough I appreciate it.
Thanks, guys.
Thank you Sir.
Thank you one moment for our next question.
Our next question comes from the line of Derik de Bruin from Bank of America.
Hi, good morning.
Good morning.
Might clarify.
Clarify that comment.
Comment I mean youre.
You are talking about seem positive organic revenue growth next year. I mean is that are you talking 1% or we talking to.
Sort of back to the 7% to 9% range and along those lines to.
To get to positive that sort of imply that your overall HCP next year proprietary products next year have to grow.
Well in excess of.
That's 79% range I mean can you just provide a little bit more color in terms of how we should think about it.
Big ranges.
Think about.
Let's start in burn if you want to add so youre right. The non COVID-19 related base business and proprietary is going to have very strong double digits and as we led by biologics.
But we're also seeing strength in both generics and pharma, but the key drivers can be the biologics and the portfolio that will support that is mostly around our AWP.
Higher end of the portfolio and Nova peer and Florida Tech.
And particularly around <unk>.
Bernie you want to give more color.
Eric.
<unk>.
We would expect to see on our base business double digit growth.
And within that base, that's going to be north of our construct that we put out there. So.
Looking at that base business to be able to offset the C 19 and declined.
Essentially you could see here and then again looking at the timing of capacity there could be some upside there also for us.
Got it.
And back to the margin question.
I mean it.
We sort of look at the.
I guess is the question.
What's the worst case scenario that you're sort of looking at for next year. I mean is there a situation where you can't get the capacity online further push outs.
I guess, there's some fear that.
The <unk>.
Fourth quarter number that you put up if you sort of annualize that going into next year, it's pretty ugly in terms of an EPS perspective, I mean is that a worst case scenario I just wanted to help us sort of understand what the parameters remark around.
The the risks youre, not being able to bring capacity online.
Thinking about how this all goes through.
Yes.
Getting that capacity online.
That's actually in progress and as we mentioned in the <unk>.
Comments at the start we would expect to see that early 2023. So we are reasonably confident around having that openness.
Got it.
And.
And just to sort of reiterate.
Good point.
The.
The.
Youre not seeing youre, not seeing any inventory related issues.
But can you give us sort of like any indication of what some of the drags you are.
<unk>, you're involved with sneezing obesity drugs that are coming up and coming online just sort of give a sense of where some of the demand is coming from.
Yes, I will give you a couple of areas, we don't give specific customers or drug molecules, particularly around the elastomers unless our customers will articulate that publicly.
But they do tend to be.
First of all we're seeing as indicated a little bit earlier successes, the very drug launches, particularly in the biologics that were over the last few years and that was that's quite positive we are obviously in.
In discussions around the obesity drug launches.
That are being looked at in the marketplaces.
Diabetes, obviously those are the key large volume areas.
That were western part of those conversations, but going further into specific drug molecule specific customer that would be.
<unk>.
We just simply don't go down that path.
Okay. Thank.
Thank you I'll get back in the queue. Thanks.
Thank you one moment for our next question.
Our next question comes from the line of Dave Windley from Jefferies.
Hi, good morning, Thanks for taking my questions.
Burns you mentioned in your prepared remarks I think.
Kind of missed it.
80 basis points.
In reference to Covid supply agreement and we had in our notes that.
There was some carryover take or pay related.
Revenue or payment that you were expecting.
Got it and <unk> expected some again in <unk> was that the same thing and could you elaborate and quantify that for us. Please.
Yes, it was.
It was the same was relating to.
The same customer database had tickets placeholder.
Two quarters.
Totally related to so and then there was some other smaller bits.
However.
Not really material, but it was primarily related to one customer.
And in the 180 basis points.
What was the 180.
Yes, it was gross margin.
Yes, okay.
And thinking about.
Your fourth quarter guidance.
And kind of Dovetailing on both Eric and I think Larry has questions on on margin it looks like the fourth quarter.
Gross margin proprietary product is probably down in the mid thirties.
Maybe lower and and so I wondered if you could help us to understand.
Is that just basically.
And utilize our underutilized capacity.
Because so much COVID-19 is coming out and before Youre really able to.
To ramp high value for these other products sounds like Plunger's, mostly.
Or what other factors should we be thinking about relative to fourth quarter margin.
And how how much of that does or does not.
Set the baseline for thinking about 2023.
Yes, so in the end.
The fourth quarter.
It's a carryover from the issues that we experienced in Q3 with the delays in getting equipment in place and then the impact that's having on our throughput and then also being able to work through this mix shift change at the same time when we layer in.
The capacity in early 2023, and that will resolve a lot of that problem.
So it's really down to having that increased capacity and throughput. So we don't believe it will reoccur.
So.
Pardon the follow up so.
I know you probably don't want to get into too much operational minutiae, but adding capacity doesn't sound like something that levers margin that sounds like something that adds more cost.
It seems like you would want more volume on the same capacity to get to get the margin back up so maybe you could help us to understand.
How that flows and how that works.
Yes.
It's not it's actually going to enable us to clear more products through.
And the lines of the cat capacity will actually help our HB key sales and help distribute fixed cost and improve our absorption. So it's not that we're going to layer in.
More cost and it's going to be detrimental to actually give us the ability to sell more high value products and get it through our plants section quicker. So we can realize those revenues faster.
And zooming out a little bit on high value.
I think.
We've probably been slow to absorb it in the market, but youre COVID-19 product mix, you would consistently highlighted that floor tech Nova pure were popular.
In that market or to those customers. It sounds like Nova pure is you are still calling out Nova pure and Nova pure Plunger's.
I would ask if we should.
Thinking that those.
Lenders are purely Nova peer or if it's more of a mix, but the general question here is how should we think about the mix within high value products.
As you move out of Covid heavy heavy period and into this period.
Where as you described the customers and the Skus are much broader.
Yes, so when you look at the portfolio.
It's going to be mostly you're right. So when you look at COVID-19, and most of it <unk> appear in Florida Tech.
Suffers in a high nice margin associated to that and but we think about the plunger's demand that we currently have it is.
A mix, but mostly as Nova peer and that is when you think about the investments we're making right now it is around that Nova peer corridor.
And so some are eliminated from that eliminated but it's in the Nova peer platform that we're working with.
Okay and then a final question for me you mentioned.
The valor the packaged valor go to market.
Product or.
System.
It was available in.
January which strikes me as.
Pretty early pretty quick so.
So good news there, but I guess I wanted to ask what does availability mean, what does that start some kind of early stage development sampling and testing.
What does that availability really mean.
Yes. It's early it's early stage when you think about one of the benefits we have with our ready pack.
Portfolio is that it has been known to be a great accelerator of seeding the market.
So, particularly around the smaller pharma and smile smaller biotechs.
Looking for a off the.
Shelf solution and we're able to provided with our technical data to support it.
So this is feeding the pipeline large and small customers.
And it's really around the early drug development phase.
To use us as an example is when we launched <unk> in 2016 timeframe. Our Avenue was through Theyre ready Pac same channel same approach seeded in the market.
And today you can sense from this call. We spent a lot of time talking about Nova appears to be.
Coming somewhat now the new standard of biologics Thats the intent with the.
The collaboration between Corning, and West and I'm very pleased.
Both technical teams are really.
Continuously driving that differentiation of what this means in the market for our customers and ultimately the patients. So it's it's early stages.
But we will keep you updated but I'm excited about the launch.
In the first part of the year.
Got it thank you.
Thank you one moment our next question.
Our next question comes from the line of Jacob Johnson from Stephens.
Hey, Thanks, Good morning, maybe a follow up on <unk> question around 2023 revenue growth obviously.
Obviously, a little bit of a change. This morning in 2022 kind of revenue dollar expectations versus where you were three months ago, but that seems to be some kind of one off issues is there any change to kind of your 2023 expectations today versus where you were a couple of months ago because obviously.
As we think about 23, you will have a little bit of an easier comp given kind of the revenue decline in those <unk>. So I'm just kind of curious how much of that strong growth next year as some of that's easy comp versus kind of strong demand.
Don't know if that's possible to answer.
Ill try asking.
No. Thanks, Jacob So I think there's a couple of levers look at one is this will put COVID-19 aside after saying that I think in the last call. We've talked about roughly around 50% reduction in 2023 over 2022 right now what we're saying is about a 75% reduction so that equates that $288 million.
We discussed on the on the on the growth of the airline growth of the business.
We are a relatively the same as what we were looking at about mid last year.
But maybe a little bit stronger than the biologics than we anticipated.
So net net about the same I would say if.
If we are able to get capacity online sooner and I can assure you that we're laser focused on.
Really those two sites right now to get this equipment validated with our customers.
So it can produce product, but we're just conservative saying right now.
We're looking at benefit of early 2023, but if we can get on in the next several weeks, we will do so because we do have demand and we have customers.
Asking us to to produce as much as we can in the short term.
I think one last thing about the last change I would say is small piece, but the CN returned to growth.
We didn't really talk as much about that last quarter, we're seeing that starting to come back to that mid single digit type corridor.
A little bit better for next year, So that's where we stand with kind of the changes from three months ago.
Okay Super helpful. Eric and then just.
I know COVID-19 is going to be a smaller piece of revenue next year, but.
The transition that single dose vials or pre filled syringes.
<unk> highlighted some of this in an announcement last week just curious your latest thoughts on.
The shift towards single dose vials in terms of kind of timing and the mix of COVID-19 doses that could be a single dose maybe as we look into next year, what's contemplated in your guidance.
Yes.
A quick comment I mean, if you're talking about a lot of variability that's one area, where there's a lot of variability in COVID-19 in the last six months.
Yes, there is a.
If you if you think about there is the transition trying to get lower doses per vial and us single dose use obviously pre filled syringe.
That shift is still.
Occurring but it satisfaction as we anticipated.
Okay got it thanks for taking the questions.
Thank you.
Thank you I would now like to turn the conference back over to Quintin Lai for closing remarks.
Thank you Gigi and thank you for joining us on today's conference call an online archive of the broadcast will be available for 30 days on our own.
In the investors section.
That concludes today's call have a nice day.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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[music].
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[music].
Okay.
[music].
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[music].
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[music].
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[music].
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[music].
Okay.
Yes.
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[music].
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Great.
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Yes.
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Thank you.
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[music].
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[music].
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Yes.
Sure.
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Okay.
<unk>.
Okay.
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Yes.
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Thank you.
Okay.
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[music].
Yes.
Okay.
Tom.
Yes.
Okay.
Yes.
[music].
Okay.
Okay.
Okay.
[music].
Okay.