Q4 2024 West Pharmaceutical Services Inc Earnings Call

February 13, 2025

We are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone to remove yourself from the queue. You May press Star one one again.

Eric Green: Yeah, Michael, good question. That's exactly what we focused on. We've had the ability to support our customers with CGM for the past 10 plus years, in particular the technologies that were introduced early on in the ramp-up of CGM in the marketplace. We've had a strong position as new technologies were developed by our customers. We did take the decision based on the economics that just did not meet our financial thresholds. That decision was not taken lightly, but we wanted to make sure that we preserve the financial construct we believe is appropriate for that business that we provide in our contract manufacturing space. Therefore, we're doing a really well-scheduled ramp-down as they can move into the next generation through, whether they're insourcing some of it. In fact, in many cases, they're insourcing. That was the decision we made.

I would now like to hand, the call over to John Sweeney, Vice President Investor Relations. Please go ahead.

John Sweeney: Good morning, and welcome to West's fourth quarter and full year 2024 earnings Conference call. We issued our financial results. Early this morning, and the release has been posted on the investors section of the company's website located at West pharma Dot com.

John Sweeney: The call today, we will review our financial results provide an update for our business and present, our financial outlook for FY 'twenty five.

John Sweeney: There is a slide presentation that accompanies today's call and a copy of the presentation is available on the investor page of West's website.

John Sweeney: On slide four of the Safe Harbor statement statements made by management on the call and the accompanying presentation contain forward looking statements within the meaning of the 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 comes.

Speaker Change: Thank you for standing by and welcome to West Pharmaceutical's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

John Sweeney: <unk> actual results could differ materially from past results as well as those expressed or implied in any forward looking statements made here.

Eric Green: We will reuse, let me state it clearly, though, there is space that will be available, which is being looked at and worked on with other customers to be able to support future launches and future product portfolios that we'll put into contract manufacturing going forward. So the impact will be in 2025, and we'll move through it. It's offset with some of the GLP-1 growth and other CM business that we're bringing in.

Speaker Change: After the speaker presentation, there will be a question and answer session.

Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

John Sweeney: Please refer to today's press release as well as other disclosures made by the company regarding the risks to which it is subject, including our 10-K 10-Q and 8-K reports.

Speaker Change: I would now like to hand the call over to John Sweeney, Vice President, Investor Relations. Please, go ahead.

John Sweeney: 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 limitations and reconciliations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in this.

Speaker Change: Good morning and welcome to West's fourth quarter and full year 2024 earnings conference call. We issued our financial results early this morning and the release has been posted on the investors section of the company's website located at westpharma.com

Michael Ryskin: All right. Thanks so much. I'll get back to you.

Eric Green: Thank you.

Operator: Thank you. Our next question comes from the line of Larry Solow of CJS Securities. Please go ahead, Larry.

John Sweeney: Mornings earnings release.

Speaker Change: On the call today, we will review our financial results, provide an update for our business, and present a financial outlook for FY25. There is a slide presentation that accompanies today's call, and a copy of the presentation is available on the investor page of WEST's website.

John Sweeney: Now I'll turn the call over to our CEO Eric Green. Please go ahead Eric.

Eric Green: Thank you John and good morning, everyone. Thanks for joining us today.

Michael Ryskin: Great. Good morning, gentlemen. I guess first question, just on the proprietary product side. And again, I know you don't guide to segments, but it sounds like just the general outlook there is positive. And does that scale up as we go through the year? Or obviously, I guess Q1's essentially or seasonal usually a little bit slower, but is there any inventory issues that continue to wane as we move forward? And then the second part of the question is, so it sounds like the core HVP is doing okay, but there will be a little bit of a transition on SmartDose and lower margins. Maybe you can give us a little more color on that side of the equation too.

Eric Green: I'd like to begin with some comments on our fiscal year and fourth quarter 2024, followed by Bernard's detailed financial review and 2025 guidance.

Speaker Change: On slide 4 is a safe harbor statement. Statements made by management on the call and the accompanying presentation contain forward-looking statements within the meaning of the U.S. Federal Securities Law.

Eric Green: Then I'll close with some final thoughts on our business outlook.

Eric Green: Starting on slide five.

Eric Green: Looking back at 2024.

Speaker Change: These statements are based on our beliefs and assumptions, current expectations, estimates and forecasts.

Eric Green: <unk> executed on several key strategic initiatives first we capitalize on opportunities with the fast growing <unk> market and continued our strong win rates a newly approved molecules, particularly in biologics.

Speaker Change: The company's future results are influenced by many factors beyond the control of the company. Actual results could differ materially from past reports of today's press release, as well as other disclosures made by the company regarding the risks to which it is subject, including our 10-K, 10-Q, and 8-K reports.

Eric Green: Thank you, Larry, and thanks for the question. So no, you're absolutely correct. Let's take a look at proprietary as a whole. The key drivers of that business we'll start with is the HVP components. That has been the thesis of growth for West for a number of years. And we still feel strong about our prospects and the current pipeline that we have in place. What's driving it? Number one, biologics. As we think about our continued strong position in that particular market, we mentioned that we're still just looking at the past year, past quarter, we still have a very high participation rate of all new launches that have been approved, around 90% plus. And I just want to be clear on that. We do put biologics and biosimilars together because the value proposition to our customers and the economics are the same for us.

Eric Green: Second we made great strides to reduce our manufacturing lead times in some cases below pre COVID-19 levels and we believe that industry wide Destocking is now close to the yen as customers are generally returning to more normalized ordering patterns.

Speaker Change: 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. Limitations and reconciliations 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. I'll now turn the call over to our CEO, Eric Green. Please go ahead, Eric.

Eric Green: Third we returned over $560 million to our shareholders through our share repurchase program during the year and finally, we made strategic investments in additional HCP capacity, which we expect will drive incremental growth for years to come.

Eric Green: Thank you, John, and good morning, everyone. Thanks for joining us today. I would like to begin with some comments on the fiscal year and fourth quarter 2024, followed by Bernard's detailed financial review and 2025 guidance.

Eric Green: Shifting to fourth quarter on slide six there were several notable achievements.

Eric Green: <unk> were above our expectations as revenues increased three 3% on an organic basis.

Eric Green: Then I'll close with some final thoughts on our business outlook.

Eric Green: Starting on slide 5, looking back at 2024, WEST executed on several key strategic initiatives. First, we capitalized on opportunities with the fast-growing GLP-1 market, and continued our strong win rate on newly approved molecules, particularly in biologics.

Eric Green: The quarter marked a return to quarterly revenue growth proprietary product organic revenues decreased four 5% in the fourth quarter. This represents a continued improving trend as proprietary products organic revenues declined year over year in each of the three quarters.

Eric Green: We are in the top 50 biologics. And when you think about the pipeline of biologics that are being developed, it's quite robust. And so we feel really good about this space. That growth will continue in the near term of 2025, but well beyond that. The second lever is GLP-1s. And our position in GLP-1s is not just in contract manufacturing, but we have a very strong foothold in the proprietary HVP elastomers, primarily providing plungers for the largest players in this space. We did comment in our prepared remarks that we have secured a long-term contract with one of the customers to provide all of their proprietary elastomers needs in the GLP-1 space. And we are working with another customer to continue to have the majority of their needs going forward. So that is the GLP-1s.

Eric Green: Of 2024, largely driven by Destocking.

Eric Green: Second, we made a great stride to reduce our manufacturing lead times, in some cases below pre-COVID levels. And we believe that industry-wide de-stocking is now close to the end, as customers are generally returning to more normalized ordering patterns.

Eric Green: Finally, adjusted operating profit margin was 21, 7% roughly in line with prior year.

Eric Green: Moving to slide seven.

Eric Green: <unk> proprietary products segment can be broken down into three categories HCP components, <unk> delivery devices and standard products.

Eric Green: Third, we returned over $560 million to our shareholders through our share repurchase program during the year. And finally, we made strategic investments in additional HVP capacity, which we expect will drive incremental growth for years to come.

Eric Green: I'm pleased to report that HCP components. The most important contributor to less long term growth is starting to show signs of strengthening and we expect this positive momentum to continue our current expectation is that HCP component revenues will grow mid to high single digits.

Eric Green: Shifting to fourth quarter on slide six, there were several notable achievements.

Eric Green: In 2025, and we anticipate that we will see a continued mix shift to HCP and 2025 and beyond.

Eric Green: To give you a little context there, it's about mid-single digit from a, in 2024, the size of the business against all of proprietary. The third area is Annex 1. We talked about it, but we're starting to see the, instead of talking about the pipeline, the actual projects that will turn into revenues in 2025. We're actually quite encouraged. We had an increase of interest in projects we've launched, well over 200, more than double-digit from the last quarter I mentioned. Roughly around 50% of those projects will turn into some sort of revenues throughout the duration of 2025. We believe that's going to give us about 100, I'm sorry, yeah, about 100 to 150 basis point growth expansion just in that particular area. So HVP components, very strong going forward. You asked about the destocking. It's consistent to what was said on previous quarters.

Eric Green: A key performance driver is the biologics market. We expect this end market to continue to grow high single digit to low double digits and we haven't consistently strong win rates participating on approximately 90% of new molecules entering this market.

Eric Green: Our <unk> business is performing well and we expect an acceleration in growth due to the continued market expansion of this category.

Eric Green: Note that we have just agreed terms for a multiyear contract with one of the largest manufacturers for all of their <unk>, one primary packaging elastomer needs.

Eric Green: We remain particularly encouraged with the progress from our customers are adopting amex one.

Eric Green: For those unfamiliar with the EU GMP annex one it is a set of regulations that govern manufacturing of sterile drugs and the European Union.

Eric Green: We believe pharmaceutical or pharma customers have normalized. Biologics is becoming more normalized as we are where we are today. We believe generics will become more normalized throughout the duration of 2025. So consistent with what we have said before. That's all based on the more consistent ordering patterns of our customers going forward. I do want to touch on SmartDose because you asked about that topic. SmartDose, we have been in a ramp-up mode in 2024. We onboarded Phoenix site in the later part of first half of 2024. As you know, it takes time to get to full efficiencies of a particular site. It was another expansion of manual processes. So when Bernard talked about, "We're going to drive automation," that's in-house. It will take pretty much 2025. If we can bring it forward, we will.

Eric Green: Alex one requires companies.

Eric Green: Sterile medicines to develop a documented contamination control strategy that assesses risk in their facilities and defines action plans to prevent the contamination of the sterile products.

Eric Green: Currently we have over 200 and X one projects in various stages with our customers.

Eric Green: While the regulation went into effect in August of 2023, some customers were early adopters and a shift towards HCP and we now have additional customers in the pipeline.

Eric Green: It generally takes about 18 months for customers to shift from standard to HCP products as they address annex one.

Eric Green: Moving to slide eight I value delivery devices. The biggest growth driver for this business in 2024 is our wearable on body injector smart dose we are working to optimize our manufacturing process with our new automation line coming Onstream later in 2025, which will.

Eric Green: But we will be driving more towards automation to take costs down. We are looking at scale as the volumes are increasing significantly for us, for our customers. And in addition, more mid-term, we're looking at new customers. But I will say we are looking at the portfolio specifically around this device and determining the best actions forward to ultimately increase shareholder values. So that's our focus on here while maintaining and supporting our customers and their patients. So those are the key topics. I believe I covered the yes. Any other, Larry? Any other?

Eric Green: More than double our smart dose capacity and drive efficiencies.

Eric Green: While we categorize and view smart dose as an HCP product, we expect that in 2025, it will be margin dilutive.

Eric Green: We are taking steps to improve our delivery device economics and all options are on the table.

Eric Green: Moving to the standard products. These are the bulk products that we produce across our global manufacturing network.

Eric Green: These products tend to be on the lower end of price and margin standard components are mainly used by our pharma and generic customers.

Operator: No, that was really good color. I guess just to follow up, anything you can add, just maybe a little tease on where the incremental opportunities not included in guidance? Is that just a bunch of different things across the P&L? Is there anything specific we could point to there? Thanks.

Eric Green: Turning to slide nine and contract manufacturing, we have made significant investments to build out our <unk> device business. The business is growing strongly and now accounts for approximately 40% of our total contract manufacturing, we anticipate the <unk> growth to continue as our investments.

Eric Green: Yeah, Larry, I don't want to create a wider range here. I just want to say that I do believe the way we look at our guidance is business that we have very clear visibility of, and very confident that we can execute against. I'm confident in our team. I do believe HVP components is a growth driver for this business. It's showing up very strongly early on in 2025, and we expect that to drive. I mentioned the three areas: biologics, GLP-1s, and Annex 1. These are very discrete projects, initiatives that we have our hands around. And then we have to fix devices, particularly one part of that portfolio. And that is a focus of the team, and we need to improve the profitability. And we do not have a lot of time to get that done. So that's the mandate.

Eric Green: In Dublin, Ireland in Grand Rapids, Michigan come online during the year.

Eric Green: There are two large continuous glucose monitoring customers that we serve in both cases these customers develop next generation devices.

Eric Green: We have made the decision to not participate going forward as our financial thresholds cannot be achieved.

Eric Green: One of these customers have started to exit and the other has let us know of their intention to exit in mid 2026.

Eric Green: Were actively pursuing opportunities in.

That more closely align with our margin and capital return requirements.

Taking all into account all of these factors, we expect a return to organic growth driven by the strength of our HCP components business, we have a highly profitable core business that will bridge west through these temporary impacts.

Eric Green: These products tend to be on the lower end of price and margin. The standard components are mainly used by our pharma and generic customers.

Eric Green: We will be taken steps in the coming years to address these areas, where we want to improve returns and we expect to finish 2025 was solid momentum now I will turn the call over to Bernard Bernard Thank.

Eric Green: I expect the teams to overdeliver, but I'll leave it to that.

Michael Ryskin: And just to follow up on that, Larry, with the number of these opportunities, some are more in the short term and then some are medium-term opportunities. And we'll update as we go through the year as to how they're transpiring. But just to put it in context, we have the ability to respond quicker than we probably have in the past based on the capacity we've installed, particularly in our HVP sites over the last number of years. So we have that ability. Our lead times have come down considerably. So we're in a better position to take advantage of those opportunities when they present themselves.

Bernard: Thank you Eric and good morning, I will take you through the drivers impacting sales and margin in the quarter as well as some balance sheet takeaways.

Eric Green: In Dublin, Ireland, and Grand Rapids, Michigan come online during the year.

Speaker Change: Finally, we will review, our first quarter and full year 2025 sites.

Eric Green: There are two large continuous glucose monitoring customers that we serve in both cases these customers develop next generation devices.

Bernard: First up Q4.

Bernard: Our financial results are summarized on slide 10.

Bernard: We recorded net sales of $748 8 million in the quarter, representing organic sales growth of three 3%.

Eric Green: We have made the decision to not participate going forward as our financial thresholds cannot be achieved.

Bernard: Looking at slide 11 proprietary products organic net sales increased by four 5%.

Eric Green: These customers have started to exit and the other has let us know of their intention to exited mid 2026.

Operator: Great. I appreciate all that. Thank you, guys.

Operator: Thank you. Our next question comes from the line of Patrick Donnelly of Citi. Your line is open, Patrick.

Bernard: This was a function of generally improving demand strong sales of delivery devices in the quarter.

Eric Green: Actively pursuing opportunities and see that more closely align with our margin and capital return requirements.

Bernard: Fourth quarter revenues included a $25 million benefit from a delivery device incentives.

Eric Green: Take it all into account all of these factors, we expect a return to organic growth driven by the strength of our HCP components business, we have a highly profitable core business that will bridge west through these temporary impacts.

Patrick Donnelly: Hey, guys. Thank you for taking the questions. Maybe another one on the GLP side, just diving in a little bit there. Can you talk about the growth you're seeing from that market, particularly on the proprietary side? And then we do get a decent amount of questions just on the oral side. And there's going to be a few readouts here in the relatively near term. Maybe just frame up how you think about the impact of orals, what that means for the market, and how you guys see that playing out.

Hey, guys. Thank you for taking the questions. Maybe another one on the GLP side, just diving in a little bit there. Can you talk about the growth you're seeing from that market, particularly on the proprietary side? And then we do get a decent amount of questions just on the oral side. And there's going to be a few readouts here in the relatively near term. Maybe just frame up how you think about the impact of orals, what that means for the market, and how you guys see that playing out.

Bernard: I value products, which made up approximately 74% of <unk> proprietary product sales generated mid single digit growth led by customer demand for self injection device platforms.

Bernard: We will be taking steps in the coming years to address these areas, where we want to improve returns and we expect to finish 2025 was solid momentum now I will turn the call over to Bernard Bernard Thank.

Speaker Change: Looking at the performance by markets.

Speaker Change: Biologics experienced high single digit organic net sales growth driven by increases in sales of self injection device platforms.

Eric Green: Yeah, Patrick, good morning. Thanks for the question. We do believe that, from our lens and speaking with our customers, there will be an oral impact in the market. We do believe, however, the majority of the delivery will be injectable. Our models are built around a shared portion of the two. So that's how we kind of look at our investments, how we make sure that we safeguard the capital we put in to build support GLP-1s, and particularly around CM, where we have very clear levels of demand, our volume requirements that need to be take-or-pay type environments for a number of years. So we're protecting that area. As you know, in the proprietary side of the elastomers, a lot of those resources are fungible. But we feel really good about GLP-1s.

Speaker Change: Pharma saw mid single digit organic net sales growth driven by an increase in sales of westar products and administrative systems.

Bernard: Thank you Eric and good morning, I'll take you through the drivers impacting sales and margin in the quarter as well as some balance sheet takeaways.

Speaker Change: Generics had a mid single digit organic net sales decline driven by lower volumes of Thoratec products.

Bernard: Finally, we will review, our first quarter and full year 2025 guidance.

Bernard: First up Q4.

Speaker Change: Our contract manufacturing segment declined by low single digits.

Bernard: Our financial results are summarized on slide 10.

Speaker Change: We recorded $273 6 million and gross profit and gross profit margin was 36, 5% down 150 basis points year over year.

Bernard: We recorded net sales of $748 8 million in the quarter, representing organic sales growth of three 3%.

Bernard: Looking at slide 11 proprietary products organic net sales increased by four 5%.

Speaker Change: Adjusted operating profit increased.

Speaker Change: Two $162 $8 million this quarter and adjusted operating profit margin of 21, 7% was consistent with the same period last year.

Bernard: This was a function of generally improving demand strong sales of delivery devices in the quarter.

Bernard: Fourth quarter revenues included a $25 million of benefits from a delivery device incentives.

Speaker Change: Finally, adjusted diluted EPS declined <unk>, 5% for Q4.

Bernard: High value products, which made up approximately 74% of <unk> proprietary product sales generated mid single digit growth led by customer demand for self injection device platforms.

Speaker Change: The stock based compensation tax benefits had no impact on EPS compared to the same period last year.

Eric Green: Right now, as I mentioned, proprietary elastomers is roughly mid-single from the whole portfolio perspective of proprietary. CM is 40%. But if I think about the ramp-up, a lot of the ramp-up has been around CM with our infrastructure expansions, particularly in Grand Rapids and Dublin. More to come as we get the capabilities online. And more exciting is that in CM, we're going to have drug handling capabilities towards the end of 2025, early 2026, which is an expansion of our capabilities with a better margin profile for West. On the proprietary side, that's going to be the fastest growth area in 2025 for us. Actually, it's think about a 2/3 versus 1/3 between the two units. And that is in line with our customers' expectations and our position with both of them from a, what do you call it, penetration rate of success, win rate with both customers.

Speaker Change: Now, let's review the drivers in both revenue and profit performance.

Bernard: Looking at the performance by markets Biologics experienced high single digit organic net sales growth driven by increases in sales of self injection device platforms.

Speaker Change: On slide 12, we show the contributions to sales growth in the quarter.

Speaker Change: Sales price increases contributed $39 3 million or.

Bernard: Pharma saw mid single digit organic net sales growth driven by an increase in sales of westar products and administrative systems.

Speaker Change: Our five four percentage points.

Speaker Change: Included in sales price is $25 million customer incentives associated with achieving volume levels.

Bernard: Generics had a mid single digit organic net sales declined driven by lower volumes of Thoratec products.

Speaker Change: The pricing benefits was partially offset by a negative mix impact of $15 3 million.

Bernard: Our contract manufacturing segments declined by low single digits.

Speaker Change: Driven by lower sales volume of <unk> components, and a higher proportion of lower margin drug delivery devices.

Bernard: We recorded $273 6 million and gross profit and gross profit margin was 36, 5% down 150 basis points year over year.

Speaker Change: In addition, we faced a foreign currency headwind of approximately $7 2 million in the quarter.

Speaker Change: Looking at margin performance on slide 13 proprietary.

Bernard: Adjusted operating profit increased to $162 $8 million this quarter and adjusted operating profit margin of 21, 7% was consistent with the same period last year.

Speaker Change: Products fourth quarter gross profit margin of 48% was 190 basis points lower than the margin achieved in the fourth quarter of 2023.

Speaker Change: The key driver for the decline was product mix.

Bernard: Finally, adjusted diluted EPS declined <unk>, 5% for Q4.

Speaker Change: Contract manufacturing fourth quarter gross profit margin of 17% was 90 basis points lower than the margin achieved in the fourth quarter of 2023.

Patrick Donnelly: Okay. No, that's helpful. And then maybe Bernard, just to build on Mike's question earlier on the margins, can you just talk about, I guess, the build as we work our way through the year? I'm just trying to think about the right exit rate, the right way to build into '26. And again, is it product mix driven, manufacturing ramp? Just talk about those moving pieces. And again, maybe the progression as we go through this year would be helpful. Thank you, guys.

Okay. No, that's helpful. And then maybe Bernard, just to build on Mike's question earlier on the margins, can you just talk about, I guess, the build as we work our way through the year? I'm just trying to think about the right exit rate, the right way to build into '26. And again, is it product mix driven, manufacturing ramp? Just talk about those moving pieces. And again, maybe the progression as we go through this year would be helpful. Thank you, guys.

Bernard: Stock based compensation tax benefits had no impact on EPS compared to the same period last year.

Speaker Change: On slide 14, we have listed some key cash flow metrics.

Bernard: Now, let's review the drivers in both revenue and profit performance.

Speaker Change: Operating cash flow was $653 4 million in 2024, a decline of $123 1 million, primarily due to a decline in operating results.

Bernard: On slide 12, we show the contributions to sales growth in the quarter.

Bernard: Sales price increases contributed $39 3 million.

Bernard: Our five four percentage points.

Michael Ryskin: Yeah. So based on the guide we put out, Q1 is the most challenged from a margin perspective. We still see a little bit of destocking, particularly impacting generics, maybe a little bit on the biologic side. And that is, we progress through the year to get to our guide, we would expect to see improvement on the margin front. And that's coupled with the growth in high-value products, particularly around the containment space and in the areas that Eric talked about, GLP-1, Annex 1, and biologics. And then the return to growth of HVP as we progress through the year. That help?

Speaker Change: In 2024, we spend $377 million on capital expenditures a.

Bernard: Included in sales price is $25 million customer incentives associated with achieving volume levels.

Speaker Change: Four 1% increase over 2023.

Bernard: The pricing benefits was partially offset by a negative mix impact of $15 3 million.

Speaker Change: We continue to leverage our capex to increase our high value products and contract manufacturing capacity.

Bernard: Driven by lower sales volume of <unk> components, and a higher proportion of lower margin drug delivery devices in.

Speaker Change: Working capital of approximately $988 million.

Speaker Change: Decreased by $277 million from 2023, mainly due to a reduction in our cash balance.

Bernard: In addition, we faced a foreign currency headwind of approximately $7 2 million in the quarter.

Speaker Change: Our cash balance at December 31, 2024, a $484 6 million or.

Bernard: Looking at margin performance on slide 13.

Bernard: Proprietary products fourth quarter gross profit margin of 48% was 190 basis points lower than the margin achieved in the fourth quarter of 2023.

Speaker Change: $369 3 million lower than our December 2023 balance.

Speaker Change: The decrease in cash is primarily due to $569 million of share repurchases and our capital expenditures offset by cash from operations.

Bernard: The key driver for the decline was product mix.

Bernard: Contract manufacturing fourth quarter gross profit margin of 17% was 90 basis points lower than the margin achieved in the fourth quarter of 2023.

Operator: Next question for you.

Speaker Change: Turning to guidance Slide 15 provides a high level summary.

Operator: Next question comes from the line of Doug. Your line is open, Doug.

Speaker Change: Full year 2025, net sales guidance is expected to be in a range of $2 87, 5% to 905 billion.

Bernard: On slide 14, we have listed some key cash flow metrics.

Bernard: Operating cash flow was $653 4 million in 2024.

[Analyst]: Hey, good morning. Thank you for.

Speaker Change: There is an estimated headwind of $75 million based on current foreign exchange rates.

Jacob Johnson: I'm doing well. Good morning. Thank you for taking my question. So I think three quick ones. I'll just rattle through them all at once. First, you have three facilities in Mexico. I just want to see how you're capturing any potential tariff impact in your guidance. So that's one. The second is, I think based on some of the disclosures in the slide deck, it looks like the math would lead us to conclude that GLP-1s as a percentage of sales are about 10%. I just want to make sure that's right. And then the third is you talked about several exciting incremental opportunities not included in guidance, as you talked about things in your prepared remarks. Any chance you would be willing to size up how impactful those could be? Thank you.

I'm doing well. Good morning. Thank you for taking my question. So I think three quick ones. I'll just rattle through them all at once. First, you have three facilities in Mexico. I just want to see how you're capturing any potential tariff impact in your guidance. So that's one. The second is, I think based on some of the disclosures in the slide deck, it looks like the math would lead us to conclude that GLP-1s as a percentage of sales are about 10%. I just want to make sure that's right. And then the third is you talked about several exciting incremental opportunities not included in guidance, as you talked about things in your prepared remarks. Any chance you would be willing to size up how impactful those could be? Thank you.

Bernard: The decline of $123 1 million, primarily due to a decline in operating results.

Speaker Change: We expect organic sales growth to be approximately 2% to 3%.

Bernard: In 2024, we spend $377 million on capital expenditures.

Speaker Change: This guidance assumes acceleration in H BP organic growth and that H VP components margins will expand driven by by biologics <unk> and <unk>.

Bernard: Four 1% increase over 2023.

Bernard: We continue to leverage our capex to increase our high value products and contract manufacturing capacity.

Speaker Change: We anticipate organic revenues in our proprietary product segment to increase as the impact of Destocking continues to abate.

Bernard: Working capital of approximately $988 million.

Decreased by $277 million from 2023, mainly due to a reduction in our cash balance.

Speaker Change: Proprietary products' gross margins are expected to be up slightly as compared to prior year.

Bernard: Our cash balance at December 31, 2024, $484 6 million.

Speaker Change: Driven by improving <unk> components performance.

Speaker Change: Contract manufacturing revenue is expected to be up low single digits as compared to FY 'twenty for us.

Bernard: The $369 3 million lower than our December 2023 balance.

Eric Green: Yeah. Excellent, Doug. Thank you. So the first question about Mexico, we do have a relationship with a company in Mexico. It's a 50-year relationship, actually, yeah, about close to 50 years, where we are the minority stakeholder in that business. And it's immaterial. The materials that we support them to be able to support the local market, but a lot of it's local for local. On the GLP-1s, you're accurate. It's ballpark about 10% with the GLP-1s of the overall business. But in CM, as I mentioned, about 40%, and the proprietary is about 5%. The growth of that is mid-single digits. The growth of that's very attractive. We'll look at a couple of basis points expansion from 2024 to 2025. On the upside.

Speaker Change: As decreased revenue in continuous glucose monitoring business offsets expected growth in self injection devices for obesity and diabetes.

Bernard: A decrease in cash is primarily due to $569 million of share repurchases and our capital expenditures offset by cash from operations.

Speaker Change: Contract manufacturing margins are expected to decline 200 basis points year over year in FY 'twenty five.

Turning to guidance Slide 15 provides a high level summary.

Speaker Change: Two lower utilization.

Bernard: Full year 2025, net sales guidance is expected to be in a range of $2 87, 5% to 905 billion.

Speaker Change: Just to note on the ramp up of our <unk> sites in Dublin. The building is now up and running.

Speaker Change: Auto injector production has commenced and will continue to ramp as we move through the third and fourth quarters ladies.

Bernard: There is an estimated headwind of $75 million based on current foreign exchange rates.

Speaker Change: Ladies and 2025 and into 2026, we expect both revenues and margins to benefit from the ramp up in the pain and drug handling portion of the business.

Bernard: We expect organic sales growth to be approximately 2% to 3%.

Bernard: This guidance assumes acceleration in <unk> organic growth and that H VP components margins will expand driven by by biologics <unk> and Hynix one.

Speaker Change: The Grand Rapids expansion is also operational and we have our first revenues in the third quarter of 2024.

Speaker Change: These revenues will increase as we achieve scale in mid 2025.

Bernard: We anticipate organic revenues in our proprietary product segment to increase as the impact of Destocking continues to abate.

Speaker Change: Our experience with new installations is that they take up to 18 months to achieve close to full capacity.

Bernard: Primary products gross margins are expected to be up slightly as compared to prior year.

Michael Ryskin: On the GLP-1, I think it's like GLPs and proprietary GLPs are about mid-single digits of our total revenue. And then the contract manufacturing GLPs represent about 40% of the contract manufacturing revenues in our total revenue. Then if we look at GLPs in total, it's really like mid-teens of our overall revenues. And obviously, then the economics around those businesses are a little bit different. And where we see the most growth, I think back to Eric's comment a few minutes ago, is really around the elastomer side where we're seeing a lot of traction with both, well, with the primary GLP-1 providers.

Speaker Change: Moving on to slide 16, our.

Speaker Change: Our 2025 or EPS guidance is now anticipated to be in a range of $6 to $6 20.

Bernard: Driven by improving H VP components performance.

Bernard: Contract manufacturing revenue is expected to be up low single digits as compared to FY 'twenty four.

Speaker Change: Please note we have several exciting incremental opportunities not incorporated in this guidance and we will update you on these in 2025 should they materialize.

Bernard: Decreased revenue in continuous glucose monitoring business offsets.

Bernard: Spectacles and self injection devices for obesity and diabetes.

Speaker Change: Slide 16 breaks down the progression from 2024, EPS $6 75 to the 2025 guidance range.

Bernard: Contract manufacturing margins are expected to decline 200 basis points year over year in FY 'twenty five.

Speaker Change: The guidance anticipates that proprietary products revenues, excluding the impact of our drug delivery device 2020 for incentive.

Bernard: Two lower utilization.

Bernard: Just to note on the ramp up of our <unk> sites in Dublin. The building is now up and running auto injector production has commenced and will continue to ramp as we move through the third and fourth quarters.

Speaker Change: Salaries with improving margins, adding 77 to 2025 EPS.

Eric Green: The third question around growth opportunities, I mean, obviously, we will continue to focus on expansion within HVP components, see if we can help our customer accelerate some of the launches that they have planned, and also some of the regulatory work that we're partnering with them on with Annex 1. Obviously, we will respond accordingly with GLP-1 growth. I think at this point in time, that's probably as much we'll provide on the potential additional growth levers as we think about throughout 2025.

Speaker Change: This was more than offset by incentive compensation plus the tax benefit on stock based compensation.

Bernard: Ladies and 2025 and into 2026, we expect both revenues and margins to benefit from the ramp up in the pain and drug handling portion of the business.

Speaker Change: Is not incorporated in our guidance and the currency headwind total to about 77.

Bernard: The Grand Rapids expansion is also operational.

Speaker Change: The drug delivery device incentive headwinds and glucose monitoring transition reduce 2025 EPS by about <unk> 43.

Bernard: Our first revenues in the third quarter of 2020 for these.

Bernard: These revenues will increase as we achieve scale in mid 2025.

Speaker Change: And incremental investments in R&D and SG&A in 2025 or 22.

Bernard: Our experience with new installations is that they take up to 18 months to achieve close to full capacity.

Speaker Change: In total these factors get us to our 25 guidance range of $6 to $6 20.

Bernard: Moving on to slide 16.

Bernard: Our 2025, our EPS guidance is now anticipated to be in a range of $6 to $6 20.

Michael Ryskin: Yeah. We'll update as we get closer to them having an impact on our numbers. So it's kind of hard to give you a sense of what they are now.

Speaker Change: For Capex, we are on a glide path back down towards traditional 6% to 8% of revenues to support our long range plan.

Bernard: Please note we have several exciting incremental opportunities not incorporated in this guidance and we will update you on these in 2025 should they materialize.

Speaker Change: We now anticipate 2025 capex of $275 million.

[Analyst]: Understood. Thank you.

Operator: Thank you. Our next question comes from the line of Paul Knight of KeyBank Capital Markets. Please go ahead, Paul.

Speaker Change: Down $100 million from 2024.

Bernard: Slide 16 breaks down the progression from 2024, EPS $6 75 to the 2025 guidance range.

Speaker Change: We expect the 2024 will be the peak investment year for our growth initiatives over the next several years.

Paul Knight: Hi, Eric. You have had a long-term guide of our construct of a 7% to 9% organic growth. As we leave 2025 with capacity additions in place and the GLP-1 elastomer business in place, what do you feel about that 7 to 9 construct?

Hi, Eric. You have had a long-term guide of our construct of a 7% to 9% organic growth. As we leave 2025 with capacity additions in place and the GLP-1 elastomer business in place, what do you feel about that 7 to 9 construct?

Bernard: The guidance anticipates that proprietary products revenues, excluding the impact of our drug delivery device 2020 for incentive.

Finally today, we are introducing first quarter 2025 guidance and anticipate of revenues in the range of $680 million to $690 million.

Bernard: Salaries with improving margins, adding 77 to 2025 EPS.

Speaker Change: Which translates into 1% to 2% first quarter organic revenue growth and first quarter 2025, adjusted EPS is expected to be in the range of $1 20 to $1 25.

Bernard: This was more than offset by incentive compensation plus the tax benefit on stock based compensation, which is not incorporated in our guidance and the currency headwind in total to about 77.

Eric Green: I believe, Paul, good morning. I believe long-term, if you think about the 7% to 9%, it feels very strong that we will be able to return to those types of top-line performance metrics. In particular, I think in 2025, we'll see ourselves transition into that direction. To your point, the key thesis of the growth is going to be around HVP components and proprietary. So the early signs for 2025 are very strong. It's not one particular area. It's multiple areas, multiple customers, multiple drugs, and categories in the marketplace. We feel that we're getting to a more normalized environment, which will allow us to get back to that growth algorithm that we had historically.

Eric Green: I would now like to turn the call back over to Eric.

Bernard: The drug delivery device incentive headwinds and glucose monitoring transition reduce 2025 EPS by about 43.

Eric Green: Thank you Bernard to summarize on slide 17, we are pleased with the strong finish to the year and with the opportunities ahead I'm confident we will deliver on a successful 2025 for west.

Bernard: And incremental investments in R&D and SG&A in 2025 or 22.

Bernard: In total these factors get us to our 25 guidance range of $6 to $6 20.

Eric Green: Our performance in HCP components is encouraging and we are seeing a return to growth in our proprietary business because of our continued success and biologics <unk>.

Bernard: For Capex, we are on a glide path back down to our traditional 6% to 8% of revenues to support our long range plan.

Eric Green: Adoption of <unk> one.

Bernard: We now anticipate 2025 capex of $275 million.

Eric Green: We anticipate that 2025 will be an important year that positions the company for the future success.

Bernard: Down $100 million from 2024.

Eric Green: We intend to capitalize on our strengths and continue to address areas that require additional attention.

Bernard: We expect that 2024 will be the peak investment year for our growth initiatives over the next several years.

In closing I would like to thank our team members across the globe for their unwavering dedication as they continue to make a difference in improving patients' lives.

Bernard: Finally today, we are introducing first quarter 2025 guidance and anticipated revenues in the range of $680 million to $690 million.

Paul Knight: Then maybe, I think, Bernard, you were commenting on the Dublin GLP-1 new site. You're expecting utilization in the year, excuse me, 2025, is it at half of capacity for the year? What's your kind of view on what it's going to be producing relative to potential revenue?

Then maybe, I think, Bernard, you were commenting on the Dublin GLP-1 new site. You're expecting utilization in the year, excuse me, 2025, is it at half of capacity for the year? What's your kind of view on what it's going to be producing relative to potential revenue?

Speaker Change: Operator, we are ready for our first question. Thank you.

Bernard: Which translates into 1% to 2% first quarter organic revenue growth and first quarter 2025, adjusted EPS is expected to be in the range of $1 20 to $1 25.

Speaker Change: Thank you and as a reminder, if you have not already you May press star one on your telephone to queue up please standby, while we compile the Q&A roster.

Speaker Change: Our first question.

Eric Green: I would now like to turn the call back over to Eric.

Michael Ryskin: Yeah, Paul, I think where it becomes more material is in the back half of the year. We're at the early stages of ramping at the moment. As we get into the back half of the year, we start to see the ramping around, particularly around the auto-injector element of the business. Then as we get into the later part of 2025 and into early 2026, that's when we would see drug handling coming on board. So it does take time. We've seen Grand Rapids starting to ramp at a start as we've got through the back end of 2024, and we'll see that continue into 2025. But Dublin, we won't really see a lot from that facility, I think, for the first half of this year.

Speaker Change: Comes from the line of Michael Risking Bofa Global Research your question. Please Michael.

Speaker Change: Thank you Bernard to summarize on slide 17, we are pleased with the strong finish to the year and with the opportunities ahead I'm confident we will deliver on a successful 2025 for west.

Speaker Change: Thanks for taking the question guys a lot to unpack here I'm going to ask one.

Speaker Change: One question that I'm asked the big ones. So if I just look at the fiscal year 'twenty five Etfs Sky, obviously, well below expectations I appreciate the color on the bridge the progression of our 'twenty four 'twenty five the moving pieces, what I want to get at is sort of like what.

Speaker Change: Our performance in HCP components is encouraging and we are seeing a return to growth in our proprietary business because of our continued success in biologics <unk> ones.

Speaker Change: A one time versus a reset to a new base. So if I look at R&D SG&A investment that seems like that's sort of part of the model right now we can debate packs.

Speaker Change: Adoption of Alex one.

Speaker Change: We anticipate that 2025 will be an important year that positions the company for the future success.

Speaker Change: We intend to capitalize on our strengths and continue to address areas that require additional attention.

Speaker Change: Incentive comp.

Speaker Change: Is it fair to say that everything outside of the contract manufacturing.

Paul Knight: And last question would be, you cited drug handling. Does this mean you're doing complete component assembly? It's not fill-finish, is it?

And last question would be, you cited drug handling. Does this mean you're doing complete component assembly? It's not fill-finish, is it?

Speaker Change: In closing I would like to thank our team members across the globe for their unwavering dedication as they continue to make a difference in improving patients' lives.

Speaker Change: CGM issue is sort of the new base and that.

Speaker Change: Dollar six quantity guide is the new model for a while.

Michael Ryskin: No, it's not fill-finish. It's final drug packaging. But we're not doing fill-finish.

Speaker Change: Operator, we are ready for our first question. Thank you.

Speaker Change: From.

Speaker Change: And if so anything additional color you can give us on that contract manufacturing with air Pocket I think he just said in the prepared remarks.

Speaker Change: Thank you as a reminder, if you have not already you May press star one on your telephone to queue up please standby, while we compile the Q&A roster.

Paul Knight: Okay. Thanks.

Okay. Thanks.

Operator: Thank you. Our next question comes from the line of Matthew Larew of William Blair & Company. Please go ahead, Matthew.

Speaker Change: 200 bps margin impact just sort of what's your outlook for being able to pass that whole to bring something else then anticipate regaining some of that EPS.

Speaker Change: Our first question.

Speaker Change: Comes from the line of Michael Riskin of Bofa Global Research. Your question. Please Michael.

Matthew Larew: I'm going to start on the device side. Obviously, that's been a big theme of the last couple of years. There's been investment in that space, and I know you've been excited about the future there. You referenced today some of the challenges you've had in terms of the financial profile as well as converting to an automated line. Eric, I think you would use the word maximizing shareholder value as you think about options, which sounds like, I guess, the question is, is there sort of an existential question as to whether that should be a core competency of the company long-term or more about harder operational decisions that would need to be made in the near term to maximize profitability?

Speaker Change: Air pocket that you're getting.

Speaker Change: Yes, thanks for the question.

Michael Riskin: Thanks for taking the question guys a lot to unpack here I'm going to ask any more questions I'm going to ask a big one so if I just look at the fiscal year 'twenty five Etfs Sky, obviously, well below expectations I appreciate the color on the bridge the progression of our 'twenty four 'twenty five the moving pieces, what I wanted to get at is sort of like one.

Michael: And Michael So when we look when we look at the guide.

Speaker Change: These impacts are.

Speaker Change: Her impacting 2025, particularly when you look at drug delivery device that has a mix impact in 'twenty five, but we have a number of initiatives ongoing to.

Speaker Change: And the profitability in that business, we're looking at automation, we're looking at scale, we're looking at.

Speaker Change: What.

Speaker Change: A one time versus a reset to a new base. So if I look at R&D SG&A investment that seems like that's sort of part of the model right now we can debate tax incentive.

Speaker Change: Well medium term term, adding more customers. So we would expect that to improve over time that will take a little bit of time for us to do that.

Speaker Change: Incentive comp.

Speaker Change: Is it fair to say that everything outside of the contract manufacturing.

Speaker Change: So again, we would expect the mix impacts to improve and as the mix improves overtime EPS also improves with that and Thats, what we talked about I think.

Eric Green: Yeah, Matthew, there are two points to that. One is more near-term, what we have in our hands to be able to produce consistently high-quality product for our customers as we scale because the demand is increasing and be flawless in the execution of the automation. So we can go from a manual to a fully automated process, which will drive efficiencies. And there are other operational excellence drivers that we are focused on in that area to deliver on. As we scale, we will get better economics. But beyond that, we do have to just continue to pressure test what the future looks like for that particular device because the drug delivery device for us is beyond just one product. We do have a pretty attractive portfolio around admin systems. We do have what we call SmartDose and also our Crystal Zenith line.

Speaker Change: CGM issue is sort of the new base.

Speaker Change: $6 six quantity guide is the new model.

Speaker Change: And towards the back half of last year in the second half really about the mix impact that we were seeing in our business.

Speaker Change: From.

Speaker Change: And if so anything additional color you can give us on that contract manufacturing their products. I think you just said in the prepared remarks.

Speaker Change: Is there I called out in his script there are areas that we are addressing.

Speaker Change: 200 bps margin impact is sort of what's your outlook for being able to pass that whole a break from the analysis.

Speaker Change: If I look at the growth in <unk>, we're seeing.

Speaker Change: Mid to high single digit growth in <unk>, with expanding margins and driving our basements or slightly offset in 2025, but again, we would expect that to be corrected.

Speaker Change: Regain some of that EPS.

Speaker Change: Air pocket that you're getting.

Yes. Thanks for the question Michael So when we look when we look at the guide.

Speaker Change: A CGM.

Speaker Change: Packed on contract manufacturing again that Thats here in the short term, we would expect to replace that business with.

Speaker Change: Lot of these impacts are.

Speaker Change: Her impacting 2025, particularly if you look at drug delivery device that has a mix impact in 'twenty five, but we have a number of initiatives ongoing to.

Speaker Change: A business that has margins more in line with.

Speaker Change: With what our return on investment thresholds would be.

Speaker Change: And again, so over time, we would see that those margins improving.

Speaker Change: And the profitability in that business, we're looking at automation, we're looking at scale, we're looking at.

Eric Green: If you think about the drug delivery device area, this particular product is one that we're really focused on right now to determine what is the long-term best option for West.

Speaker Change: Okay.

Speaker Change: Well medium term term, adding more customers. So we would expect that to improve over time now it will take a little bit of time for us to do that.

Speaker Change: Any additional color you can provide on the CGM.

Speaker Change: Issue I mean, the way I'm reading it as sort of a it was your decision to walk away from the contract because the financial metrics just <unk>.

Speaker Change: So again, we would expect the mix impacts to improve and as the mix improves over time EPS also improves with that and Thats, what we talked about I think.

Matthew Larew: Okay. Understood. And then just on the multi-year contract, GLP contract you mentioned, could you frame how that participation rate and duration of contract would compare to your prior just so we have a sense for what really is incremental there?

Speaker Change: Given the creates an air pockets of how bad was that given the needs of our existing customers and we know the CGM marketplace.

Speaker Change: For any concentrated in just two maybe three players.

Speaker Change: Towards the back half of last year in the second half really about the mix impact that we were seeing in our business.

Speaker Change: So if you if you've got some customers doesn't seem like that's something you can replace that is that something you can flex to another product line outside of CGM.

Speaker Change: Is there I called out in his script there are areas that we are addressing.

Speaker Change: If I look at the growth in <unk>, we're seeing.

Eric Green: Well, in that particular case, we were on and have historically been the provider of all the elastomer components for our customer. And so what this does is it secures that position for multiple years. We have not articulated exactly the duration, but it is quite lengthy. And so it isn't a drastic departure of our customer. And as you know, it takes a long time to build that rapport, that credibility, and that supply chain. And so we feel really comfortable. And it was a natural progression of our relationship just to secure it and ensure that we're both aligned on future expectations and that we can help them and support one another and make sure that they can support their end patients at the end of the day with the drug launches. So it is long in duration.

Speaker Change: Yes, Michael Good question and that's exactly what we're what we've focused on we've had the ability to support our customers with CGM for the past 10 plus years.

Speaker Change: Mid to high single digit growth in <unk>, with expanding margins and driving our basements or slightly offset in 2025, but again, we would expect that to be corrected.

Speaker Change: In particular the <unk>.

Speaker Change: The CGM.

Speaker Change: Technologies that were introduced early on.

Speaker Change: Packed on contract manufacturing again, that's here in the short term, we would expect to replace that business with.

Speaker Change: And the ramp up of <unk> CGM in the marketplace. So we have a strong position as new technologies were developed by our customers.

Speaker Change: A business that has margins more in line with.

Speaker Change: We did take the decision based on the economics that just did not meet our financial thresholds.

Speaker Change: It's what our return on investment thresholds were eight.

Speaker Change: And again, so over time, we would see that those margins improving.

Speaker Change: And that is.

Speaker Change: The decision was not taken lightly, but we wanted to make sure that we preserve.

Speaker Change: Okay.

Speaker Change: Any additional color you can provide on the CGM.

Speaker Change: The financial construct we believe is appropriate for the business that we provide in our contract manufacturing space.

Speaker Change: Issue I mean, the way I'm reading it as sort of a it was your decision to walk away from those contracts because the financial metrics just I mean, given it creates an air pockets or how bad was that given the needs of our existing customers and we know the CGM marketplace.

Speaker Change: Therefore.

Speaker Change: We are doing.

Eric Green: We haven't articulated exactly the number of years, but it is very long. It is a continuation of our participation, which is majority of basically all their needs in that market with that customer.

Speaker Change: Really its well scheduled ramp down.

Speaker Change: As they can move into the next generation.

Speaker Change: <unk> concentrated in just two maybe three players.

Speaker Change: Through whether they're in sourcing some of it.

Speaker Change: So if you if you've got some customers doesn't seem like that's something you can replace that is that something you can flex to another product line outside of CGM.

Speaker Change: In fact, many many cases or in sourcing.

Michael Ryskin: I think, Matt, it's also very important, too. It supports the growth in the GLP-1 market and feeds into the long-term construct that we talked about as one of the key drivers there. Now, we've ring-fenced that. And again, so it's really supporting that growth around HVP over the long term.

Speaker Change: So that was the decision we made and that is we will reuse.

Speaker Change: Stated clearly, though there is space that would be available, which is being looked at and worked on with other customers.

Speaker Change: Yes, Michael Good question and that's exactly what we're what we've focused on we've had the ability to support our customers with CGM for the past 10 plus years.

Speaker Change: To build support future launches in future.

Speaker Change: Private portfolios that we'll put into contract manufacturing going forward.

Speaker Change: In particular, the technologies that were introduced early on.

Speaker Change: So.

Speaker Change: And the ramp up of <unk> CGM in the marketplace. So we've had a strong position as new technologies were developed by by our customers.

Speaker Change: The impact will be in 2025, and we'll move through its offset it with some of the <unk> growth and other <unk>.

Matthew Larew: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Justin Bowers of Deutsche Bank. Please go ahead, Justin.

Speaker Change: Business that we're bringing in.

Speaker Change: We did take the decision based on the economics that just did not meet our financial thresholds.

Speaker Change: Alright, thanks, so much ill get back in queue.

Speaker Change: Thank you.

Justin Bowers: Thank you. Good morning, everyone. Just a couple of clarifications here to kick it off. Eric, on the 100 basis points of growth expansion from Annex 1, is that referring to 2025 specifically, or is that sort of like a longer-term contribution? And then on the device part of the business, you said that there's a mandate there. And is that related to the contract manufacturing side of the business or also in prop products as well?

Thank you. Good morning, everyone. Just a couple of clarifications here to kick it off. Eric, on the 100 basis points of growth expansion from Annex 1, is that referring to 2025 specifically, or is that sort of like a longer-term contribution? And then on the device part of the business, you said that there's a mandate there. And is that related to the contract manufacturing side of the business or also in prop products as well?

Speaker Change: And that is.

Speaker Change: Thank you. Our next question comes from the line of Larry Solow of CJS.

Speaker Change: That decision was not taken lightly, but we wanted to make sure that we preserve.

Speaker Change: <unk> Securities. Please go ahead Larry.

Speaker Change: The financial construct we believe is appropriate for the business that we provide in our contract manufacturing space.

Speaker Change: Great. Good morning, gentlemen, I guess I guess first question just on the proprietary product side and again I know you don't guide to segments, but it sounds like just the general outlook there is positive.

Speaker Change: Therefore.

Speaker Change: We're doing a.

Speaker Change: Really its well scheduled ramp down.

Speaker Change: And does that does that scale up as we go through the year or obviously, I guess Q1 sequentially seasonally usually a little bit slower but.

Speaker Change: As they can move into the next generation.

Speaker Change: Through whether they're in sourcing some of it.

Speaker Change: Are there any inventory issues that continue to wane as we move forward and then the second part of that question. So it sounds like.

Speaker Change: In fact, many many cases their in sourcing.

Speaker Change: So that was the decision we made and that is we will re use stated clearly, though there is space that would be available which is being looked at and worked on with other customers.

Speaker Change: The core HCP is doing okay, but there will be a little bit of a.

Eric Green: Yeah. No, thanks for the question. The 100 basis points that reference the 100 to 150 is really 2025. So these are projects that we were sharing with you last year, and just wanted to give visibility that now they're converting into actual revenues for 2025. It takes about 14 to 18 months to do the transition, sometimes a little bit longer with our customers. And so that's why I wanted to mention it enough to realize that it's starting to become impactful for us near term. And we do believe that there's long-term growth trajectory on this, but we really haven't framed that as of as we speak. But it's been contemplated in our long-term growth algorithm for high-value products. On the device side, that is specifically my comment was specifically around the proprietary devices. And to be very clear, it's around our smart dose platform.

Speaker Change: <unk> smart dose and lower margins, maybe you can give us a little more color on that side of the equation too.

Speaker Change: To build support future launches in future.

Speaker Change: Thank you Larry and thanks for the question, so you're absolutely correct.

Speaker Change: Private portfolios that we'll put into contract manufacturing going forward.

Speaker Change: Take a look at proprietary as a whole.

Speaker Change: The key drivers of that business will start with the HCP components.

Speaker Change: So.

Speaker Change: The impact will be in 2025, and we will.

Speaker Change: That has been the thesis of growth for west for a number of years.

Speaker Change: We'll move through its offset it with some of the <unk> growth and other cm business that we're bringing in.

Speaker Change: And we really we still vary.

Speaker Change: Alright, thanks, so much ill get back in queue.

Speaker Change: I feel strong about our prospects and the current pipeline that we have in place what's driving it number one biologics as we think about our continued strong position in that particular market.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Larry Solow.

Speaker Change: C. J F Securities. Please go ahead Larry.

Speaker Change: We mentioned that we're still just looking at the past year past quarter, we still have a very high participation rate of all new launches that have been approved.

Great. Good morning, gentlemen, I guess I guess the first question just on the proprietary product side and again I know you don't guide to segment, but it sounds like just the general outlook there is positive.

Speaker Change: No.

Speaker Change: Around 90% plus.

Speaker Change: Does that does that scale up as we go through the year or obviously, I guess Q1 sequentially, our seasonal usually a little bit slower but is there any inventory issues that continue to wane as we move forward and then the second part of that question. So it sounds like the.

Speaker Change: And I just want to be clear on that we do put biologics and biosimilars together, because the value proposition to our customers and the economics are.

Justin Bowers: Okay. And then a follow-up to that, in the prepared remarks, you talked about price and incentive headwinds. And you called out $44 million in the second half of 2024. Is that ring-fenced there, or is there more to that? And then unrelatedly, HVP mid-single digit, back to mid-single digit growth this year, and then Biologics high single to low double. Is there any anticipated restock there, or are those back to run rate levels?

Okay. And then a follow-up to that, in the prepared remarks, you talked about price and incentive headwinds. And you called out $44 million in the second half of 2024. Is that ring-fenced there, or is there more to that? And then unrelatedly, HVP mid-single digit, back to mid-single digit growth this year, and then Biologics high single to low double. Is there any anticipated restock there, or are those back to run rate levels?

Speaker Change: The same for us.

Speaker Change: We are in the top 50, biologics and you think about the pipeline.

Speaker Change: <unk> that are being developed.

Speaker Change: Core HCP is doing okay, but there will be a little bit of a transition on smart dose and lower margins. Maybe you can give us a little more color on that side of the equation too.

Speaker Change: Quite robust and so we feel really good about this space.

Speaker Change: That growth will continue in the near term of 2025, but well beyond that the second lever is <unk>.

Speaker Change: Thank you Larry and thanks for the question, so you're absolutely correct.

Speaker Change: Look at proprietary as a whole.

Speaker Change: And our position in <unk>.

Speaker Change: The key drivers of that business will start with the HCP components.

Speaker Change: Not just in contract manufacturing, but we have a very strong foothold in the proprietary HCP elastomers, primarily providing plunders for for the largest players in this space. We did we did comment in our prepared remarks that we have secured a long term contract with one.

Speaker Change: That has been the thesis of growth for west for a number of years.

Speaker Change: And we really we still vary.

Eric Green: Yeah. I'll start with the last one first, if you don't mind. We believe that it's more of a natural back-to-the-growth algorithm that we expect with Biologics and HVP as we progress through 2025. So we don't see this as a restock since we do believe it becomes more normalized. And as you know, that once you're on the molecule, you tend to be on it for the duration of that drug in the market. And so it's really starting to harmonize with their supply chain needs going forward. On the first question, I think we mentioned the $0.44 on HVP. Not all of it is related to the device, but the majority is. So a good portion of it is.

Speaker Change: Feel strong about our prospects and the current pipeline that we have in place what's driving it number one biologics as we think about our continued strong position in that particular market.

Speaker Change: The customers provide all of their proprietary elastomers.

Speaker Change: <unk> needs in the <unk> space and we are working with another customer to continue to have majority of their their needs going forward.

Speaker Change: We mentioned that we're still just looking at the past year past quarter, we still have a very high participation rate of all new launches that have been approved.

Speaker Change: Around 90% plus.

Speaker Change: So that is the <unk> and to give you a little context, there it's about mid single digit from.

Speaker Change: And I just want to be clear on that we do put biologics and biosimilars together, because the value proposition to our customers. The economics are.

Speaker Change: In 2024.

Speaker Change: Size of the business against all of our proprietary the third area is antics, one and we've talked about it but we're starting to see the instead of talking about the pipeline actual projects that will turn into revenues in 2025.

The same for us.

Speaker Change: From the top 50, biologics and you'd think about the pipeline of biologics that are being developed.

Speaker Change: Quite robust and so we feel really good about this space that growth will continue in the near term of 2025, but well beyond that the second lever is <unk> and our position in <unk>.

Eric Green: Some of it, the smaller portion, is related to the transition that we're seeing on the CGM business transitioning out this year and then also toward the tail end of last year, I'm sorry, next year, so that the impact. But we'll obviously use that asset, those locations to fill with new contracts, new customers that meet our financial construct. So that's kind of how you would look at that $0.44 headwind this year.

Speaker Change: We're actually quite encouraged we had an increase of interests in projects, we've launched well over 200 more than double digit from the last quarter, I mentioned and roughly around 50% of those projects will turn into some sort of revenues throughout the duration of 2025.

Speaker Change: Not just in contract manufacturing, but we have a very strong foothold in the proprietary HCP elastomers, primarily providing plunders for for the largest players.

Speaker Change: We believe that's going to give us about 100, I'm sorry, yes about 100.

Speaker Change: 150 basis points.

Speaker Change: In this space.

Speaker Change: We did we did comment in our prepared remarks that we have secured a long term contract with one of the customers provide all of their proprietary elastomers.

Speaker Change: Both expansion just in that particular area.

So HCP components very strong going forward you asked about the destocking.

Justin Bowers: Thanks for all the questions. I'll jump back in queue.

Thanks for all the questions. I'll jump back in queue.

Eric Green: Thank you.

Speaker Change: Consistent to what we've said on previous quarters, we believe.

Operator: Thank you. Our next question comes from the line of David Windley of Jefferies. Your line is open, David.

Speaker Change: Needs in the <unk> space and we are working with another customer to continue to have majority of their their needs going forward. So that is the <unk>, one and to give you a little context, there it's about mid single digit from.

Speaker Change: Pharmaceutical or pharma customers have.

Speaker Change: Normalized biologics is becoming more normalized as boots, where we are today and then we believe generics will become more normalized throughout the duration of 2025, so consistent to what we have said before and Thats all based on the more normal.

David Windley: Hi. Good morning. Thanks for taking my questions. I have a few. I hope I can squeeze them in. So the first one, kind of on the last on Justin's question, I believe that your messaging in the second half of last year as you were seeing the ramp of your on-body wearable production and supply to the one key client that you were ramping was that you hoped to get some of this incentive fee value kind of converted into base price. I gather from the guidance that you're giving around this that you didn't. My math suggests that the incentive fee would have been worth $0.46 or so. And so I'm wondering, can you be a little more specific? Did you get some of it baked into base price, but not all? Or how did that play out, if you don't mind?

Hi. Good morning. Thanks for taking my questions. I have a few. I hope I can squeeze them in. So the first one, kind of on the last on Justin's question, I believe that your messaging in the second half of last year as you were seeing the ramp of your on-body wearable production and supply to the one key client that you were ramping was that you hoped to get some of this incentive fee value kind of converted into base price. I gather from the guidance that you're giving around this that you didn't. My math suggests that the incentive fee would have been worth $0.46 or so. And so I'm wondering, can you be a little more specific? Did you get some of it baked into base price, but not all? Or how did that play out, if you don't mind?

Speaker Change: In 2020 for the size of the business against all of our proprietary <unk>.

Speaker Change: Consistent ordering patterns of our customers going forward I do want to touch on smart dose because you asked about that topic.

Speaker Change: Third area is that <unk> won and we talked about it but we're starting to see instead of talking about the pipeline actual projects that will turn into revenues in 2025.

Speaker Change: <unk>, we have been in the ramp up mode in 2024.

Speaker Change: Onboarding Phoenix sites.

Speaker Change: In the later part of first half of 2024 is no. It takes time to get to full.

Speaker Change: We're actually quite encouraged we had an increase of interest in projects, we've launched well over 200 more than double digit from the last quarter I mentioned.

Speaker Change: Efficiencies of a particular site it was another expansion of manual processes.

Speaker Change: And roughly around 50% of those projects will turn into some sort of revenues throughout the duration of 2025.

Speaker Change: So when Bernard talked about we're going to drive automation.

Speaker Change: In the house.

Speaker Change: It will take pretty much 2025, and if we can bring them forward, we will but we will be driving more towards automation take costs down we are looking at scale as the volumes are increasing significantly for us for our customers.

Speaker Change: We believe that's going to give us about 100, I'm sorry, yes about 100.

Eric Green: Yeah. The way I would respond to that, David, well, first of all, good morning, is that the incentives far out exceed the price that we have established so far in 2025. So I won't dimension any further, but it is the incentives in the latter part of 2024, as we ramped, did exceed the going-forward pricing.

Speaker Change: 150 basis points.

Speaker Change: Both expansion just in that particular area.

Speaker Change: So HCP components very strong going forward you asked about the destocking.

Speaker Change: And.

Speaker Change: Consistent to what we've said in previous quarters, we believe.

Speaker Change: In addition, more midterm, we're looking at new new customers, but I will say is we are looking at the portfolio specifically around this device and determining the best actions forward to ultimately increase shareholder value. So that's that's our focus on here, while maintaining and supporting our customers and their <unk>.

Speaker Change: Pharmaceutical or pharma customers have.

Speaker Change: Normalized biologics is becoming more normalized where we are today and then we believe generics will become more normalized throughout the duration of 2025, so consistent to what we have said before and Thats all based on the more.

Michael Ryskin: Understood. But also to that, David, we're also seeing better production efficiencies and yield on that line. So we're improving on the cost side as well as the price. So when we're looking at how do we improve the economics around this device, it's looking at it from both a price perspective and also from a cost perspective. So we're working a couple of different areas on that. So that gets us to that 33.

Speaker Change: <unk>.

Speaker Change: So those are the key topics that I believe I covered the yes and the other.

Speaker Change: Consistent ordering patterns of our customers going forward I do want to touch on smart dose because you asked about that topic.

Larry Solow: Larry any other listen on those dose.

Larry Solow: Really good color I guess, just the follow up.

Larry Solow: And anything you can add just maybe a little tease on where the incremental opportunities not included in guidance any is that just a bunch of different things across the P&L is there anything specific we can point to there.

Speaker Change: Smart to us we have been in the ramp up mode in 2024.

Speaker Change: Onboarding Phoenix sites.

Speaker Change: In the later part of first half of 2024 is no. It takes time to get to full.

David Windley: Got it. I probably should have started with this one so as not to jump around. But the investments in SG&A and R&D, what are those specifically? And maybe talk to the timing of those. Why do those need to be made now?

Got it. I probably should have started with this one so as not to jump around. But the investments in SG&A and R&D, what are those specifically? And maybe talk to the timing of those. Why do those need to be made now?

Speaker Change: Efficiencies of a particular site it was another expansion of manual processes.

Larry Solow: Yes, Larry.

Larry Solow: I don't want to create a wider range here I just wanted to say that I do believe the way we look at.

Speaker Change: So when Bernard talked about we're going to drive automation, that's an in house.

Larry Solow: Our guidance is.

Larry Solow: Business that we have very clear visibility of and I'm very confident that we can execute against.

Eric Green: Yeah. So in the R&D area, specifically, the largest incremental investment that we're making in 2025 is to build out and be prepared for the launch at the end of this year or early next year of our integrated system. So this is the for human use prefilled syringe system that we have been working on with our customers. And we actually did launch not for human use prefilled systems with borosilicate earlier this year. The receptivity was very high. The engagement with customers was very strong. And therefore, we felt really comfortable to continue the planned path that we were on to execute and make sure we hit the timetables that we've established a couple of years ago with this product launch. It's new. It's early. But the adoption is quite exciting and more to come as we get to that point.

Larry Solow: I am confident in our team I do believe HCP components as a growth driver for this business.

Larry Solow: <unk> showing up very strongly early on in 2025, and we would expect that to drive I mentioned three areas Biologics <unk>. One is a very discrete projects initiatives that we have your hands around.

Speaker Change: <unk>.

Larry Solow: And then we have to fix.

Larry Solow: Devices particular, one part of that portfolio and that is a focus of the team and we need to improve the profitability.

Speaker Change: Supporting our customers and their patients.

Speaker Change: So those are the key topics that I believe I covered the yes and the other.

Larry Solow: And they do not we do not have a lot of time to get that done. So that's that's the mandate and I expect the teams to over deliver but I'll leave it to that.

Larry: Larry any other.

Larry: That was really good color I guess, just a follow up.

Larry: And anything you can add just maybe a little tease on where the incremental opportunities not included in guidance any is that just a bunch of different things across the P&L is there anything specific we can point to there.

Larry Solow: Just to follow up on that Larry.

Larry Solow: A number of these opportunities some are.

Larry Solow: More in the short term and then more some are medium term.

Larry Solow: Opportunities and we'll update as we go through the year as to how they are transpiring, what Jay just to put it in context that we have.

Eric Green: But that is probably the largest incremental piece of our R&D from last year to this year, clearly.

Speaker Change: Yes, Larry.

Larry: I don't want to create a.

Larry: Wider range here I, just wanted to say that I do believe the way we look at.

Larry Solow: The ability to respond quicker than we probably have in the past based on the capacity we've installed, particularly in our <unk> sites over the last number of years.

Larry: Our guidance is.

David Windley: Okay. On the SG&A side?

Okay. On the SG&A side?

Larry: The business that we have very clear visibility of and I'm very confident that we can execute against.

Michael Ryskin: Yeah. On the SG&A side, Dave, a lot of the incremental cost there is the annualization of costs that were being added as we were getting towards or getting through 2024. So when they get fully annualized, we have a little bit of a step up there. And there's some near normal merit increases. But we're not adding any additional resources from an SG&A perspective. So they're really costs that are carrying through. And then you're just our annual merit increase.

Larry Solow: So we have that ability our lead times have come down come down considerably. So we're in a better position to take advantage of those opportunities when they present themselves.

Larry: I am confident in our team I do believe HCP components as a growth driver for this business.

Larry: <unk> showing up very strongly early on in 2025, and we would expect that to drive I mentioned three areas Biologics <unk>. One is a very discrete projects initiatives that we have their hands around.

Larry Solow: Great I appreciate it thank you guys.

Larry Solow: Thank you.

Larry Solow: Our next question comes.

Larry Solow: From the line of Patrick Donnelly with Citi. Your.

Speaker Change: Your line is open Patrick.

Larry: And then we have to fix.

David Windley: Got it. Okay. So then, coming back a little bit, kind of bringing the device question back in. And this is a little bit of Matthew Larew's question. So I believe you've covered the company for a long time. I think the Tech Group acquisition dating back to the 2000s, in fact, is the basis of your kind of foundation of your contract manufacturing business. And I believe the strategic import of that for you is to have the capability to parlay, so to speak, into some of the injection-molded proprietary devices like the on-body that you're bringing to market. So I guess it gets back to. I use the existential question that the contract manufacturing business is proving to be lumpy. You're moving out of CGM, but into what is now going to be a very high client concentration in the contract manufacturing business.

Got it. Okay. So then, coming back a little bit, kind of bringing the device question back in. And this is a little bit of Matthew Larew's question. So I believe you've covered the company for a long time. I think the Tech Group acquisition dating back to the 2000s, in fact, is the basis of your kind of foundation of your contract manufacturing business. And I believe the strategic import of that for you is to have the capability to parlay, so to speak, into some of the injection-molded proprietary devices like the on-body that you're bringing to market. So I guess it gets back to. I use the existential question that the contract manufacturing business is proving to be lumpy. You're moving out of CGM, but into what is now going to be a very high client concentration in the contract manufacturing business.

Larry: Devices particular, one part of that portfolio and that is a focus of the team and we need to improve the profitability.

Larry Solow: Hey, guys. Thanks for taking the question.

Speaker Change: Maybe another one on <unk>.

Larry Solow: Just diving in a little bit there can you talk about the growth youre seeing from that market what.

Larry: And.

Larry: They do not we do not have a lot of time to get that done. So that's that's the mandate and I expect the teams to over deliver but I'll leave it to that.

Speaker Change: Bryan Ferry side, and then we do get a decent amount of questions just on the oral side and there's maybe a few readouts here in the relative near term, maybe just frame up how you think about.

Speaker Change: Just to follow up on that Larry.

Larry Solow: The impact of oral is what that means for the market.

Larry: A number of these opportunities summer.

Larry Solow: How you guys see that playing out.

Larry: In the short term and then more so some are medium term and opportunities and we'll update as we go through the year as to how they are transpiring, what Jay just to put it in context that we have <unk>.

Speaker Change: Yes, Patrick good morning. Thanks for the question, we do believe that from our from our lens and speaking with.

Speaker Change: Our customers that there will be an oral impact in the market. We do believe however, a majority of the delivery will be injectable.

Larry: The ability to respond quicker than we probably have in the past based on the capacity we've installed, particularly in our <unk> sites over the last number of years.

Speaker Change: And in our models are built around.

Larry: So we have that ability our lead times have come down come down considerably. So we're in a better position to take advantage of those opportunities when they present themselves.

Speaker Change: A shared portion of the two so that's how we kind of looked at our investments I will make sure that we safeguard.

Speaker Change: The capital we put in to build support <unk>, particularly around the <unk>.

Speaker Change: Great I appreciate all of that thank you guys.

Speaker Change: Where we have.

David Windley: I can understand where you would want to tolerate that for the contribution that could make on the proprietary product side. But the on-body wearable device margins are just not attractive enough to justify pursuing. It doesn't seem. So I guess I come back to, is that pursuit worth it? I guess is the basic question. Because if I understand correctly, based on your answer on the on-body wearable, those margins are probably the lowest in your portfolio at something like 10%. So sorry for the very direct question, but just really wanting to understand why this makes strategic sense to continue to pursue, given the margins, the lumpiness, and the CapEx requirement. Thanks.

I can understand where you would want to tolerate that for the contribution that could make on the proprietary product side. But the on-body wearable device margins are just not attractive enough to justify pursuing. It doesn't seem. So I guess I come back to, is that pursuit worth it? I guess is the basic question. Because if I understand correctly, based on your answer on the on-body wearable, those margins are probably the lowest in your portfolio at something like 10%. So sorry for the very direct question, but just really wanting to understand why this makes strategic sense to continue to pursue, given the margins, the lumpiness, and the CapEx requirement. Thanks.

Larry: Thank you.

Speaker Change: Clear levels of.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Patrick Donnelly of Citi. Your.

Speaker Change: Demand or volume requirements that need to be.

Speaker Change: Your line is open Patrick.

Speaker Change: Take or pay type of environment for a number of years. So we're protected in that area and as you know in the proprietary side of the elastomers lot of those resources are fungible, but we feel really good about <unk> right now as I mentioned proprietary last versus roughly.

Patrick Donnelly: Hey, guys. Thank you for taking the question.

Speaker Change: Maybe another one on the G&P side.

Speaker Change: Digging a little bit there can you talk about the growth youre seeing from that market in parts of your proprietary side and then we do get a decent amount of questions just on the oral side and theres going to be.

Speaker Change: Mid single from the whole portfolio perspective proprietary cm is 40%.

Speaker Change: You read out here in a relative near term.

Speaker Change: Can you just frame up how you think about the impact of oral is what that means in the market and how you guys see that playing out.

Speaker Change: I think about the ramp up a lot of the ramp up has been around <unk> with her.

Patrick Donnelly: Yes, Patrick good morning. Thanks for the question, we do believe that from our from our lens and speaking with.

Speaker Change: Infrastructure expansions, particularly in Grand Rapids in Dublin more to come as we get the capabilities online.

Patrick Donnelly: Our customers that there will be an oral impact in the market. We do believe however, a majority of the delivery will be injectable.

Speaker Change: And more exciting is that in <unk>, we're going to have drug handling capabilities towards the end of 2025 early 2026, which is a expansion of our capabilities, but better.

Eric Green: Yeah. David, as we look at it, separate the two on the on-body wearable for the proprietary side. That technology is making an impact, but the economics on the scale-up has not met our expectations. And so therefore, we have to, as Bernard mentioned, we are driving ways to improve efficiencies through operational excellence, through automation, and through scale. However, to your question, we are looking at all options right now about the fit of this part of the portfolio long-term. On the contract manufacturing side, while some of the skills and resources did come out of that group to support the build-up of that portfolio a while back, it is still, it's independent, and it actually does support us when we think about diversifying our top line.

Patrick Donnelly: And in our models are built around.

Speaker Change: Better margin profile for poor west on the proprietary side thats going to the fastest growth area in $2025 for us.

Patrick Donnelly: A shared portion of the two so that's how we kind of looked at our investments.

Patrick Donnelly: Make sure that we safeguard.

Speaker Change: Actually it's think about it two thirds versus one third between the two units.

Patrick Donnelly: The capital we put in to build support <unk>, particularly around the <unk>.

Speaker Change: And that is in line with our customers.

Patrick Donnelly: Where we have <unk>.

Patrick Donnelly: Very clear levels of.

Speaker Change: Expectations, and our position with both of them from a from a.

Patrick Donnelly: Demand or volume requirements that need to be.

Speaker Change: Yeah.

Patrick Donnelly: Take or pay type environments for a number of years. So we're protected in that area and as you know in the proprietary side. The last summers lot of those resources are fungible, but we feel really good about <unk> right now as I mentioned proprietary last versus roughly.

What I'd call a penetration rate of success win rate with both bulk customers.

Speaker Change: Okay. No. That's helpful. And then maybe Bernard just to build on Mike's question earlier on the margin can you just talk about I guess the build as we work our way through the year I'm just trying to figure out the right exit rate the right way to build into 'twenty six.

Patrick Donnelly: Mid single from the whole portfolio.

Patrick Donnelly: <unk> proprietary cm is 40%, but if I think about the ramp up a lot of the ramp up has been around <unk> with her.

Speaker Change: Again product mix driven manufacturing ramp just talk about those moving pieces and again, maybe the progression as we go through this year. It would be helpful. Thank you guys.

Eric Green: It also allows us to have a larger, more robust relationship with some of the largest drug companies because they're looking to West to support them both on the contract manufacturing side and also on the proprietary side. So, on a collective basis, that does positions very well in our conversations, in our customer engagements with some of the largest drug companies across the globe. So, while they do have different economics, C&S does have different economics to our proprietary. We expect those investments to have robust returns for that business. And when they don't, we have to make those decisions like we did with CGM. So, I do believe for diversification of our top line, but same customer segment and spirit of being really focused on injectable medicines, we are positioned well strategically at this point with both of those businesses.

Patrick Donnelly: Infrastructure expansions, particularly in Grand Rapids in Dublin more to come as we get the capabilities online.

Speaker Change: Yes, so based.

Speaker Change: Based on the guide we put out Q1 is the most challenged from a margin perspective, we still see a little bit of.

Patrick Donnelly: And more exciting is that in <unk>, we're going to have drug handling capabilities towards the end of 2025 early 2026.

Speaker Change: Destocking, particularly impacting generics may be a little bit on the biologic side.

Patrick Donnelly: As a expansion of our capabilities, but better.

Speaker Change: And that as we progress through the year to get to a guide we would expect to see improvement on the margin front.

Patrick Donnelly: Better margin profile for four west on the proprietary side thats going be the fastest growth area in $2025 for us.

Speaker Change: That's coupled with a growth in high value products, particularly around the containment base in <unk>.

Patrick Donnelly: Actually it's think about it two thirds versus one third between the two units.

Patrick Donnelly: And that is in line with our customers.

Eric Green: The areas that Eric talked about <unk> and biologics and then the return to growth of <unk> and as we progress through the year.

Patrick Donnelly: Expectations, and our position with both of them from a from a.

Patrick Donnelly: What I'd call a penetration rate of success win rate with both bulk customers.

Eric Green: That helps.

Speaker Change: Next question pretty helpful. Thanks. Our next question comes from the line of.

Speaker Change: Okay. No that's helpful and then maybe burner.

David Windley: Got it. I appreciate your patience on the questions. Thank you for the elimination.

Got it. I appreciate your patience on the questions. Thank you for the elimination.

Speaker Change: Mike's question earlier on the margin can you just talk about I guess, the build as we work our way through the year I'm just trying to figure out the right exit rate the right way to build into 2006.

Eric Green: Doug.

Speaker Change: Your line is open Doug.

Eric Green: Thank you, David.

Eric Green: Yeah.

Operator: Thank you. Our final question comes from the line of Jacob Johnson of Stephens Inc. Your question, please, Jacob.

Eric Green: Hey, good morning, guys.

Speaker Change: Product mix driven manufacturing ramp just talk about those moving pieces.

Speaker Change: I'm doing well good morning. Thank you for taking my question. So.

Speaker Change: And again, maybe the progression as we go through this year it would be helpful. Thank you guys.

Speaker Change: I think three quick ones I'll, just rattle through them all like one first you have three facilities in Mexico.

Eric Green: Hey. Thanks. Good morning. Maybe sticking with Dave's kind of strategic question and following up on a comment you just made there, Eric, on contract manufacturing, it seems like a bit of shift in strategy for this segment. Historically, kind of a lower margin, lower growth business. Seems you're now going after higher growth, higher return projects that maybe are more synergistic with proprietary products. Was this kind of a deliberate change in strategy that happened at some point, or is this just opportunistic given what's going on in the GLP-1 market and maybe related to that? Historically, this has been a low single digit grower. Could it be something more than that as we look out over a multi-year period?

Speaker Change: Yes so.

Speaker Change: Based on the guide we put out Q1 is the most challenged from a margin perspective, we still see a little bit of.

Speaker Change: I just want to see how you're capturing any potential tariff impact in your guidance. So that's one.

Speaker Change: Destocking, particularly impacting generics may be a little bit on the biologic side.

Speaker Change: Second is I think based on some of the disclosures in the slide deck.

Speaker Change: And that as we progress through the year to get to our guide we would expect to see improvement on the margin front.

Speaker Change: It looks like the math would lead us to conclude that clip ones as a percentage of sales or about 10% I just want to make sure. That's right and then the third is you talked about several exciting incremental opportunities not included in our guidance and as you talk about things in your prepared remarks.

Speaker Change: That's coupled with a growth in high value products, particularly around the containment base and in the areas that Eric talked about <unk> won in biologics and then the return to growth of <unk> and as we progressed through the year.

Speaker Change: Any chance you would be willing to size up how impactful those could be thank you.

Speaker Change: Excellent.

Speaker Change: So the first question about Mexico, we do have a relationship with a company in Mexico 50 year relationship.

Eric Green: Yeah. No, excellent question. I see two things here. One is in the contract manufacturing space, we think with our position, you're probably looking at mid-single digit type growth ± for long-term. And you are correct. Our focus has been we started shifting towards conversations with customers to go a little bit further downstream. We started to think about drug device assembly and packaging, which is a higher value capability. And we're proving it out while it's early stage. As we talked about, Bernard gave details about the Dublin expansion where we expect to be in line with the drug handling. These are active conversations we're having with existing customers that have asked us to do manufacturing and assembly of their devices. But now, can you bring the drug delivery into the equation?

Speaker Change: That helps.

Speaker Change: So you have about close to 50 years.

Speaker Change: Next question for you.

Speaker Change: We are the minority minority stakeholder in that business. So.

Speaker Change: Our next question comes from the line of.

Speaker Change: Doug.

Speaker Change: And it's immaterial.

Speaker Change: Your line is open Doug.

Speaker Change: The materials that we support them to build to support the local market.

Speaker Change: Yes.

Speaker Change: Hey, good morning, guys.

Speaker Change: But a lot of its local for local on the GOP ones Youre accurate, it's ballpark about 10%.

Speaker Change: I'm doing well good morning. Thank you for taking my question. So.

Speaker Change: I think three quick one I'll just rattle through them all like one first you have three facilities in Mexico.

Speaker Change:

Speaker Change: With the GOP ones of the overall business.

Speaker Change: I just want to see how you're capturing any potential tariff impact in your guidance. So that's one.

Speaker Change: And CMS as I mentioned about 40% and the proprietary is about 5%.

Speaker Change: Second is I think based on some of the disclosures in the slide deck.

Speaker Change: The growth of that is.

Speaker Change: Mid single digits the growth of that is very attractive.

Speaker Change: It looks like the math would lead us to conclude that clip ones as a percentage of sales or about 10% I just wanted to make sure. That's right and then the third is <unk>.

Speaker Change: We will look at a couple.

Speaker Change: Basis points expansion from 'twenty four to 'twenty five.

Eric Green: So, yes, to answer your question, we're looking at shifting this business to be more differentiated, and actually bring incremental value to West as a whole, and still while leveraging the global relationships that we have with these large drug companies from an enterprise perspective.

Speaker Change: On the up.

Speaker Change: You talked about several exciting incremental opportunities not included in guidance.

Speaker Change: On the <unk> I think it's like we are.

Speaker Change: GOP and proprietary gop's above mid single digits for total revenue and then the contract manufacturing.

Speaker Change: Talk about things in your prepared remarks.

Speaker Change: Any chance you would be willing to size up how impactful those could be thank you.

Speaker Change: <unk> represent about 40% of the contract manufacturing revenues and our total revenue.

Speaker Change: Excellent.

Speaker Change: Thank you. So the first question about Mexico, we do have a relationship with a company in Mexico 50 year relationship.

Speaker Change: If we look at <unk> in total it's really like mid teens of our overall revenues and obviously then the economics around those businesses are a little bit different and where we see the most growth and think back to Eric's comments two minutes ago is really around the elastomer side, where we're seeing a lot of traction with <unk> and <unk>.

Operator: Thank you. I would now like to turn the call back to John Sweeney for closing remarks. Sir?

Speaker Change: So, yes about close to 50 years.

Speaker Change: We are the minority minority stakeholder in that business. So.

John Sweeney: Thank you very much for joining us today on the call. An online archive of the broadcast is available on our website at westpharma.com in the investors section. Additionally, you may access a replay for 30 days following the presentation by using the dial-in numbers and conference ID provided at the end of today's earnings release. That concludes the call. Thank you and have a great day.

Speaker Change: And it's immaterial.

Speaker Change: The materials that we support them to build to support the local market.

Speaker Change: Well with the primary <unk> won't providers.

Speaker Change: But a lot of its local for local on the GOP ones Youre accurate.

Speaker Change: The third question around growth opportunities I mean, obviously, we will continue to focus on.

Speaker Change: Ballpark about 10%.

Speaker Change: With GOP ones of the overall business.

Speaker Change: Expansion within HCP components.

Speaker Change: So if we can help our customers accelerate some of the launches that they have planned and also the some of the regulatory work that we're partnering with them on with Amex, one and obviously, we will respond accordingly with.

Operator: Thank you for participating. You may now disconnect.

Speaker Change: But as I mentioned about 40% and the proprietary is about 5%.

Speaker Change: The growth of that is.

Mid single digits the growth of that is very attractive.

Speaker Change: <unk> growth.

Speaker Change: We will look at a couple.

Speaker Change: Basis points expansion from 'twenty four to 'twenty five.

Speaker Change: So those.

Speaker Change: But I think at this point and tenants probably as much will provide on the potential.

Speaker Change: On the <unk> I think it's like <unk>.

Speaker Change: Additional growth lever as we think about throughout 2020, we'll update as we.

Speaker Change: <unk> and proprietary Gop's about mid single digits of our total revenue and then the contract manufacturing.

Speaker Change: We get closer to them.

Speaker Change: Having an impact on our numbers. So it's kind of hard to give you a sense of what they are now.

Speaker Change: Gop's represent about 40% of the contract manufacturing revenues, our total revenue and then when you look at <unk> in total it's really like mid teens of our overall revenues and obviously then the economics around those businesses are a little bit different and where we see the most growth I think back to Eric's comments.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Paul Knight of Keybanc Capital markets. Please go ahead Paul.

Speaker Change: Hi, Eric.

Speaker Change: You have had a long term guide of her construct of 7% to 9% organic growth.

Speaker Change: Few minutes ago is really around the elastomer side, where we're seeing a lot of traction.

Speaker Change: And both with the primary <unk> won't providers.

Speaker Change: As we leave 2025 with capacity.

Speaker Change: The third question around growth opportunities I mean, obviously, we will continue to focus on.

Speaker Change: The additions in place in GOP one.

And elastomer business in place.

Speaker Change: Sure.

Speaker Change: Expansion within HCP components.

Speaker Change: What do you feel about that seven to nine construct.

Speaker Change: If we can help our customers accelerate some of the <unk>.

Speaker Change: Hi, Paul Good morning, I believe long term, if you think about the 7% to 9% and feel very strong that we will be able to return to those type of <unk>.

Speaker Change: <unk> that they have planned and also the some of the regulatory work that we're partnering with them on with Amex one.

Speaker Change: And obviously, we will respond accordingly with.

Speaker Change: Top line performance.

Speaker Change: <unk> growth.

Speaker Change: Metrics, and particularly I think in 2025, we will see ourselves transition into that direction.

Speaker Change: So those but that's it.

Speaker Change: At this point and tenants probably as much will provide on the potential.

Speaker Change: Additional growth lever as we think about throughout 2020.

Speaker Change: Your point the key thesis of the growth is going to be around <unk> components in proprietary.

Speaker Change: We will update as they.

Speaker Change: We get closer to them.

Speaker Change: And so the early signs for 2025 are very strong.

Speaker Change: Having an impact on our numbers and so it's kind of hard to give you a sense of what they are now.

Speaker Change: One one particular areas multiple areas multiple customers.

Speaker Change: Understood. Thank you.

Speaker Change: Multiple drugs.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Paul Knight of Keybanc Capital markets. Please go ahead Paul.

Speaker Change: And categories in the marketplace. So we feel that we're getting to more normalized environment, which will allow us to get back to that growth algorithm that we've had historically.

Paul Knight: Hi, Eric.

Paul Knight: You have had a long term guide of her construct of 7% to 9% organic growth as we leave 2025 with capacity.

Speaker Change: And then.

Bernard: Maybe I think Bernard you were commenting on.

Speaker Change: The Dublin.

Bernard: <unk> one new site.

Speaker Change: Capacity additions in place and the GOP one.

Speaker Change: You're expecting what utilization in VB or excuse me 2025 is it half of capacity for the year, what's your kind of view on what it's going to be producing relative to potential revenue.

Speaker Change: Elastomer business in place.

Speaker Change: What do you feel about that seven to nine construct.

Speaker Change: Hi, Paul Good morning, I believe long term, if you think about the 7% to 9% feel very strong that we will be able to return to those type of.

Speaker Change: Yeah, Paul I think where it becomes more material is in the back half of the year. We're at the early stages of ramping at the moment.

Speaker Change: Top line performance.

Speaker Change: As we get into the back half of the year, we started to see the ramp in around particularly around the auto injector element of the business and then as we get into the later part of 'twenty five and into early 'twenty six asked when we would see drug handling coming on board. So it does take time.

Speaker Change: Metrics, and particularly I think in 2025, we will see ourselves transition into that direction.

Speaker Change: To your point the key thesis of the growth is going to be round SVP components in proprietary.

Speaker Change: And so the early signs for 2025 are very strong.

Speaker Change: Seeing no Grand Rapids, starting to ramp at a startup.

Speaker Change: One particular area, it's multiple areas multiple customers.

Speaker Change: Through the back end of 'twenty, four and we'll see that continue into 'twenty.

Speaker Change: Multiple drugs.

Speaker Change: Dublin.

Speaker Change: And categories in the marketplace. So we feel that we're getting to more normalized environment.

Speaker Change: We won't really see a lot from that facility I think for the first half of this year.

Speaker Change: It will allow us to get back to that growth algorithm that we've had historically.

Speaker Change: And last question would be you cited drug handling does this mean you're.

Speaker Change: And then.

Speaker Change: Doing complete component assembly is not fill finish isn't it.

Speaker Change: Maybe I think Bernard you were commenting on.

Speaker Change: The Dublin.

Speaker Change: No it's not fill finish it said.

Speaker Change: One new site.

Speaker Change: Final drug packaging.

Speaker Change: You're expecting what utilization in excuse me 2025 is it half of capacity for the year, what's your kind of view on what it's going to be producing relative to potential revenue.

Speaker Change: So, but we're not doing fill finish.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you. Our next question comes from the line of Matthew <unk> of William Blair <unk> Company. Please go ahead Matthew.

Speaker Change: Yeah, Paul I think where it becomes more material in the back half of the year. We're at the early stages of ramping at the moment.

Matthew: I wanted to start on.

Speaker Change: On the device side, obviously, that's been a big theme.

Speaker Change: <unk>. The last couple of years, there has been investment in that space and I know you've been excited about the future there.

Speaker Change: As we get into the back half of the year, we start to see the ramp in around particularly around the auto injector element of the business and then as we get into the later part of 'twenty five and into early 'twenty six asked when we would see drug handling coming on board. So it does take time.

Speaker Change: You referenced cash amid a challenging ad.

Speaker Change: In terms of financial profiles.

Eric Green: Converting to an automated line Eric.

Eric Green: Thank you.

Speaker Change: And maximizing shareholder value as you think about options pits.

Speaker Change: Seeing no Grand Rapids, starting to ramp at a startup as we got through the back end of 'twenty four and we'll see that continue into 'twenty five.

Speaker Change: It sounds like.

Speaker Change: Yes. The question is.

Is there <unk>.

Speaker Change: Question as to whether that should be a core competency of the company long term or more about our operational decisions that would need to be made in the near term to maximize profitability.

Dublin.

Speaker Change: We won't really see a lot from that facility I think for the first half of this year.

Speaker Change: And last question would be you cited the drug handling does this mean you're <unk>.

Speaker Change: Yes, that's it.

Speaker Change: Two points to that one is more near term what we have in our hands bill to produce consistently high quality product for our customers as we scale because the demand is.

Speaker Change: Fueling complete component assembly is not fill finish isn't it.

Speaker Change: No it's not sales finish.

Speaker Change: Final drug packaging.

Speaker Change: Is increasing.

Speaker Change: So, but we're not doing fill finish.

Speaker Change: And the flawless execution of the automation. So we can go from Emmanuel to a automated fully automated process, which will drive efficiencies and theres. Other operational excellence drivers that we're going to we are focused on in that area to deliver on.

Okay. Thanks.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Matthew <unk> of William Blair <unk> Company. Please go ahead Matthew.

Matthew: I wanted to start on.

Speaker Change: As we scale, we will get better economics.

Matthew: On the device side, obviously, that's been a big theme.

Matthew: <unk>. The last couple of years has been investment in that space and I know you've been excited about the future there.

Speaker Change: But beyond that we do have to just continues to pressure test.

Matthew: You referenced some of the challenges you've had.

Speaker Change: What's the future look like for that device that particular device because the drug delivery devices for us. This is beyond just one product, we do have a pretty attractive portfolio around <unk> systems.

Matthew: In terms of financial profiles.

Matthew: Converting to an automated line Eric.

Speaker Change: Eric I think you used the word maximizing shareholder value as you think about options pits.

Speaker Change: We do have.

Yes, it sounds like.

Speaker Change: We call self dose.

Matthew: Yes. The question is.

Speaker Change: And also our crystal zenith clients. So if you think about the drug delivery device area. This particular product is one that we're really focused on right now to determine what is the long term best option for west.

Matthew: Is there actually essential question as to whether that should be a core competency of the company long term or more about <unk>.

Matthew: Our operational decisions need to be made in the near term to maximize profitability.

Matthew: Yes.

Speaker Change: Okay understood and then just on the multiyear.

Matthew: Two parts to that one is more near term what we have in our hands bill to produce consistently high quality product for our customers as we scale because the demand is.

Speaker Change: Okay.

Speaker Change: Contract you mentioned could you frame what year.

Speaker Change: How that participation.

Speaker Change: Ranked and duration of contract would compare to prior year.

Matthew: Is increasing.

Matthew: And and the flawless execution of the automation. So we can go from Emmanuel to a automated fully automated process, which will drive efficiencies and theres. Other operational excellence drivers that we're going to we are focused on in that area to deliver on.

Speaker Change: For what really is incremental there.

Speaker Change: Well in that particular case, we were on and have historically been on all the provide.

Speaker Change: Provided all the elastomer components for our customer.

Speaker Change: So what this does it secures that position for multiple years, we haven't articulated exactly.

As we scale, we will get better economics.

Matthew: But beyond that we do have to just continues to pressure test.

Speaker Change: The duration, but it is quite frankly.

Speaker Change: And so it isn't a drastic departure of our customer.

Matthew: The future look like for that device that particular device because the drug delivery devices for us. This is beyond just one product, we do have a pretty attractive portfolio around <unk> systems.

Speaker Change: And as you know it takes a long time too.

Speaker Change: Bill that that report that credibility and that supply chain. So we feel really comfortable and it was a natural progression of our relationship just to secure it.

Matthew: We do have.

Matthew: We call self dose.

Matthew: And also our crystal zenith clients. So if you think about the drug delivery device area. This particular product is one that we're really focused on right now to determine what is the long term best option for west.

Speaker Change: And ensure that we're both aligned on future expectations, we can help them and support one another and make sure that they are.

Speaker Change: They can see.

Speaker Change: Port in patients with end of the day with the drug launches. So it is long in duration, we havent articulate exactly number of years, but it is very long.

Speaker Change: Okay understood and then just on the multiyear.

And it is a continuation of our participation which is.

Matthew: Do you have any contract you mentioned could you frame what year.

Speaker Change: A majority of basically all their needs in that market does that with that customer.

Speaker Change: How that participation.

Speaker Change: Right and in duration of contract would compare to prior I guess you have a sense for what really is incremental there.

Speaker Change: Yes, I think Matt. It's also it's very important to it.

Speaker Change: It supports the growth in the <unk>, one market and feeds into.

Speaker Change: Well in that particular case, we were on and they have historically been on all the provide.

Speaker Change: A long term construct that we told talked about as one of the key drivers there and how we bring fence fast.

Speaker Change: Provide LDL aspirin components for our customer.

Speaker Change: And so it was very important for us to get that done.

Speaker Change: So what this does it secures that position for multiple years, we haven't articulated exactly.

Speaker Change: And again, so it's it's really supporting bass go round.

Speaker Change: Around <unk> over the long term.

Speaker Change: The duration, but it is quite safely.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

And so it isn't a drastic departure of our customer.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Justin Bowers Sub Deutsche Bank. Please go ahead Justin.

Speaker Change: And as you know it takes a long time too.

Speaker Change: Bill that that report that credibility and that supply chain. So we feel really comfortable and it was a natural progression of our relationship just to secure it.

Speaker Change: Thank you and good morning, everyone.

Speaker Change: A couple of clarifications here to kick it off.

Eric Green: Eric on the 100 basis points of gross expansion from Nx, one is that referring to.

Speaker Change: And ensure that we're both aligned on future expectations that we can help them and support one another and make sure that.

Speaker Change: They can see.

Eric Green: 2025, specifically or is that sort of like a longer term.

Speaker Change: Port there and patients end of the day with the drug launches. So it is long in duration, we havent articulate exactly number of years, but it is very long.

Eric Green: Contribution and then.

Eric Green: The device.

And it is a continuation of our participation which is.

Eric Green: Part of the business you said that there.

There is a mandate there and is that is that related to the contract manufacturing side of the business or also and.

Speaker Change: The majority are basically all their needs in that market because with that customer.

Speaker Change: Yes, I think Matt. It's also is very important too.

Eric Green: And prop.

Eric Green: Products as well.

Speaker Change: It supports the growth in the <unk>, one market and feeds into.

Speaker Change: Yeah no. Thanks for the question the 100 basis points of reference the under the 150 is really 2025.

Speaker Change: A long term construct that we told talked about as one of the key drivers there and how we bring fence SaaS.

Speaker Change: These are projects that we are sharing with you last year and just wanted to give visibility that now they are converted into.

Speaker Change: And so it was very important for us to get that done.

Speaker Change: And again, so it's it's really supporting bass go round.

Speaker Change: Around <unk> over the long term.

Speaker Change: Actual revenues for 2025, it takes about 14 to 18 months to do the transition, sometimes a little bit longer with our customers and so thats why we wanted to.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Justin Bowers of Deutsche Bank. Please go ahead Justin.

Speaker Change: Dimension it.

Speaker Change: Enough to realize that it's starting to come in <unk>.

Speaker Change: Impactful for US near term and we do believe that there is long term growth trajectory on this but we really havent framed that as of as we speak that's contemplated in our long term.

Speaker Change: Thank you and good morning, everyone just.

Speaker Change: A couple of clarifications here to kick it off.

Speaker Change: Eric on the 100 basis points of growth expansion from Nx, one is that referring to.

Speaker Change: Growth algorithm for high value products on the device side that is specifically.

Speaker Change: 2025, specifically or is that sort of like a longer term contribution and then.

Speaker Change: My comment was specifically around the proprietary devices and to be very clear, it's around spark smart those platform.

The device.

Speaker Change: Part of the business you said that there.

Speaker Change: Okay, and then a follow up to that.

Speaker Change: There is a mandate there and is that is that related to the contract manufacturing side of the business or also and.

Speaker Change: In the prepared remarks, you talked about.

Speaker Change: Price and incentives headwinds and you called out 44.

Speaker Change: <unk>.

Speaker Change: Products as well.

Speaker Change: In the second half of 2024.

Speaker Change: Yes, no. Thanks for the question the 100 basis points of reference. The 100 150 is really 2025. So these are projects that we are sharing with you last year and just wanted to give visibility that neither converted into.

Speaker Change: Is that is that ring fence, there or is there is there more to that.

Speaker Change: And then.

Speaker Change: <unk>.

Speaker Change: Unrelatedly <unk> mid single digit back in mid single digit growth in this year, and then biologics high single to low double.

Speaker Change: Actual revenues for 2025, it takes about 14 to 18 months to do the transition, sometimes a little bit longer with our customers and so that's why I wanted to dig.

Speaker Change: Is there is there any anticipated restock there or are those back to <unk>.

Speaker Change: Run rate levels.

Speaker Change: <unk> enough to realize that.

Speaker Change: So I'll start with the last one first if you don't mind.

Speaker Change: Starting to come in.

Speaker Change: Impactful for US near term and we do believe that there is long term growth trajectory on this but we really havent framed that as of <unk>.

Speaker Change: Believe that it's more of a.

Speaker Change: Natural.

Speaker Change: Back to the growth algorithm, we expect with biologics and HCP as we progress through 2025. So we don't see this as a <unk>.

Speaker Change: Speak puts and contemplated in our long term.

Speaker Change: <unk> stock.

Speaker Change: Growth algorithm for high value products.

Speaker Change: Since.

Speaker Change: We do believe it becomes a more normalized as you know that.

Speaker Change: Outside the us specifically my.

Speaker Change: My comment was specifically around the proprietary devices and to be very clear, it's around our smart smart those platform.

Speaker Change: Sure on the molecule tend to be honest for the duration of that drug in the market and so it's really trying to harmonize with their supply chain needs going forward.

Speaker Change: Okay, and then a follow up to that.

Speaker Change: On the first question on the.

Speaker Change: You mentioned the 44 EPS.

Speaker Change: In the prepared remarks, you talked about.

Speaker Change: Not all of it is related to.

Speaker Change: Price and incentives headwinds and you called out 44.

Speaker Change: The device.

Speaker Change: But majority is so a good portion of it is.

Speaker Change: <unk> million in the second half of 2024.

Speaker Change: A little some of the smaller portion is related to the transition that we're seeing of.

Speaker Change: Is that is that.

Speaker Change: <unk> ring fence, there or is there is there more to that.

Speaker Change: On the CGM business transitioning out this year and then also towards the tail end of last year.

Speaker Change: Then.

Speaker Change: Unrelatedly.

Speaker Change: Mid single digit back in mid single digit growth in this year, and then biologics high single to low double.

Speaker Change: I am sorry next year.

Speaker Change: So that the impact, but we will obviously use that that asset those that those locations to fill with new contracts new customers that meet our financial construct so.

Speaker Change: Is there is there any anticipated restock there or are those back to <unk>.

Speaker Change: Run rate levels.

Speaker Change: I'll start the last one first if you don't mind.

Speaker Change: That's kind of how you would look at that 44%.

Speaker Change: Believe that it's more of a.

Speaker Change: Headwind this year.

Speaker Change: Natural.

Speaker Change: Back to the growth algorithm, what we expect with biologics and HCP as we progress through 2025. So we don't see this as a <unk>.

Speaker Change: Thanks for all the questions I will jump back in queue.

Speaker Change: Thank you.

Speaker Change: Thank you our.

Speaker Change: Our next question comes from the line of David Windley of Jefferies. Your line is open David.

Speaker Change: <unk> stock.

Speaker Change: Since all but.

Speaker Change: We do believe it becomes a more normalized as you know that.

Speaker Change: Hi, good morning, Thanks for taking my questions I have a few I hope I can squeeze in and so the first one on the last on Justin's question I believe that your messaging in and.

Speaker Change: Sure on the molecule tend to be on it for the duration of that drug in the market and so it's really trying to harmonize with their supply chain needs going forward.

Speaker Change: On the first question on the.

Speaker Change: In the second half of last year as you were.

Speaker Change: You mentioned the 40 <unk> on EPS.

Speaker Change: Seeing the ramp of your on body wearable.

Speaker Change: Not all of it is related to.

Speaker Change: The device.

Speaker Change: Production and supply to the one key client that you were ramping was that you hope to get some of this incentive fee value.

Speaker Change: But majority is so a good portion of it is.

Speaker Change: A little some of the smaller portion is related to the transition that we're seeing.

Speaker Change: Converted into base price I gather from the guidance that youre, giving around this.

Speaker Change: On the CGM business transitioning out this year and then also towards the tail end of last year.

Speaker Change: That you Didnt my math suggests that that the incentive fee would have been worth 46 or so.

Speaker Change: I am sorry next year.

Speaker Change: And so.

Speaker Change: So that the impact, but we will obviously use that that asset those that those locations to fill with new contracts new customers that meet our financial construct so.

Speaker Change: Im wondering can you be a little more specific did you get some of it baked into the base price, but not all are.

Speaker Change: How does that play out if you don't mind.

Speaker Change: Yeah, the way I would respond to that David will first of all good morning is that the incentives <unk> see the.

Speaker Change: That's kind of how you would look at that 44 cent headwind this year.

Speaker Change: Thanks for all the questions I'll jump back in queue.

Speaker Change: The base of the pricing that we have established so far in 2025.

Speaker Change: Thank you.

Speaker Change: I won't dimension any further but it is the incentives in latter part of 2024.

Speaker Change: Our next question.

Speaker Change: Comes from the line of David Windley of Jefferies. Your line is open David.

Speaker Change: As you ramped did exceed.

David Windley: Hi, good morning, Thanks for taking my questions I have a few I hope I can squeeze them in so the first one kind of on the last on Justin's question.

Speaker Change: The going forward pricing.

Speaker Change: Understood.

Speaker Change: Relative to.

Speaker Change: We're also seeing.

Speaker Change: I believe that your messaging and.

Speaker Change: Better production efficiencies and yield on that line. So are improving on the cost side as well as the price. So when we're looking at how do we improve the economics around this device. It's looking at it from a both a price perspective and also from a cost perspective. So we're working a couple of different areas on that so that gets us to that 33.

David Windley: In the second half of last year as you were.

David Windley: Seeing the ramp of your on body wearable.

David Windley: Production and supply to the one key client that you were ramping was that you hope to get some of this incentive fee value.

David Windley: Converted into base price I gather from the guidance that youre, giving around this.

Speaker Change: Got it.

Speaker Change: Probably should have started with this one so as not to jump around but the.

David Windley: That you Didnt my math suggests that that the incentive fee would have been worth 46 or so.

Investments in SG&A and R&D, what are those specifically and and maybe talk to the timeline.

David Windley: So.

Speaker Change: Im wondering can you be a little more specific did you get some of it baked into the base price, but not all are.

Speaker Change: Timing of those like why do those need to be made now.

Speaker Change: Yes.

David Windley: How does that play out if you don't mind.

Speaker Change: So the in the R&D area, specifically the largest incremental investment that we're making in 2025 years is to build out and be prepared for the launch at the end of this year or early next year.

David Windley: Yeah, the way I would respond to that David will first of all good morning is that the incentives for oxy.

David Windley: The base of the pricing that we have established so far in 2025.

Speaker Change: Of our integrated systems. So this is the for human use pre filled syringe system that we have.

David Windley: I won't dimension any further but it is the incentives in the latter part of 2024.

Speaker Change: <unk> been working on with our customers.

David Windley: As you ramped did exceed.

Speaker Change: And we actually did launch not for human use.

The going forward pricing.

David Windley: Understood.

Speaker Change: Prefills CIS.

David Windley: But also balance that with.

Speaker Change: Systems with Boral silicate.

David Windley: We're also seeing.

Speaker Change: Earlier this year the reception receptivity was very high engagement with customers is very strong.

David Windley: Better production efficiencies and yield on that line. So we are improving on the cost side as well as the price. So when we're looking at how do we improve the economics around this device thats looking at it from a both a price perspective and also from a cost perspective. So we're working a couple of different areas on that so that gets us to that 33.

Speaker Change: And therefore, we felt really comfortable continue the planned path that we're on.

Speaker Change: To execute and make sure we hit the timetables that we've established a couple of years ago with this with this product launch.

Speaker Change: It's new it's early but the adoption is quite exciting.

David Windley: Got it.

Speaker Change: I, probably should have started with this one so as not to jump around but the.

Speaker Change: And more to come as we get to that point, but that is probably the largest incremental piece of R&D.

David Windley: Investments in SG&A and R&D what are those specifically.

David Windley: And maybe talk to the timeline the timing of those like why do those need to be made now.

Speaker Change: From last year to this year.

Speaker Change: <unk>.

Okay and on the SG&A side.

David Windley: Yes.

Speaker Change: Yes on the SG&A side, Dave a lot of the incremental costs. There is the annualized <unk> of costs that were being <unk> as we were getting towards on.

The in the R&D area, specifically the largest incremental investment that we're making in 2025 years is to build out and be prepared for the launch at the end of this year or early next year.

Speaker Change: I'm heading to 2024, and so when they get fully annualized we have a little bit of a step up there.

David Windley: Of our integrated system. So this is the for human use pre filled syringe system.

And there is some near normal merit increases, but we're not adding any additional resources.

David Windley: We have.

Speaker Change: From an SG&A perspective, so they're really costs that are carrying through in menu.

David Windley: <unk> been working on with our customers and we actually did launch not for human use.

Speaker Change: Our annual Merit increase.

Speaker Change: Got it okay. So then coming back a little bit.

David Windley: Pre sales.

David Windley: Systems with bottled silicate.

Speaker Change: Bringing the device question back in and this is a little bit of.

David Windley: Earlier this year the reception receptivity was very high engagement customers is very strong.

Speaker Change: Mallory question.

Speaker Change: So if I I believe I've covered the company for a long time I think the the Tech group acquisition dating back to the two thousands in fact is the.

David Windley: And therefore, we felt really comfortable continue.

David Windley: The planned path that we're on.

David Windley: To execute and make sure we hit the timetables that we've established a couple of years ago with this with this product launch.

Speaker Change: Is the basis of your of your kind of a foundation of your contract manufacturing business and I believe the strategic important of that for you is to have the capability too.

David Windley: It's new it's early but the adoption is quite exciting.

David Windley: And more to come as we get to that point, but that is probably the largest incremental piece of R&D.

Speaker Change: Two to parlay, so to speak into some of the injection molded proprietary devices like the on body.

David Windley: From last year to this year.

David Windley: <unk>.

Speaker Change: That you're that you're bringing to market.

David Windley: Okay and on the SG&A side.

Speaker Change: So I guess, it's it gets back to not use.

David Windley: Yes on the SG&A side, Dave a lot of the incremental costs. There is the annualized <unk> of costs that were being added as we were getting towards getting to 2024 and so when they get fully annualized we have a little bit of a step up there.

Speaker Change: The existential question.

Speaker Change: The contract manufacturing business is proving to be lumpy.

Speaker Change: You're moving out of CGM, but into what is now going to be a very high client concentration and the contract manufacturing business.

David Windley: And there is some <unk>.

David Windley: Normal merit increases, but we're not adding any additional resources.

Speaker Change: And I can understand where you would want to.

Speaker Change: Tolerate that for the contribution that could make on the on the proprietary product side, but the on body wearable device margins are just not attractive enough to justify pursuing it doesn't seen and so I guess I come back to.

David Windley: From an SG&A perspective, so they're really costs that are carrying through and then you have our annual merit increase.

David Windley: Got it okay. So then coming back a little bit.

David Windley: Bringing the device question back in and this is a little bit of.

David Windley: Matt <unk> question.

Speaker Change: Is that pursuit.

David Windley: So if I I believe covered the company for a long time I think the the Tech group acquisition dating back to the two thousands in fact is the is.

Speaker Change: Worth it I guess is the basic question, because if I understand correctly based on your answer on the.

Speaker Change: On body wearable those margins are probably the lowest in your portfolio, it's something like 10%.

David Windley: As the basis of your of your kind of a foundation of your contract manufacturing business and I believe the strategic important of that for you is to have the capability too.

Speaker Change: So so sorry for the very direct question, but just really wanting to understand why this makes strategic sense to continue to pursue given the margins the lumpiness in the Capex requirement.

Speaker Change: Q2, partly so to speak into some of the injection molded proprietary devices like the on body.

Speaker Change: Yes.

David Windley: That you're that you're bringing to market.

Speaker Change: As we look at it as a separate the two on the on body wearable.

Speaker Change: So I guess, it's it gets back to not use the existential.

Speaker Change: For for the proprietary side.

Speaker Change: Question.

Speaker Change: Technology.

Speaker Change: The contract manufacturing business is proving to be lumpy.

Speaker Change: Is making an impact.

Speaker Change: But the economics on the scale up has not met our expectations.

Speaker Change: You're moving out of CGM, but into what is now going to be a very high client concentration and the contract manufacturing business.

Speaker Change: And so therefore, we have to as Bernard mentioned, we are driving ways to improve.

Speaker Change: And I can understand where you would want to.

Speaker Change: Improve efficiencies through operational excellence through automation and through scale. However to your question. We are looking at all options right now about the fit of this part of the portfolio long term on the contract manufacturing side, while some of the skills and resources.

Speaker Change: Did.

Speaker Change: Come out of that group to build support the buildup of that portfolio.

Speaker Change: Is that pursuit.

Speaker Change: I'll back it is still a its independent and it actually does support us when we think about diversifying the top line.

Speaker Change: Worth it I guess is the basic question, because if I understand correctly based on your answer on the.

Speaker Change: On body wearable those margins are probably the lowest in your portfolio at something like 10%.

Also allows us to have a larger more robust relationship with some of the largest drug companies because they are used there as well.

Speaker Change: So sorry for the very direct question, but just really wanting to understand why this next strategic sense to continue to pursue given the margins the lumpiness in the Capex requirement.

Speaker Change: We're looking to west to support them both on the contract manufacturing side and also on the proprietary side. So on a collective basis that does position us very well in our conversations and our customer engagements.

Speaker Change: Yes, David.

David Windley: As we look at it as a separate the two on the on body wearable.

Speaker Change: With some of the large drug companies.

Speaker Change: For for the proprietary side.

Speaker Change: The globe. So while we do have different economics CN does does have different economics to through our proprietary we expect those investments to have.

David Windley: That technology is.

Speaker Change: Is making an impact.

Speaker Change: But the economics on the scale up has that met our expectations and so therefore, we have to as Bernard mentioned, we are driving ways to improve.

Speaker Change: Robust returns.

Speaker Change: For that business and when they don't we have to make those decisions like we did with CGM.

Speaker Change: Improve efficiencies through operational excellence through automation and through scale. However to your question. We are looking at all options right now about the fit of this part of the portfolio of long term on the contract manufacturing side, while some of the skills and resources.

Speaker Change: I do believe for diversification of our topline, but same customers segment.

Speaker Change: And.

Speaker Change: Spirit of being really focused on injectable medicines, we are positioned well strategically at this point with both of those businesses.

Speaker Change: Did.

Speaker Change: Got it.

Speaker Change: Come out of that group to build support the buildup of that portfolio.

Speaker Change: Appreciate your patience on the questions. Thank you for the elimination.

Speaker Change: I'll back it is still it's independent.

Speaker Change: Thank you David.

Speaker Change: And then it actually does support us when we think about diversifying that topline.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our final question comes from the line of Jacob Johnson of Stephens, Inc. Your question. Please Jacob.

Speaker Change: It also allows us to have a larger more robust relationship with some of the largest drug companies because they are used.

Jacob Johnson: Hey, Thanks, Good morning, maybe sticking with Dave's kind of strategic question and following up on a comment you just made there Eric.

Jacob Johnson: Contract manufacturing it seems like a bit of shift in strategy for this segment historically kind of a lower margin lower growth business seems youre now going after higher growth higher return projects that maybe are more synergistic with proprietary products.

Speaker Change: With some of the largest drug companies across the globe. So while we do have different economics and does does have different economics to through our proprietary we expect those investments to have.

Jacob Johnson: This kind of a deliberate change in strategy that could happen at some point or is this just opportunistic given what's going on in the <unk>, one market and maybe related to that historically this has been a low single digit grow or could it be something more than that as we look out.

Speaker Change: Robust returns.

Speaker Change: For that business and when they don't we have to make those decisions like we did with CGM.

Speaker Change: I do believe for diversification of our topline, but same customers segment.

Jacob Johnson: A multi year period.

Jacob Johnson: Excellent question I see two things here one is in the contract manufacturing space, we think with our position you're probably looking at mid single digit type growth.

Speaker Change: And.

Speaker Change: Spirit of being really focused on injectable medicines, we are positioned well strategically at this point with both of those businesses.

Jacob Johnson: Plus or minus for long term.

Speaker Change: Got it.

Jacob Johnson: And you are correct our focus.

Speaker Change: Appreciate your patience on the questions. Thank you for the elimination.

Jacob Johnson: Has been we started shifting towards conversations with customers to go little bit further.

Speaker Change: Thank you David.

Jacob Johnson: Further downstream you start to think about drug device assembly and packaging, which is a higher valued capability.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our final question comes from the line of Jacob Johnson of Stephens, Inc. Your question. Please Jacob.

Jacob Johnson: And we're we're proving it out while it's early stage as.

Jacob Johnson: Hey, Thanks, Good morning, maybe sticking with Dave's kind of strategic question and following up on a comment you just made there Eric.

Jacob Johnson: As we talked about burner give details about the Dublin expansion, where we expect to be in line with the drug handling.

Jacob Johnson: These are actually active conversations we're having with existing customers that have asked us to do.

Jacob Johnson: Manufacturing and assembly of the devices, but now can you bring the drug delivery into the equation. So yes to answer your question. We're looking at shifting this.

Speaker Change: This kind of a deliberate change in strategy that could happen at some point or is this just opportunistic given what's going on in the <unk>, one market and maybe related to that historically this has been a low single digit grower can it be something more than that as we look out over.

Business to be more differentiated.

And actually bring incremental value to two west as a whole and still while leveraging the global relationships that we have is.

Jacob Johnson: A multi year period.

Jacob Johnson: These large drug companies from an enterprise perspective.

Speaker Change: Excellent question I see two things here one is in the contract manufacturing space, we think with our position you're probably looking at mid single digit type growth.

Speaker Change: Thank you I would now like to turn the call back to John Sweeney for closing remarks, Sir.

Jacob Johnson: Plus or minus for long term.

Speaker Change: Well. Thank you very much for joining us today on the call an online archive of the broadcast is available on our website at west pharma Dot com in the investors section. Additionally, you may access the replay for 30 days following the presentation by using the dial in numbers and conference I'd provided at the end of today's earnings release.

Speaker Change: And you are correct our focus.

Speaker Change: Has been we started shifting towards conversations with customers to go a little bit further downstream you start to think about drug device Assembly and packaging, which is a higher valued capability.

Speaker Change: And we're we're proving it out while it's early stage as.

Speaker Change: That concludes the call. Thank you and have a great day.

Speaker Change: As we talked about burner give details about the Dublin expansion, where we expect to be in line with the drug handling.

Speaker Change: Thank you for participating you may now disconnect.

Speaker Change: These are actually.

Speaker Change: Active conversations we're having with existing customers that have asked us to do.

Speaker Change: Manufacturing and assembly of the devices, but now can you bring the drug delivery into the equation. So yes to answer your question. We're looking at shifting this.

Speaker Change: Business to be more differentiated.

Speaker Change: And actually bring incremental value to to Wes as a whole and still while leveraging the global relationships that we have.

Speaker Change: Large drug companies from an enterprise perspective.

Speaker Change: Thank you I would now like to turn the call back to John Sweeney for closing remarks, Sir.

Speaker Change: That concludes the call. Thank you and have a great day.

Speaker Change: Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Q4 2024 West Pharmaceutical Services Inc Earnings Call

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