Q2 2025 AptarGroup Inc Earnings Call
Mary Skafidas: Ladies and gentlemen, thank you for standing by and welcome to AptarGroup, Inc.'s 2025 second quarter results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. Introducing today's conference call is Ms. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead, Mary.
At this time, all participants are in listen-only mode later, we'll conduct question and answer session.
Introducing today's conference call. Is Miss Mary's cafeteras.
Senior vice president, investor relations and Communications.
Please go ahead Mary.
Mary Skafidas: Thank you. Hello, everyone, and thanks for being with us today. Our speakers for the call are Stephan Tanda, our President and CEO, and Vanessa Kanu, our Executive Vice President and CFO. A press release and accompanying slide deck have been posted on our website under the Investor Relations page. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure, and the reconciliations are set forth in the press release. Please refer to the press release disseminated yesterday for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. As always, we will also post a replay of this call on our website. I would now like to turn the call over to Stephan. Stephan, over to you.
Thank you. Hello everyone, and thanks for being with us today. Our speakers for the call are Stephan Tanda, our president and CEO, and Vanessa canoe, our Executive Vice President, and CFO.
A press release in accompanying. Slide deck have been posted on our website under the investor relations page.
During this call, we will be discussing certain non-gaap Financial measures.
Terrible Gap, Financial measure, and the reconciliations are set forth in the press release.
Stephan Tanda: Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our Q2 results. Later in the call, Vanessa Kanu, our CFO, will provide additional details on key drivers for the quarter. Starting on slide three, we delivered a strong Q2, exceeding the high end of our guidance range, delivering an adjusted earnings per share of $1.66, an increase of 18% over the prior year quarter. Each of our segments contributed to our growth in the quarter. Core sales increased, driven by our pharma and closure segment. We saw solid demand for our pharma segment's proprietary drug delivery systems used for emergency medicine, asthma, COPD, and ophthalmic treatment. Additionally, strong sales of elastomeric components for injectables and active materials, as well as royalties, helped drive our strong results.
Please refer to the press release disseminated yesterday for reconciliations of non-gaap measures to the most comparable, gaap measures discussed during this earnings call. As always, we will also post a replay of this call on our website. I would now like to turn the call over to Stefan, Stefan over to you.
Thank you, Mary and good morning everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our second quarter results.
Later in the call Vanessa canoe, our CFO will provide additional details on key drivers for the quarter.
Starting on slide 3, we delivered a strong second quarter exceeding. The high end of our guidance range
delivering an adjusted earnings per share of a 1.66 cents and increase of 18% over the prior year quarter.
Each of our segments, contributed to our growth in the quarter.
Core sales increased driven by our farmer and closure segments. We saw solid demand for our farmer segments. Proprietary drug Delivery Systems used for emergency medicine asthma COPD and of tic treatments.
Stephan Tanda: Demand for dispensing closures for sauces, salad dressings, and functional drinks also contributed positively to our quarterly results. Three of our divisions in pharma showed robust core sales growth this quarter. Prescription delivered a core sales increase of 8%, injectables 9%, and active material science solutions grew core sales by 11%. The exception was our consumer healthcare division, which continued to be impacted by softer demand for dispensing technologies in nasal saline and nasal decongestants. Consumer healthcare's two largest regions are Europe and North America. While sales in North America grew nicely, Europe has not yet recovered from the excess inventory due to a weaker cold and flu season. The visibility into future European demand for cold and cough medications has not improved meaningfully. A few weeks ago, we announced the acquisition of Mod 3 Pharma's clinical trial manufacturing capabilities.
Additionally, strong sales of a lost American components for injectables and active materials, as well as royalties help Drive our strong results.
Demand for dispensing closures for sauces, salad dressings, and functional drinks also contributed positively to our quarterly results.
3 of our divisions in Pharma showed robust core sales. Growth this quarter.
Prescription delivered. A core sales, increase of 8% injectables 9% and active Material, Science Solutions, grew core sales by 11%.
The exception was our consumer Healthcare division which continued to be impacted by softer, demand for dispensing Technologies in Natal saline and natal decongest.
Consumer health care's larger regions are Europe and North America. While sales in North America grew nicely, Europe has not yet recovered from the excess inventory due to a weaker cold and flu season.
The visibility into future European demand for cold and cough medication has not improved meaningfully.
Stephan Tanda: This expands Aptar Pharma's services into highly specific CDMO fields, supporting phase one and phase two GMP fill and finish services for orally inhaled nasal drug products, an area we view as a significant unmet market need. We believe this added capability will help accelerate adoption of our proprietary drug delivery devices and further strengthen our position as a preferred partner in early-stage development. As a result of this acquisition, we now operate an FDA-inspected, state-of-the-art facility in New Jersey, featuring CGMP clean rooms, high-potency API suites, biologic capabilities, and advanced small-scale fill-finish technologies, fully aligned with our drug delivery portfolio. The acquisition is also expected to enable future expansion into dermal, ophthalmic, injectable, and packaging solutions powered by our active material science division. Our closure segment had a great quarter. Bringing closures under one roof appears to be really paying off.
A few weeks ago, we announced the acquisition of mod 3, pharma's clinical trial manufacturing capabilities. This expands APTA Pharma Services into highly specific, cdmo Fields, supporting Phase 1 and Phase 2 gmpp fill and finish services for orally inhaled nasal drug products.
An area. We view as a significant unmet Market needs.
We believe this added capability will help accelerate adoption of our proprietary drug delivery devices.
And further strengthen our position as a preferred partner in early stage development.
As a result of this acquisition. We Now operate, an FDA inspected, state-of-the-art facility in New Jersey featuring, cgmp clean rooms High potency API, Suites biologic capabilities and advanced small scale. Fill finish Technologies, fully aligned with our drug delivery portfolio.
The acquisition is also expected to enable future expansion into dermal of Tomac injectable and packaging Solutions. Powered by our active Material Science division.
Stephan Tanda: Core sales have been spurred by a solid innovation pipeline, enabling the segment to grow faster than the industry while also improving utilization rates and managing costs to expand margins. We are energized by the future of this segment and the opportunities ahead. Let me touch on beauty. Cost management is a well-developed muscle in this segment, and the beauty industry remains resilient and poised for sustained growth, driven by regional expansion, product innovation, and evolving consumer preferences. While prestige beauty has faced headwinds from trade uncertainties, which are slowing demand recovery despite a few encouraging signs, our growth in massage fragrance is helping to offset some of that softness. Additionally, continued momentum in personal care, supported by a broad and globally relevant portfolio, reinforces the resilience of the segment.
Our closure segment had a great quarter bringing closures under 1 roof appears to be really paying off.
Course sales have been spurred by solid Innovation pipeline, enabling the segment to grow faster than the industry while also improving your utilization rates and managing costs to expand margins.
We're energized by the future of the segment, and the opportunities ahead.
Now, let me touch on beauty cost management; it is a well-developed muscle in the segment. The beauty industry remains resilient and poised for sustained growth, driven by regional expansion, product innovation, and evolving consumer preferences.
While Prestige Beauty has faced headwinds from trade uncertainties, which is slowing demand recovery, despite a few encouraging signs. Our growth in message fragrance is helping to offset.
Stephan Tanda: To further enhance the competitiveness of our industrial footprint, earlier this week, we executed a previously agreed-upon call option to increase the ownership in our BTY joint venture to 80%. While the JV assets are based in China and serve the broader Asia region, BTY brings highly specialized custom decoration capabilities that will also be leveraged at our flagship beauty facility in Aulnay-aux-Minces, France. Moving to slide four, I am proud to highlight recent corporate awards and recognitions. At the end of the quarter, APTAR was named one of Time Magazine's world's most sustainable companies for the second year in a row. For this recognition, over 5,000 of the world's largest and most influential companies are assessed based on revenue, market capitalization, and public prominence. Only the top 10% were recognized with an award.
Some of that softness. Additionally, continued momentum in Personal Care supported by a broad and globally relevant portfolio reinforces the resilience of the segment.
BT Rojo inventure to 80%.
While the JV assets are based in China and serve the broader Asia region, BTY brings highly, specialized custom decoration capabilities that will also be leveraged at our Flagship Beauty, facility in orona France.
moving to slide 4, I'm proud to highlight recent corporate Awards and recognitions,
At the end of the quarter, after was named 1 of Time, magazine's world, most sustainable companies for the second year, in a row for this recognition, over 5,000 of the world's largest, and most influential companies are assessed based on Revenue market capitalization and public prominence.
Stephan Tanda: Following the end of the quarter, APTAR was again named to CDP's Suppliers Engagement Assessment A-list for the 2024 disclosure cycle. This CDP assessment evaluates companies on their performance on governance, target, Scope 3 emissions, and value chain engagement. Turning to innovation, I want to now highlight just a few recent technologies and product launches, as shown on Slide 5. Our recent innovation, the lateral control system with a shorter nozzle and easy one-push button actuation for precise dosing, is the dispensing solution of choice for Haleon's nasal Theraflu brand congestion relief in the U.S. This is Theraflu's first nasal decongestion product. I also wanted to cover a topic that spans both the beauty and pharma market. The combined dermal cosmetics and medical aesthetics markets have been growing double digits over the past five years.
Only the top 10% were recognized within an award.
Following the end of the quarter after was again named to CBP, suppliers engagement assessment, a list for the 2024 disclosure cycle.
This CVP assessment evaluates companies on their performance on governance targets, Scope 3 emissions, and value chain engagement.
Turning to Innovation. I want to now highlight just a few recent Technologies and product launches as shown on slide 5.
A recent Innovation, the lateral control system with a shorter nozzle and easy 1. Push button, actuation for precise dozing.
If the dispensing solution of choice for helion's nasal therapy brand congestion relief in the US. This is theraplus. First natal decongestion product.
Stephan Tanda: According to IQVIA, these markets are expected to keep growing 2 to 3 points above the beauty market's average growth rate. We are addressing this fast-rising market with a range of solutions tailored to the needs of dermal cosmetic brands. Our recently launched Pharma Beauty Derma Series features a curated selection of high-performance packaging and dispensing solutions adapted perfectly to the specifications of the dermal cosmetic market. Before I turn the call over to Vanessa Kanu to share further details of the quarter, I want to highlight that we continue to ramp up share purchases. For the first six months of the year, we repurchased approximately 1 million shares for about $150 million and returned about $210 million to shareholders through both dividends and share repurchases. Now I would like to turn the call over to Vanessa.
I also wanted to cover a topic that spans both Beauty and Pharma markets. The combined thermal cosmetics and Medical Aesthetics markets have been growing double digits over the past 5 years. According to iqvia, these markets are expected to keep growing 2 to 3 points above the beauty Market, average growth rate.
We are addressing this fast rising market with a range of solutions, tailored to the needs of dermocosmetic brands.
Our recently launched Pharma Beauty, Derma series features. A curated selection of high-performance packaging and dispensing Solutions adapted perfectly to the specifications of the dermocosmetic market.
Before I turn the call over to Vanessa to share further details of the quarter. I want to highlight that we continue to ramp up share purchases.
For the first 6 months of the year, we repurchased approximately 1 million shares for about 150 million and returned about 210 million to shareholders to both, dividends and share repurchases.
Vanessa Kanu: Thank you, Stephan, and good morning, everyone. Let me begin by summarizing the highlights for the quarter. Starting on slide six, our reported sales increased 6%, which included a foreign currency translation tailwind of approximately 3%. Therefore, core sales grew 3% compared to the prior year period. As shown on slide seven, we achieved adjusted EBITDA of $218 million, an increase of 13% from the prior year. We reported adjusted earnings per share of $1.66 versus the prior year's $1.41 at comparable exchange rates. The effective tax rate for the second quarter was 20.0% compared to 23.5% in the prior year. The lower effective tax rate reflects the realization of a previously unrecognized tax loss benefit as part of our ongoing tax planning, as well as greater tax benefits from share-based compensation.
Now, I would like to turn the call over to Vanessa.
Thank you, Stefan.
Good morning, everyone.
Starting on flight 6, our reported sales increased 6%, which included a foreign currency translation, Tailwind of approximately 3%.
Therefore, core sales, grew 3% compared to the prior year period.
As shown on slide 7, we achieved adjusted ebida of 218 million and increase of 13% from the prior year.
We reported adjusted earnings per share of a 1.66 versus the prior years. A $1.41 at comparable exchange rates,
Vanessa Kanu: Neutralizing for foreign currency effects and tax, adjusted earnings per share would have increased 13% over the prior year quarter. We should note that actual exchange rates and the effective tax rate for the quarter were comparable to the guidance provided on our last earnings call. With those high-level comments, let's take a closer look at segment performance. Turning to slide eight, our pharma segment's core sales increased 3%. Let me break that down by market, starting with our proprietary drug delivery system. Prescription core sales increased 8%, driven by strong demand for dosing and dispensing technologies for emergency medicines, asthma, and COPD therapeutics, and royalty payments. Consumer healthcare core sales decreased 14%, primarily due to continued inventory management by customers in Europe, leading to softer demand for nasal decongestants and nasal saline rinse solutions.
The effective tax rate for the second quarter was 20.0% compared to 23.5% in the prior year the lower effective tax rate. Reflects the realization of a previously, unrecognized tax loss benefits as part of our ongoing tax planning, as well as greater tax benefits from share-based compensation.
Neutralizing for foreign currency effects and tax adjusted earnings per share would have been increased 13% over the prior year quarter.
We should note that actual exchange rates and the effective tax rate for the quarter were comparable to the guidance provided on our last earnings call.
With those high-level comments. Let's take a closer look at segment performance.
Turning to slide 8, our former segments course, sales increased 3%.
Let me break that down by market, starting with our proprietary drug Delivery Systems.
Prescription core sales, increase 8% driven by strong, demand for dosing, and dispensing Technologies for emergency medicines asthma and COPD Therapeutics and royalty payments.
Consumer Healthcare core sales decreased 14% primarily due to the continued Inventory management by customers in Europe, leading to software, demand for nasal decongestants and nasal saline, rinse Solutions.
Vanessa Kanu: Sales for ophthalmic solutions continued to grow in the quarter but could not offset the overall decline in cough and cold medicines. Ingestibles core sales increased 9%, with strong demand for elastomeric components used for biologics, GLP-1, small molecule, and antithrombotic applications contributing positively to the result. Services also contributed positively in the quarter. For our active material science solutions, core sales increased 11%, driven by strong demand for our active film technology. Pharma's adjusted EBITDA margin for the quarter was 35.4%, a 130 basis points improvement from the prior year. The margin improvement was driven by increased sales of higher-value products, services, and royalties, as well as ongoing operational efficiencies. Moving to our beauty segment on slide nine, core sales increased 1% in the quarter, primarily driven by stronger tooling sales.
Sales for Opthalmic Solutions continue to grow in the quarter but could not offset. The overall decline in cost and cold medicines.
Elastic components used for biologics glp1, small molecule, and anti-thrombotic, applications contributing positively to the results.
Services. Also contributed positively in the quarter.
And for our active Material, Science Solutions, core sales increased 11% driven by strong, demand for our active film technology.
Farmers adjusted Aida margin for the quarter was 35.4% 830 basis, points improvement from the prior year.
The margin improvements was driven by increased sales of higher value products, services and royalties as well as ongoing operational efficiencies.
Vanessa Kanu: Looking at the beauty segment by market, fragrance, facial skincare, and color cosmetic products core sales decreased 4%, primarily due to lower sales of skincare dispensing products for indie brands, as well as muted customer demand for our prestige fragrance dispensing technologies, given tariff-related uncertainties. Core sales for mastiche fragrance continue to show solid growth. Personal care core sales increased 11%. About half of the core sales increase can be attributed to tooling sales, as well as continued strong demand for body care and haircare products applications. Core sales for home care were flat in the quarter. The beauty segment's adjusted EBITDA margin for the quarter was 14.1%, an improvement of 20 basis points, largely attributed to ongoing cost management efforts. Moving to slide 10, our closures segment's core sales increased by 7% compared to the prior year.
Moving to our Beauty segments on slide 9 core sales increased 1% in the quarter, primarily driven by stronger, tooling sales.
Looking at the beauty segment by market fragrance, facial skin, care and color Cosmetics, core sales, decreased 4%, primarily due to lower sales of skin care dispensing products. For Indie Brands, as well as muted customer demand for our Prestige fragrance dispensing Technologies giving tariff related uncertainties.
Core sales from Mass teach fragrance continued to show solid growth.
Personal Care. Core sales increased 11% about half of the core sales. Increase can be attributed to tooling sales as well as continued strong demand for body care and Hair Care applications.
And core sales for Home Care were flat in the quarter.
The beauty segments adjusted Aida margin for the quarter was 14.1% and improvements of 20 basis points, largely achieved, its ongoing cost management efforts.
Vanessa Kanu: The segment saw product sales growth in key end markets across nearly all regions. When looking at the market fields for closures, food core sales increased 13%. Product sales for food were driven by strong demand across nearly all of the end market categories, including sauces, condiments, salad dressing closures, spreads, and jellies, as well as food protection. Beverage core sales increased 7%, primarily driven by increased sales of functional drinks closures and bottled water. Personal care core sales decreased 4%, primarily due to lower tooling sales compared to the prior year. While in our other category, which includes beauty, home care, and health care, core sales increased 1%, driven by higher sales for dish care solutions and laundry care solutions. Closures adjusted EBITDA margin was 16.9%, representing a solid 130 basis points improvement over the prior year, primarily due to volume growth and continued cost management.
Moving to slide 10, our closure segments, core sales, increased by 7% compared to the prior year.
The segment saw product sales growth in key and markets across nearly all regions.
When looking at the market fields for closures food, core sales, increased 13%.
Product sales for food were driven by strong demand across, nearly all of the End Market categories.
Including sauces condiments, salad dressing, spreads, and jellies as well as food protection.
Beverage core sales increased 7% primarily driven by increased sales of functional drinks and bottled water.
Personal Care, core sales, decreased 4%, primarily due to lower cooling sales compared to the prior year.
While in our other category which includes Beauty home, care and Healthcare core sales increased 1% during by higher sales for Dish and laundry Care Solutions.
Closures adjusted, evida margin was 16.9%, representing a solid 130 basis, point improvement, over the prior year, primarily due to volume growth and continued cost management.
Vanessa Kanu: At the total company level, due to ongoing cost reduction efforts, increased volumes, and improved revenue mix, consolidated gross margins expanded over 30 basis points in Q2 year-over-year, while SG&A, as a percentage of sales, declined from 16.4% last year to 15.6% this year, an 80 basis point reduction year-over-year. One thing I will note on SG&A, over the last few months, we have begun to incur costs related to litigating our pharma intellectual property rights. While the costs in Q2 were not material to highlight, we do anticipate legal fees associated with this effort to increase significantly, which I will speak to in the quarterly guidance section. Overall, with a strong gross margin and SG&A performance in Q2, consolidated adjusted EBITDA margins expanded by 140 basis points to 22.6% compared to 21.2% in the prior year.
As a total company level due to ongoing cost reduction efforts, increased volumes and improved Revenue. Mix Consolidated growth margins, expanded over 30 basis points in Q2 year-over-year while sgna as a percentage of sales declined from 16.4% last year, to 15.6% this year and 80 basis point reduction year-over-year.
On sgna over the last few months, we have begun to incur costs related. To litigating, our Pharma intellectual property rights
While the cost in Q2 were not material to highlight, we do anticipate legal fees associated with this effort to increase significantly, which I will speak to you in the quarterly guidance section.
Vanessa Kanu: Slides 11 and 12 cover our year-to-date performance and show that both reported sales and core sales increased 2%. Our reported earnings per share increased 10%, and adjusted earnings per share increased 8% compared to the prior year, including comparable exchange rates. The current year had an effective tax rate of 22.5% compared to the prior year's effective tax rate of 22.1%. Neutralizing both the effective tax rate and the exchange rate for the year-ago period, adjusted earnings per share would have been up 9%. Additionally, during the six-month period, adjusted EBITDA margin increased by 130 basis points to 21.7%. In the first six months, free cash flow was $92 million, comprising cash from operations of $209 million, less capital expenditures, net of government grants of $117 million. Free cash flow overall was in line with the prior year period.
Overall with a strong growth margin in sgna performance. In Q2 Consolidated adjusted, evida margins expanded by 140 basis points to 22.6% compared to 21.2% in the prior year.
Slides 11 and 12, cover, our year-to-date performance and show that both reported sales and core sales increased 2%.
Our reported earnings per share increased 10%.
And adjusted earnings per share, increased 8% compared to the prior year, including comparable exchange rates.
The current year had an effective tax rate of 22 and a half percent compared to the prior Year's effective tax rate of 22.1%.
Neutralizing, both the effective tax rates and the exchange rate. For the year ago, period, adjusted earnings per share would have been up 9%.
Additionally, during the 6-month period adjusted evida margin increased by 130 basis points to 21.7%.
In the first 6 months, free cash flow was 92 million. Comprising cash from operations of 209, million less Capital expenditures, net of government, grants of 117 million,
Vanessa Kanu: Finally, we ended June with a strong balance sheet once again, reflecting cash and short-term investments of nearly $170 million, net debt of $917 million, and a leverage ratio of 1.19. Now, moving on to outlook, slide 13 summarizes our outlook for the third quarter. We anticipate third quarter adjusted earnings per share, which exclude any restructuring expenses, acquisition costs, changes in the unrealized fair value of equity investments, as well as an anticipated revaluation of our BTY investment to be in the range of $1.53 to $1.61 per share. EPS for Q3 2025 reflects a negative impact of approximately 6 to 7 cents, driven by the elevated legal expenses that I mentioned previously associated with litigating our pharma intellectual property rights. The effective tax rate for the third quarter is anticipated to be in the range of 20.5% to 22.5%.
Free cash flow overall was in line with the prior year period.
Finally we ended a June with a strong balance sheet once again reflecting cash and short-term Investments of nearly 170 million. Net debt of 917 million and the leverage ratio of 1.19.
13 summar is our outlook for the third quarter.
We anticipate third quarter adjusted, earnings per share, which excludes any restructuring expenses? Acquisition costs changes in the unrealized Share value of equity Investments, as well as an anticipated revaluation of our b2i investments.
To be in the range of 1.53 to 1.61 cents per share.
EPS for Q3 2025 reflects a negative impact of approximately 6 to 7 cents driven by the elevated legal expenses that I mentioned. Previously associated with litigating, our Pharma intellectual property rights
Vanessa Kanu: Our guidance for the quarter is assuming a 1.15 euro to U.S. dollar exchange rate. With that, I will turn it over to Stephan to provide a few closing comments before we move to Q&A.
The effective tax rate. For the third quarter is anticipated to be in the range of 20 and a half to 22 and a half percent.
Our guidance for the quarter is assuming a 1.15 euro to US Dollar exchange rate.
Stephan Tanda: Thank you, Vanessa. We are pleased with the continued resilience and adaptability of our teams as they successfully navigated a dynamic second quarter. Despite the complex macroeconomic backdrop, we delivered strong performance and made meaningful progress across several strategic areas. In the second quarter, we saw some end markets pull forward order volumes from Q3 to avoid tariff uncertainties as customers moved to secure inventory ahead of potential trade disruptions. At the same time, other markets, such as prestige fragrance, were impacted by broader uncertainty, leading to delays in new product launches, which also impacts our sampling business. Our nasal saline and decongestant dispensing solutions continue to face headwinds, and we expect these challenges to persist into the third quarter. Looking ahead for the third quarter, we anticipate continuing to navigate a diverse set of macroeconomic and supply chain conditions across our portfolio.
With that, I will turn it over to Stefan to provide a few closing comments before we move the Q&A.
Thank you, Vanessa. We are pleased with the continued resilience and adaptability of our teams as they successfully navigated, a dynamic second quarter.
Despite the complex macroeconomic backdrop. We delivered. Strong performance and made meaningful progress across several strategic areas.
in the second quarter, we saw some in markets, pull forward order volumes from quarter, 3 to avoid tariff, uncertainties,
The customers moved to secure inventory ahead of potential, trade disruptions.
At the same time, other markets such as precede fragrance were impacted by broader uncertainty leading to delays in new product launches which also impacts our sampling business.
Our nasal saline and decongestion dispensing Solutions, continue to face headwinds and we expect these challenges to persist into the third quarter.
Stephan Tanda: In our pharma segment, we anticipate that injectables is poised for another strong quarter, continuing the positive product sales momentum we've seen all year, and we expect to finish the year strong. The industrial capabilities that we've added to our injectables division since 2020 are now contributing nicely to the business's growth. Within proprietary drug delivery systems, we want to call out two specific headwinds. We expect the cough and cold end markets in Europe to continue to face elevated inventory levels, while in the U.S., a market inflection point has already been reached. In emergency medicine, we anticipate challenging year-over-year comparisons as naloxone sales begin to normalize following a period of rapid growth. These products are distributed through nontraditional channels, making restocking patterns very difficult to monitor and predict.
So looking ahead for the third quarter, we anticipate continuing to navigate our diverse set of macroeconomic and supply chain conditions across our portfolio.
In our farmer segment, we anticipate that injectables is poised for another strong quarter, continuing the positive product sales momentum. We've seen all year and we expect to finish the Year Strong.
The industrial capabilities that we've added to our injectables divisions. Since 2020 are now contributing nicely to the business's growth.
Within proprietary drug delivery systems, we want to call out two specific headwinds.
We expect the cough and cold and markets in Europe. To continue to face elevated inventory levels, while in the US and Market in flection point has already been reached
In emergency medicine. We anticipate challenging year-over-year comparison as naloxone sales begin to normalize following a period of rapid growth.
Stephan Tanda: While most funding for naloxone remains at the state level, recent federal guidance, such as the executive order discouraging federal funding for harm reduction programs, has introduced additional uncertainty that may affect future demand. In the medium to long term, we continue to believe in the strength of our pharma pipeline, which is growing and expanding into new areas, including systemic nasal drug delivery. As a recent example, just last week, a study conducted by Wake Forest University School of Medicine in collaboration with Aptar was released, demonstrating that intranasal insulin delivered using Aptar's precision nasal tray system successfully reached 11 key brain regions associated with memory and cognition in older adults.
these products are distributed through non-traditional channels, making restocking patterns, very difficult to Monitor and predict
While most funding for naloxone remains at the state level, recent federal guidance, such as the executive order, discouraging federal funding for harm reduction programs.
Has introduced additional uncertainty that may affect future demands.
Stephan Tanda: This was confirmed through PET, or positron emission tomography imaging, marking the first direct evidence that active compounds like insulin administered through the nose can reach targeted areas of the brain, an essential step for developing effective Alzheimer's treatments. The study also emphasized that this delivery method could be adapted for other neurological treatments, reinforcing the potential of nose-to-brain drug delivery as a transformative route for central nervous system therapies. The growing recognition of the respiratory system as a viable delivery route for targeted therapies is very exciting for us and will be a substantial future growth platform for our pharma business. In beauty and closures, we expect a positive contribution in Q3. Continued product sales growth in closures is expected to be dampened somewhat by lower tooling sales. The key question in beauty remains around the timing of the rebound in prestige fragrance dispensing systems.
In the medium to long term, we continue to believe in the strength of our farmer pipeline, which is growing and expanding into new areas, including systemic nasal drug delivery. As a recent example, just last week, a study conducted by Wake Forest University School of Medicine in collaboration with Aptar was released, demonstrating that intranasal insulin delivered using Aptar's precision nasal spray system successfully reached 11 key brain regions associated with memory and cognition in older adults.
This was confirmed through PET, or positron emission tomography imaging, marking the first direct evidence that active compounds like insulin, administered through the nose, can reach targeted areas of the brain—an essential step for developing effective Alzheimer's treatments.
The study also emphasized that this delivery method could be adapted for other neurological treatments reinforcing. The potential of nose to brain drug delivery as a transformative route for central nervous system Therapies.
The growing recognition of the respiratory system as a viable. Delivery route. For targeted therapies is very exciting for us and will be a substantial future growth platform for our Pharma business.
Stephan Tanda: Our data and customer conversations indicate that some clients are operating at very low inventory levels, awaiting clarity on tariffs. Last weekend's announcement of the U.S.-EU trade deal should provide the much-needed clarity to our European clients, but the development is too recent to have been incorporated in our Q3 guidance. Across all segments, cost discipline remains a top priority. We continue to explore and execute initiatives that can meaningfully enhance earnings per share. In summary, while macroeconomic, supply chain, and public policy factors may temper revenue in certain end markets, we anticipate continuing to build on the momentum we have established over the past two-plus years and are well positioned for continued growth. With that, I would like to open up the call for your questions.
In Beauty enclosures to be expect the positive contribution in, Q3 continued product, sales, growth. Enclosures is expected to be damped and somewhat by lower tooling sales. And the key question in Beauty remains around the timing of the rebound. In Prestige fragrance, dispensing systems
Conversations indicate that some clients are operating at very low inventory levels, awaiting Clarity on tariffs, last weekend's announcement of the US EU trade deal, should provide the much-needed Clarity to our European clients. But the development is too recent to have been Incorporated in our quarterly guidance.
Across all segments, cost discipline remains a top priority. We continue to explore and execute initiatives that can meaningfully enhance earnings per share.
In summary while macroeconomic supply chain and public policy factors. May temper Revenue in certain end markets, we anticipate continuing to build on the momentum. We have established over the past, 2 plus years,
And they're well, positioned for continued growth with that. I would like to open up the call for your questions.
Mary Skafidas: Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. In the interest of time and fairness to all participants, please limit yourself to two questions and then come back into the queue if you have any more questions as time allows. Our first question comes from Ghansham Panjabi from Baird. Your line is open. Please go ahead.
Thank you very much.
To ask a question. Please press star. Followed by 1 on your telephone keypad now.
If you change your mind, please press star followed by 2.
From parents to ask your question, please ensure a device is unmuted locally.
And in the interest of time and fairness to all participants, please limit yourself to 2 questions and then come back into the queue. If you have any more questions as time allows.
Our first question, councilman gonami from bed. Your line is open.
Ghansham Panjabi: Yeah, thanks. Thank you, operator. Good morning, everybody. Stephan, can you just give us more color on the naloxone, if I am pronouncing that correctly, comment as it relates to sales beginning to normalize? How should we think about that dynamic impacting your core sales growth specific to pharma over the back half of the year and maybe into 2026 as well? Also, how will that impact margin mix?
Please go ahead.
Yeah, thanks. Thank you, operator. Good morning everybody. Um,
I guess Stefan, you know, can you just give us more color on the noon? I'm pronouncing that correctly, um, comment as it relates to sales, beginning to normalize. You know, how should we think about that Dynamic? Impacting your core sales growth specific to Pharma, you know, over the over the back half of the year and maybe into 2026 as well. And also, how will that impact margin mix?
Stephan Tanda: Hi, Ghansham Panjabi. Good morning.
Ghansham Panjabi: Morning.
Good morning. Um,
Stephan Tanda: Naloxone is part of emergency treatments, which clearly have grown nicely from about 2% of revenue a few years back to today, 5%. Narcan and its generic versions that we also supply are supplying to these nontraditional channels. We have called out several times that they are hard to track, and we believe there is inventory, but we cannot track it. We start to hear from our customers extreme uncertainty, rescheduling of orders, and this recent executive order on top of it certainly makes us think that growth is going to be much more muted for naloxone, at least for the next quarter or two. Clearly, that will have an impact on the overall pharma growth rate. Having said that, there is a bit of a relay race going on. Injectables is picking up the pace quite nicely with high single-digit, maybe even low double-digit sales growth.
Morning. Malik zone is is part of of, uh, emergency treatments. Which clearly have grown nicely from about 2% of Revenue a few years back to do, they 5%?
Now, um, Narcan and its generic uh versions that we also Supply obviously is applying to these non-traditional channels.
Uh, We've called out several times that, uh, you know, they, they are hard to track and we believe there is inventory, but we can't track it now.
We start to hear from our customers extreme uncertainty, uh, rescheduling of orders. Uh, and then this, uh, recent executive order on top of it certainly, um, makes us think that, uh, growth is going to be, uh, much more muted, uh, in that.
Foreign Alex on uh at least for um the next quarter or 2.
Stephan Tanda: Active materials had a great quarter. Clearly, as of Q4, we have different comparisons for the consumer healthcare. There will be a mixed effect at the same time. We have royalties kicking in continuously. Yes, we have grown anywhere from 1% to, I think, 12%, 13% in the pharma business. That growth will vary. This is just a current iteration of these fluctuations. As we said often, one single product doesn't make or break the business. We have thousands of products and thousands of customers. Clearly, naloxone is important enough that we wanted to call it out in this current state of extreme uncertainty.
And and clearly, that will have an impact, uh, on the overall farmer growth rate. Now, having said that, you know, there's a bit of a relay race going on injectables is, um, picking up the pace quite nicely, uh, with um, High single digit, maybe even low, double digit sales growth and, uh, active materials had a great quarter. And clearly as a quarter 4, we have a a different comparisons for the consumer Healthcare.
There, there will be a mixed effect. At the same time, we have royalties kicking in continuously. So, yes.
Uh, we have grown anywhere from 1% to, I think, uh, 1213 percent in in, in the Pharma business and, um, that growth will vary, and this is just a, a current iteration of of, of these fluctuations. But uh, as we said, often 1 single product doesn't make or break, uh, the business. We have thousands of products, and thousands of customers, but clearly now it's on is important enough that we wanted to call it out in this current
State of extreme uncertainty.
Ghansham Panjabi: Okay. In terms of what you are embedding for pharma growth in the back half of the year versus the first half, you have had three very strong years for pharma, and the core sales is tracking about half of what it has averaged over the last three years. Is that going to look very different in the back half of the year? Then just one final clarification. I think you mentioned cough and cold inflected in the U.S. during the quarter. What kind of an inflection did you see in terms of growth?
Okay. And, in terms of what?
you're about 3, very strong years for Pharma and the core sales is tracking about half of. You know what, what its average over the last 3 years is that going to look very different in the back, half of the year and then just 1 final clarification, I think you mentioned cough and cold inflected in the US during the quarter. Um, what kind of an inflection did you see? In terms of growth,
Stephan Tanda: We saw nice growth in the U.S., let's say mid-single digit. Europe, of course, is still a much bigger part of that.
Um we thought nice growth in the US, let's say mid mid single digits. Um yeah Europe of course is still a much bigger part of that. Yeah.
Ghansham Panjabi: Pharma back half growth versus first half?
Stephan Tanda: It will be slower, but you know, we don't guide by segment growth rate. As you know, we will continue to have growth in the second half.
Um, yeah, it will be slower but um, you know, we don't guide by segment growth rate. Um, as you know, uh, we it will continue to have a growth in the second half.
Ghansham Panjabi: Okay. Thank you.
Okay, thank you.
Mary Skafidas: Our next question comes from George Staphos from Bank of America. Your line is open. Please go ahead.
Our next question comes from George Stefanos from Bank of America. Your line is open.
Please go ahead.
Ghansham Panjabi: Thanks. Hi, everyone. Good morning. Hope you are doing well. Thanks for the details. My two questions. Maybe the first one, I will piggyback off of Ghansham Panjabi's question. Can you talk a little bit more about CHC, the consumer side? This is the deepest downturn and longest downturn in that end market for pharma that you have reported since you have been reporting on the end market data, which goes back a number of years, Stephan Tanda. We get it. There was too much inventory, and now we are going through destocking. What caused such a big buildup and in turn is causing such an extended period of downturn in that particular end market within pharma? Recognizing the comps get easy, and hopefully, Q4, Q1 next year, it is a different story. If you could give us a bit more color, that would be great.
Thanks, hi everyone, good morning. Uh, hope you're doing well, thanks for the details, you know, uh, my 2 questions, maybe the first 1. I'll I'll take you back off of goans question. So can you talk a little bit more about, um, CHC the consumer side? This is the, the deepest downturn, and longest downturn. And that end market for Pharma that you've reported. Since you've been reporting on the End Market data, which goes back a number of years Stefan. So,
I mean, we get it. There was too much inventory and now we're going through de stocking, but you know what? Caused such a big buildup and in turn is causing such an extended period of of downturn in that particular End Market within Pharma, uh, recognizing the comps, get easy, and hopefully fourth quarter first quarter next year, where it's a different story. But if you could give us a bit more color, that would be great.
Stephan Tanda: Sure, George, and sorry for the butchering of your last name there.
Ghansham Panjabi: No worries. Go through the territory.
Sure, George and I'm sorry for the butchering of your last name there. Uh, the no worries.
You guys say the territory? Um,
Stephan Tanda: Okay. Coming back to the topic, there are a number of factors involved here. Coming out of COVID, we had a very brisk pickup of growth. When that happens, I think I mentioned before, sometimes we just can't supply to demand. Then customers take notes and say, "Oh, you can't supply? Let me put in an extra order. If you short ship me three orders when I only need one, then I still get what I need." They start to build inventory. Of course, if you multiply this across the whole value chain, we believe that's what happened. It's not just the cough and cold, good season, bad season. You have this upswing in demand, and everybody's starting to hoard products. Once they realize, "Okay, now there's plenty of supply, now let me work off the inventory." I think that's one part. Two is the cough and cold season.
Okay. Um, coming back to the topic. So
there are a number of factors involved here. Um,
Uh, coming out of Co we had a very brisk pickup of growth.
And and when that happens,
Uh I think I mentioned before sometimes we just can't Supply the demands and then customers that take notes and say oh uh you can't Supply. So let me put in an extra order. Uh you know if you short ship Me 3 orders but I only need 1 then I still get uh what I need and they start to build inventory of course.
If you multiply it as the cross the whole value chain. Um, we believe that what happened, so it's not just the cold and cough. Uh,
Good season Bad season it as you have is up uh Upstream uh in demand. And everybody is starting to hoard products.
Stephan Tanda: Three, we talked about also is that we had to step back from a significant portion of the Russian markets for obvious reasons. Those three things together really contribute to the development that you highlighted.
And once they realize, okay, now there's plenty of Supply. Now, let me uh, work off the inventory, so I think that's 1 part 2 is the call and call season and 3. We talked about um, also is that we had to step back from a significant portion of the Russian markets for obvious reasons. So, those 3 things together, really contribute to the development that you highlighted.
Ghansham Panjabi: Okay. Just a point of clarification there, and my second question I will ask as well. From your vantage point, you have not lost share from what you can track in that piece of the market within Europe, and what would be your proof points there? You brought it up, the legal expenditures. I know it is legal, it is litigation, you cannot say much if anything, but what in particular have you been litigating around your intellectual property rights? Is it regionally centered? Is there anything else you can tell us? Based on what you know, is this going to continue past Q3 into Q4 and beyond? Thank you.
Okay, just point of clarification there in my second question, I'll answer ask as well, so from your vanish point. You have not lost share from what you can track in that piece of the Market within Europe and kind of what would be your proof points there. And then you know, you brought it up the the the legal expenditures can you? I know it's legal. It's litigation. You can't say much if anything. But um, what in particular has been, uh, have you been litigating around your intellectual property rights? Is it regionally centered? Is there anything else you can tell us? And based on what you know, is this going to continue past third quarter into fourth quarter and Beyond? Thank you.
Stephan Tanda: On the share question, with the exception of Russia, obviously somebody picked up that business, most likely Chinese. With the exception of Russia, to the best of our knowledge, we have not lost any share. I am actually quite excited with some of the developments that have come out. I spoke earlier about the very technical name, lateral actuation, but it is a nasal spray that now has a push button, and you push the button and you get exact dose, and you can buy it in the U.S. under the Theraflu brand. I already bought half a dozen. We are actually very excited about the development in consumer healthcare, but we appreciate your patience as we work through this inventory mega cycle, let us call it that way.
Yeah, on the share question, uh, with the exception of Russia, obviously somebody picked up that business most likely Chinese with the exception of of, of Russia. Um, the best of our knowledge, we have not lost any share and actually quite excited with some of the developments that, uh, have come out. Um, I I spoke earlier about, uh, the
it's a very technical name, lateral, actuation, but it's a nasal spray that now had to push button and you push the button and you get exact dose and you can buy it in the US under the, the flu brand, or we both have a dozen, um,
Uh, we we actually very excited about the development consumer Healthcare, but we we appreciate your patience as we work through this inventory. Um,
Stephan Tanda: On the legal front, you have covered us a very long time, so you will remember that sometimes our customers forget their confidentiality obligations. We actually brought a lawsuit to one of our largest customers, Kraft Heinz, way back when. It was, of course, under different Kraft Heinz leadership. In the end, we prevailed. Today, we receive customer awards from Kraft Heinz. But sometimes you have to remind customers that they have obligations to safeguard our intellectual property, be it patents, be it know-how, be it trade secrets that are supplied to them under appropriate confidentiality agreements. This is another case like that. Indeed, because it is in litigation, we cannot comment on the details. Our business is founded on decades-long experience, know-how, and patents. When they are not observed, we defend them vigorously.
Mega cycle. Let's call it that way.
On on the, on the uh, legal front. Um,
Largest customer Kraft. Heinz way back when. Um, there was of course in a different Craft Time leadership. And in the end we prevailed and you know, today we received customer awards from Kraft Heinz. But sometimes you have to remind customers that they have obligations.
Uh, to uh, Safeguard our intellectual property, be it patents, be it, uh, no habit Trade Secrets. It does apply to them under under, uh, appropriate confidentiality agreements. And, uh, this is another case like that in indeed, because it's it's in litigation, we can't comment on the details. But, uh,
our business is is founded on decades long experience, know how and and patterns and uh when they are uh not um,
Stephan Tanda: This will be with us for a few quarters. It is not an ongoing part of our business, but when it is required, of course, we defend what is important to our business.
Observed, we we defend them vigorously. Um, this will be with us for a few quarters. It's not an ongoing part of our business. But when it's required, of course, we defend, uh,
Uh, what is important to our business?
Mary Skafidas: Thank you, Stephan. I'll turn it over. Our next question comes from Matt Roberts from Raymond James. Your line is open. Please go ahead.
You know, thank you, Stefan. I'll turn it over.
My next question comes from Matthew Roberts. Raymond James.
Your line is open.
Matt Roberts: Stephan, Vanessa, Mary, good morning. Not to belabor the point on George Staphos's question, but that legal expectation did note some in Q2. Sorry, George. Since that call, since our last call or even June, what changes? It was more material to call out. I believe a response was due in June. Is there anything in the public docket that you could share or, if you maybe try to frame scenarios, I do not know, win, lose, settle? What would that look like? Would it be monetary damages received or on the contrary, could there be any change in the pharma pipeline from this?
um,
Just a photo of these questions. Um, but that legal issue did not come in Q2.
Sorry George. Uh so so yeah, since that call since our last caller or even June, you know what changed? It was more material to call out? I believe a response was due in June. So is there anything in the public document that you could share or, you know, if you maybe try to frame scenarios? I don't know. Win Loose settle. You know, what would that look like? I mean, would it be monetary damages received or around the contract? Could there be any change in the form of pipeline from this?
Stephan Tanda: We do not expect any change. In fact, other than the legal cost, there is no impact to our P&L at the moment, but we want to make sure it stays that way. So this is more of a preemptive move to safeguard our intellectual property. Depending on your Googling skills, you may find something, but we would rather not discuss it here.
So we, we do not expect any change. In fact, you know,
Other than the legal cost, there is no impact to our p&l at the moment, but we want to make sure it stays that way. So this is more of a preemptive uh, uh move though. Um,
uh,
Safeguard our intellectual property and yeah, depending on your your Googling skills. Uh, you you may find something uh but we'd rather not discuss it here. Yeah.
Ghansham Panjabi: Fair enough. I will work on my Southern district login. Switching topics, maybe on the beauty side, the fragrance, skincare products, and color cosmetic products, I believe that was down 4%. What did the overall prestige market see in Q2? Were headwinds really bound to a certain region? Given now we have some more visibility on tariffs, any color on expected timing for rollouts and what you expect for that category going into the second half? Thank you again for taking the questions.
Fair enough. I'll work on my Southern District login. Um,
Switching topics, maybe on the beauty side.
Fragrance skin care and cosmetics. I believe that was down 4%. What did the overall Prestige Market see in Q2, and where are headwinds really bound to a certain region?
Given now we have some more visibility on on tariffs. Any any color on expected timing for rollouts, and what you expect for that category going into second half. Thank you again for taking the questions.
Stephan Tanda: We certainly take a lot of, not comfort is probably, but we are happy that the uncertainty for our European customers, which is most important for prestige beauty with respect to imports to the U.S., has been resolved. Unfortunately, it comes too late for the third quarter. It was just last weekend. Most of you know, France is shut down in August, and then pretty much the quarter is over. I think on that one, we will be able to give you much better color with Q3. Clearly, an increased launch activity on the prestige side will help us not only selling more pounds, but also reinvigorating our sampling business that has really been depressed. If companies don't launch, they also don't need any samples to support the launch. China, Asia is actually doing very well. This is more for local brands, and that has developed nicely.
Yeah. Um, we certainly take uh, um,
a lot of, uh,
Not Comfort is probably but we we're happy that the uncertainty for our European customers which is you know, most important for Prestige Beauty. Uh with respect to Imports to, the US has been resolved
Unfortunately it it it comes too late for the third quarter, you know, it's just last weekend.
Most of, you know, friends it's shut down in August and then, you know, pretty much the quarter is over. So I think at that moment we will be able to give you much better call up uh color with a quarter 3.
And clearly an increase, the launch activity on the prestige side will help us, not only selling more pounds, but also, uh, reinvigorating, our sampling business, that has really, uh, been depressed. Uh, if if companies don't launch it, they also don't need any samples to, uh, support the launch. So um,
Stephan Tanda: Of course, the European market that then re-exports to the U.S. and to Asia is still much bigger for us.
Market that then re-exports to the US and to Asia is still much bigger for us.
Ghansham Panjabi: Thank you, Stephan.
Thank you.
Mary Skafidas: Our next question comes from Daniel Rizzo from Jefferies. Your line is open. Please go ahead.
My next question comes from Daniel Rizzo. Jeff, your line is open.
Daniel Rizzo: Good morning. Thanks for taking my questions. Just to kind of belabor the point, with the nasal decongestant softness, was that always more of a European issue versus the U.S., or has the U.S. just gotten through it faster?
Please, go ahead, good morning, good morning. Thank thanks for taking my questions and just kind of the labor. The point with the, the nasal DC investment softness was that always more of a European issue versus the us or is the US just gotten through it faster.
Stephan Tanda: First, the European market for us is much bigger. It is historically more of a nasal spray kind of market. Indeed, the U.S. has gotten through it much faster. It didn't have as much inventory buildup, hindsight is 2020, in the supply chain. Of course, Russia is also a big nasal decongestant market.
Well, first the European market for us is much bigger. Uh, it is historically more of a natal spray kind of Market, uh, and indeed, uh, the US has gotten through it much faster. Um, didn't have as much inventory. Build up, hindsight is 2020, you know, in the, in the supply chain. Um, and then, of course, Russia is also a big nasal Decon Market.
Daniel Rizzo: Then you are in beverages. One of your competitors called out on-the-go beverages being kind of overstocked, but it is not something that seems to be affecting you guys. I was wondering if that is not really a large market for you guys or if you have kind of weathered it better. The quick question, though, is, have you seen like on-the-go cold beverages being an issue for you over the past quarter? Seemingly no.
And then you're in in beverages um morning competitors, you called out on the go beverages being kind of overstocked but it's not something that seems to be affecting you guys. I was wondering if if that's not really a large market for you guys or if you just kind of whether it better, I guess the the the the quick question though is, have you seen like on the go, cold beverages being an issue for you, uh, over the past quarter seemingly now,
Stephan Tanda: No. Overall, our beverage business is up nicely. It is, of course, very diversified between bottled water, sports drink, energy drinks, and also geographically diversified. In addition, we continue to pump innovation into that market. Overall, we are quite happy with the beverage market.
No, overall, our beverage, uh, business is up nicely. It's of course. Very Diversified between bottled water and sports drink, energy drinks and also geographically Diversified. So, um, in addition, we continue to, uh, pump Innovation into that market. So overall, we, we're quite happy with the beverage Market.
Daniel Rizzo: Thank you very much.
Thank you very much.
Mary Skafidas: Our next question comes from Gabe Hajde from Wells Fargo. Your line is open. Please go ahead.
Our next question comes from Gabe Haiti.
From Wells, Fargo. Your line is open.
Please go ahead.
Ghansham Panjabi: Stephan, Vanessa, good morning.
No Stefan, when I say good morning.
Stephan Tanda: Thank you.
Ghansham Panjabi: I know it's probably challenging, but I think you mentioned the size of the Narcan naloxone business for you all at this point. Is there any way to discern where or who's buying those products? I know you mentioned some federal subsidization or funding that may impact the product line as well. Maybe just help us understand from your vantage point how that could impact it.
Again.
I know. It's, I know it's probably challenging, but, um, I think you mentioned the size of the Narcan Lock Zone business for you all at this point.
Um, is there any way to discern? Uh, where or who is buying those products? Um, I know you mentioned some federal subsidization, or, or funding that that may impact the product line as well. Um, maybe just help us understand from your Vantage Point, um, how that could impact it?
Stephan Tanda: Yeah, it is a very broad set of distribution. What has accelerated that market greatly, if you remember, when Narcan went over the counter, it was not that people lined up to go to CVS or Walgreens to buy it. It was that the state-level harm reduction agencies could now buy it without prescription and just distribute it. Those state harm reduction agencies are funded not so much by federal funds, but by the settlement money from the opioid overdose crisis. So those funds are still there. The question is, have their distribution points, whether it is fire stations, school buildings, libraries, and all the non-traditional stuff, been saturated? Depending on the color of the state, does the executive order change their priorities on what they spend this settlement money on? They can spend it on other things. They do not have to spend it on Narcan.
Yeah, it it it's it's a very broad um set of distribution. What, uh, has accelerated that market greatly. If you remember, uh, when Narcan went over the counter,
It wasn't the people lined up to go to CVS or Walgreens to buy it. It was that uh, the state level harm, reduction agencies could now buy it without prescription and just distribute it. And those State harm reduction agencies are funded, not So Much by federal funds. But by the settlement money from the opioid uh overdose
Crisis. So those funds are still there. The question is, you know, have their distributions, uh points, whether it's fire stations School, uh, buildings, libraries and, uh, all the non-traditional stuff being saturated.
Stephan Tanda: Certainly, there is enough noise in the system that we hear from our customers. The best signal we have is what our customers tell us and, frankly, what they do with their orders. When they start to get nervous and push orders out and say, "We are not sure about this," and, you know, the order was X, now it is Y, we see enough noise in the system that this is real. This is slowing down. That is the best we can tell you.
Um, and depending on the color of the state does the, the executive order, uh, change the priorities on on what they spend on, uh, this this settlement money on the they can spend it on other things. They don't have to spend it on our end, you know,
And certainly there is enough, uh, noise in the system that we hear from our customers. The best signal. We have is what our customers tell us. And frankly, what they do with their orders and when they start to get nervous and push orders out and say, we're not sure about this and, you know, the order was X now it's why, uh, we see enough noise in the system? Is that this is, this is real, this is slowing down. Um, and that's the best we can tell you, yeah,
Ghansham Panjabi: Fair enough. I appreciate that. It is always tough to track this stuff down to the end user. I guess on the litigation, I just want to make sure I heard you correctly. The legal expenses, $6 million to $7 million this quarter and probably persist into Q4. Hopefully, there is some sort of resolution, meaning the litigation costs are $6 million to $7 million.
Fair enough. No, I appreciate that. It's, it's always tough to track this stuff down to
the end user.
Um,
and then I guess on the the litigation I just sort of want to
Make sure I heard you correctly: the legal expenses.
Um, 67 million this quarter and probably persist in the Q4. Um, and then hopefully there's some sort of resolution.
Meaning meaning the litigation costs are 6 to 7 million.
Daniel Rizzo: Yeah, it's $0.06 to $0.07, which is about $5 million to $6 million a quarter. As Stephan Tanda said, we would expect that for the next few quarters. I think that's a good run rate for now. Of course, we do not expect this will be a long-term thing, and we will update you as things progress.
A quarter, uh, and that's the fund said, you know, we we we would expect that for the next few quarters. Um and I think that's a uh that's a good run rate for for the you know for now. And and of course we don't expect, this will be a long-term thing um and we'll update you uh as as things progress.
Ghansham Panjabi: Thank you.
Thank you.
Mary Skafidas: As a reminder, to ask a question, please press star followed by one. Our next question comes from George Staphos from Bank of America. Your line is open. Please go ahead.
As a reminder to ask a question. Please press star followed by 1.
But on his open, please go ahead.
Ghansham Panjabi: Thanks so much. Hi, guys. Stephan, could you talk just a little bit about the acquisition in New Jersey? I know there is not going to be a single type of customer. I do not think there will be anyway. But can you talk to us about who the typical types of customers will be? Can you go through a little bit more detail in terms of what services will be offered? One of the things that you said suggested that you also might be doing contract filling. I do not want to just if you could sort of confirm or correct that view, just anything that you have on that acquisition would be interesting. Then I had a quick follow-on within beauty.
Thanks so much. Hi guys. Um, Stefan could you talk just a little bit about the acquisition in New Jersey? Um, you know, I, I know there's not going to be a single type of customer, I don't think there will be any way, but can you talk to us about who the typical types of customers will be?
Uh, can you go through a little bit more detail in terms of what services will be? Offered? I 1 of the things that you said, suggested that you also might be doing
Contract filling and I don't want to just if you could sort of uh confirm or correct, uh, that view just anything that you have on that. Um acquisition would be uh interesting and that had a quick follow on within Beauty.
Stephan Tanda: Sure. Thanks for asking for the clarification. No, we're not contract fillers. We're not changing the scope of our business. This is a further build-out of our service capability in early-stage development. As you know, innovators need product that they can put in the clinic for Phase 1 and Phase 2 trials. That product needs to be filled. You're talking very low volumes, but you need to have the qualified clean rooms and CGMP facilities to do that to support early-stage trials. We just see the pipeline continue to expand and explode. It's probably too much, but significantly expand in systemic nasal drug delivery. We'll give you more color at the upcoming Investor Day. When you hear things like neurological drugs for Parkinson's, Alzheimer's, and things like that, you really want to make sure that these innovators get everything they need to advance their projects.
Sure. So, thanks for asking for the clarification. Know, we, we're not contract fillers, uh, so we're not changing our
Scope of our business. This is a further build-out of our service capability in early-stage development.
And as as um, you know, innovators need product that they can put in the clinic uh for Phase 1 and Phase 2 trials, you know that that product needs to be filled. Now you're talking very low volumes but you need to have the qualified clean rooms and cgmp Facilities to do that to support early stage trials.
And we just see the pipeline continue to expand and explode, as probably too much, but uh.
Significantly expand in. Systemic nasal drug delivery will give you
Even more color at the upcoming invest today, but when you hear things like, you know, um, uh neurological uh, drugs for Parkinson Alzheimer's, and things like that.
Stephan Tanda: This is really expanding that capability that they get in the clinic faster, that they get to do their trials. We're not the contract manufacturing facility for large-scale filling.
Ghansham Panjabi: Understood. Stephan, I am recognizing you are just venturing into this now. Is this something that you could see as perhaps, you know, a fourth or fifth leg to the pharma business? Recognizing, yes, you have been developing the services component of your business for a few years now, but is this something that you expect you might even be able to broaden out? If you did, what would it do to margins? What kind of multiples do these businesses trade at? Just curious there. Then back to beauty. Go ahead first with that one. Go ahead.
You really want to make sure that these innovators, uh, get everything they need to, to, um, Advance their projects. And this is really uh, the expanding that capability, uh, that they get in the clinic faster, uh, that they get to do the trials, but we, we're not the contract manufacturing facility for for large scale. Okay, filling
Understood, it's Stefan. Recognizing you're just venturing into this now? Um,
Is this something that you could see as perhaps?
You know a fourth or fifth leg to the Pharma business, recognizing yes, you've been developing the services component of your business for a few years now. But is this something that you expect you might even be able to broaden out and
If you did, what would it do to margins? You know, what kind of multiples do these businesses trade at? Just curious there and then you know, back to to Beauty
Stephan Tanda: So look, if you add up all of our services, including digital, you get a few tens of millions, certainly less than $100 million. We may have added a few more million here. At the end of the day, all of this is still to accelerate what is in the pipeline, broaden what is in the pipeline, and ensure that we have more device sales at the end that, as you know, for us, are growing perpetuities. The more of these growing perpetuities you can stack on top of each other, the better off we will be. Compared to device sales, it is still small. I think we paid for this facility some $7 million or so. So it is not a major change of our footprint.
Go ahead first with that. 1. Uh, go ahead. Yeah. So uh
Look, if you add up all of our services, including digital, you get a few tens of millions, certainly less than $100 million. And we may have added a few more million here. At the end of the day, all of this is still to...
Accelerate what's in the pipeline?
Broaden what's in the pipeline and and and ensure that we have more uh device sales at the end. That as you know for us they're growing perpetuities and the more of these growing perpetuity you can start to set on top of each other the better off we'll be but compared to the device sales it's still small and I think we paid for the spec facility some 7 million dollars or so. So it's it's it's not uh made to change of our footprint.
Ghansham Panjabi: Okay. I appreciate you going through that, Stephan. It is very helpful. In beauty, some of the other companies that have reported this reporting period have mentioned that they seem to be doing relatively well. I seem to remember a comment that sampling growth for some of the other players was doing fairly well. I do not know if there is a way, again, that you can track share there. I know it is kind of a disparate market, but do you think you are losing share in beauty, or is it just, "Hey, listen, it is a customer mix, and some customers have new products out in the market. Yours might not have as many." This just sort of cycles back and forth like a pendulum. How would you have us think about that and why? Thank you, and good luck in the quarter.
I appreciate you going through that Stefan, it's very helpful. Um, in Beauty
You know, some of the other companies that have reported this reporting period have mentioned that.
Uh, you know, they seem to be doing relatively well.
Uh, I seem to remember a comment that
Uh, sampling growth. For some of the other players was doing fairly well. I don't know if there's a way again that you can track share. Their, I know, it's kind of a disparate Market, but do you think you're losing share in beauty or is it just? Hey, listen, it's, it's customer mix and, um, some customers have new products out in the market, yours might not have as many, and this just sort of Cycles back and forth, like a pendulum. How would you have us? Think about that. And why, thank you and good luck in the quarter.
Stephan Tanda: Yeah, I think you answered your own question, George Staphos. It's really the latter.
Ghansham Panjabi: I'm good at that.
Stephan Tanda: The more on the.
Ghansham Panjabi: Yeah.
Stephan Tanda: The prestige end. I am not sure I can add a lot more. We have a different geographic mix. We are not as much in, or at all in the mass part of this. I probably cannot add more color than the way you answered it.
Color. Then the way you entered it,
Ghansham Panjabi: Okay. Yeah, I thought the momentum was also in prestige in some of the other reports, but I will double-check. Thanks, guys. Good luck in the quarter. Thanks for all the details.
Okay.
Stephan Tanda: Thanks.
Yeah, I thought the momentum was also in Prestige and some of the other reports, but I'll double-check. Thanks, guys. Good luck in the quarter, and thanks for all the details.
Mary Skafidas: Our next question comes from Gabe Hajde from Wells Fargo. Your line is open. Please go ahead.
On next question. Question Gabe. Haydee from Wells Fargo.
Your line is open.
Please go ahead.
Ghansham Panjabi: Hey, guys. I wanted to follow up on the active packaging press release that you all put out in terms of having an oral solid dose solution for GLP-1 drugs. I am just curious, maybe how far along testing is for that or just where we are. Maybe I felt like it was too early, but help us understand what the opportunity set could look like for that.
Hey guys. I I wanted to follow up on the the active packaging. Uh press release that you all put out in in terms of having a oral solid dose solution for for glp1. I'm just curious maybe how far along um testing is for that or just Where We Are.
Um,
and, and maybe
It's probably too early but help us understand maybe what the opportunity set could look like for that.
Stephan Tanda: Maybe backing up a little bit. Our active materials in oral solid dose, that basically means there is a film in every blister that contains a pill. That film helps with the conditioning of the atmosphere inside the blister that helps with stability of a drug or reduces the production of nitrosamine. We also announced that we can reduce oxygen and moisture at the same time. So it is a very sophisticated offering for certain drugs. For example, Descovy is one of those. Now this GLP-1 drug is in phase 3. We certainly do not want to speculate on approval timelines and commercialization timelines, but it is another proof point about how good the technology is.
Yeah, maybe um, backing up a little bit. So, um, our active materials in oral solar deals. That basically means there's a, is a film in every blister, that contains a a pill. And that film, uh, helps with the conditioning of the atmosphere, inside the blister that helps with stability uh, of a drug or uh, reduces the production of nitrosamine. We also uh, announced that we can reduce oxygen and moisture at the same time. So it's it's a very sophisticated uh, offering for service.
Certain drugs for example discov uh is is 1 of those. And now um this GOP 1 drug is in in Phase 3. So we we certainly don't want to speculate on approval timelines and and and commercialization timelines. But it's another proof point that about uh how good the technology is.
Ghansham Panjabi: Thank you.
Thank you.
Mary Skafidas: Our next question comes from Matt Roberts from Raymond James. Your line is open. Please go ahead.
Our next question comes from customer Matthew Roberts from Raymond James. Your line is open. Please go ahead.
Ghansham Panjabi: Hello again. Earlier, you spent a good bit of time talking about emergency medicines and contribution in sales, but I want to ask about another medication. A customer who had a nasally delivered depression medication was up like 53% again, I believe, in Q2, and sales are now exceeding $1 billion on that product. Could you give a little more color around depression medication and the growth you've seen there? While those growth rates are certainly very impressive, it seems like it is coming off the peak as well. Any influence that has on that long-term pharma growth rate? Thanks again for taking the questions.
Hey, hello again. Um,
The earlier you spent a good bit of time talking about emergency medicine and contribution and sales, but long after that, another medication a customer...
Not a nasally delivered depression medication was up like 53% again, I believe in Q2, and sales are now exceeding $1 billion on that product. So could you give a little more color around?
Depression medication and the growth you've seen there and a lot of those growth rates are certainly very impressive. Um, it seems like it's coming off the off the peak as well. So any influence that has on that long term from the growth rate. Thanks again for taking that questions.
Stephan Tanda: I think you may be referring to Johnson & Johnson's Spravato, and that is indeed enabled by those nasal delivery systems. It is not categorized as emergency treatment, but it is a great product. It is certainly contributing to our growth. We also got approval in China not too far back and continue to drive growth. So it is an exciting product. We have other products for depression treatment in the pipeline that may have different treatment regimes or different molecules. So it is another example of systemic nasal drug delivery or central nervous system drug delivery.
Yeah, I I I think you may be referring to uh, Jansen or Johnson Johnson's privato, um, and that is indeed enabled by our by those nasal delivery system. And indeed, uh, it's not categorized as emergency treatment, but, uh, uh, it it's a great product. Um, it's certainly contributing to our growth. Um, and uh, they also got approval in China, not too far back and continue to drive growth. So, uh, it's an, it's an exciting product and we have other products, uh, for depression treatment in the pipeline, um, that may have different treatment regimes or different molecules. So it's another example of
systemic natal drug delivery or central nervous system drug delivery.
Ghansham Panjabi: That's helpful. Thanks, Stephan. Are you able to quantify how much depression medication is as a percentage of sales in a similar fashion as you've done for emergency medication? If you have emergency medication as 5%, is there a quantification for depression medication?
That's helpful. Thanks! And, but are you able to quantify how much depression medication is as a percentage of sales in a similar fashion as you've done for emergency medication?
If we have emergency medication is 5, is there a quantification for depression medication?
Stephan Tanda: Okay. Maybe, Vanessa, you just corrected me.
Daniel Rizzo: Yeah. Hey, Matt, it's within our emergency medicine, which Stephan quantified earlier, about 5% of it. Yeah.
Okay, I uh, maybe want to say, you just corrected me. Yeah. Hey Matt, it's within its within our emergency medicine.
um, which uh, Steph
About.
Yeah.
Ghansham Panjabi: Okay. Very helpful. Thank you all again.
Okay.
This is very helpful. Thank you all again.
Stephan Tanda: Always better to get the numbers from the CFO.
Always better to get the numbers from the CFO.
Thanks much.
Mary Skafidas: We currently have no further questions. So at this time, I'd like to hand back to Ghansham Panjabi with some closing remarks.
Stephan Tanda: Very good. Let me summarize the call by zooming out. I just want to say again how proud I am of our teams. They really have executed with tremendous agility, perseverance, determination, grit, whatever you want to say, delivering a very strong quarter across the board, exceeding the top end of our guidance range. We do not take that lightly, ending up with an 18% EPS growth. Let us recall, April 2nd was not that long ago, and it just created a lot of uncertainty for our customers, supply chains, and consumers around the world. Our team has executed in the face of this and with tremendous agility. Our resilience is indeed rooted in our unique leadership positions across the critical end markets we operate in delivering dispensing solutions for chronic disease treatments and everyday consumer essentials.
We currently have no further questions. So, at this time, I'd like to hand back to Panda. Some closing remarks.
Take that lightly, uh, ending up with an 18% EPS growth.
just,
Let's recall April 2nd.
Well, that was not that long ago. Go, go, and it just created a lot of uncertainty for our customers, supply chains, and consumers around the world. Our team has executed in the face of this with tremendous agility. Our resilience is indeed rooted in our unique leadership positions across the critical end markets we operate.
And delivering, dispensing solutions for chronic disease treatments and everyday consumer essentials.
Stephan Tanda: While we face this uncertainty around naloxone sales and sales trajectory, let us remember the fundamentals of our pharma end markets remain highly favorable, and our project pipeline continues to grow. We support that growing project pipeline. We talked about the fact that our novel innovations and decades of experience drive a significant body of intellectual property, including patents, know-how, and trade secrets, and we protect them vigorously. The consumer businesses are gaining traction with innovations and ongoing improvements in competitiveness, driving both top line and bottom line. Our region-for-region supply chains with more than 50 manufacturing sites allow us to execute that agility and operational flexibility. Given all of that, we did not talk much about it, but we have accelerated capital returns to shareholders, underscoring our confidence in the business. With all that, let me wish you a good rest of the summer.
Uh, while we face uncertainty around naloxone sales and sales trajectory, uh, let's remember the fundamentals of our pharma and markets remain highly favorable, and our project pipeline continues to grow as we support their growing part of the pipeline.
Um, we talked about
The fact that our novel innovations, driven by decades of experience, has resulted in a significant body of intellectual property, including patents, know-how, and trade secrets.
And we protect them vigorously.
The consumer businesses are gaining traction with Innovations and ongoing improvements in competitiveness.
Driving both top line and bottom line.
And our reach for supply chains was more than 50 manufacturing sites. This allows us to execute that agility and operational flexibility.
Um,
Given all of that, we didn't talk much about it, but we've accelerated capital returns to shareholders, underscoring our confidence in the business.
Stephan Tanda: We look forward to seeing you all at the Investor Day on September 9 in New York City, where you can experience hands-on some of our exciting innovations. You have to be there for that. With that, operator, we can close the call.
And with all that, let me wish you a good rest of the summer. We look forward to seeing you all at the Investor Day on September 9th in New York City, where you can experience hands-on some of our exciting innovations, but you have to be there for that.
With that operator, we can close the call.
Mary Skafidas: Thank you very much. This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Thank you very much.
This concludes today's call. We thank everyone for joining. You may now disconnect your lines.