WEST PHARMACEUTICAL SERVICES INC Q4 FY2024 earnings call

2024 Highlights - Capitalized on the fast-growing GLP-1 market and maintained a strong win rate on new biologics molecules. - Reduced manufacturing lead times, with industry-wide destocking nearing completion. - Returned over $560 million to shareholders via share repurchase. - Invested in additional HVP capacity. ### 4Q 2024 - Revenues increased 3.3% organically, marking a return to quarterly revenue growth. - Proprietary product organic revenues decreased 4.5% (improving trend, driven by destocking). - Adjusted operating profit margin was 21.7%, roughly in line with the prior year. ### HPP Components - HPP component revenues expected to grow mid to high single digits in 2025, with a mix shift to HPP anticipated. - Biologics market expected to grow high single-digit to low double digits, with a 90% win rate on new molecules. - GLP-1 elastomer business performing well, with a multiyear contract secured for a major manufacturer's GLP-1 primary packaging needs. - Over 200 Annex One projects in progress with customers. ### HPP Delivery Devices - SmartDose was a growth driver in 2024, but margin dilutive in 2025. - New automation line to double SmartDose capacity in 2025, aiming to drive efficiencies. ### Contract Manufacturing - GLP-1 device business growing strongly, accounting for 40% of total contract manufacturing. - Continuous glucose monitoring business revenue declined, and contract manufacturing margins expected to decline 200 basis points in 2025 due to lower utilization.

West Pharmaceutical Services, Inc.'s proprietary product segment has three categories: HBP components, HPP delivery devices, and standard products. The HPP components, a key long-term growth driver, is showing signs of strengthening with mid to high single-digit revenue growth expected in 2025, driven by the biologics market (expected to grow high single-digit to low double digits) and the GLP-1 elastomer business (performing well with a multiyear contract secured). Over 200 Annex One projects are in progress with customers. The HPP delivery devices segment saw SmartDose as a growth driver in 2024 but is margin dilutive in 2025, with a new automation line set to double SmartDose capacity in 2025. Standard products are lower in price and margin, used by pharma and generic customers. The contract manufacturing segment declined low single digits in Q4 2024, with the GLP-1 device business growing strongly (40% of total contract manufacturing) but offset by revenue decline in the continuous glucose monitoring business. Contract manufacturing margins are expected to decline 200 basis points in 2025 due to lower utilization.

2025 Net Sales - Expected to be in the range of $2.875 billion to $2.905 billion, with an estimated $75 million headwind from foreign exchange rates. - Organic sales growth expected to be approximately 2%-3%. ### Proprietary Products - Organic revenues to increase as destocking impact abates. - Proprietary products gross margins expected to be slightly up compared to prior year, driven by improving HBP components performance. ### Contract Manufacturing - Revenue expected to be up low single digits compared to FY 2024, with revenue decline in CGM business offsetting growth in self-injection devices. - Margins expected to decline 200 basis points year over year in FY 2025 due to lower utilization. ### EPS - Anticipated to be in the range of $6.00 to $6.20. ### CapEx - $275 million in 2025, down from 2024. ### First Quarter 2025 - Revenues expected in the range of $680 million to $690 million, translating to 1%-2% first-quarter organic revenue growth. - Adjusted EPS expected to be in the range of $1.20 to $1.25.

• Contract Manufacturing CGM: Revenue decline due to CGM customers exiting, requiring replacement with higher margin business. - Device Margins: SmartDose is margin dilutive in 2025, with efforts needed to improve profitability through automation and scale. - Foreign Exchange: $75 million headwind in 2025 net sales guidance. - Regulatory: Annex One implementation timeline and customer adoption could impact HPP component growth.

Q: Michael Ryskin asks about the FY 2025 EPS guide and contract manufacturing CGM issue.

A: Bernard Birkett and Eric Green discuss mix impact, CGM exit, and plans to replace CGM business with higher margin contracts.

Q: Larry Solow inquires about the proprietary product outlook and SmartDose.

A: Eric Green talks about HPP components growth, biologics, GLP-1s, Annex One, and SmartDose automation plans.

Q: Patrick Donnelly asks about GLP impact and margins.

A: Eric Green and Bernard Birkett discuss GLP-1 growth, oral impact, and margin progression throughout 2025.

Q: Doug Schenkel asks about Mexico, GLP-1 percentage, and incremental opportunities.

A: Eric Green and Bernard Birkett respond about Mexico's immateriality, GLP-1 percentage in the business, and incremental opportunities not yet incorporated in guidance.

Q: Paul Knight asks about long-term growth and Dublin site.

A: Eric Green discusses long-term growth expectations and Bernard Birkett talks about Dublin site ramp and utilization.

Q: Matthew Larew asks about device existential question and GLP contract.

A: Eric Green addresses device strategy and GLP contract duration.

Q: Justin Bowers asks about Annex One and price headwinds.

A: Eric Green and Bernard Birkett discuss Annex One impact and price headwinds in 2025.

Q: David Windley asks about device incentives and SG&A/R&D.

A: Eric Green and Bernard Birkett discuss device incentives, SG&A/R&D investments, and contract manufacturing strategy shift.

Q: Jacob Johnson asks about contract manufacturing strategy shift.

A: Eric Green discusses shift towards higher value contract manufacturing within the segment.