AptarGroup, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to APTA'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 Scafidis, Senior Vice President, Investor Relations and Communications. Please go ahead, Mary.

Thank you. Hello, everyone, and thanks for being with us today. Our speakers for the call are Stefan Tanda, our president and CEO, and Vanessa Canu, 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 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 Canu, our CFO, will provide additional details on key drivers for the quarter. Starting on slide three, we delivered a strong second quarter, 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 enclosure segments. We saw solid demand for our pharma segments proprietary drug delivery systems used for emergency medicines, asthma, COPD, and ophthalmic treatments. Additionally, strong sales of elastomeric components for injectables and active materials, as well as royalties, helped drive our strong results. 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 continue to be impacted by softer demand for dispensing technologies in nasal saline and nasal deconditions. 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 medication has not improved meaningfully. A few weeks ago, we announced the acquisition of Mod3 Pharma's clinical trial manufacturing capabilities. This expands AptoPharma's services into highly specific CDMO fields, supporting Phase I and Phase II GMP fill-and-finish services for orally inhaled needle 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. 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're energized by the future of the segment and the opportunities ahead. Now let me touch on beauty. Cost management is a well-developed muscle in the 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 prestige 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 segments. 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 Oyonnax, France. Moving to slide four, I'm proud to highlight recent corporate awards and recognitions. At the end of the quarter, APTA 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. following the end of the quarter after it was again named to CDP Suppliers Engagement Assessment A-list for the 2024 disclosure cycle. This CDP assessment evaluates companies on their performance on governance, targets, scope three emissions, and value chain engagement. Turning to innovation, I want to now highlight just a few recent technologies and product launches as shown in slide five. A 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 Halion'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 beauty and pharma markets, the combined dermocosmetics and medical aesthetics market, have been growing double digits over the past five years. According to IQVIA, these markets are expected to keep growing two to three 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 derma 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 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.

Thank you, Stefan, 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 7, 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. 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 segments core sales increased 3%. Let me break that down by market, starting with our proprietary drug delivery systems. 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. Sales for ophthalmic solutions continued to grow in the quarter, but could not offset the overall decline in cough and cold medicines. Injectables core sales increased 9%, with strong demand for elastomeric components used for biologics, GLP-1, small molecule, and antithrombotic 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. Pharma's adjusted EBITDA margin for the quarter was 35.4%, 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 9, core sales increased 1% in the quarter, primarily driven by stronger tooling sales. Looking at the beauty segment by market, fragrance, facial skincare, and color cosmetics 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, giving tariff-related uncertainties. Core sales for Mastiche 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 EBITDA margin for the quarter was 14.1% and improvements of 20 basis points largely attributed to ongoing cost management efforts. Moving to slide 10, our closure segments core sales increased by 7% compared to the prior year. The segments 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, 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 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 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. 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. 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 rates 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. 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 excludes any restructuring expenses, acquisition costs, changes in the unrealized fair 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 per share. EPS for Q3 2025 reflects a negative impact of approximately six to seven 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 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 with that i will turn it over to stefan to provide a few closing comments before we move to 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 end markets pull forward order volumes from quarter three to avoid tariff uncertainties. as customers move 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. So looking ahead for the third quarter, we anticipate continuing to navigate a diverse set of macroeconomic and supply chain conditions across our portfolio. 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 have 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 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 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 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. In beauty enclosures, we expect the positive contribution in Q3. Continued product sales growth in closures is expected to be dampened somewhat by lower tooling sales. And the key question in beauty remains around the timing of the rebound in prestige fragrance dispensing systems. 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 quarter three 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.

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. And 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 Gonshum Panjabi from Baird. Your line is open. Please go ahead.

Yeah, thanks. Thank you, operator. Good morning, everybody. I guess, Stefan, you know, can you just give us more color on the naloxone, if I'm 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? And also, how will that impact margin mix?

Hi, Gantram. Good morning. Good morning. Naloxone is part of emergency treatments, which clearly have grown nicely from about 2% of revenue a few years back to today, 5%. Now, Narcan and its generic versions that we also supply, obviously, is applying to these non-traditional channels. We've called out several times that they are hard to track, and we believe there's inventory, but we can't track it. We start to hear from our customers, extreme uncertainty, rescheduling of orders, and then 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. And clearly, that will have an impact on the overall farmer growth rate. Now, having said that, you know, there's 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. And active materials had a great quarter and clearly increased. As of quarter four, we have different comparisons for the consumer health care. There will be a mixed effect at the same time. We have royalties kicking in continuously. So, yes, we have grown anywhere from 1% to, I think, 12%, 13% in the pharma business. And that growth will vary, and this is just a current iteration of these fluctuations. But as we said, often one single product doesn't make or break the business. We have thousands of products and thousands of customers, but clearly Naloxone is important enough that we wanted to call it out in this current state of extreme uncertainty.

Okay. And in terms of what you're embedding for pharma growth, you know, in the back half of the year versus the first half, I mean, obviously, you've had three very strong years for pharma, and the core sales is tracking about half of, you know, what its average over the last three years. Is that going to look very different in the back half of the year? And then just one final clarification. I think you mentioned coffin cold inflected in the U.S. during the quarter. What kind of an inflection did you see in terms of growth?

We saw a nice growth in the US, let's say mid single digits. Europe, of course, is still a much bigger part of that.

And pharma back half growth versus first half?

Yeah, it will be slower, but we don't guide by segment growth rate, as you know. We will continue to have growth in the second half.

Okay. Thank you.

Our next question comes from George Stafosi from Bank of America. Your line is open. Please go ahead.

Thanks. Hi, everyone. Good morning. I hope you're doing well. Thanks for the details. You know, my two questions, maybe the first one I'll piggyback off of Gansham'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'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. Now we're going through destocking. But, you know, 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 fourth quarter or first quarter next year it's a different story but if you give us a bit more color that'd be great sure george and i'm sorry for the butchering of your last name there uh the no worries go through the territory um

Okay, coming back to the topic. So there are a number of factors involved here. Coming out of COVID, we had a very brisk pickup of growth. And when that happens, I think I mentioned before, sometimes we just can't supply the demand. And then customers take notes. Oh, you can't supply? So 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, and they start to build inventory. Of course, if you multiply this across the whole value chain, we believe that's what happens. So it's not just the cold and cough, good season, bad season. You have this upswing in demand, and everybody's starting to hoard products. And once they realize, okay, now there's plenty of supply and let me, uh, work off the inventory. So I think that's one part two is the cold and cough season. And three, 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 three things together really contribute to the development that you highlighted. Okay.

Just a point of clarification there in my second question, I'll ask as well. So from your vantage 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 legal expenditures, can you, I know it's legal, it's litigation, you can't say much, if anything, but 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 to fourth quarter and beyond? Thank you.

Yeah. On the share question, uh, 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. And I'm actually quite excited with some of the developments that have come out. I spoke earlier about the very technical name, lateral actuation, but it's 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're actually very excited about the development in consumer health care, but we appreciate your patience as we work through this inventory mega-cycle, let's call it that way. On the legal front, You've 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, in a different Kraft Heinz leadership. And in the end, we prevailed, and 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. And this is another case like that. Indeed, because it's in litigation, we can't comment on the details. But our business is founded on decades-long experience, know-how, and patents. And when they're not observed, we defend them vigorously. 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 what is important to our business.

Thank you, Stefan. I'll turn it over.

Our next question comes from Matthew Roberts from Raymond James. Your line is open. Please go ahead.

Stephen, Vanessa, Mary, good morning. Not to belabor the point on Mr. Sristofosi's question, but that legal extension did note some in 2Q. Sorry, George. So since that call, since our last call or even June, what changed? There was more material to call out. I believe a response was due in June. So is there anything in the public docket that you could share or you know, if you maybe try to frame scenarios, I don't know, win, lose, settle, you know, what would that look like? I mean, would it be monetary damages received, or on the contrary, could there be any change in the pharma pipeline from this?

So 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 move to... safeguard our intellectual property. And yeah, depending on your Googling skills, you may find something, but we'd rather not discuss it here.

Fair enough, I'll work on my Southern District login. Switching topics, maybe on the beauty side, Fragrant skincare and cosmetics, I believe that was down 4%. What did the overall prestige market see in 2Q? And were headwinds really bound to a certain region? And 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.

Yeah. We certainly take... A lot of, not comfort is probably, but we're happy that the uncertainty for our European customers, which is, you know, 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. You know, it's just last weekend. Most of you know France is 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 color with a quarter three. And 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. So China, Asia is actually doing very well. This is more more for local brands and that it developed nicely. But of course, the European market that then re-exports to the US and to Asia is still much bigger for us.

Thank you, Stefan.

Our next question comes from Daniel Rizzo from Jefferies. Your line is open. Please go ahead.

Good morning. Good morning. Thanks for taking my questions. And just to kind of belabor the point, with the nasal de-congestion softness, was that always more of a European issue versus the U.S.? Or has the U.S. just gotten through it faster?

Well, first, the European market for us is much bigger. It is historically more of a nasal spray kind of market. And indeed, the U.S. has gotten through it much faster. didn't have as much inventory buildup. The hindsight is 20-20 in the supply chain. And then, of course, Russia is also a big natal decon market.

And then in beverages, one of your competitors 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 that's not really have large market for you guys, or if you've kind of weathered it better, I guess 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?

No, overall our beverage business is up nicely. It's of course very diversified between bottled water, sports drink, energy drinks, and also geographically diversified. So, um, In addition, we continue to pump innovation into that market. So overall, we're quite happy with the beverage market.

Thank you very much.

Our next question comes from Gabe Hady from Wells Fargo. Your line is open. Please go ahead.

Hi, Stefan. Vanessa, good morning.

Hi, Gabe.

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.

Yeah, it's a very broad set of distribution. What has accelerated that market greatly, if you remember, 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 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 overdose crisis. So those funds are still there. The question is, you know, have their distributions points, whether it's fire stations, school buildings, libraries, and all the non-traditional stuff being saturated. And depending on the color of the state, does the executive order change their priorities on what they spend on this settlement money on? They can spend it on other things. They don't have to spend it on Narcan. And 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. 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 Y. We see enough noise in the system that this is real. This is slowing down. And that's the best we can tell you.

Fair enough. No, I appreciate that. It's always tough to track this stuff down to the end user. And then I guess on the litigation, I just sort of want to, Make sure I heard you correctly. The legal expenses $6 million, $7 million this quarter and probably persist in the Q4. And then hopefully there's some sort of resolution. Meaning the litigation costs are $6 million to $7 million.

Yeah, it's $6 million to $7 million, which is about $5 million to $6 million. a quarter. And as Stefan said, you know, we would expect that for the next few quarters. And I think that's a good run rate for now. And of course, we don't expect this will be a long-term thing. And we'll update you as things progress.

Thank you.

As a reminder, to ask a question, please press star followed by one. Our next question comes from George Staffos, Bank of America. The line is open. Please go ahead.

Thanks so much. Hi, guys. Stefan, could you talk just a little bit about the acquisition in New Jersey? You know, I know there's not going to be a single type of customer. I don't 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 there? TAB, Mark McIntyre, One of the things that you said suggested, you also might be doing contract filling and I don't want to just if you could sort of confirm or correct that view just anything that you have on that acquisition would be interesting and that a quick follow on within beauty.

TAB, Mark McIntyre, Sure, so thanks for asking for the clarification, no we're not contract pillars that we're not changing our. scope of our business is a further build out of our service capability and early stage development. And as innovators need product that they can put in the clinic for phase one and phase two trials, 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. It's probably too much, but significantly expand in systemic nasal drug delivery will give you more color at the upcoming investor day. But when you hear things like, you know, 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 project. And this is really expanding that capability, that they get in the clinic faster, that they get to do their trials. But we're not the contract manufacturing facility for large-scale filling.

Understood. Stefan, I recognize you're just venturing into this now. Is this something that you could see as perhaps 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? What kind of multiples do these businesses trade at? Just curious there. And then back to beauty, Go ahead first with that one. Go ahead. Yeah.

So, 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. Gotcha. and ensure that we have more device sales at the end that, as you know, for us are growing perpetuities. And the more of these growing perpetuities you can start to stack on top of each other, the better off we'll be. But compared to device sales, it's still small. And I think we paid for this facility some $7 million or so. So it's not a major change of our footprint.

Okay. I appreciate you going through that, Stefan. It's 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 don't know if there's a way, again, that you can track share there. 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 a customer mix, and 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.

Yeah, I think you answered your own question, George. It's really the latter. I'm good at that. It's the precision, so I'm not sure I can add a lot more. And we have a different geographic mix. We are not as much in the mass part of it. So probably can't add more color than the way you answered it.

Okay. 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. Thanks for all the details. Thanks.

Our next question comes from Gabe Hady from Wells Fargo. Your line is open. Please go ahead.

Hey, guys. I wanted to follow up on the active packaging press release that you all put out in terms of having a oral solid dose solution for GLP-1. I'm just curious maybe how far along testing is for that or just where we are. And maybe it's probably too early, but help us understand maybe what the opportunity set could look like for that.

Yeah, maybe backing up a little bit. So our active materials in oral solid dose, that basically means there is a film in every blister that contains a pill, and that film helps with the conditioning of the atmosphere inside the blister. It 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's a very sophisticated offering for certain drugs. For example, Descovy is one of those. And now this GLP-1 drug is in phase three. So we certainly don't want to speculate on approval timelines and commercialization timelines, but it's another proof point about how good the technology is.

Thank you. Our next question is from Matthew Roberts from Raymond James. Your line is open. Please go ahead.

Hey, hello again. You spent a good bit of time talking about emergency medicine and contribution in sales, but I want to ask about another medication. And a nasally delivered depression medication was up 53%, again, I believe, in 2Q. And sales are now exceeding a billion dollars on that product. So could you give a little more color around depression medication and the growth you've seen there? And while those growth rates are certainly very impressive, it seems like it's coming off the peak as well. So any influence that has on that long-term pharma growth rate? Thanks again for taking that question.

Yeah, I think you may be referring to Janssen's or Johnson & Johnson's Pravato, and that is indeed enabled by our Fido's nasal delivery system. And indeed, it's not categorized as emergency treatment, but it's a great product. It's certainly contributing to our growth. They also got approval in China not too far back and continue to drive growth. So it's an exciting product. And we have other products for depression treatment in the pipeline that may have different treatment regimes or different molecules. So it's another example of systemic nasal drug delivery or central nervous system drug delivery.

That's helpful. Thanks, Vaughn. 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? Basically, if emergency medication is five, is there a quantification for depression medication?

Okay. Maybe, Vanessa, you just corrected me.

Yeah, hey, Matt, it's within our emergency medicine, which Stefan quantified earlier, about 5% of it. Yeah.

Okay. This is very helpful. Thank you all again.

Always better to get the numbers from the CFO.

Thanks, Matt.

We currently have no further questions. So at this time, I'd like to hand back to Alexander for some closing remarks.

Very good. So let me summarize the call by zooming out. I just want to say that, again, how proud I am of our team. They really have executed with tremendous agility and Perseverance, determination, grit, whatever you want to say, delivering a very strong quarter across the board, exceeding the top of our guidance range, and we don't take that lightly, ending up with an 18% EPS growth. Just let's 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. and 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 and delivering dispensing solutions for chronic disease treatments and everyday consumer essentials while we face this uncertainty around naloxone sales and sales trajectory Let's remember the fundamentals of our pharma and markets remain highly favorable and our project pipeline continues to grow and we support that growing partnership 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. And 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 didn't talk much about it, but we've accelerated capital returns to shareholders, underscoring our confidence in the business. 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 9 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.

Thank you very much. This concludes today's call. We thank everyone for joining. You may now disconnect your lines.