AptarGroup, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Aptar's 2025 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Introducing today's conference call is Mrs. Mary Scafidis, Senior Vice President, Investor Relations and Communications. Please go ahead.

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 third quarter results. Later in the call, Vanessa Canu, our CFO, will provide additional details on key drivers for the quarter. Starting on slide three, for the third quarter, we delivered adjusted earnings per share of $1.62. During the quarter, growth in our pharma segment was driven by solid demand for proprietary drug delivery systems for central nervous system therapeutics, asthma, COPD, and ophthalmic treatments. We saw moderating demand for emergency medicine dispensing systems. We also captured significant growth in injectables during the quarter from increased demand for elastomeric components for GLP-1 medications and solid growth in our active material science division. When you step back and look at our pharma segments performance for the first nine months of the year, prescription has a 7% core sales increase, injectables at 6% and growing, and active material science is up 8%. Consumer healthcare continues to be affected by the destocking and is down 11%. Additionally, royalties continue to contribute positively to our top and bottom line results. And we're continuing to invest in the ongoing growth and innovation within pharma. To that end, we have signed an agreement to acquire SomaPlus, a Brazil-based provider of oral dosing pharma packaging solutions. including droppers, dispensers and dosing cups. Aptar has been manufacturing in Brazil for 25 years and this acquisition, which is subject to regulatory approvals and anticipated to close later this year, is expected to further reinforce our footprint in the region. It also helps position us to capitalize on growth in Brazil's oral dosing, over-the-counter and nutraceutical markets, which are projected to grow at mid to high single digits through 2030 this growth is driven by an expanding population rising middle class and aging demographic in our beauty segment for the quarter we saw revenue growth in a number of regions over the previous year quarter such as asia latin america and certain end markets in north america at the same time in europe our largest region sales were flat as we continue to see softness in our higher value products such as facial skin care and in certain prestige fragrance end markets our prestige fragrance pumps did have modest volume growth in the quarter additionally we saw lower sales for our full pack solutions that service the indie market in the us due to the challenges at one of our larger customers in the first nine months beauty reported sales rose two percent while core sales held steady overall Strong 11% growth in personal care helped balance softer demand in prestige fragrance and facial skin care. Turning to the closure segment for the quarter, while product volumes were up, lower tooling sales and pass-throughs of lower resin pricing impacted core sales growth. For the first nine months, closures reported and core sales rose 1%, driven by a 5% increase in product sales, partially offset by lower tooling sales and the pass-through of lower resin pricing. Food and beverage markets saw solid growth and personal care declined. Turning to innovation, I'd like to highlight recent technology launches and key news as shown on slide four. Starting with the pharma segment, our unidose liquid system is used in the newly FDA-approved Envermist by Corsace Therapeutics, the first intranasal loop diuretic for treating edema linked to heart failure, liver, and kidney disease. This approval underscores the growing role of nasal drug delivery in systemic treatment and our commitment to patient-centric solutions. An APTA proprietary nasal system is also used in a Phase I clinical trial for a powder nasal spray managing Parkinson's off periods. Managing Parkinson's off episodes means treating periods when medication wears off and symptoms like stiffness or tremors return, often by adjusting medication timing or using fast-acting rescue treatments for on-demand relief. During the quarter, we signed an exclusive partnership with French biotech company Dianosig to develop a bioresorberable intranasal insert for long-term local drug delivery in chronic allergic rhinitis and rhinosinusitis. This collaboration also explores nose-to-brain delivery for neuropsychiatric and neurodegenerative diseases. Next, our HeroTracker sense technology has also received FDA 510K clearance as a Class 2 medical device. This Bluetooth-enabled sensor transforms traditional inhalers into smart, data-driven tools for patients and providers. Finally, we inaugurated our expanded Pharma Research and Development Center in France, which helps boost capabilities across our proprietary drug delivery business. It's one of APTR's 11 global innovation centers. Over 10% of our pharma workforce is dedicated to research and development, supported by nearly 4,700 active and pending patents. The center integrates advanced technologies, digital simulation, rapid prototyping, predictive modeling, data utilization, and artificial intelligence. It is aimed at accelerating and de-risking development of next-generation drug delivery solutions. Turning to our beauty segment, during our recent investor day, we showcased our award-winning technology for the Clarins Reloadable Total Eye Lift Serum featuring our patented airless packaging with a highly recyclable reload and double tamper seal system. In fragrance, Christian Dior is using our prestige fragrance pump for its new launch, Miss Dior Essence Parfum. Finally, our precise dropper technology used for the controlled and targeted application of liquid formulas is a dispensing solution for the Indie Brand Basic Lab in Europe. Lastly, enclosures, Marzetti's Buffalo Wild Wings Sauces in the U.S., feature our poor spout closure a more lightweight sustainable solution that delivers convenience in the beverage concentrate market our flip top non-drip solution was chosen by pepsico for their soda stream syrups moving to slide five all of this would not be possible without tremendous teams around the world we take great pride in the numerous recognitions we have earned including being named among the top 100 of the world's best companies for women by Forbes. This honor highlights our ongoing efforts to build an inclusive culture that empowers individuals to grow, connect and reach their full potential through meaningful development opportunities and inclusive initiatives. Before I turn the call over to Vanessa to share further details on the quarter, I want to highlight that we continue to focus on returning capital to shareholders through share repurchases and by increasing our dividend. To date, 2025 has been a banner year for share repurchases and we plan to lean in more. In addition, we recently announced an increase to our quarterly dividend by nearly 7% to 48 cents a share. This underscores the strength and resilience of our business model, as well as our confidence in Aptos long-term growth prospects. We are very proud of having paid an increasing annual dividend for the last 32 years. 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 on slide six and seven. Our reported sales increased 6% and core sales, which adjust for currency effects and acquisitions, grew 1% compared to the prior year period. Before moving further, I want to call out that this quarter we had a couple of atypical items impacting our reported net income. First, as a result of the BTY transaction that closed this quarter, we recorded a gain on the re-measurement of the previously held minority interest of approximately $27 million, which increased our net income. And as this gain is non-tax impacting, it reduced our reported effective tax rate for the quarter to 17.1%. our adjusted effective tax rate, which excludes the impact of this item, was 20.8% in line with expectations. Second, as we mentioned on our prior quarter call and in our recent investor day, we are engaged in litigation to actively and vigorously defend our pharma IP portfolio and products. This resulted in atypical litigation costs of approximately $4 million that impacted our net income. As the gain on remeasurement of our equity investment and the litigation costs incurred in the quarter are both atypical and not indicative of operational earnings of our business, we have excluded both of these items from our adjusted EBITDA and adjusted earnings per share for the quarter. All references that I now make to adjusted EBITDA and adjusted earnings per share exclude these items. A full reconciliation is provided in our earnings press release and in our 10-Q. With those high-level comments, let's take a closer look at segment performance. Turning to slide eight, our pharma segments core sales increased 2%. Let me break that down by market, starting with our proprietary drug delivery systems. Prescription core sales increased 3%, driven by strong year-over-year demand for dosing and dispensing technologies for central nervous system applications, asthma, and COPD therapeutics. We also saw growth for emergency medicine, albeit at a slower rate. And royalty payments continued to contribute positively to revenue in the quarter. Consumer healthcare core sales decreased 11%, primarily due to lower sales of nasal decongestant and nasal saline. Sales for ophthalmic solutions continued to grow in the quarter, but could not offset the overall decline in cough and cold volumes. Injectables core sales increased 18%, with strong demand for elastomeric components used for biologics, GLP-1, and regulatory-driven Annex 1 requirements. Services also contributed positively in the quarter. And for our active material science solutions, core sales increased 3%, driven by continued strong demand for active material science technologies for diabetes treatments. Pharma's adjusted EBITDA margin for the quarter, which excludes the impact of non-ordinary course litigation costs referenced earlier, was 37.2%, a 120 basis point improvement from the prior year. The margin improvement was driven by increased sales of higher value proprietary drug delivery systems, services, and royalties. Moving to our beauty segment on slide nine, core sales were flat in the quarter. While increased tooling revenues provided a lift, these gains were offset by a decline in product sales. Looking at the beauty segment by market, fragrance, facial skincare, and color cosmetics core sales decreased 5%, primarily due to lower sales of skincare dispensing products for indie brands in North America. Personal care core sales increased 13%, driven by continued strong demand for body care and hair care applications. And core sales for home care, the smallest end market in our beauty portfolio, decreased 18% in the quarter due to the timing of some non-recurring service fees in the previous year. This segment's adjusted EBITDA margin for the quarter was 12.1%, a decline of 120 basis points. The decline in beauty margins primarily reflects less favorable sales mix and lower margin tooling sales. Moving to slide 10, our closure segment core sales decreased by 1% compared with the prior year. While product sales were up 2%, this growth was more than offset by lower tooling sales and pass-throughs of lower rest and pricing. When looking at the market fields for closures, food core sales decreased 4%, primarily due to lower tooling sales, while volumes increased across a number of categories. beverage core sales increased 9%, primarily driven by increased sales for functional drinks and bottled water. Personal care core sales decreased 8%, while in our other category, which includes beauty, home care, and healthcare, core sales were flat. This segment's adjusted EBITDA margin was 16.1%, representing a 110 basis point decline over the prior year, primarily due to unscheduled equipment maintenance that impacted production. At the total company level, consolidated gross margins declined by 80 basis points year over year, while SG&A as a percentage of sales declined from 15.6% to 15.5%, a 10 basis point reduction. SG&A expense in absolute dollars increased largely due to the aforementioned non-ordinary course litigation costs incurred in the quarter. Overall, consolidated adjusted EBITDA margins increased by 30 basis points to 23.2% compared to 22.9% in the prior year period. And adjusted earnings per share was $1.62, up 4% year-over-year on comparable foreign exchange rates. Slides 11 and 12 cover our year-to-date performance and show that reported sales increased 3% and core sales increased 1%. Our reported earnings per share increased 17% to $4.75 and adjusted earnings per share increased 7% to $4.48 compared to the prior year, including comparable exchange rates. The current year had a reported effective tax rate of 20.4% and an adjusted effective tax rate of 21.9% compared to the prior year reported and adjusted effective tax rates of 22.7 and 22.8% respectively. Neutralizing both the effective tax and exchange rates for the year-ago period, adjusted earnings per share would have been up 6%. Additionally, adjusted EBITDA increased 8% to $624 million, and the adjusted EBITDA margin increased by 100 basis points to 22.2%. In the first nine months, free cash flow was $206 million, comprising cash from operations of $386 million, less capital expenditures net of government grants of $180 million. The year-over-year decline in free cash flow was largely due to higher working capital and higher pension contributions in 2025. These were partially offset by lower capital expenditures. Finally, we ended September with a strong balance sheet once again, reflecting cash and short-term investments of $265 million, net debt of $936 million, and a leverage ratio of 1.22. Over the past nine months, the company has returned $279 million to shareholders through share repurchases and dividends. So far this year, we have repurchased 1.3 million shares for $190 million, the highest repurchase amount in a decade. Of the $500 million authorized by our board of directors for repurchases, approximately $270 million remains available as of the end of September. Given the recent trends and the strength of our balance sheet, we expect to fully utilize this remaining authorization over the next couple of quarters. Before we move on to outlook, I'd like to provide a brief update on our emergency medicine portfolio, where we continue to see strong underlying demand, but we anticipate near-term headwinds in this end market that we expect will impact Q4 and at least the first half of FY26. To help with your modeling, as we previously shared, in 2024, emergency use delivery systems represented approximately 5% of total company sales. For the first half of 2025, this end market accounted for 7% of Aptar's total sales. Revenue for the first half of 2025 grew roughly 50% year over year, while Q3 showed more modest growth. For Q4 2025, we expect a more pronounced deceleration, mainly due to elevated inventory levels at a large customer, and expect revenue contribution for the full year 2025 to be about 5% of total sales. While demand from other customers remains healthy, we expect this inventory normalization to extend into 2026. Based on what we currently know about end market demand, funding dynamics, and customer inventory positions, we anticipate 2026 revenues from this end market to be approximately 35% lower than 2025. Given the high value nature of this portfolio, this will have a compressing effect on overall margins prior to any mitigation actions. Now onto outlook for Q4, summarized on slide 13. We expect continued strength across the majority of our pharma businesses in Q4, particularly injectables, driven by rising demand for higher-value elastomeric components fueled by growth in biologics, GLP-1 therapies, and Annex I compliance requirements. Partially offsetting the growth in injectables is softer demand for emergency medicine that I just spoke about. For the consumer businesses, we anticipate beauty will have positive core sales growth in Q4, and product sales volumes for closures will also continue to grow. In terms of earnings per share, we anticipate fourth quarter adjusted earnings per share to be in the range of $1.20 to $1.28 per share. Our effective tax rate range for the fourth quarter is 19.5% to 21.5%. Our guidance for the quarter is assuming a 1.17 euro to USD exchange rate. Additionally, as you will model depreciation and amortization, due to the closing of the BTY transaction and other timing and FX impacts, we expect fourth quarter depreciation and amortization expense to be between 75 and $80 million. With that, I will turn it over to Stefan to provide a few closing comments before we move to Q&A.

Thank you, Vanessa, for the review of our emergency use delivery systems business. Now, let me step back and share the bigger picture. In the short term, we face some headwinds due to tough comparables from the exceptionally steep one time ramp up of the unique Naloxone distribution channels, as well as uncertain and evolving landscape around government funding. Steady state, our customers expect this market to grow in the low to mid single digits. Over the past three years, our prescription division serving this market has grown at brisk double digit rates. After a period of destocking, we anticipate more stable sales of our dispensing systems. Looking ahead, we expect our pharma pipeline to continue to be strong and robust. As I shared during the investor day, it has been contributing 7 to 10% of revenue annually. What is important is that our revenue stream in pharma is largely based on the treatment of chronic diseases with the help of our proprietary solutions, resulting in a long-term stable to growing business with new launches layered on top of that base. We believe this is possible because together with the molecule, our dispensing system form a combination medicine, which is part of the regulatory filing and remains embedded in the drug master file. When I touch on injectables, I want to highlight that we are seeing good and strong growth in the very areas where we have invested. GLP-1, NX-1 and biologics. Our investments in added capacity and capabilities in high-value products are paying off. Closures is performing well. The reorganization we started two years ago has delivered solid growth and innovation traction. Beauty has lowered its cost base and break-even point, which we believe is giving it a competitive footprint. We have reinforced operational efficiency and cost discipline as an important part of our culture, and these efforts sharpen our execution. We also keep a close eye on shareholder returns, strategic capital allocation, and bolt-on acquisitions. Bolt-ons are a core strength. Take our Brazilian pharma packaging acquisition as just the most recent example. As we look to the future, we remain confident in our ability to deliver sustainable, profitable growth. We believe our business model is resilient, our pipeline is robust, and our teams are focused. With the right mix of innovation, operational discipline and strategic investments, we think we are well positioned to continue creating value for our customers, our employees and our shareholders. With that, I would like to open up the call for your questions.

Thank you. We will now begin the question and answer session. In the interest of time and fairness to all participants, please limit yourself to two questions and then re-queue if you have more questions, as time allows. If you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gancham Punjabi with Baird. Please press star six to unmute. Your line is open. Please go ahead.

Hi, good morning. Can you hear me okay?

Yep. Hi, Gancham.

Okay. Hi, Gancham. Good morning. Yeah. Good morning, Vanessa. Just so I can understand your comments specific to 26 for pharma. So is it right to assume that you're assuming 7% or 10% growth just from the new product pipeline, et cetera, and then emergency medicine is roughly 11% of pharma, and that's going to be down 35%, and that's how we should calibrate as it relates to the growth expectation for next year? And then related to that, where are we on the cough and cold, specifically Europe, in terms of the D-STOCK? going to drag into 4Q, and yeah, where are we on that?

Yeah. Let me start, and then Vanessa, please chime in. The 7 to 10 comment was just to reiterate what we covered in Invest Today, that we have a stable, growing business, and on top of that is innovation, and that supports our long-term targets. It was not meant to give you guidance for 26. So When we look at the 26, of course, we don't give guidance for 26. We made an exception for emergency medicines for the obvious reasons, and Vanessa went through that in quite some detail. Zooming out, we expect injectable to grow very nicely, high single-digit, low double-digit rates for the coming period. We expect consumer healthcare to return to growth. To your second question, we believe that has largely run its course with quarter four potentially returning to growth, admittedly versus a lower base and also active material returning to growth. So the key impact will be emergency medicines and Vanessa, can you reiterate some of that if you'd like?

Yeah, no, absolutely. But I think, Gancham, you got the number. It is, you know, again, we expect for the, you know, full year 2025 to be roughly 5% of the total company. And so for the pharma business specifically, it'll be in that 10, 11% range of revenue. So that goes down about 35%.

And then European cold and coughs?

Yeah, that's what I was referring to. Sorry, that has largely run its course. We expect quarter four to potentially be growing again and certainly growing in the next year.

Okay, thank you. And then for my second question, so for the initial 3Q guidance, you did include the litigation cost of $0.06 to $0.07, and then you've changed that going forward? And just give us a reason as to why that is. Thank you.

Yeah, we did, Gansham. So we did give the estimates. We said it would be roughly five to six million dollars a quarter, roughly six to seven cents of VPS impact. You will see in our disclosure that the actuals for Q3 came in at about four point four million. We did disclose that. But, you know, this is litigation. This is litigation. The timing of the litigation is always uncertain. And you discover things as the litigation progresses. And as we looked at the business, these are elevated litigation costs, very atypical. You know Aptar, you have a very long history with the company. We don't typically do this. So these are very atypical costs. And when you look at the underlying performance, the underlying operating performance of the business, from a management perspective, this is not indicative of the underlying performance of the business. And so we certainly provided all the transparency that we need to, but we wanted to make sure that we called out what the underlying operating performance was of the business.

You're quite right. It was included when we gave the guidance. Okay. Okay. Thank you.

Your next question comes from the line of Paul Knight with KeyBank. Your line is open. Please go ahead.

Hi, can you talk to the GLP-1 marketplace and NX-1? What level of contribution to growth do you think those two markets represent? Is it one, two, 300 basis points of additional organic growth? Or can you quantify it as the first question?

Yeah. Hi, Paul. We don't break it out in that detail, but clearly GLP-1 is a solid driver, probably in the quarter and let's say in a couple quarters to come, top one driver of growth, NX-1 closely behind, and then obviously biologics continues to fill the pipeline. Now, we are on all of the auto-injectors. And remember, there was always two SKUs on an auto-injector, plunger and needle shield. And two companies can say they're on the same auto-injector. It may very well be true. And on the plunger side, I think there is even some double sourcing. We had lower growth rates in the beginning of the year, quite simply because we were still validating some of our capital investments and some of the equipment. Now, as of, let's say, middle of the year, early quarter three, everything's been fully validated and we can catch up with demand. So the growth rate you're seeing is reflective of the market demand, but also a certain catch up. That's why we feel we're going to have a very strong finish of the year. The other question, of course, that people often ask, what about our oral? Is that going to crimp demand? We don't see that at the moment. One, it's still quite a bit away. Two, from everything we hear, it's more intended to serve markets that don't have cold chain capability, but pricing will be such that it will not obsolete existing investments by our clients. That's our best read.

And maybe the only other thing I'll add, just because you did mention GLP-1 specifically, Paul, we continue to see really healthy year-over-year growth rates. For September, year-to-date, we were up over 40% compared to the prior year. So to Stefan's point, we're really seeing some very healthy growth there.

And then lastly, Annex 1, with your large French operations, are you seeing, what, is that number two or three benefit you said in the quarter? Correct, correct. No.

I don't want to make too light of it, but it basically says, you know, you need to provide sterile products. Well, this is not a change of the world. It's just some customers, as a result, decide to go more towards higher value solutions. Okay, thank you.

Your next question comes from the line of George Stafos with Bank of America. Your line is open. Please go ahead.

Hi, everyone. Good morning. Thanks for the details. How are you? My two questions, thanks for taking them. First of all, certainly you've had progress in your non-pharma business operationally over the years. You've been doing really quite well. And closure is better than we would have expected a couple of years ago. Props to you on that. Beauty, we certainly recognize the challenges that you've been managing against, yet the margin still seems to be slow to come around. What is the next two or three steps that are going to drive higher margin in beauty? When should we expect that inflection? And then A separate question, just as we think about the pharma business and the product side, and recognizing, you know, you love all of your kids, and you have a tremendous suite of products, and that's the reason why you've been able to grow 7% or better over the years. Should we expect that Unidose has been where you've seen most of the product activity recently? Just seems like that's the case from your slides even today and some of the commentary the last couple of quarters. How should we think about that? Thank you, guys.

Sure. Thanks for recognizing the progress, George. I take any compliment I can get, especially for closures. I would say that number one, two, and three for beauty is volume. But clearly, we're never done with the productivity story. We have significantly strengthened the competitiveness of the footprint. We see that now flowing into project activity, including leveraging our very agile China footprint for rapid prototyping, small volume launches, and so on. So that makes us quite confident that the volume is going to come. Number two, it's a regional story. As we've discussed, Europe is already well in its target range. Of course, it's a global target, not a regional target, but nevertheless, China is also doing well. Where we currently held back is North America. We talked about what is in essence a fusion PKG business that serves indie brands with a significant customer having issues. And then... Overall, of course, innovation continues to be a key driver in that business. Again, with a more competitive infrastructure that gives us confidence that their business will grow. Now, on your second question regarding our kids, yes, e-dose is important, especially also for a lot of those things in the pipeline. For additional indications, I mentioned the one to treat edema, and I think tachycardia is not much far behind. But we also have other formats. Of course, Spravato is a good example. It's the by-dose that supports Janssen J&J's ramp-up. And we have large volume powder inhalers and many other formats. But clearly, emergency medicines, which is primarily unidose, played a big role in the last couple of years.

Hey, Stefan, if I could just get a clarification point on volume in beauty. Did you see signs of destocking in your customer base in the quarter or looking at the fourth quarter? You don't have to go into great detail. Just curious, yes or no. Thanks.

Not really. I think there's more of keeping the powder dry for next year. Customers really manage their year in inventories. We actually see some encouraging signs for quarter one order entry as opposed to destocking. Very good. Thanks so much.

Your next question comes from the line of Matt Leroux from William Blair. Your line is open. Please go ahead.

Hi, good morning. I wanted to ask about growth expectations for the pharma segment. So over the last 12 months, core sales growth has been about 3%. Obviously, you've been dealing with the cough and cold, D-stock, but it sounds like you've had a benefit from higher Narcan sales, given that that was 7%. Emergency medicine as a class was 7% in the first half of of the year so as you think about kind of the more medium-term period understanding you're not giving guidance what's the level of confidence that seven to eleven percent uh you know absent of the writing moving part is still the right range given that again it's been uh several quarters now since you've been at the low end of that ridge yeah well first let's acknowledge seven to eleven is our long-term uh target range it's not a quarterly

and conceptually not even the yearly number. So long-term target range, we've been in that range for many, many years. There were some years where we've not been in that range, but I think everything we went through in September, what we have in the pipeline, the growth that we see coming out of the pipeline with launches, the injectable growth, active material growth, the lapping of consumer healthcare, European cough and cold, as Genshom calls it. All of these things are contributing to growth. Of course, the emergency medicine situation we've described as best as we could, that kind of gets us the visibility perhaps into the middle of next year. So nothing's changed about the attractiveness of our pharma pipeline, about our pharma business, the pharma markets. And yeah, we just reaffirmed the 7 to 11 growth rate and the investor day as the long-term target. So no reason to change that.

Okay, very good. And then, you know, obviously from a capital allocation standpoint, the balance has been towards pharma in recent years. And Stefan, you alluded to the validation of some equipment, bringing on new capacity. You know, as you're starting to ramp your objectables capacity and now thinking about the next level of capital investment, you know, what are the areas that you think are most interesting? And at what point do you think from an objectable standpoint, you will need to, you know, start to think about broadening capacity again?

I think we have quite some time with injectables. You may remember I disrespectfully called it the large boxes. We built three large boxes. And there's a lot of equipment we can put in that box in injectables and to create capacity as needed. And those are much lower increments. So we don't foresee a next large increment for quite some time. Certainly not on the books.

Yeah.

Okay, thank you.

Your next question comes from the line of Daniel Rizzo with Jefferies. Please press star and six to unmute yourself. Your line is open. Please go ahead.

Sorry about that. I was muted. Hi, thanks for taking my question. Just with the Narcan, with the emergency medicine, is that a significant margin difference between that product and others, or is it kind of just along with the rest. I was just wondering how we should think about that effect on- Yeah, thank you for- Hi, Dan.

Thanks for calling that out. I did mention that in my remarks. There is a significant margin differential. I mean, as you can imagine, emergency medicine being a high value, life-saving product with high regulatory requirements, quality requirements, et cetera, these are very high value products to us. So certainly amongst the highest of our margin products within our overall pharma portfolio. I can't give you specifics. You know, as you can imagine, we've got competitive, you know, reasons not to share that, you know, publicly. But as you kind of think about our overall pharma portfolio, this is amongst the highest of the margins.

All right. I'm sorry. I must have missed that. I understand you talked about volume and mix. How does pricing work on an annual basis? Is it generally like a 100 to 200 basis points tailwind? Just, I mean, across the board, I'm just wondering how that kind of plays into the things versus also versus I mean, some of your costs, which are generally not kind of called out, but I was just wondering how we should think about price versus cost.

Yeah. Clearly, pharma is about value and use pricing. So price is not very much related to cost. The material content is valuable. in relation to the other value added, whether it's quality systems, whether it's data packages, additional services, completely different mix than in our consumer-facing business. So the one addition I would want to add to Vanessa is that It's really our uni-dose system that is quite attractive. It's not just limited to Narcan. It's across the board in our uni-dose system as our bi-dose system. Clearly, anything that is lifesaving and central nervous system targeting is more profitable than an allergic rhinitis business, of course. Great, thanks.

Your next question comes from the line of Matt Roberts with Raymond James. Your line is open. Please go ahead.

Hey, good morning. Can you all hear me? Yeah, I'm ahead. Okay, great. Morning, Stefan. Morning, Vanessa. On the emergency medicine, again, I'm just trying to square some of that commentary with a customer in emergency medicine. Seemed like Narcan was down, but sequentially improving, and they noted some international potential and broader market growth. So are there other categories within emergency medicine that are still growing? And if so, how much specifically is Naloxone expected to be down and maybe into 26? What gives confidence in a second half recovery and any market share changes or shifts in that category at all?

Yeah, Matt, we don't break down different indications or SKUs within the emergency medicine category, but things like NEFI, things like hyperglycemia, buxemia are also in that category. I don't know which customer you referred to, but Maybe there's one publicly traded customer is pretty important. You could look at their balance sheet and their inventory. I think that will be a big part of the reconciliation you're looking for.

Yes, that's exactly right, Matt. They did express some optimism going forward, I think actually validates that things will improve. But as we said in our commentary, there is inventory in the system. So they'll have to work through, you know, customers will have to work through that inventory situation.

All right. Right. That makes sense. Thank you all. And maybe on personal care, that seemed mixed. It was up in beauties, closures was down, home care I think was down. So given some mixed signals there and another publicly traded peer recently called out sudden inventory corrections in those categories, maybe just broadly, what are you seeing in those categories or what are customers saying in regard to inventory levels heading into 4Q, recognizing that they are smaller contributors overall in beauty and closures? Thanks again for taking the questions.

Sure. I mean, we obviously separate what is accounted for in beauty versus what is accounted for in closures. Those are different formats. Sometimes customers switch between these two formats, and we try to catch as much of that as possible. Don't hear a lot of noise around inventory or destocking in personal care. It's more of a rotation in formats. And sometimes the pump side wins and sometimes the closure side wins. It's different by customer. I'm not sure we can call out a trend there. Okay, thank you.

Your next question comes from the line of Gabe Haiti with Wells Fargo. Your line is open. Please go ahead.

Good morning, Stefan, Vanessa, Mary. Hey, Gabe. I just want to make sure I'm doing my math right. Are we sort of implying maybe a $40 to $45 million revenue headwind associated with what you called out specific to the emergency response medicines in H-126?

Well, we gave you a lot of data points. And I think if you sort of work through the math, you know, again, if you think about, you know, 10, 11% of pharma, 5% of the company, 10, 11% of pharma declining, you know, 35% year over year. You know, it's a slightly bigger number than you're coming up with. But I think you can get to the same zip code, you know.

Okay.

11% declines at, you know, 35%.

Got it. Um, I guess I appreciate it's, it's tough on an open mic like this, but, um, as it relates to, um, you called it out Stefan, is that a product line that you're currently supplying to, or does the litigation prevent any sort of outside sales of that product? Like, is it sort of progressing as normal commercially, uh, until there's a resolution?

To the best of our knowledge, we are supplying all of that product. It's the only one that has the 99.999% proven reliability. And of course, we serve our customers with that, and in this case, ARS, absolutely.

Got it. Okay. Thank you. That was it.

We have a follow-up question from George Staples with Bank of America. Your line is open. Please go ahead.

Hi. Thanks so much, guys. First of all, on DNA, Vanessa, you called out the 75 to 80. Just from a modeling standpoint, should we be carrying that forward for the next number of quarters, or is that just a one-time kind of step up because of –

No, no, no. Carry it forward. Yeah. So the runway, thanks for the question, George. And we would, as we put out our future quarters, we'll provide more clarity around some of this. But you did see a bit of a step up because we're now going to be amortizing or we are now amortizing the intangibles from BTY. So that was the reason for the step up. So it's essentially a new run rate. So if you take sort of the midpoint of the guide and annualize that, I think you should get pretty close.

Okay, very good. The other question I had for you, just back to emergency medicines, and we appreciate all the detail that you've given us. No guarantees, no guarantees in life, but if it plays out as you expect, are we back to sort of the more normal growth rate into 27 after the step down in 26? And I think you said low single digit growth on a going forward basis. I just want to confirm that. Thank you guys and good luck in the quarter.

Yeah, we don't guide for 26. We for sure don't guide for 27. But based on what we've said, I think that is a fair interpretation, George.

Yeah, Stefan, I wasn't asking you to guide. I was saying I just want to know, is the assumption that you're done with the the de-stocking in 26, no guarantees, and then it's more normal going forward. And you said, and what'd you say, the growth rate normal?

Yeah, I said a load of mid-single digits in my opening remarks. The one additional uncertainty that I hate to throw on you is, of course, that's assuming that normal government funding levels. Now, we've just had reconfirmation in September that this is a supported product by the government. And of course, the opioid overdose settlement money is readily available. So of course, if those funding sources are turned off, then it will be more difficult in mine, but I wouldn't expect that for a life-saving intervention that has been proven so successfully. And then your interpretation would be my interpretation of what we're seeing.

All right. Very good. I appreciate it. Thanks, Stefan. Good luck in the quarter.

Thanks. There are no further questions at this time. I will now turn the call back to Mr. Tanda for closing remarks.

Thank you, operator. And let me just summarize and zoom out a bit. Our teams delivered another solid quarter with adjusted EBITDA growth of 7%, continuing our well-established track record of expanding the bottom line at a faster pace than the top line. While we do face the uncertainty, we discuss at length on the sales trajectory of emergency medicine We hopefully were able to give you progressive insights that we gained ourselves since Investaday that confirmed the temporary nature of this headwind. The fundamentals of our pharma business remain highly favorable with an attractive and growing project pipeline, a steady stream of new launches leveraging the nasal delivery route for exciting new indications. We talked about edema. And at the same time, of course, our injectable business is now taking full advantage of a booming market with our state-of-the-art capabilities. Our novel innovations and decades of experience drive a significant body of intellectual property, including patents, know-how, and trade secrets, which we protect vigorously. Now, as we look towards 2026, beyond the emergency medicine topic, we see solid growth in the other parts of our pharma business and are receiving some encouraging signals from our consumer goods customers, including in fragrance and beauty at large. Given the strengths of our performance and our strong balance sheet, we have and we will further accelerate capital returns to shareholders, underscoring our confidence in the business while retaining the strategic optionality of our capital structure. With that, I look forward to speaking with many of you in the coming weeks. And should we not speak before then, let me wish you already now a restful Thanksgiving in the U.S. and the holiday season around the world. With that, operator, we cannot close the call.

This concludes today's call. Thank you for attending. You may now disconnect. Have a wonderful day.