West Pharmaceutical Services, Inc.

Good day, and thank you for standing by. Welcome to the Q2 2022 West Pharmaceutical Services Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today. Quentin Lai, Vice President, Investor Relations. You may begin.

Thank you, Tawanda. Good morning and welcome to West's second quarter 2022 conference call. We issued our financial results this morning and the release has been posted in the investor section on the company's website located at westfarmer.com. This morning, Eric Green and Bernard Burkett will review our financial results. provide an update on our business, and present an update on our financial outlook for the remaining full year of 2022. There's a slide presentation that accompanies today's call, and a copy of that presentation is available on the investor section of our website. On slide four is our safe harbor statement. Statements made by management on this call and in the accompanying presentation contain forward-looking statements within the meaning of U.S. federal securities laws. These statements are based on our beliefs and assumptions, current expectations, estimates, and forecasts. The company's future results are influenced by many factors beyond the control of the company. Actual results could differ materially from past results as well as those expressed or implied in any forward-looking statement made here. Please refer to today's press release as well as any other disclosures made by the company regarding the risk to which it is subject, including our 10-K, 10-Q, and 8K reports. During today's call, management will make reference to non-GAAP financial measures, including organic sales growth, adjusted operating profit, adjusted operating profit margin, and adjusted diluted EPS. Reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in this morning's earnings release. I now turn the call over to our CEO, Eric Green.

Thank you, Quinton. And good morning, everyone. Thanks for joining us today. We will start on slide five. I'm pleased to report that we delivered an excellent second quarter. We grew 13% organically with over 18% organic sales growth in our proprietary product segment. Our base business continues to have solid demand across all three market units, biologics, pharma, and generics. which more than offsets a slight decline in COVID-19-related sales. And again, our high-value products led the way to this impressive growth. Our continued success highlights the strength and the resilience of our proven strategy of execute, innovate, grow, which continues to set us apart as a trusted market leader today. It is the strength of our One West team guided by our purpose that makes a meaningful difference in ensuring our customers have reliable supply of the components necessary to deliver drugs to patients. An example of our One West culture in action is our team members in China, who I would like to thank for their inspiring efforts and commitment to our customers during the lockdowns in April and May. The relentless focus and our purpose enabled us to reopen our sites and continue to serve our customers with minimal impact. Now moving to slide six. We made great progress in the second quarter. Let me briefly share a few highlights. We continue to deliver the key drivers of growth in Q2, primarily driven by our HVP components, including NovaPeer, Envision, Daikyo Crystal Zenith, and self-injection devices. With a strong order book for our biologics and generics customers, along with pharma demand ramping up, we are seeing the benefits of our capital spending investments as we optimize productivity across our global operations. Our 2020 capital expansion is now complete, and we're driving forward to complete the installation of our 2021 expansion. Turning to Crystal Zenith, we have been expanding capacity of our 1ml syringe as our customer uptake has been robust. At the 2022 Bile International Conference, we launched the Dicul Crystal Zenith 2.25ml insert needle syringe system. With the market trend for larger dose injections, we're able to answer the needs of more patients with a safe and reliable containment solution. The new CZ syringe system will help our customers bring a larger volume of product to patients with fewer or less frequent injections, enabling an easier patient experience. As we continue to advance the standard of care for patients with our customers, I'm pleased to share that we have a combination drug approved using our newly launched CZ 2.25 ml system with targeted customer launch in 2023. In addition, we're seeing good progress with our smart dose on-body sub-Q delivery system and now have three FDA-approved biologic drugs using our technology. Shifting to slide seven and an update on ESG. At the end of June, we published our 2021 Corporate Responsibility Report on the company website. We are tracking well towards our five-year targets, and I'm proud of how our organization has connected our One West culture with our ESG initiatives. We know to fulfill our purpose effectively, we must progress our environmental sustainability goals diversity and inclusion, and success around our charitable efforts. Together, this makes for a better performing company today and into the future. I'm also pleased to share that yesterday we announced that our board of directors has elected Dr. Steven Lockhart as our newest member. As the former chief medical officer of Sutter Health in California, his expertise will be a valuable addition to our board. Before I turn it over to Bernard, I wanted to provide some high level thoughts on our updated full year outlook and implied second half 2022 guidance. We have two headwinds, FX and slowing COVID-19 demand. On the positive, Not only has our base business been strong in the first half of the year, but we also expect the generics and farmer market units to perform even better in the second half of the year with additional resources to address the demand dynamics. For guidance, we're taking our overall sales down by $100 million for the full year. Incremental FX is going to be a $75 million headwind. In addition, we're seeing a decline in COVID-19 demand as compared to our April outlook that assumed modest growth over 2021. While we're seeing some orders for stoppers for smaller vials to hold fewer doses, we do not assume a meaningful sales impact in 2022 and expect an overall decline of COVID-19 sales of 20% or $85 million from 2021 sales levels. To sum it up, changes in FX and COVID are causing headwinds, well in excess of our $100 million negative change to full-year sales guidance. On the positive side, we're expecting even stronger base business growth in the second half of this year from all three market units of biologics, pharma, and generics that is helping to moderate the guidance impact. Now I'll turn it over a call to Bernard.