West Pharmaceutical Services, Inc.

Good day and thank you for standing by. Welcome to the third quarter 2023 West Pharmaceutical Services Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, please press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Quentin Lai, VP of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, and welcome to West's third quarter 2023 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 westpharma.com. This morning, we will review our financial results, provide an update on our business, and present an update on our financial outlook for the full year 2023. There is 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 law. 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 risks to which it is subject, including our 10-K, 10-Q, and 8-K 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 over the call to our CEO, Eric Ring. ERIC RING.

Thank you, Quintin, and good morning, everyone. Thanks for joining us today. Due to an unexpected family emergency back in Ireland, Bernard cannot participate today. I appreciate your understanding. Quintin will step in for Bernard. I would like to begin by addressing the ongoing situation in Israel. our top priority and focus remains on the safety and well-being of our team members and their families that live and work in the region. Now let's turn us to slide five in the Q3 performance. I am pleased to report that our team delivered a solid third quarter, our ongoing success can be attributed to our well-established market-led growth strategy, which allows us to take full advantage of our solid base customer demand and recent capacity expansions. And it is the strength of our OneWest team, who I'd like to thank, that make a meaningful difference to ensuring our customers have a reliable supply of components necessary to deliver drugs to patients. In the third quarter, we had solid organic net sales growth of 5.7%, with an approximate $78 million year-over-year decrease in COVID-19-related sales. Our base organic sales growth exceeded 20% for both the enterprise and our proprietary product segment. Shifting to slide six, in proprietary products, we had strong base demand of HVP components and devices. We continue to see certain customers experiencing strong uptake of their drugs as they accelerate and increase their replenishment orders with us. The greater than 20% growth in our base business was again led by our biologics market unit. which had very strong double-digit growth in the quarter, excluding the impact of COVID-19-related sales. And as we have seen through much of the year, we also had accelerated growth from restocking long lead time HVP components that we've been able to produce through our capacity expansions. This fueled growth in our generics and pharma market units. During September and October, we have started to see an increase in inventory management trends by certain large pharma and generic customers, especially for our standard products, as they manage their safety stocks for the remainder of the year. These issues have led us to temper our fourth quarter organic sales growth to 2% to 3%. Excluding COVID-related sales, we expect double-digit overall organic sales growth and double-digit proprietary product sales growth for the quarter. And we continue to monitor the situation in Israel and currently do not expect any impact on our ability to manufacture and ship out of the country. As in prior years, we will provide our formal 2024 guidance on our upcoming February Q4 call. In a bit of a preview, Despite the inventory management we are seeing by some of our large customers, we continue to expect to deliver our financial construct of 7% to 9% organic sales growth and 100 basis points of operating margin expansion. In addition, we anticipate that our pandemic-related sales are at a point where we will no longer have to separate out base performance in 2024. Lastly, a key aspect of our growth strategy and market leadership is West's team of scientific thought leaders and technical experts. They continue to advance the care for patients with our customers through valuable insights to address the changing needs of more complex molecules and combination products. For example, at the recent PDA conference and CPHI worldwide conference, several are west experts delivered insightful presentations about the revised regulatory standards and emphasis on the development of sustainable products now i'll turn the call over to quentin who will go into more detail from the quarter quinton thank you eric and good morning let's review the numbers in more detail