West Pharmaceutical Services, Inc.

Thank you for standing by and welcome to West Pharmaceuticals' fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to John Sweeney, Vice President, Investor Relations. Please go ahead.

Good morning and welcome to West's fourth quarter and full year 2024 earnings conference call. We issued our financial results early this morning and the release has been posted on the investor section of the company's website located at westfarmer.com. On the call today, we review our financial results, provide an update for our business, and present our financial outlook for FY25. There's a slide presentation that accompanies today's call, and a copy of the presentation is available on the investor page of West's website. On slide four is a safe harbor statement. Statements made by management on the call and the accompanying presentation contain forward-looking statements within the media of the 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 statements made here. Please refer to today's press release as well as 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. Limitations and reconciliations 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'll now turn the call over to our CEO, Eric Green. Please go ahead, Eric.

Thank you, John, and good morning, everyone. Thanks for joining us today. I would like to begin with some comments on the fiscal year and fourth quarter 2024, followed by Bernard's detailed financial review and 2025 guidance. Then I'll close with some final thoughts on our business outlook. Starting on slide five, looking back at 2024, Wes executed on several key strategic initiatives. First, we capitalized on opportunities with the fast-growing GLP-1 market and continued our strong win rate on newly approved molecules, particularly in biologics. Second, we made great strides to reduce our manufacturing lead times, in some cases below pre-COVID levels, and we believe that industry-wide destocking is now closed to the end, as customers are generally returning to more normalized ordering patterns. Third, we returned over $560 million to our shareholders through our share repurchase program during the year. And finally, we made strategic investments in additional HVP capacity, which we expect will drive incremental growth for years to come. Shifting to fourth quarter on slide six, there were several notable achievements. Results were above our expectations as revenues increased 3.3% on an organic basis. And the quarter marked a return to quarterly revenue growth. Proprietary product organic revenues increased 4.5% in the fourth quarter. This represents a continued improving trend as proprietary products organic revenues decline year over year in each of the three quarters of 2024, largely driven by destocking. Finally, adjusted operating profit margin was 21.7%, roughly in line with prior year. Moving to slide seven, West's proprietary product segment can be broken down into three categories, HPP components, HPP delivery devices, and standard products. I'm pleased to report that HPP components, the most important contributor to West's long-term growth, is starting to show signs of strengthening, and we expect this positive momentum to continue. Our current expectation is that HPP component revenues will grow mid to high single digits in 2025, and we anticipate that we will see a continued mix shift to HPP in 2025 and beyond. A key performance driver is the biologics market. We expect this end market to continue to grow high single digit to low double digits, and we have a consistently strong win rate, participating on approximately 90% of new molecules entering this market. Our HBP GLP-1 elastomer business is performing well, and we expect an acceleration in growth due to the continued market expansion of this category. I would note that we have just agreed to terms for a multi-year contract with one of the largest manufacturers for all of their GLP-1 primary packaging elastomer needs. We remain particularly encouraged with the progress from our customers adopting Annex I. For those unfamiliar with the EU GMP Annex I, it is a set of regulations that govern manufacturing of sterile drugs in the European Union. Annex 1 requires companies filling sterile medicines to develop a documented contamination control strategy that assesses risk in their facilities and defines action plans to prevent the contamination of sterile products. Currently, we have over 200 Annex 1 projects in various stages with our customers. While the regulation went into effect in August of 2023, some customers were early adopters in a shift towards HVP, and we now have additional customers in the pipeline. It generally takes about 18 months for customers to shift from standard to HVP products as they address Annex 1. Moving to slide eight, high-value delivery devices. The biggest growth driver for this business in 2024 is our wearable on-body injector SmartDose. We are working to optimize our manufacturing process with our new automation line coming on stream later in 2025, which will more than double our SmartDose capacity and drive efficiencies. While we categorize and view SmartDose as an HPP product, we expect that in 2025 it will be margin-dilutive. We are taking steps to improve our delivery device economics, and all options are on the table. Moving to standard products, these are the bulk products that we produce across our global manufacturing network. These products tend to be on the lower end of price and margins. The standard components are mainly used by our pharma and generic customers. Turning to slide 9, in contract manufacturing, we have made significant investments to build out our GLP-1 device business. The business is growing strongly and now accounts for approximately 40% of our total contract manufacturing. We anticipate the GLP-1 growth to continue as our investments in Dublin, Ireland, and Grand Rapids, Michigan come online during the year. There are two large continuous glucose monitoring customers that we serve. In both cases, these customers develop next-generation devices. We have made the decision to not participate going forward as our financial thresholds cannot be achieved. One of these customers has started to exit, and the other has let us know of their intention to exit in mid-2026. We're actively pursuing opportunities in CM that more closely align with our margin in capital return requirements. Taking all into account all these factors, we expect a return to organic growth driven by the strength of our HVP components business. We have a highly profitable core business that will bridge west through these temporary impacts. We will be taking steps in the coming years to address these areas where we want to improve returns, and we expect to finish 2025 with solid momentum. Now I'll turn the call over to Bernard. Bernard?