Eric Green: Yeah, David, that’s a good observation is that not just upstream, but downstream we had to be aware of. We do have very strong — very long-term relationships with customers that are in this space. So, those relations are very well established where we do interact with them about their demand profiles [indiscernible] type of conversation to the various drugs. And so, we’re sensitive towards that. Obviously, we don’t speak to any of those volumes of a customer. But the way to look at it is — so to your question, if there’s bottlenecks somewhere else in the value chain of — to get these products into the market, we had to be aware and we try to work with our customers with that understanding. Our role is to make sure that we aren’t the bottleneck.
And so, as you think about the elastomer side of the business, a lot of those assets are fungible. So, these lines are not exclusive. So, if we have to make a high value product plunger, we’re able to do that in multiple high value product facilities and our customers can improve more than one site. When it comes to Contract Manufacturing, it is a little different, that’s installed capacity and there’s a theoretical maximum to it. And that is one of many suppliers in that space. So that is different. That’s a very tailored business model for a customer or multiple customers. So that’s how we are tackling this, Dave. As we look at the investments, on the elastomer side, we feel really good about where we are with our capacity. We have been expanding capacity.
So, we’re in a very good position on the Contract Manufacturing site. We will — if and when awarded additional contracts, we will build out, expand and ramp up production to peak volumes within one or two years. So that’s pretty typical of the model that we have today.
David Windley: That’s very helpful. If I could just sneak the last one in. On the destock, is it possible to size or quantify or comment to — is the impact of customer inventory management in 1Q, the peak and you expect that to wane still continue into 2Q, but wane as you continue through the year. Can you comment on that?
Eric Green: Well, I will say, it will wane. Yes, it is going to wane — as you talked about throughout the year. And that’s supported by our confirmed orders as we think through the balance of 2024 and also the discussion we had about sequential growth quarter-over-quarter for the next four quarters.
David Windley: Got it, thank you.
Operator: Thank you. Our next question coming from the line of Larry Solow with CJS Securities. Your line is open.
Larry Solow: Great, thanks guys. Just a few follow-ups. I guess, just on the — any update? I know you mentioned Annex 1 and whatnot. Just any qualitative thoughts on that you can speak to just conversations with customers on potential conversions of legacy products going forward? Anything that you could speak to there?
Eric Green: Good morning, Larry. Thanks for the question. Yeah, we’ve been having a lot of active discussions. And as I mentioned at the recent conference that we attended in New York, that was clearly the number one discussion point. And it’s interesting is that we’re very well positioned to be able to support our customers as we kind of think about how do our customers get ready for — to be able to build, support and provide product with the regulations of Annex 1. Now the one comment I will make is that one of the clear indicators that the most interest is coming from the multinationals. I think originally thinking around just the European firms, but this clearly is a discussion at a multinational level to really simplify their own supply chains.
And so that’s encouraging. And again, it’s not just for new drugs. It’s really a heavy emphasis on the legacy portfolio. So that’s as much as I probably can give you without going too detailed, but these are active dialogue discussions that they will take time. It will depend on the customer. It will depend on the drug that they like to transfer, but we’re well positioned to have those discussions and then act on them.
Larry Solow: Great. I appreciate that color. And just a question on R&D. I think R&D increased last year, I think, 16%, 17%. What’s sort of the outlook this year? I know Q1 looks like it was only up a little bit year-over-year, but I know the quarters could jump around a little bit. Just thoughts on R&D? And where is the lion’s share of that increase going into? Is that — I know a lot of investment into Corning, but is it going into a lot of different areas?
Bernard Birkett: Yeah, Larry, as a percentage of revenue, we expect R&D to be pretty constant as we go through the year and where is that money going. A lot of that increase is around integrated systems and how we’re building that out. And again, it is our partnership with Corning and supporting that and developing that market.
Larry Solow: Okay. And just lastly on price, I think you had like a little over 3% increase you mentioned this quarter. Is that about — that also could probably move around a little bit, but is that probably a good run rate you think for the full year?
Bernard Birkett: Yeah, that’s correct. That’s a good position to be in for us.
Larry Solow: Great, excellent. Thanks guys, appreciate it.
Eric Green: Thanks, Larry.
Operator: Thank you. And I see no further questions from the queue at this time. I’ll turn the call back now over to Quintin Lai for any closing remarks.
End of Q&A:
Quintin Lai: Thanks Olivia. Thank you for joining us on today’s conference call. An online archive of the broadcast will be available on our website at westpharma.com in the investors section. Additionally, you may access the replay for 30 days following this presentation by using the dial-in numbers and conference ID provided at the end of today’s earnings release. That concludes the call. Have a nice day.
Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.
