Eric Green: So Dave in addition to that Quintin is right. It’s — if you think about the growth for — we’re really confident with the growth of biologics continues to be strong. And when we speak about Biologics, we’re not really bringing in GLP-1 conversations into that mix. And so the growth we’re — we talk about 7% to 9% construct it has to be led by HVP it has to be led by Biologics that really isn’t part of the GLP-1 conversation. As demand comes in for GLP-1 when the drugs are approved and there is further launches and the whole supply chain is working effectively and efficiently we’ll be in a very good position to be able to support that scale up. Exact timing, exact cadence of that aspect I would probably refer more to our customers on that.
But we’re positioned well to absorb the elastomer side and also the investments we’re making. We’ll take some time to get the buildings and validate that up in addition to what we have already that will be — CM is a little bit longer term. But we’re ready to address that Dave.
David Windley: I appreciate that answer. If I could just clarify Eric on what you just said. When you say, you’re not bringing GLP-1s in on that statement, does that mean that GLP-1s are categorized say in pharma not Biologics? Or are you just saying that you’re enthusiastic about the Biologics pipeline notwithstanding whatever GLP-1s do to that pipeline?
Eric Green: Yeah. It’s really — it’s latter. I tend to focus on what’s approved or about to get approved in the market and that’s around the Biologics space. We have a diverse portfolio of customers, diverse portfolio of approved drugs in the market and about to be approved. And yes we as an organization are going to fully support and be ready and available to support any GLP-1 launches that are beyond what we see today. We’re excited to be part of that participation and we’ll lead in the front like we have. And there’s no reason why we can’t deliver like we did around COVID. It’s the same model frankly when you think about really the number of SKUs, number of assets that we’re leveraging their existing operations. We’re very confident we can deliver. But I would say I just want to be clear I’m very excited about Biologics without saying that this growth could be driven by GLP-1.
David Windley: Understood. Thanks for the clarification. Thank you.
Eric Green: Thanks.
Operator: Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Justin Bowers with Deutsche Bank. Your line is open. Please go ahead.
Justin Bowers: Hi, good morning, everyone. Just a two-parter on the outlook for 2024, which I think we all appreciate. I wanted to clarify that the 7% to 9% organic does include the $68 million of — it’s on top of the COVID, the $68 million on COVID? And then number two, can you help us understand the visibility that you have now into that growth? Is there a level of commitments from customers? Are you already talking about sort of like project planning and the pipeline for next year, just investors in this space have been very skittish around visibility. So any framing there would be helpful.
Eric Green: Yeah. No great questions. The first one is pretty clear. Yes, when we talk about 7% to 9% top line 100 basis point margin expansion that is inclusive of the COVID $68 million that we guided for 2023 in that number, and if there’s a drastic change between now and February we’ll communicate that. But based on what we’re seeing the answer is yes, it’s part of that equation. The second part about visibility just to — it’s interesting our business is make to order for the most part. So our customers are coming to us and giving us campaigns whether it’s three quarters, six quarters, five quarters and we’re able to support them on — whether it’s new drug launches or existing drug launches. And there’s always going to be some variability on each and every molecule.
But on aggregate we have pretty good lens what type of volume we need for our SKUs and what investments we need to make. On the CM side, it tends to be very long contracts with specific assets in CapEx installed that will take a little time to ramp. But once we’re operating, we pretty much know what the capacity and output will be day over day. On the elastomer side there is more volatility, more variability. And again it depends on how successful the drugs are in the marketplace. And so therefore we’re able to move a little bit up and down quarter-to-quarter. So we do have visibility. Is it 100%? No. But this business has tremendous amount of — call it annuity-like repeat year-over-year. It’s not 100% but it’s very high. And that gives us confidence on how we can plan existing growth, but also future launches working with our customers.
So there’s a little bit of both in there in that answer.
Justin Bowers: Got it. And then just a quick follow-up on CM. Sort of, the margins this year or this quarter is that, sort of, a good go forward great just given sort of the commentary on the longer visibility of that business?
Quintin Lai: Yes. I think that this quarter we did have some benefit from some pricing that we did take through some of our contracts. We think longer term we’re looking at 16% to 17%.
Justin Bowers: Okay. That’s all from me. Thank you.
Quintin Lai: Thank you.
Operator: Thank you. One moment as we move on to our next question. And our next question is going to come from the line of Derik De Bruin with Bank of America. Your line is open. Please go ahead.
Derik De Bruin: Thanks for taking my question. So the margin guide that’s implied for the fourth quarter. I mean to get to your EPS number that is basically sort of using your organic revenue guides and everything you put in there to get to that EPS number for the year. Even if we don’t assume you’re going to get any of that stock-based compensation it looks like you’re going to take a pretty big step down sequentially Q3 to Q4. I’m just, sort of, curious what’s going on? Is it validation of lines? Why is there such why is this sort of the implied margin step down so big between the quarters? Thanks.
Quintin Lai: Hi, Derik. Thanks for the question. Really it’s just utilization and absorption given that we’re probably going to have lower volumes through our facilities in the fourth quarter. We’re just we just want to make sure that we have a reasonable swag at gross margin. And then we’re going to continue to manage our costs on the SG&A and R&D line but so that’s where the margin impact is really going to be reflected especially in proprietary products margin for the quarter.
Derik De Bruin: Got it. So gross margin on Proprietary products you expect to be down sequentially just given the utilization?
