West Pharmaceutical Services, Inc. (NYSE:WST) Q4 2022 Earnings Call Transcript

Derik De Bruin: Got it. And if I can squeeze one more in, if you don’t mind. How should we think about the economics on the prefilled syringes? I mean, obviously, there’s a lot of new drugs coming out for metabolic disease, for obesity. And how should we think about your potential profitability or the revenues associated with one of those units? And just give us some way to sort of like ballpark what your — I mean what your revenue contribution could be on something like that?

Eric Green: Yes. So if you think about the prefilled syringe area and the plungers, we are — it depends on if it’s NovaPure, it’s pretty comparable to — we talk about the $0.88 to over $1 a unit. But if it’s not the NovaPure, other types of HVPs you have a very large range between, let’s call it, $0.40 per unit. So you can see the range that we’re operating in. From a margin perspective, again, if it is HVP that could range anywhere between 55% to 80%. So I’m giving you a very broad range because not all molecules have the same requirements. But what’s good around our investment thesis in our facilities, particularly on plungers is that the equipment and the processes are somewhat fungible. So we can leverage the existing assets we’re putting into the current drug launches, but also the anticipated areas of potential growth. So we’re positioned well.

Operator: Our next question comes from the line of John Sourbeer with UBS.

John Sourbeer: I guess maybe digging in a little bit more on the new capacity coming online in the CapEx. Any color just on pacing there for the year? And then just a follow-up on the equipment and the delays in 3Q. I think that was around the $30 million a month headwind. Can we assume now that this is up, that’s contributing around $30 million a month as well?

Bernard Birkett: Yes. The impact in Q3 was about $30 million. And that may vary depending on volume mix as we go through each quarter. So it’s hard to say, it’s $30 million each quarter. It would be difficult to commit to that at this point. But in saying that all of those problems that we had in Q3 have been resolved, as Eric kind of talked about earlier, and much of that happened as we progressed through Q4. And on the pacing of layering in new CapEx, that will happen as we move through 2023. So it’s not all at once. We’ll see some of it as we get into the back end of the second quarter particularly in Kinston, where we are getting new parts of our facility up and running with the equipment that we’ve installed there. And then as we progress through the year, there will be equipment layered in in the other HVP sites.

John Sourbeer: Got it. I appreciate it. And then I guess just maybe on COVID, it looks like you lowered the guidance there slightly. I guess just any thoughts on just where endemic levels go from here? How much more further drop do you think that you see coming down from COVID beyond 2023?

Bernard Birkett: It’s hard to estimate that. Like we’ve tried to — well, we’ve given our best estimate based on the information that we have today. If we thought it was going to drop any further, and we would have included that in the guidance. But based on what we see today, that’s where we think it’s going to play out.

Operator: Our next question comes from the line of David Windley with Jefferies.