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

David Windley: I hope you can hear me. I wanted to — I’ve got a couple of follow-ups, but I wanted to start with just asking if you would level set where the market units are with kind of generics having a strong end of the year and biologics down, those are kind of opposite directions than is normal. What’s the kind of relative sizing of your 4 segments of the business so we have a base to work off of?

Bernard Birkett: Yes. So if you look at biologics as we go into 2023, the biggest drop — or the biggest impact of COVID revenues being reducing is within the biologics segment. So we do see a reduction there. But if you back that out, we’re actually seeing very strong double-digit growth within the biologics segment for our core business. And then as we progress through ’23 on generics, again, we would be looking to see high single-digit, early double-digit growth, pharma, high single digits and then contract manufacturing, as we said earlier, mid-single-digit growth.

David Windley: Okay. And Bernard, so to apply those, so is it like I think biologics was 40% to 45%. I’m just looking for should I think about with the kind of COVID correction that it’s closer to the 40%? I’m just looking for kind of the percentages to apply those growth percentages to.

Bernard Birkett: Yes. It’s — biologics was mid-40s. It’s going to come back a slight bit. So you’re probably 40% to 45%. And then — pharma and contract was about 17% or 18%.

David Windley: That’s fine. I can follow up offline. On the installation of the equipment and Eric, we talked about in Kinston, the washing equipment in that process, I guess I was under the impression that that was specifically NovaPure and maybe even more specifically NovaPure plunger equipment, but Bernard’s answered the last question that it kind of varies that that $30 million a month will vary based on volume and mix, maybe I misunderstood what — how fungible that equipment is across your product lines? So perhaps you could further elaborate on that, please?

Eric Green: Yes. No, absolutely. So specifically the equipment that we’ve discussed about Q3, that was ongoing operations, not specifically just NovaPure. So you have washers that wash — pharmaceutical washing capability that supports really the high-value product portfolio. The vision that you — the washing equipment that you were able to see that is for NovaPure. So some of the equipment is not fungible, but the core elements of the equipment is. But the growth that we’re having, based off of that equipment you looked at was really around the heavy part about the NovaPure. There’s some mix effect to it. And in the future investments we’re making that you saw in Kinston, that is — that’s, again, it’s a wide range of high-value products. FluroTec all the way up to NovaPure.

David Windley: Okay. So where I wanted to go with that, and I’ll make this my last one, is you’re losing the year-over-year COVID $300-ish million. Management has made the point that that has been very high gross margin, high incremental margin revenue. And so that creates, I think, contributes to this transition year on margin, Eric, that you mentioned in your prepared remarks, it seems like as you’ve put some of this equipment in place that was the hold up in 3Q, again, your last answer helps me to understand that better. But the revenue potential that that equipment unlocks is in the neighborhood of the revenue that you’re losing from COVID. I guess I now understand that maybe the margin on that revenue that’s coming in is perhaps not quite as rich as COVID, you could confirm that for me.