Hello and welcome to the 44th Annual JPMorgan Healthcare Conference. I'm Sean Perkins, an associate in our Healthcare Investment Banking Group. I'm delighted to be joined today by Aptar, Stephan Tanda, CEO and President, Vanessa Kanu, CFO, Gael Touya, President, Aptar Pharma, and Mary Skafidas, SVP, Investor Relations and Communications. Please join me in welcoming Aptar to the stage. Thank you.
Thank you for this kind introduction. It's wonderful to be back at JPMorgan. Really great event. We've come here for many years, and happy to update you on our progress. I'm joined by Vanessa Kanu, our CFO, and Gael Touya, the head of Pharma, on stage, and we'll be happy to answer your questions afterwards. So, reminder, our Pharma business is by far the largest part of the company at 46%, dominated by the proprietary drug delivery systems business. And overall, Pharma delivers two-thirds of our EBITDA and rising. But we're also very proud of our Beauty and Closures business, who are increasingly doing very well. Now, we, of course, report out our financials, as you see them in the verticals here: Pharma, Beauty, Closures, and so on. That reporting structure was established around 2010. The business is really sharing a lot of common technology platforms that you see here.
I won't go through it, from fine mist pumps to aerosol valves. We practice common industrial technologies: precision injection molding, high-speed automated assembly, and AI-assisted quality control, as just some examples. We continue to build out this capability set to work with our customers. Fundamentally, we are an IP-driven organization, and IP really in the broad sense. It's patents, it's know-how, it's trade secrets. We've been around for 80 years. We know what we're doing, and we own the intellectual property of what we're selling. We are a manufacturer of dispensing, drug dispensing solutions. We create the consumer experience when we work with consumer companies.
Deep, deep regulatory expertise, deep consumer insights, and working together with our clients, we create medicines that are new to the world, that improve patients' lives, sometimes even save patients' lives, and improve the consumer experience, all the way to human factor studies through one of our acquisitions a few years ago. We have large total addressable markets, in case you wonder what TAM stands for, and those markets are growing. Pharma, obviously, leading at 7% growth rate, and I'm talking about the market, not about our growth rates. Beauty around four and closures around two, and we're really focused in our execution to address and take advantage of these large addressable markets around the world.
Of course, with the superior returns in the pharma business, we have allocated capital preferentially towards pharma and have a very balanced approach to capital allocation, taking care of our shareholders with 32 years of rising dividends, and I will certainly be not the guy to break that streak, and we don't need to because our growing cash flow supports an annually increasing dividend. We've been recently a bit more active in share repurchases, but have always been buying back some shares to make sure the share count stays in line, and of course, investing in our business and making acquisitions is how we create value for shareholders, first and foremost. Maybe not so interesting to U.S. investors, but we are active around the world. More than 50% of our base is in Europe. We are a leader in sustainability in our industry, and it is a competitive weapon.
It is a competitive weapon to attract talent around the world and to retain talent. We certainly have become an academy company in our industry, and it is important not only to attract great talent, but to retain the talent. We are very proud of our sustainability efforts, and especially our consumer-facing customers, including consumer healthcare, are very, very keen on upping their sustainability credentials by working with us, so let's deep dive into the pharma business. That's why we're here. Again, proprietary drug delivery systems is the growth and profit engine, followed by active material solutions, and injectables is increasingly gaining its stride. We deal with all the leading pharma companies on a direct basis, of course, often supplying their CMO partners. That is the growth engine of the company.
And again, it's built on Intellectual Property, on really being deeply involved in the regulatory process, which ultimately leads to lock-in of our devices in the Drug Master File, and our services and digital health offerings allow us to really embrace customers early on in the process. As a manufacturer, the engineering and science know-how, not only of how we make products, but how they interact with drugs and ultimately how they help patients, is critical. And that's really built on 40 years of expertise that we've built up, starting this business organically out of the beauty business. So today's profit engine has been started organically, of course, augmented by acquisitions over time. This gives you an additional view on how the portfolio has developed. We often say if it goes through the nose, Aptar is involved, substantial position there, and for good reasons, and we'll talk more about that.
Very strong position in inhalers. We've developed a strong position in eye care drug delivery and dermal drug delivery, and with an acquisition about 13 years ago, built out now a world-leading injectable business, clearly a distant number two or three, depending on the SKU, to the market leader, but being a very attractive partner to our customers, and in the oral area, we have some forays with our active material business. This is the end result of all this effort and capability and 10 years of very strong growth. Of course, if you go back to previous decades, same thing. We feel very good about our 7-11 top-line growth guidance for this business, as well as the 32%-36% EBITDA margin.
When you look at our pipeline, we've started to disclose that as we came more often to JPMorgan because healthcare investors are interested in the pipeline, rightly so. That's what drives our business in the long run. And you see, since 2019, the average weighted value of our pipeline has increased 54%, and the numbers of opportunities by 46%. So substantial increase in the pipeline. And what has been driving that? It is really a proliferation of indications that can be addressed with our kind of delivery items. In the respiratory field, of course, low GWP propellant transition is an important part of the pipeline. The biologics for injectables. And then I will dive deeper into what we call systemic nasal drug delivery. Now, for those of you who are not doctors, what that means? Using the nose to administer drug for the whole system.
So basically getting into the bloodstream via the nose rather than through a pill going through the GI tract or direct injection into the bloodstream. The nose has been discovered as this drug delivery vehicle to the bloodstream, and then in addition to that, bypassing the blood-brain barrier by going directly through the nose to the brain with targeted drug delivery, which opens up an amazing new universe for drug delivery. Then, of course, small molecule traditional injectable opportunities of ophthalmology, allergic rhinitis, vaccines. We just announced recently a COVID vaccine through the nose in clinical trials, and dermatology rounds out our top eight in the pipeline. It is an increasingly growing, increasingly diverse pipeline, but taking full advantage of our historical strength in drug delivery with our technologies.
At the Capital Markets Day, we opened the curtain a bit more on all the things that go through the nose primarily in terms of when I talk systemic drug delivery, and if you had asked me two years ago whether I could show this slide, I said, "You're crazy," but it has exploded from neurological disorders to neurodegenerative diseases, and anybody who has Alzheimer's or dementia or Parkinson's or Huntington's in their family knows how important those indications are. Cardiovascular, we have two heart medications approved just in the last quarter, one for edema, one for tachycardia, so you take your heart medications now through a nasal spray, and of course, vaccines I just mentioned, oncology, of course, GLP-1s. I say, of course, now we have people working on delivering peptides through the nose. Dramatic, dramatic explosion of the pipeline.
We know pharma pipelines are long, but you see first products coming out of the pipeline, and we are extremely excited about that. I want to describe a little bit what gives us the confidence in that revenue stream. I don't know any other pharma business that works that way. Basically, we work with a client for 10 years from an idea to formulate the drug, to get the drug dispensed, to create the clinical trials, and then launch and hopefully have a successful launch. But that's only the start of it. During that 10 years of development, we make small revenues, but we are certainly not losing money. And then in the originator phase, the product grows nicely. Product goes off patent. What goes off patent is the API, not the combination medicine. So we participate then in the generic phase, just with more volume, same margin.
Eventually, products go over the counter. Same story, more volume, same margin. Basically, you have a growing perpetuity. When you think about that, we have hundreds and thousands of products in the pipeline and maybe close to 100 products launching every year. You layer on one growing perpetuity after another, basically for eternity, because we're dealing with treating chronic diseases and emergency medicines. That is the beauty of this business. That's the power of this business. Over time, we have broadened our capability to embrace customers early on in the drug delivery process, from design, formulation, creating patient insights with our service offerings, analytical testings, human factor, device design, but also how medicines get administered, all the way to patient engagement in the initial picking up of the medication and then patient retention, especially through our digital capability, all the way to consumer devices like Oura.
Recently, we announced a collaboration with Oura, with the Oura Ring and our Migraine Buddy app. This is really the profit engine, again, of the company that's growing, has a healthy pipeline, and you see just here some of recent examples. In addition to nasal devices, of course, we have also ophthalmic and dermal. This is another way of describing how this business has built up over time. We've been known for allergic rhinitis and dermal drug delivery, nasal saline, and so on. With the advent of Narcan, Spravato, new preservative-free eye care medications, that business has grown and expanded substantially. With this additional pipeline with systemic drug delivery, nose to brain, new propellants, biologics, GLP-1, the business has just accelerated.
In addition to achieving regulatory success by working very closely with customers until that combination medicine, and again, that combination medicine means the API, the formulation, and the delivery device being then captured in a Drug Master File for eternity. In addition to that dynamic, with our 40 years of manufacturing, we've proven 99.999%, we call it the five nines, of reliability in the field. So if you have a lifesaving drug, you have a patient on the floor who is COVID because of an opioid overdose, you use the Narcan, it needs to fire with at least that reliability. Nobody else has been able to demonstrate that reliability based on real-world data. And this is really unique in the industry, and that's why people come back to us when they have an idea about their next nasally delivered drug.
In addition to getting in the bloodstream, I mentioned the nose has also been discovered to bypass the blood-brain barrier via the olfactory bulb and the olfactory nerves and the brainstem to get drugs directly delivered to brain receptors. We've partnered with Wake Forest School of Medicine that really targeted specific areas of the brain using insulin as an example molecule, proving how we can get to targeted areas of the brain. It's really fantastic news for dealing with mental and neurodegenerative diseases, and it's the basis of many, many products in our pipeline. Now, on the consumer healthcare side, we continue to innovate. Two recent examples. One is the award-winning, sorry for the technical talk, Lateral Control System or LCS that we've worked with Haleon in Europe or outside of the US. It's called Otrivin. In the US, it's called Theraflu, a laterally actuated push-button nasal spray, award-winning.
It just received a major award in the U.S. A little bit longer in the market is our preservative-free eye drop dispenser, ophthalmic squeeze dispenser. And another example driven and lifted from our consumer business, a monomaterial nasal pump Futurity that's been very welcomed by the consumer healthcare market. PureHale has been around for a while, but it's again based on another technology platform that we share across the company, which is the aerosol valve and bag-on-valve technology. Just recently, we announced a beat-the-blink platform. So what the hell does that mean? Basically, you spray it in your eye before you can blink. Not requiring that you tilt back your head and maybe the drop hits your eye or doesn't hit your eye, but it's precisely dosed drug delivery in your eye. And we have a partnership with Bausch + Lomb, and this is currently in final customer trials.
Injectables, obviously, are a very exciting area for us. We have invested in that business substantially. All these capabilities with premium products are now ready and able to supply the market, and the market is exploding. Of course, led by GLP-1, we are most, if not all, the auto injectors for GLP-1s, all the brands that you know: Zepbound, Mounjaro, Wegovy, and a few more. But also vaccines, small molecules, anti-thrombotics that drive that business. And as you've seen with the Q3 print, very healthy growth rates, and we certainly see those growth rates continue for a while as all our capability has been recognized.
So what that business really goes through, I mentioned it's the least profitable part of our pharma business now, but we do multiple things: accelerate the top line, mix enrich with PremiumCoat and value-added products, and drive the productivity in that business based on that new state-of-the-art technology with higher margins. So over time, this will be a much more meaningful part of the portfolio from an earnings generation point of view. Overall, biologics in our business has grown 50% over the two years shown there with a significant margin expansion. The substantial investments in biologics and in injectable business is not only in Europe, but that got the brunt of the investment. We also significantly expanded our U.S. facility outside of Congers, New York, and added capability with an acquisition and build-out in China.
So our in-region, four-region supply chain strategy is also being materialized in the injectable business and given today's supply chain challenges and geopolitical challenges. It is important that you have the capability in each region to supply customers, and we are very well positioned for growth in that business. Last but not least, active material science. It may sound a little different, but you go in their factory, they look like any other factory precision injection molded, automated quality control. But what they make is compounds that condition the atmosphere in whichever space they're in. They can be in a vial, they can be in a pill blister, they can be in a sensor pod for Abbott Libre or for Descovy, for Gilead's ACE drug.
It's really nifty technology, and customers beat their way to our door when they have a problem to keep a sensor stable, keep a COVID test stable, keep a drug stable, or keep a test strip stable. So this is really a very unique technology, and we're building on that business with additional pharma packaging acquisitions over time. We did a recent deal in Brazil, and you probably will see a few more there. Last but not least, our digital business. Often people ask us, "Why is that important?" Well, it all started with enabling our devices. If you are in clinical trials, you want to be sure that patients have taken the drug at the time they were supposed to take it, in the way they were supposed to take it, and track that. It then evolved into apps.
With the acquisition of Volantis, we got the world leader in medical devices, being software, tracking patient populations, creating patient trial, creating patient adherence, and nothing is more valuable than a patient who keeps taking their drugs at the right time. And it is a key ingredient to engage with clients early on in the development journey around clinical trial following, around patient engagement, about patient retention, and then tracking of patient communities like with Migraine Buddy that now has almost four million users and is, we announced that partnership with Oura that I mentioned earlier. So let me summarize. The pharma fundamentals are very, very strong. We have a growing business, a growing pipeline, and unique position in the market, having that deep knowledge in the regulatory field, in the patient journey, and being really have become a patient-centric drug delivery engine that customers really value.
And we are here for a reason, not to necessarily only talk to investors, but all our clients are here, and they want to talk about this. They want to talk about the digital journey of their patients. They want to talk about how they can get their drug repurposed from an oral dose or an injected form to get it delivered through the nose. So it's a real strong engine. Then our injectable business is going now really hitting its strides. All the investments have been put in the ground, have been validated, and the market is booming. Couldn't be better timing. I also might say that our business model is different than some of our competitors, and customers appreciate if their supplier doesn't compete with them. So that creates additional customer traffic.
Our innovation leadership is backed by really decades of experience, a robust IP portfolio, an IP portfolio that we defend. It's the family jewels. If somebody wants to grab the family jewels, we don't take that lightly. Last but not least, clearly we have a reset in Narcan sales after a pipeline explosion of Narcan, but we see strong growth in pharma with the exception of Narcan this year, and we quantified it with Q3, but also other businesses, beauty and closures are doing quite well. Especially in beauty, we see customers having run inventories pretty low and threatening us with more orders, and the closures business has really done a great job in getting in fighting shape and taking more business.
Last but not least, our very solid balance sheet, near one times leverage, allows us not only to buy back our stock but retain our strategic optionality and the strategic flexibility to further build the company. With that, I'll hand it over to you. Looking forward to your questions.
Thank you. I'll just quickly scan for questions in the room.
Can you talk a little bit generally about intellectual property? You have an issue that is currently in litigation, but can you just talk about how you think about costs of your business from that and return profiles and how you manage around that?
Yeah. Fundamentally, as I said, intellectual property is at the core of what we do. We own the intellectual property of everything we sell, and that can be in the form of patents, that can be in the form of trade secrets, it can be in the form of know-how. We protect that with very clear confidentiality obligations with anybody we work with. And not often, but once in a while, people tend to forget what they have signed, and then we go after that with a lot of vigor. It has happened to us. It's public information on the consumer side. A few years ago with Kraft Heinz, and we prevailed. And as always with litigation, you litigate until you settle or you get a judgment, and the current situation is no different.
If you are in pharma, if you're in biotech, intellectual property disputes are daily bread, and while this is an extraordinary decision, you always have legal expenses, IP expenses, patent fees, and so on. But every once in a while, it gets beyond that. But we feel very strong about our position, but obviously can't comment on any ongoing cases.
Thank you very much. Touching on Narcan again, you mentioned that you had detailed some of the impacts in Q3. Could you, for the benefit of us here today, comment on any of the underlying demand trends that you're expecting versus the channel adjustments that you spoke about and provide any additional color or perspective on how you expect Narcan to recover or behave normally?
Yeah, so let me kick it off and then ask Vanessa and Gael to comment. Narcan is a fantastic medication. It is now in the public culture. You can't watch a cop show or anything where not somebody is being Narcan and being brought back to life. Because it is so important, the originator has been very, and that's Emergent BioSolutions, has been very successful in kind of making the case for its importance. The FDA has pushed very quickly for opening up for generic players that we, of course, also deliver and supply and making the drug available over the counter, and that was really critical because what's funding the Narcan market for a big part is the settlement money from the opioid overdose settlements, and those are funds that are available at least for the next decade.
They are administered through government and then at the state level, but the funds come from the opioid settlements, but they have to be spent on harm reduction, and it's not easy to find a lot of ways to spend that money on harm reduction, and buying Narcan at the state level for your harm reduction activities is an easy way of doing that, so as all of that came together, there was, of course, a bonanza. All these six players wanted to have products from us to be ready to bid on those contracts, but as happens with contracts, only one can win, so everybody's ready to supply, but not everybody gets to supply, which led to a little bit of inventory. Vanessa will quantify what we expect, but the fundamental fact remains it's a lifesaving medication.
It could be and should be in a lot more places. I would compare it to defibrillators. I'm sure if I go out in the hallway here, I find a defibrillator. Narcan, it really should be available everywhere, so we see good growth rates. We see good growth rates expected from our customers after this kind of initial launch bonanza resets to a steady state level. Maybe you give some numbers to that narrative, Vanessa.
Yeah, sure. Just to add a bit of context, in the first half of 2025, we saw about 50% growth in that part of our business. And as Stephan said, just due to the trends that we're seeing, we were seeing inventory build-up. Again, we are a B2B supplier, so we're seeing inventory build-up in the channels. And so based on that, based on the trends, our conversations with customers, and all of the data that we're seeing, we projected that we would go through a period of normalization after that 50% growth that we had seen in the previous year and through the first half of 2025. And so we quantify that as being about a $65 million year-over-year headwind, which would largely hit us in first half 2026.
We're not in a position, we're in our earnings quiet period, so we're not in a position to give you any update on that figure today, but certainly we'll comment on that on the upcoming earnings call.
I don't have any other comment on that one. I mean, the one I would like to highlight, I mean, normally moving from the originator to the generic player and then to go TCM index 10 years more plus, it took 24 months max. So we have massively supported, I mean, all the players on the market in order to make sure that you've got Narcan everywhere you could. And so we gave some color already that we suspect that some inventory are built in the supply chain, and that's reality where we are right now. So all the players basically are resetting their view on that one. They are extremely dynamic in pushing, I mean, new distribution center with the university, with the administrations and so on. But that's the reality we are in by now.
Thank you. Injectables, while a smaller part of your overall portfolio, are fairly well understood by investors. Could you comment on the new capacity that's come online in 2025 and how you see that shaping the trajectory, mix, and profitability of your injectables business over time?
Gael? Yeah, okay. Thank God we invested a lot to prep the capacity. I mean, if you look at the recent performance, I mean, Q2 and Q3, I mean, we've got solid double-digit growth. Without that capacity, we will have faced challenge to answer market demand, so we are more than happy. This investment is not only around capacity increase because we are in the U.S., we are in China, we are in Europe, but that's also leveling up our quality capabilities in order to answer Annex 1 requirements to get an environment even more cleaner than before. So that's a mix between capacity extension, new technology around the PremiumCoat technology at par with the best in the market and quality environment in order to face tighter specification to answer some of the regulatory requirements.
To add kind of the longer trajectory I would make, the moment we take customers to our new brand new facility, they kind of say, "You don't need to talk anymore. I get it," because we went kind of from generation one to generation four or five in one step, so these are state-of-the-art facilities with tremendous automation, additional automation potential, so we will take our capabilities really significantly forward at the same time that we've upgraded the product technology with premium products that are on par with the market leader, and as I said earlier, if our business model is a little bit more customer-friendly, so whenever they can, they certainly will look more to doing business with us.
We learned a lot today about your nasal inhalation business. You mentioned that this was an area that was more nascent in how investors understand your business today. Could you provide a little bit of forward-looking perspective or color on sustainability of growth in nasal inhalation and what you're seeing today on drivers of growth and just how you expect that to continue?
Yeah. I think it was a large part of my presentation, but just to summarize it, the historic strong part dealing with asthma, COPD, allergic rhinitis, all of these things will continue. If anything, allergies are growing in terms of durations around the year, but also in terms of geographic impact, especially Asia is coming online with more and more consumers being able to have access to these medications. And of course, after decades of pollution, you have a lot of asthma and COPD going around. So that keeps growing, and that by itself would be exciting. Now, on top of that, there's a whole new universe of indications available to us now that a few years ago, people would have just said, "You're dreaming." And now the pipeline is bulging with these indications for systemic drug delivery through the nose.
At the same time, of course, injectables is filling more the pipeline ophthalmic. So that's why we're so excited about the pipeline and kind of keep peeling back the onion or the curtain on that pipeline without giving the competition too many breadcrumbs to follow. But we will continue to look at how much more we can give you on the pipeline.
I will add on your comment, Stephan. I mean, around our product vertical, I mean, we add capabilities and expertise to really support our customers to accelerate and de-risk their drug development program. So the science behind the drug development, we've got that ability by now to do and to provide formulation support, formulation strategy, which kind of excipient you go for a drug repositioning program, we can support you. We can provide you the analytical support, so the deposition, the dissolutions, and so on. That's really helping, I mean, your development program from the early stage to phase one and two. Last year, we announced the acquisition of new capabilities to do phase one and two from a cGMP environment, I mean, to supply customers to be able to generate data for phase one and two because we want to accelerate and de-risk their pipeline.
On top of that, we've got a patient-centric organization. Everything we are doing within Aptar Pharma is really patient-centric. Some of the new innovations coming, like the beat-the-blink, for example, we went, we discussed with patients and the difficulties they were facing to use an eyedropper and so on, and we came with a horizontal way to deliver the same efficacy. So really patient being at the center of everything we are doing. We are really happy, I mean, to be able to truly improve user experience, onboarding to improve adherence to remote monitoring the patient. I mean, today we've got more than five million patients using our digital solution by today.
And the partnership we signed with Oura yesterday, I mean, last week, to be precise, I mean, is going to give us millions of additional data trying to better identify your drivers, your pattern for migraine with your sleep condition, with your temperature condition, your stress situations, or your hormonal situation. So that's where we are. So strong product verticals with science behind and patient understanding.
Thank you. It would be great to touch on capital allocation priorities. You mentioned that you provided some helpful metrics, but could you provide a little bit of additional information on how your priorities will support long-term value creation through capital allocation?
Sure. So if you look at our historically, our capital allocation policy or methodology has been, I would say, fairly well balanced between sort of investing in the growth of our business and then returning capital to shareholders. If you look at the last sort of five years, average, it's been about a 70%-30% split where we're investing in the business and 30% giving back to shareholders. You heard Stephan mention earlier about we're in the 32nd year of annually increasing dividends, which certainly is a part of that 30%, as well as buybacks, which remain the most discretionary part of our capital allocation program. Now, that's a split that we've sort of averaged over time, but certainly there will be years where we lean in more on the buybacks and a little bit less on the buybacks.
And so in 2025, we certainly did take a much more opportunistic approach in terms of share buybacks and bought back the greatest number of shares that we have, certainly when looking back into our history. And we did talk about at the end of Q3, we had about 270 million left in our share buyback authorization that we expected to fully utilize in Q4 as well as Q1 of this year. And certainly, we are on track to doing that. But just to go back, with all that being said, we are a growth company. We are a growth company, which is why roughly 70% of our capital goes back into investing in our business, and that's through organic growth as well as inorganic growth.
You saw in one of the slides that Stephan presented the TAMs that we play in and the growth rates of those, the market growth rates of those TAMs, and certainly, for us to continue to participate in that growth certainly requires investment, and so that's why investing back in our business will remain a key priority.
Thank you. And we're obviously at a healthcare conference, but it would be unfair and remiss of me not to ask a question on the other segments. Could you speak a little bit about beauty enclosures, some of the dynamics that you're expecting, and provide a little bit of perspective on how these businesses have continued to perform so well?
Yeah, so we've done significant renovation of the beauty business over the last seven, eight years. There was a business that needed to regain its competitive footing, and basically, we've taken out a bunch of costs, shut down non-competitive sites, created new state-of-the-art facilities, significantly strengthened our footprint in Asia, and that business is now in good fighting shape. A little bit unlucky last year with Liberation Day creating a lot of uncertainty for our customers, pulling back some of the launches that they would have otherwise made, but as I mentioned, we see good growth signals from the business already in Q4 and into Q1. Closures has done the same and more and has already benefited very much from being a much more competitive force and being in its long-term targets for a few quarters and certainly going to get there.
So we are really happy that this consumer part of our business is now in good fighting shape. And many things that first happened with consumers, I mentioned sustainability, really benefiting the whole company based on the decade we've spent in honing our sustainability jobs on the consumer side.
Thank you.
Thank you.
Thank you.