AptarGroup since the mid-2000s. Joining us today is Gael Touya, who is, as of September 1st, President and CEO. Congratulations once again. Mary Scafidas, IR. These sessions are intended to be interactive. To the extent there are questions in the room, please do not hesitate to ask. With that, I would like to just, Gael, maybe give you a moment for a quick introduction. You are nine days on the job, but you have obviously been at Aptar for a long time. Nobody expects a strategic overhaul this afternoon, but as you have prepared yourself for the new role, what are maybe two or three things as you look across the organization that are core to what Aptar is and non-negotiable in terms of, "We know we are not going to change this," if you will. Thank you.
Okay. Thanks, Gabe, and I am first pretty excited to be with you, so thanks for the invite. Nine days into the job and still alive, so good. As you rightly said, more than 30 years with the company in different parts of the organizations, all the three segments, working and living in different regions. I will share with you three elements. The first one being the customer centricity. I want us to continue to be perceived as the preferred partner for our customers and to develop this kind of very tight relationship. For me, that is not negotiable. I am not there to be a supplier. I am there to be a partner of choice with whom, as a customer, because we bring the right value proposition, expertise, and capabilities you are going to co-invest with. That is number one. Number two is innovation.
In that space, for me, innovation is one of the only sustainable competitive advantages of any company. For me, innovation is what will give you that ability to be perceived as a preferred partner. Number three, performance mindset, execution. I am coming with an earlier decade in pharma. When you play in the pharma space, you know that your quality of supply, your safety of supply is non-negotiable. This is the same for the other segments. When L'Oréal is waiting for a new product because they have got a new product to be introduced on the market, and they sign already with all the, I do not know, Sephora of the world that they are going to get product on time for their product launch. You better have, as a partner, to be on time with good quality product. That will be the three elements.
Me as CEO, cross-segment, I am going to be looking at where we need to really strengthen our leading position, but at the same time, where we need to look at course-correcting and to improve performance, and how we can unlock value across the organization.
Got it. On the Q2 call, you talked about visiting some factories and again, maybe some preliminary groundwork for setting the stage to step into the new role. You obviously ran Pharma, I think, since 2017.
Correct.
Maybe not as close with beauty enclosures necessarily. Again, not asking you to grade anyone, but as you're going through that process, and I guess in fairness, beauty has had a couple of stumbles here in the past couple of years, some of which were outside of Aptar's control. Just things that you're looking at within those two segments that you, like I said, maybe couldn't see from Pharma, that you're paying attention to.
Yeah. I started my listening tour, and I will continue. That listening tour is putting me in front of the business, at any level of the organizations, but also with customers and partners. What I will say for the two segments, there's a very strong technical capabilities. You've got people extremely committed and engaged for their business, and I had very interesting conversation around talent management, for example. People asking us to be way more agile and to accelerate some process decision approach. But when I look at the two business, there's two different realities. On one hand, beauty is outside our long-term target and outside their potential.
This being said, I've seen regions that are well within the long-term target, and I could say Asia is well within the long-term target, but also Europe. Knowing that Europe is our largest market from a beauty perspective. Americas is a problem. LatAm, for me, is temporary. They should rapidly be back on track where they should be. The number one problem for us is really North America beauty. I am not satisfied at all with the performance over there. And we need to be way better from an execution standpoint. Everything will come down to a, you set the expectation, you have got a culture of execution with discipline and clear accountability, and sense of ownership through the organization. That is what I have seen. Closure, they have been within the long-term target. They have been off, they have been within.
We need to be reliable from an execution standpoint, and we have been facing two problems for production ramp-up and the other one was for a maintenance issue in one of our main factories. Performance is a little bit lower than the long-term target, but the top line is there, the business category, the pipeline, and the mindset. For me, I am confident that they are going to be back within their long-term target.
Okay. Maybe we will come back to Beauty in a second. But I think you closed the second quarter call talking about three priorities. Profitable growth, you have talked already a decent amount about execution, so I think that is pretty clear, and then allocate capital. I guess what is becoming more evident to me over time is companies that consistently are profitable, they are capital aggregators, and then it ultimately rolls up to you to decide where that goes, reward shareholders, share buyback, et cetera, make acquisitions. If you had to kind of pick one today that is maybe been a little bit of a binding constraint looking backwards on, I will say, the Aptar value creation.
Yeah.
Which one would you think was kind of a little bit of a thorn?
Execution.
Yeah.
We don't control the weather conditions, but we need to control the way we navigate those different weather conditions. Beauty and Closures, two of them, they've got good fundamentals from a market standpoint. Market is growing, so we've got long-term relationship with customers. They want more of Aptar with more listening tour. We've got good technology. We need execution, guys. We need to make sure that through accountability, we need to make sure we lead with accountability.
We set the expectation, we control transparently the performance, and we deliver based upon our commitments. We need to move with agility. We need to simplify the way we work internally. We need to reduce complexity. We need to accelerate decision-making process. And we need to win through accountability. And we need to transform how to turn, what I will say, our great market position into a market leadership, what we have, but into sustainable profitability for the organization. Execution by far.
Love it. It's obviously a healthcare conference, turning to pharma.
Yeah.
Hopefully, this is one of the last quarters that we're talking about this emergency medicine destock issue. Last update, it was on track. We knew it was going to be about a $65 million to $70 million top-line hit, abating, starting to abate in Q3, mostly gone by Q4. Some of the data that I look at actually suggests the molecule has started to inflect positively from a scripts standpoint, and I appreciate that's not the only channel in which this kind of drug gets distributed. Any updates for us there funding-wise or just we've got line of sight, feel good about?
You've got a good public health support program. You've got good funding program that are critical to tackle the opioid overdose situation. We are on track with the $65 million to sell impact in the H1 and the remaining for the second part of the year. You know that we have to rely a lot on our customers because you don't have any public information. I can't go to a Nielsen and to buy Nielsen to get the sell-out of the product. It doesn't work that way because the number one market is public market interest.
When you listen to those different players, they are telling us low mid-single digits, so we have to track on that one. Early 2027, we're going to better know where the baseline has been reset up to build from. Fundings, public market interest, discussing with our customers, they are all trying to make sure that you've got, let's say, opioid overdose using our technology everywhere on the market. Yes, that's a $65 million top-line hit and margin-wise also, we are losing that contribution. Maybe I could share that we factor in early on this kind of navigating impact. If you exclude the margin from this emergency medicine, pharma margin went up.
Here also, I don't have magic recipe other than being disciplined on the execution and making sure that we prioritize, we execute, we deliver on time to make the overall machine more performant. I was very pleased to see that excluding emergency medicine prescription is at 8% in Q2. Injectable is at 9%.
Following two quarters where they were in the 20% because the market is growing and the market is asking for solutions. CHC has 15%, excluding emergency medicine, yes, the 711 Algorithm and that framework, still solid for us.
Perfect.
It is a long-term commitment.
I was going to go to the 7 11. What excites me, and we are overweight on the stock, and it is one of our favorite ideas as we sit right now, particularly given we want to lean into defensive names in the moment. Your model is a little bit unique relative to maybe some other folks that are here at the conference, or even packaging in general. You have talked about roughly 90% of your revenue is recurring and growing, and then you get the remainder contribution from the pipeline of new molecules, new product introductions, things like that. Can you talk about the magic of, you say we do not have a secret sauce, but there is a little bit of a unique strategy that you have or mantra.
When I come on that business back in 2017, we were what? $750 million. Good technology, but we were predominantly a product-driven organization. You need a product to dispense your solution for a specific route of delivery, nasal, pulmonary, ophthalmic, and so on and so forth. Here are our product. I mean, fantastic technology. So we have been keeping, evolving, and developing and strengthening our technology. Don't get me wrong. But the point was to gain flexibility in the value chain and to say, well, if 70% of all the R&D work is done by two person, one molecule, early-stage biotech company, maybe we could partner with those guys in the early stage of their development.
Then to follow the molecule from formulation, from analytical support, but also whenever they're going to face the FDA or any regulatory bodies. That was the decisions taken by then to say, yes, we're going to be on top of a drug delivery devices, a combination product player that will be able to provide formulation support for any drug to be repurposed through the nose or the lungs. From an analytical standpoint and the regulatory guide, they are raising the bar always. So we've got that expertise. We strengthen a lot our regulatory capabilities in order to support our customers to navigate such complexity. So when you are in the early stage, they're going to specify your product. They're going to generate data to demonstrate compliance, efficacy, safety to the FDA, and they're going to stay the course with you.
We went event a year ago, or a little bit more than a year ago, we went event to acquire the company doing clinical testing phase I and phase II, so the ability to work drug substance to fill the substance with our product for our customers to do clinical testing. Guess what? They stay with us. So the magic recipe is maybe to follow the molecule, to be the partner of choice, and to look at different ways to extract value with them. Why not? Instead of waiting ages to get your product on the public market, we can have fees for service.
Or we can discuss differently, saying, "Well, guys, maybe we would like to have a kind of biotech value extraction model. Why not for your different milestone payment? I am going to put resources to support your program. Phase I, you are successful, I want to cash in. Phase II, you are successful, I want to cash in.
Change of control, I want to cash in, because I have been supporting you, early-stage biotech company, to be acquired by a big guy. That is some of the magic ingredients, if I may say, not so magic, but that is making our value proposition so robust. It is one side. The other side of this magic recipe is we are a customer and a patient-centric organization.
Everything we are doing, we think patient. We have got user experience capabilities, how to onboard patients, how to remote monitor a patient in a world where the healthcare market is moving a lot from clinics to virtual settings or at home. How to support them. We bring this element of differentiation.
And we extract value from.
I'm an analyst, so I have to ask the question. You talked about maybe six or seven years ago, the change in mindset to maybe co-invest, but with some of those customers on the molecule, presumably you've got scientists on staff that are saying, "This one has a higher probability of efficacy than this one," or something like that.
Yeah.
Do you guys track, I suspect you do, the number of projects that maybe starting point indexed to some level, and now you're 200, you're up 2x on opportunities sort of in the pipeline, irons in the fire if you will.
We are.
Conversion rate, things like. Anything that, and a little off script, but I'm just curious if there's something that, since you're running Pharma.
How much we can share, I mean, to support the 711 Algorithm and so on.
Right.
That is something we are working on.
Okay.
Because when you listen to pharma company, they are going to openly share, "This is the number of phase I I have got, number of phase II. This is the readout for phase III that I am expecting," and so on and so forth. That is something we are working with Mary to improve the way we could disclose our pipeline because yes. We are very strict on our pipeline build and pipeline conversion.
We follow all the steps and so on. At the same time, because in many route of delivery, as we have got a leading position, I do not want to give indication to my competitor. That is where those Aptar guys, they are sniffing around. There is maybe something interesting.
What I will say, though, is that everything that goes through the nose, that goes through the lungs, we are behind any kind of development. We are trying to support our customers at best. This building of drug capabilities behind have been helping us to move from, I will say, kind of decongestants. You spray through the nose to treat a local issue.
Nose is running, your nose is blocked, you have got some allergies. Now we have got more and more through the nose to your blood system for different kind of products that you know of.
Yeah.
Tachycardia, edema for water retention problems, opioid overdose, severe hypoglycemia, and so on. We are also working a lot around the nose to brain. We all have a blood-brain barrier. This blood-brain barrier is protecting basically our brain. You take your pill, it goes through your GI tract. Only a fraction will go through brain for different kind of treatment. Through the nose, you can directly go to very specific part of the brain.
Yep.
That is where we are working to develop the science and the analytical capabilities to provide the support to all the early-stage biotech to work and develop their solution.
You mentioned a couple of drugs. I had it on the list. Enbumyst, CARDAMYST, neffy.
Yeah.
A couple of these products. I know it is difficult to say in terms of uptake and how physicians are going to adopt different drugs and treatments and things like that. Just as you look across the addressable markets, maybe internally, are there one or two drugs that you are more excited about today than maybe you were six months ago? Is kind of question number one. Then anything in the pipeline on the generic conversion opportunity, because I think that is unique again to Aptar as drugs go from patent-protected, generic, and then maybe over the counter, sort of the multiplier effect. If you could talk about that a little bit.
Yeah. The very first part of the. You have got two questions. Again, first question, I will say we are not predicated on any single drug.
Like to say, we hit a lot of singles or doubles, rarely home run. We are not against. What we are exciting about is really to see the attractiveness of the nose or the lungs for therapies to be repurposed from one route of delivery to another one, be oral or injection. That is one. There are some interesting programs. The adoption level varies a lot. The one way I believe we could have some potential success, I am still very big on, I am not going to name neffy, but the epinephrine.
You've got an anaphylactic shock. You need to carry your EpiPen. It's bulky, it's very painful. If you discuss with patient, you go to a restaurant, they don't have any EpiPen.
I hope they're going to carry a neffy somewhere or the new neffy is coming, and so on. I see a potential for scalability for that product. Now they see the success, and it will depend on the success of our customers. The second part of your question is kind of from originator to generic and from prescription to OTC. What would I say? We've got a long experience around moving drug through the life cycle.
Everywhere we are there to support our customer. With the originator on day one, if it's successful, it's going to attract generic company. This is the way it work. The generic company, they are all fighting to get the first-mover advantage because they know that they're going to grab most of the market share. A drug per se from an originator is going to lose a lot of market share after two, three years with a generic company. That's why all the big pharma, they are a lot discussing about loss of exclusivity.
That's why they are fighting hard to reshape their pipeline. We are the partner of choice for the generic because they want to be the first one, and they're going to work with, as much as possible, the originators. They develop their formulation. From a drug delivery standpoint, they're going to work with us also because we're going to support them to be in front of the regulatory guys to be approved. All the switch prescription OTC market. Yes, naloxone has been the first one to blur frontier, because it's a prescribed drug that was available over the counter. You've got additional drugs whenever it's critical to reach at scale number of patients.
There also, we have to be well prepared for the scale volume. So we have to discuss clearly with the customers, what does it mean? Because between a drug being prescribed and being over the counter, you multiply the access or the accessibility of the drug. So you have to discuss your supply chain resilience with your customer.
You have to a very tight connection with them.
As we learned during the pandemic.
Yeah.
Okay. I wanted to ask about something specific, I know it's sort of more in developmental phases and maybe difficult to comment. I think May, you announced a patent application, preclinical data supporting intranasal delivery for GLP-1. I think a lot of people are trying to draw a correlation or use you as a proxy for how successful West may be on the injectable side as it relates to GLP-1, but just maybe where that is in the stages. Sounds like early stage, but could be wrong. Then as you look at your drug delivery versus it being injectable, that seems like at least based on the script data that we look at, would be a pretty big opportunity. A way to scale it, think about it.
Right. Okay. First, whenever you deliver a drug through the nose or the lungs and so on, we want to be involved.
We are scouting the market, and we are scouting if it's starting somewhere in two person, one molecule, somewhere. We want to be their partner on the discussion. Because we have not seen any early-stage biotech, we are working on that one, we decided, why not us? Yes, we develop the formulations because we've got that capabilities. But the intent for us is not to go to commercial.
We know where we are, but we've got the ability to reformulate a drug being either orally taken or injected to be delivered through the nose. Which kind of excipient, which kind of can you characterize the deposition, the dissolution to the human tissue, how you build the analytical support on that one. We know this. The job is, well, let's look at that one. Let's patent that route of delivery, and let's shop around and to see whether some company could be of interest or not. Obviously, we spec our delivery solution. So that's also another way to demonstrate the kind of capabilities we have in terms of being a partner of choice for the market. Now, will that necessarily deliver GLP-1 be impacting the injectable space? I think it's not going to be on market before years. That's a long road.
Okay.
At first. We are very humble with that program. Very humble. But it demonstrate that we are more than just a device player, and this is what I wanted to demonstrate.
Mm-hmm. If I could add.
Sure.
Because this is really a capability that Gael started the services part. This ability to reformulate an injectable into something that is an easily deliver, respiratory delivered.
If you talk to the team, they say, "We usually wait for customers to come to us. They need formulation help. But if we see an idea now, why don't we reformulate it? Take it to maybe a phase I, maybe a phase II, and see then who might be interested in the market.
Yeah.
Right now, it's exploratory, right? Very early stages.
Yeah. That's a way to demonstrate the strength of your expertise and capabilities. In the asthma and COPD market, using our valve.
We've done more or less the same. You know, guys, that we contracted with the FDA, and the FDA is developing the guidelines for the new propellant switch because the entire market will transition to a new propellant with Aptar. Because we developed the methodologies and the clinical expertise, and we've got the formulation capabilities to be the right partner with the FDA to define the guidelines for new drug approval. That was not our job before. We were just a product player. You want my product, here my product. Now, you want my product, yeah, but I can offer way more.
Switching gears to injectables.
Yeah.
Last year, you completed, wrapped up, qualified a $170 million-ish investment in injectables. I do not know if you guys have talked about the, I guess, objective to maybe double that business over five to seven years, but just as you look across, again, the pipeline and thinking about just that market itself, the pace at which it is growing, can you lay out for us, you are fully done, you are qualified, selling product. Any new updates, incremental margins that we should think about there?
Yeah.
And then, as that utilization rate comes up.
Okay.
Maybe does that change anything?
Different questions. So number one, are we done with the big investment program? As we speak, the answer is yes. No more big bucks on the CapEx roadmap. This being said, within those big bucks, if we need to add additional lines and manufacturing lines, we're going to do it based upon the different programs. So number one. And number two, do we maintain our vision to develop the business for the next years? We share, we are confident, pretty confident to be in the high single, low double-digit growth. Some quarter would be better than others, and so on. That's directionally the comfort where we are. This is where we've been, Q2 at 9%.
That was a pretty solid Q2 2025, following two quarters where we've been at 20%+ . C onfident on that one because customers, first, the market is growing faster than the overall pharma market. The injectable segment, biologics, more sensitive type formulation, GLP-1. People are looking for a reliable partner to sustain that growth, and this is where we are. What was the last question? Margin expansion.
Yep.
Margin expansion, because our strategy is very much to focus around high-value products, where once again, we try to be the right partner and try to be selective on our market, to extract best value as possible. Remember, we represent a fraction of the overall drug product. So yes, we believe good execution, market segmentation, pushing a high-value product will contribute to margin expansion. Now you know that we share that prescription is the highest profit engine of the segment, followed by consumer healthcare, then Aptar Material Science, CSP, and then Injectable. But confident that we're going to move profit margin expansion from an Injectable standpoint as well.
Understood. Last one as we wrap up, and a little bit of a sensitive topic. I appreciate that, but intellectual property is the lifeblood of what you guys do. There is a couple of cases out there right now.
Yeah.
Maybe not necessarily anything specific, but any updates? I think that there was a case in California that got consolidated to New York.
To New York.
Mm-hmm.
So that is good, I think generally speaking.
That is positive.
But just maybe for investors that are worried about this or paying attention, is it possible that it is wrapped up in 2026? Too hard to tell? Can't say?
First, the decisions taken by the judge from our landscape is positive decision. Aptar strongly value innovation.
We are not there to be an expert in litigation. That's not the point. But whenever we believe that we have to defend our know-how expertise and IP, we will be present. We've done it. We are doing it. We're going to do it. I'm sure this is pharma environment is behaving that way. To give you now the outcome of those two cases for 2026, or to give you more color, I can't.
Okay.
For many kind of reasons, I can't share more.
No. Fair enough. All right. That wraps it up for today.
Okay.
Thank you very much. Great.
Thank you very much, Gabe. Okay.
Thank you.