Okay. Good morning, everybody. I'm Daniel Cohen. I'm a Managing Director at Morgan Stanley. It's my pleasure to host this fireside chat with the leadership of AptarGroup. AptarGroup is a global leader in drug delivery and active material science, the technology behind the nasal sprays, inhalers, injectables, and dispensing systems that get critical medicines to patients. Before I introduce the team, just the disclosures that I need to read. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. With me here today, Gael Touya recently stepped into the role of President and CEO, capping more than three decades at Aptar, and most recently leading the Pharma segment. Vanessa Kanu joined as Executive Vice President, CFO in January 2025, bringing a deep track record as a public company CFO.
Gael, Vanessa, welcome, and thank you for both for being here.
Thank you, Daniel.
Thank you.
for the invite.
Gael.
Yes.
Congratulations on this next chapter as CEO.
Thank you.
How should we think about Aptar priorities going forward under your leadership? What carries forward, and perhaps where will there be changes?
Yeah. Look, the first priority is really to execute on 2026, our commitment. No question. We need to deliver our best upon our commitment and at the same time prep the company for our future long-term growth. This being said, priority one would be to stay focused and close to the Pharma segment. This is the growth engine for the company. I'm looking for my successor for the segment, so I'm going to stay close to it because we need to keep on delivering where we are, and we've got a good business, a good pipeline, and customers expecting on our partnership with them. Then, look, I've been three decades with the company, but it's been a long time. I was a beauty guy or a food and beverage guy.
As we speak, I started my listening tour with the organization, so reengaging with customers, reengaging with the team, and visiting the sites. We've got a global footprint, so I'm starting. I will continue. Priority will be to make sure that from an Aptar standpoint, we allocate resources, energy, and our CapEx to the opportunities where we've got the greatest returns, value not only for customers but for shareholders.
Thank you. Vanessa, you've been with the company for going on two years now. Some of the market still describes Aptar as a packaging company. When you first looked under the hood and over the past two years, what surprised you most about the business, particularly about the economic side of the business?
Yeah. First of all, I definitely would not describe Aptar Pharma as a traditional packaging company. When I first joined the company, I have to tell you, I was very impressed by the breadth of the portfolio. So spanning everything from our proprietary drug delivery devices to our injectable solutions, to active material science solutions, to the services that we offer, going from formulation expertise to development support, regulatory support. I'm sure we'll talk a bit more about those services in our discussion. But when you look at the breadth of the portfolio and you look particularly at the products that we offer, these are products that are very technical, highly regulated, where safety, quality are super important. Very important, because we cannot compromise patients' lives.
This is where our technical expertise, our intellectual property, and our decades of knowhow in this space really do form a competitive differentiator, so to speak. You do see that in our margin profile. In the Pharma business, our EBITDA margins, I should say, are 32%-36% is our target range, and we have consistently been in that target range. These are EBITDA margins that are best in class. I would say it is really more reflective of a differentiated technology platform than a traditional packaging business.
Not even simply a component supplier either. There is more of a platform-
Absolutely
wrapped around that.
Absolutely.
Maybe just to talk a little bit about the transition. Obviously, you have been, Gael, in the job for a couple of weeks now. Stephan would say, I think was known for saying, "If it goes through the nose, Aptar is involved." Is that still how we should think about Aptar or-
He was making a comment for Aptar Pharma, and I will say it's a colorful way to describe the group. In the pharma space, we are way more than a component player. That was one of your questions. Nine years ago, taking over the segment, this is all the work done to transition from a strong product vertical where I believe we've got the best-in-class drug delivery solutions for the nose, for the lungs, for ophthalmic or dermal type application. We added a lot of capacity in order to make sure that we could become the partner of choice of customers. It does require that you start as soon as possible in the drug development program of our customers. Then you follow the molecule.
We've got, as we speak, nine years after, the ability to do formulation strategy, formulation development predominantly for the respiratory tract, and then to add the analytical support, the regulatory expertise for our customers, big, large, and all the early-stage biotech company to be in front of regulatory bodies and to be approved. I would say we are way more than just a component. We are really part of the overall drug development program with our customers. With a lot of humility, we know where we stand, where we can support them, when we can de-risk and accelerate their drug development program. More broadly, Aptar is not only a pharma player. We are a long-standing relationship and a very strong competitive advantage in beauty, in food and beverage. Everywhere where you need to protect formulation and dispense complex formulation, Aptar is the partner of choice.
This is what I'd like to emphasize, the proximity, the long-lasting relationship with customers because we know how to solve their most complex dispensing challenges.
Do you see, given your recent tenure leading that pharma business, do you see opportunities in your new role to bring some of the learnings or some of the expertise from pharma to the other parts of the business?
Yeah. One of the learning, if you really want to be a partner of choice, and if you want to be, let's say, mission-critical for your customers, you need to bring way more than just a dispensing platform. You need to create value beyond products. So from components to integrated solutions, to service capabilities, digital support, where you're going to be supporting your customers during their development program and whatever the kind of development program. The objective is for us to become the most trusted collaborators, where we're going to be part of their success. So depending on the business categories, we will have to create that value beyond just a technical platform. I could mention, for example, in the beauty world, you've got a lot of evolutions around the nature of fragrance without ethanol and so on and so forth.
How are we going to provide them the maximum support to find the right solution? I was with L'Oréal not long ago. They've got a segment called dermatological beauty. L'Oréal is the number one beauty player in the world. They were talking prescription, patients, this blurred frontier between the pure skincare and the consumer healthcare, where to navigate. The CEO of L'Oréal was telling me, "Gael, you've got the unique expertise where you can really support a skincare player to transition to become way more an healthcare player where tech and science are so critical because consumer, at the end of the day, we are patient and consumer at the same times, we want effective results.
Thank you. Maybe turning a little bit to diving into the business a bit. The last 18 months there's been some volatility in the business. Could you talk about that, reflect on that, and perhaps how you think about the longer-term
Okay
7%-11% pharma growth rate I think that you've put out there?
Correct. Yeah. If we step back, the last nine years, we have been growing at top line at a CAGR growth rate of 9%. But in the last 18 months, we have been facing some volatility, and that is due to the emergency medicine. You know that we are a strong partner of the opioid overdose issues on trying to make sure that you have naloxone drugs all over the place in the U.S. And this market is facing inventory readjustments. So we qualify the kind of negative impact we are going to face in 2026 with a $65 million top line impact. And obviously, we are losing the contribution for. We are trending pretty in line with what we share with you, and we are very close to our customers. So we believe by early 2027, we will know where the baseline of this market will be.
This being said, if you look at our Q2 results, excluding emergency medicine, that is a major impact. The pharma segment grew by 8%. If I look at the different divisions, injectable grew by 9%, and Q2 2025 was very solid. So comparison way of challenging. Following two quarters with a +20% growth rate. Consumer healthcare done +15%. Prescription, pharma prescription excluding the naloxone impact, the emergency medicine impact at +8. Beyond your question, should we change our framework and the algorithm? The answer is no. The 7%-11% long-term growth remain the framework we believe strongly. Market conditions are good. The overall pharma market is growing. Some segments are growing faster than others. Then you combine or you accelerate that growth with your innovation and with your pipeline build and pipeline conversion.
One example. The cough and cold market has been quite challenging for us. The growth rate is GDP plus. You have the ability to accelerate that growth thanks to your innovations, because you are going to convert some dispensing solutions to your innovation. This is what Haleon, one of the leader in the market with Theraflu in the U.S., or Otrivin outside of the U.S., is grabbing significant market share with our new innovation. So that is where natural market growth accelerated by innovation, and innovation critical for us, and the pipeline build and pipeline conversion make us being confident with the 7-11 long-term targets.
Great. Just a question on margins. As your pipeline expands into other therapeutic areas, cardio, neuro, and biologics, how does the margins of that business compare to existing margins?
We share with you, we have got four divisions. Prescription is the most profitable division of Aptar Pharma, followed by consumer healthcare, active material science, and then injectable. The nose-to-brain or the central nervous system type work we are doing work by the prescription division. To give you some color or maybe some indications about potential margin expansion for this pipeline conversion, part of the pipeline conversion. That is why we are comfortable with the 32%-36% profitability range. What would I characterize for you? Years back, Aptar Pharma entered the nasally delivered drug to treat local issues. You have got your nose running, you have got your nose blocked, you have got your allergies. But in the last nine years, we have been working a lot in order to use the nose as a different pathway to treat chronic disease, to treat emergency disease.
This is what we see with naloxone being one example. You take BAQSIMI for severe hypoglycemia, you take SPRAVATO for depression-resistant treatment, you take NAYZILAM or UCB for severe, I would say, epileptic seizure, or epinephrine with neffy. The more and more you are going to use the nose as an alternative pathway for chronic and emergency treatment. Part of the pipeline is more and more for the nose-to-brain, where we are working actively with different scientific organizations in order to characterize the science behind the nose-to-brain delivery pathway. We published yesterday a joint collaboration with the Massachusetts General Hospital. What is the job there with them? It is to characterize the pathway to understand the kinetics of the drugs moving from the nose to go through the brain and to avoid the blood-brain barrier that is highly protecting every brain. We are characterizing the science.
We want to evaluate different compound or different potential candidates to go through the nose for CNS treatment, and that is the work we are doing, and that the quality of our pipeline. That is why we were indicating with Vanessa, we are not just the component, we really play with them to understand the science behind, to understand the regulatory standpoint or to build the regulatory with authorities and the analytical science. The objective for us is to demonstrate to the hundreds of early-stage biotech that nose-to-brain might be a very interesting delivery pathway.
Can you talk-
If I can just add, because I wanted to make sure we hit your margin comments also. Just to complement what Gael was saying, the pipeline is very diversified. If you look at the weighted pipeline in terms of what does it comprise, it's respiratory, it's biologics, it's the systemic nasal drug delivery that Gael's talking to you. It's injectables.
Ophthalmic
Ophthalmic, et cetera. And the reason I really wanted to complement Gael, to add that on, is because it's not going to be any one molecule, any one therapeutic area, any one delivery route. It's very diversified. And when you think about the top items there, these are the highest margin parts of our portfolio. So when you think long-term margin profile, which is where you're going, it is well-supported just based on what is in our pipeline today. And the weighted value actually skews upward.
One other exciting area of pharma is the GLP-1 space. Can you talk about the opportunity in intranasal or pulmonary delivery and if Aptar's playing a role there?
Our business model is customer-led. We work with pharma company, we support them to accelerate and de-risk their drug development program. In the space of GLP-1, everybody's focusing on injection and overall, we participate to that growth. But nobody was really moving there. Because we've got the capabilities, we said, "Hey, why not taking an API and working around the formulations to a nasally delivered GLP-1 or to look through the lungs?" We've got the formulation capabilities. We've got the technical platforms capabilities. Why not doing this? So we've done it. We find the pattern and so on. We're going to be looking whether we can partner with some companies, because we don't look at going to the end. That's not who we are. And that was also a way, Daniel, to prove our thought leadership.
Whenever it goes through the nose or the lung, we are more than a component, and we can really support you guys in your drug development. Will GLP-1 delivered through the nose will be a new, huge administration pathway? I don't know. It's a good example of what we can offer. Let's look pragmatically speaking, how can we support a biotech, a big company that could be interested by the work we have done, and let's look at that one. There's many cases when you think about Envimist, where we work with the lab. When you do excess body fluid, you can take your pill, or you go to the hospital and you've got an IV. We work with them to say, "Maybe you can have a treatment through the nose." So that's the same principle. How to support customers whenever they consider potential alternative pathway.
Sounds like some of that early work may start on your own, but you will look to partner that with the customer.
Ideally
Very early.
We want to start with early-stage biotech. How can we support you? Obviously, the earlier we start, the earlier we're going to spec our drug delivery platform. Once you start generating data, and if you do a good job, and you are a true partner of choice, you're going to continue in the course of the development. Then you look at your revenue extraction model being slightly different. Fees for service, but why not also extracting your fair value from the work you are doing through access fees, milestone payment, change of control, and why not drug royalties? So, that's also a way to strengthen our pipeline, have a defensive mode around our product, and to generate different revenue streams.
Got it. Maybe talk a little bit, because you do play across the life cycle of a drug. Maybe talk a little bit conceptually about how the economics for Aptar evolve as a drug goes from brand to generic, maybe to OTC. There is evolution that is going on in the respiratory market with the new propellants. How does that all interplay in your business?
Okay. We are actively focusing on the life cycle management for our customers. You are right, a drug will start with an originator. Some years after, you are going to get generic players, and maybe the regulatory bodies will say, "From prescription, we can move OTC." This is what happened with naloxone, with Emergent, the originator. This is also what happened with many customers with whom we are working. Our algo is 90% of our business is really with the natural growth of the molecule, the ability to support this life cycle management, and to provide support to generic company to enter that space, and they are working with us. The additional growth sweat will be really back to this innovation accelerator to convert additional market to our solutions and the pipeline conversion.
In the example of the new propellant, the world is going to switch from current propellant to a new one, having less of an impact to global warming. The entire world is going to change. Where Aptar is playing a role is to define the right technical platform that is going to be compatible with the new formulation, because the formulation with the new propellant will behave differently. How to make sure that we are going to be fully compliant, number one. Number two, the regulatory pathway might be different, and we are, Aptar, working with the FDA in the U.S. to define the guidelines for pharma to come with an approval for a propellant switch, because at the end of the day, it should be fully compliant, fully safe for the patient. We are supporting our customers there, not only with the device, but with the services.
That is our business model, this from formulation to patients.
Then maybe just turning to the injectable side, I think there's also an evolution, particularly in Europe, with respect to Annex 1-
Correct
compliance. How does that impact you?
The European regulatory agencies are raising the bar. The Annex 1 is really a requirement for all players in that ecosystem to be more, I would say, in line with the best product to be delivered on the market. We are fully compliant with Annex 1, number one. We raised the bar everywhere in our different manufacturing sites. We've got a good pipeline built with Annex 1 because all our customers should comply with the regulation, and they are looking at partners, Aptar being one of them, to make sure that we've got the organizations to be in line with Annex 1 in order to give them the comfort that Aptar is the right partner to be fully Annex 1 compliant. That's a good pipeline build for us, and that's where we are fully committed to.
Got it. Maybe, Vanessa, just talk a little bit about balance sheet. Aptar has relatively low leverage as a company, low amounts of debt. How do you, as a management team, prioritize returning of capital, organic investment, and M&A, as you look to the future?
Yeah. We have a very strong balance sheet, as you've pointed out. We have discussed our leverage corridor being between 1x to 3x EBITDA. Think of the leverage corridor as the range of leverage that we would expect to be within, under normal steady state conditions. If we went above 3, we would expect to delever back down to be in that range. If we went below 1, we would expect to get back within the range. That's our corridor. As of the end of last quarter, we're just under 1.5 in leverage. So low on the leverage scale, as you mentioned, which gives us a lot of flexibility.
In terms of how we deploy capital, in terms of our priorities, our first priority is always to invest in the business, in R&D, in innovation, digital technologies, capital investments that will help to not only sustain the business but also drive profitable growth and obviously returns. That's always the first priority, organic and inorganically, in terms of where we deploy our capital. Then once we have done that, we obviously then prioritize return of capital back to shareholders. In that vein, we're actually very proud of our dividend program. We are in 32 years of annually increasing dividends. We do participate in share buybacks. I would say that is the more flexible, discretionary part of our capital allocation framework.
Although, if you look at the last 18 months alone, we've returned about $700 million of capital just in the last 18 months to shareholders, roughly $180 in dividends and the rest being in share buybacks. We've been pretty active on that front. What I would say, just to your question about looking forward, is what you can expect from the management team is to continue to prioritize those opportunities where we see that, of course, we're going to generate significant returns to the organization and ultimately our shareholders.
We've talked about Aptar's exposure to a lot of different therapeutic areas, modalities, whether it's nasal or pulmonary, ophthalmic, injectable.
Yeah.
You're at the kind of beginning of a new journey. If you look out three or five years, where would you expect to see the most exposure impact to your business? In addition to the modalities, there's also therapeutic areas that we talked about that's pretty wide-ranging. Where would you prognosticate into the future that will have the biggest impact?
From a pipeline perspective, I would say three years, I don't know whether this is a good indicator. You know that in pharma, everything is taking a little bit longer. All the work done around the nose-to-brain is pretty exciting. Building the science, building the analytical framework to support the company. When you think about some neurodegenerative issues, with the Wake Forest University School of Medicine last year, we published a joint research and demonstrated that nose-to-brain, we've got a way better deposition rate of insulin than taking a pill or an injection because you need to bypass the blood-brain barrier. There's a lot of very interesting tractions where not only this is a new pathway, but also the technical platform being different because you need to have a different delivery mechanism. That's one area of interest.
Obviously, all the SNDD chronic disease treatment through the nose, through the lungs. We are working a lot around biologics as well. That could be an alternative pathway. We are pretty excited to continue the work in the injectable space. In the injectable space, we are a component player. We have to be clear there. We supply stopper, plunger for pre-filled syringe or needle shield protection. We provide a certain level of services behind, and we participate in full to the growth of that market. It's strategic for us, but I want it to be fair on that one.
We see the injectable having a lot of potentials because the market is looking for good, reliable partner working with them for biologics trends, for Annex 1, having a global footprint that we invested a lot in order to be present in China and the U.S. on top of Europe. We're going to be pretty exciting looking at injectable moving up. It's going to be a lot already. Helping the market to transition to the new propellant. We are also investing a lot for through the lungs, for the lungs with biologics, larger molecule that does require different kinds of formulation and different kind of drug delivery, high payload system. We are actively working on this.
Well, I think, look, this is a healthcare conference, so we have spoken a lot about the pharma business. So appreciate that. What certainly comes across is, and perhaps is underappreciated, is how deeply embedded Aptar is in the development and delivery of critical medicines. So both from a component supply standpoint, services as well. So that certainly came across in your remarks today. Any final thoughts for you, Gael?
I will add something. We have not discussed patients, but that is maybe something that is underappreciated. Everything we are doing at Aptar is patient-focused. When you look at the developments, we are offering user experience back to our customers, the ergonomics about a product. We are providing human factors to our customers. We are providing onboarding solution. The complexity of the world and with the shift from clinics to at home or to virtual settings, very challenging for new patients to onboard and to have a good adherence rate. So we are working a lot on many times where you have big players, Aptar is the one in the room with their commercial and their business development team to discuss patients, because we do understand how the patient is going to behave and what kind of onboarding solution.
We have data showing that the better you are onboarding, the longer you stay the course and the sooner you are going to refill your script. Last, all the digital elements. We have patient communities, for example. We have an app that is used by over 3 million patients on a worldwide basis for migraine treatment. So how to track, how to understand, how to improve potential issues. We have this patient community. We are operating on behalf of Biogen. We are their operator from a digital standpoint. So I truly believe that better understanding a patient in his environment, better supporting remote monitoring, having patient community, is helping really to position Aptar as a trusted partner with companies, not only as a drug delivery expert, having the ability to provide formulation, analytical, and regulatory support, but also to put the patient at the center of everything.
On that note, thank you, Gael and Vanessa.
Thank you very much.
Thank you.