Great. Good morning, everybody. We're gonna cover life science tools diagnostics here for Barclays. With me, I have Eric Green, CEO, and Bob McMahon, CFO, and we have John Sweeney over there as well. I guess we can just kick off. You guys, a little bit of a little press release last night. Just kinda walk us through, you know, the decision, the strategic plan here, and how you feel like you're leaving the business off to the next generation, if you will.
Excellent. Thank you, Luke, and again, thank you for the invitation for Bob and I to participate today at the healthcare conference. Fantastic venue and turnout. Last night we had a press release. It was to describe my intent to retire once we've identified the right successor for West going forward. I had the honor to be the CEO of this great company for the last 11 years, and it's been a personal decision on the next stage of my life. You know, timing was important for me personally because you come really close to the organization, but it's the right time when you think about West is in a very strong operating position in the market.
I think our strategic direction that we're going is extremely clear, and it's informed by the macro trends that are occurring in the industry. Again, we're very well-positioned for that. Third, I have to really say that we have a phenomenal executive leadership team that's been in place. We finalized it last year. Obviously, my colleague to my left here, Bob, has been added to that list. We do have a very, very strong team that can continue to execute for a number of years to come. It was the right timing, and also we wanted to make it public, working with the board, so that we have the best opportunity to bring in the next leader, the seventh CEO of West, for this fantastic organization.
I will be here clearly full pedal down until we have a successor appointed and smooth transition, and then we'll go from there.
Okay. Internal, external, both on the table at this point?
Well, we are gonna engage with the external executive recruitment firm, and we'll be looking at this holistically, taking the opportunity to see what's in the marketplace today. I think we're taking the right approach.
Great. On those macro drivers and kind of where you're leaving the business right now, you know, significant GLP1 ramp across the market, the elastomer business, high-value components, right? You just have a lot of good growth drivers right now with biologic coming back, biosimilars. You know, like I said, there's a murderer's row of good things coming from a tailwind perspective. But as we think about the near term and some of the noise or headwinds that we always get asked about, like orals on the GLP1, so given the size of all your business, plus the shift to the multi-dose side. Like, walk us through how you see and think about this stuff longer term playing out within, you know, the next two or three years.
Yeah. Well, first of all, I'll start and then Bob—
Yeah. Sure
…you can add. I think we need to stay the course. You absolutely articulated very well the macro trends when you think about IV to subQ. We're very well positioned. They're not just in the wearable space, but the auto-injectors and multi-dose pens because our components are necessary for those devices to function properly, the primary containment. You think about the rise of biologics and biosimilars. We benefit West here in that category with over 90% of new approvals, West participates on those new approvals. You think about the onshoring effect that's happening in North America. There isn't another firm in this space that has the footprint we do to best support our customers across the whole globe with our 25 manufacturing plants.
You also think about the rise of the GLP1s and our criticality of West to participate in multiple modalities, whether it's in a vial, auto-injector, multi-dose pen, configuration. We participate in all of the above, right? To start off, the macro trends are very favorable.
Mm-hmm.
For us. These are long-term trends that we can drive. I think specifically around the GLP1s, we're in a very formidable position. We're able to support the current customers in the marketplace. We do think that growth we'll see into the end of the decade to build support because the market is still new. It's still growing. Orals is bringing new patients into the market, so the market is expanding with orals versus cannibalizing, we believe. We also hear that publicly from our customers. We're very well-positioned to support that growth. Bob, you wanna add?
Yeah. The only thing I would say is, you know, as you think about the clinical pipeline for GLP1s, there's a lot of exciting opportunities that are continuing to come. You know, we're really in the first generation of these products right now. As we think about throughout the course of the rest of this decade, we are expecting GLP1s to continue to be higher than the company average growth. Now, not at what we had in 2025.
Yeah.
You know, what we're seeing is a kind of a convergence to that HVP growth rate of high single digits to low double digits. Given the penetration, the increasing access today, as well as the upcoming biosimilars and generics, we think there's gonna be a significant expansion of market opportunity for GLP-1s. You couple that with all the other growth drivers that Eric was talking about, including things like Annex 1 as well, we feel we're very well-positioned. As that market expansion, as you think about like GLP-1s going generic and pretty sizable markets.
Yes
Let's just say, put it lightly. You know, how are you guys thinking about, like, where are you positioned there? Is that your HVP components, or is that gonna be standard components just as you're thinking about the generic opportunity?
Yeah. It's interesting. In the biosimilar space in generics, many of the new approvals are using our HVP portfolio. Which is exciting for us. As you think about the biosimilars for the GLP-1s particularly, you think about China, India, Canada, Brazil. I think now in Turkey, these are all markets that we play in.
Mm-Hmm.
The expectation is for us to continue to have participation. We can leverage our existing assets to be able to manufacture those products very similar to the branded GLP-1s in the marketplace. We do have the capacity and the capability to support our customers in that. It's an additional growth driver for us in that category.
Okay. As you see that playing out from a single-dose versus multi-dose. Like, I guess, how do you see that playing out, I guess, is the question.
Yeah. We see that it's historically multi-dose is quite prevalent in the European-
Mm-Hmm.
…markets, not so much in the North American markets. You know, just to give you a little bit of background, we do have a great lens on what type of delivery devices are being used in the market because of our contract manufacturing business. As you recall, we have expanded significantly in Grand Rapids, Michigan. We also expanded in Dublin, Ireland, just for those types of products. These are installed capacities around auto-injectors and multi-dose pens. We have a lens, and they take about two to three years to get the assets up and running and start commercializing. As you think about the next three, four, five years, we do have a lens what type of demand is starting to be installed.
There will be some multi-dose pens in North America, but it's the auto-injector will be the dominant delivery device, we believe, for the rest of this decade.
Okay. From a demand or order perspective, like, how much lead time do you guys need outside of the contract manufacturing? Is it like, do they order with you every two, twice a year, or is it like almost as a just-in-time basis?
Yeah. In the GLP-1 space, specifically, it's pretty consistent with other therapeutic classes with other drug companies, particularly larger blockbusters. We have a lens of multiple years, but then we have an ongoing regular, monthly, sometimes weekly discussions adjusting forecasts. Our lead times could anywhere between, you know, 10-14 weeks for manufacturing of a High-Value Product, sometimes a little bit longer. All that's taken in consideration when we look at our order book with our customers. That conversation is active, it's dynamic.
Hmmm.
…because the portfolio of our customer might shift from one molecule to the next, but still in the same category, and we're able to pivot and support them as we go forward. Overall, the demand continues to increase.
I think the other thing, Luke, that's important and exciting about our manufacturing footprint is, you know, our assets are fungible. You have the ability to pivot products in the manufacturing facilities depending on what our customers need. Our customers also know that it takes two to three years to get a piece of equipment up and running. We do have those long lead time. They're not POs, but forecasts to help us inform what our capital forecasts are gonna be looking like as we look at our manufacturing network. On a more frequent basis, we do have those updated supply plans, and we're able to move things around to manage and ensure that we're delivering to our customers.
With that in mind, in 4Q, there was a supply-demand issue in Europe. Can you walk us through what happened? Also, is there a risk that secondary or tertiary suppliers took some of your share? Will you get that back?
No, the risk is low. We are working closely with customers to adjust lead times and deliveries to support their campaigns. In 2025, our German plant faced a labor bottleneck—not an asset issue. After COVID, we adjusted resources and are now in the ramp-up phase. The momentum with new team members coming on-site is strong.
Demand is also increasing at other high-value product locations in Europe and the U.S. The issue was a faster ramp-up of demand than anticipated, which we are resolving.
When comparing Q4 to Q1 2025, plant output was significantly higher. We have been ramping capacity—it’s a good problem to have: demand is growing faster than supply. We are adding resources to satisfy that demand, which remains in our order book. We expect normalization in 2026; it’s not lost business, just a larger backlog.
Hmmm.
... has increased even faster than supply, so we're actually adding additional resources into that plant in order to satisfy that demand. As Eric was mentioning, that demand is still in our order book. We expect that to normalize throughout the course of 2026. It's not lost business. It's just, you know, a greater than expected backlog coming into 2026.
At what point will more resources be needed?
If demand continues to grow faster than forecast, will you need more CapEx? Can you talk about the runway for that?
Most demand comes from our High-Value Product plants. From an asset perspective, we have capacity. The effects you see are due to the biologics and biosimilars ramp-up, the GLP-1 ramp-up, and Annex 1, which relies more on HVP finishing processes.
Mm-Hmm
Assets are mostly in place. Based on Bob and team’s capital plan, we are comfortable at 6%-8% of sales for facility CapEx, with a portion allocated to HVP components.
Mm-Hmm
About 60%-70% of spend is growth-oriented; the rest is infrastructure and maintenance. Past investments, especially during COVID, make many assets fungible.
Yeah.
HVP processing used for COVID vaccines is now available for Annex 1, biologics, biosimilars, and GLP-1. Constraints were mostly labor, now normalizing. The 6%-8% CapEx corridor will support comfortable growth.
Also, there is a trend of onshoring, moving production from Europe to the U.S. We are transferring some formulations to U.S.-based plants to reduce tariffs and balance capacity. Capital expansion will continue, but not drastically.
Mm-Hmm
You know, moving out of places in Europe into the US, and we actually have more capacity in the US. We're actually working with our partners and the customers on actually what we call a tech transfer. Actually moving some of the formulations out of Europe into our US-based plants. That does two things. One, it helps reduce tariffs and do the local for local, which is what our customers really want. It helps to level load our capacity. We think we're well-positioned to be able to do that. We'll always continue to invest in capital expansion, but I don't foresee a huge capital expansion.
Yeah
Like we saw during COVID, at least in the next several years.
Thinking about non-GLP-1 HVP products, your guidance seems conservative considering the 4Q jump. Can you walk us through upside and downside factors?
Our guidance is prudent to start 2026. We expect 5%-7% top-line growth, mostly from HVP components. About 80% of growth comes from non-GLP-1 products. We have bias toward upside, especially for GLP-1s, which are only growing 10% at midpoint.
We expect more than 10% growth for GLP-1s. Demand in non-GLP-1 businesses continues to grow, setting us up well for 2026.
As we walk down the P&L, I'm thinking about the margin side.
Yeah
of that, considering that ramp or kinda sustainability.
The beauty of the business today is our high value products helps with product mix, as I mentioned. So we've built into our guidance greater than 100 basis points of margin expansion. Some of that's as a result of, in the second half of the year, the divestiture of the Smart Dose business. But a lot of it is also just the fundamentals of mix and then being able to fill the factories. And so the nice thing is as you get more and more product through these factories, given the fixed asset base, it actually drops to the bottom line quite nicely.
And on the SmartDose sale, it's talking about that being in the second half. You walk through the strategic optionality and full review on that one, kind of walk us through why better as a sale, from a margin perspective, is it just you couldn't get it up to where you guys needed? And then we kind of assume basically, if the sale happens, let's say, June 1, right in the second half,
Yeah.
probably about a 20 basis point tailwind to a margin, we're thinking about that right for the year?
Yes. Full year closer to 40%-50%, or 50 basis points in the second half.
Yeah
50 basis points in the second half of the year. Your math is good as usual.
The strategic rationale: early 2025, focus was driving costs out and improving profitability for SmartDose 3.5. The team made progress via lean initiatives, automation, and quality improvements. The market for 3.5 mL is limited; larger auto-injectors are taking share. Our decision allows focus on larger scale, using lessons from past products.
Mm-Hmm
Wearable market is larger. The 3.5 mL device supports important customers, adherence, and ease of use.
Strategic decision: divest 3.5 mL, focus on larger scale with new technology, more molecules, and better economics.
Mm-Hmm
Larger market, more customers, more molecules that are in the marketplace today. We'll continue, but we'll be very focused on making sure it's the right economics for West. We're not gonna repeat what we have done in the past.
Standard Products: legacy business. As HVP and Annex 1 roll out, HVP will become standard. Any strategic reason to keep legacy business long-term?
Yes. There will be a natural transition from Standard Products to HVP. Our innovation and R&D group is focused on next-generation products, extending the HVP curve. We’re also launching total combination devices like Synchrony, which we’ll set aside for now. The strategy is to elongate the HVP portfolio and add services and capabilities. For Standard Products, particularly proprietary and primary containment, over 70% of volume is Standard Products; the rest is HVP.
From a revenue perspective, it's inversed.
Okay.
And so you can't assume 100% of the standard will become high value products. Not all Standard Products will become HVP. There's several products in the marketplace that aren't, they don't have that regulatory aspect to it as, as, as we've been talking about Annex 1, but majority do. And so this Annex 1 regulation change, regulatory change has been a one catalyst that we think will be multi-year it'll expand. So what we're saying today is out of about 25, 26 billion components we've produced that are standard products, roughly around 6 billion of those components are really targeted as a great candidates to transition to HVP to remind everyone, these are existing drug molecules in the marketplace today.
As we transition to whether it's Envision, inspection, washing, and sterilization, the original drug formulation remains intact. This avoids reopening the FDA filing process, making transitions easier.
Yeah.
This creates better economics for us, higher quality for customers, and keeps drugs on the market longer. As regulations evolve and customers consider global portfolios, the $6 billion target will grow. Currently, just over 10% of that has converted into commercial revenues. The runway is long, and our HVP processing assets are ready.
Thinking about the 2026 guidance, approvals are coming slower in Q1. How does that factor into your growth trajectory? What assumptions are baked into the guide regarding mid-single-digit approval growth?
Is this more of an out-year headwind if the trend continues?
Yeah. One thing to take a look at.
Go ahead.
I'll start here.
Yeah
If you focus on biologics and biosimilars, there were over 55 approvals last year.
Mm-Hmm
Approximately there, and our participation is very, very high. That's still very healthy. We're really confident, but that's more long term.
Mm-Hmm
It takes a while for that to ramp up. I don't know if you want-
Yeah. I was gonna say our you know Luke our guidance for 2026 isn't dependent on the number of approvals.
Okay. Got it.
I think that's more of a long-term opportunity for us. As we think about it, and again, it's not just the U.S., we have to look globally because we are the global leader there as well. We feel well positioned.
Yeah. Okay.
Had to ask it. Thanks.
Excellent.
Great. Thank you.
Thanks, Luke.