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

Eric Green: Yes. So those issues are resolved. The team did a really great job to resolve the issues and get our manufacturing facilities back up online. Fully validated, characterized and be able to support commercial production. That was done in, I’d say, mid part of Q4, a little bit later in that part of the quarter. So we’re full out right now in Q1. And I’m excited that we have that at this point to allow us to get some of the backlog caught up in the early parts of this year.

Operator: Our next question comes from the line of Jacob Johnson with Stephens.

Jacob Johnson: Congrats on a nice quarter. Maybe kind of following up on that last question. Just Bernard, as we think about how the year plays out, anything you’d highlight in terms of seasonality or kind of margin progression, revenue progression throughout the year? And maybe along those same lines, can you just remind us when you have the toughest comps from COVID that you’ll be lapping from 2022?

Bernard Birkett: Yes. So I think from a cadence perspective, going back to what we would have seen kind of pre-COVID where first quarter is usually a little bit lighter, picks up a bit in the second quarter and then levels out in Q3 and Q4. And from a comp perspective, I think a lot of the COVID revenues we would have had would have been in the first half of 2022. So that’s where, I won’t say challenges, but that’s where the biggest comps are going to be from that perspective, and then some in Q3 and then obviously lighter in Q4.

Jacob Johnson: Got it. And then on contract manufacturing, nice to see a return to growth there, uptick in revenue in the quarter. I think gross margin was down sequentially. Can you just hit on what drove both? And maybe related, you’re pointing to, I think, pretty robust growth in 2023. Were there some investments you’re making for this year and kind of again along the same lines, what’s driving the growth in that business in 2023?

Bernard Birkett: Yes. I think as you’ll remember, when we were talking through 2022, a lot of the challenges we face within contract manufacturing is really around 1, 2 — 1 customer mainly and a shift in their business. And so as that kind of have tailed off towards the back end of the year, it allows us to be able to return to growth. And then we actually saw demand increase from our existing customer base probably a little bit ahead of where we would have anticipated going into the fourth quarter. So that was again positive to see. And what we would expect as we move into 2023 that we will be seeing mid-single-digit growth for our contract manufacturing on our existing business and then layering in new business at the same time. So we continue to make some investments in that area.

Operator: Our next question comes from the line of Paul Knight with KeyBanc.

Paul Knight: The question is, I touched on it, I guess, is COVID probably starts flow then they manufacture more product Q2, Q3, right? And then less in Q4. That’s the question one. And then the other would be regarding this prefilled syringe market is that really what you’re seeing as biggest opportunity right now?