West Pharmaceutical Services, Inc. (WST)

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West Pharmaceutical Services, Inc. (WST)

Barclays 2013 Global Healthcare Conference Call

March 14, 2013 9:30 AM ET


Bill Federici – VP and CFO


Elliot Feldman – Barclays


Elliot Feldman – Barclays

Well great, good morning. My name is Elliot Feldman, I work in the Healthcare distribution and technology team here at Barclays. Welcome to day three of our Global Healthcare Conference.

Once again, I’m pleased to have West Pharmaceutical Services with us. Kicking us off today is Bill Federici, CFO, who will take us through a presentation. Mike Anderson also is here is well to help out. So, Bill could talk for about 20 to 25 minutes or so and then we’re going to head over to Point Center 4, just down the hallway here for an informal Q&A in the breakout session and we’ll go from there.

So, Mike, Bill, thanks again for being with us, welcome. I’m glad to have you guys back.

Bill Federici

Thank you Elliot. And thanks to Barclays for allowing us to come here and present to you today. I will call your attention to our Safe Harbor statements which give you some insights into the risks associated with our forward-looking statements.

Today, what we’re going to do is spend about, as Elliot said about 20 minutes talking through who we are, the fundamentals of our business, what’s making us grow, some of the results from 2012. And then give you some view of what we see as an outlook.

West is a global manufacturing company that since 1920s has been involved very closely with our customers in looking at how they can package their drug product. In fact if you have to boil everything down from our history, fundamentally, our expertise in understanding the way drugs interact with materials is critical to our business’ history and also to our future.

We do have a stable and diverse customer base nearly all the major pharmaceutical, biotechnology, medical device and generic customers, our companies, our customers of ours who we worked with three years, we enjoy large market share in the Western developed world and we have a small but growing market shares in the far emerging markets.

We operate in two business segments, our pharmaceutical packaging systems, business and our delivery systems business. The packaging systems business is where we produce all of the components, primary packages for injectable drugs. We produce 36 billion units a year for our customers and we’ll talk a little bit about the attributes that are associated with that.

And then in the delivery system business, which is primarily a contract manufacturing business today, 80% of our revenues in 2012, rough numbers were driven off of contract manufacturing. We also have a small but growing part of our businesses proprietary products and it’s very key to the future.

Our competitive advantages are many, let me talk about a few of them. In the packaging system space, we literally, as I mentioned earlier, we’re the category in the Western markets. We have 65% to 70% shares of the Western markets both in US and Europe. In the growing far emerging markets we have smaller shares but they are growing in double digits.

Important is from a differentiating perspective, the fact that we’re designed into our customer’s regulatory filings, when they produce a new drug and they are going to either the US regulators or the other regulators across the world, they have to include documentation around the package, the primary package. We – once we are on that package and it gets approved by the regulators, we are literally designed into that package, into that drug’s package.

So therefore for a customer to go ahead and change, it first of all it doesn’t happen very often. And it’s time consuming and very expensive, that creates a nice mode for the business.

In addition, our global footprint, we have invested well over a $1 billion in manufacturing capacity globally, that capacity, that investment ended the largest and geographic dispersion of that capacity is another huge mode for us, we are innovators.

We worked with our customers very closely for as I mentioned earlier 90 years. And in that time, we have come up with lot of innovations, us and our Japanese affiliates Daiki have come up with lot of innovations in terms of the primary drug package and that creates another nice mode for us.

In the delivery system space, I mentioned it’s a – primarily a contract manufacturing business. But our key differentiators there are – we are experts in taking a customer’s design of the drawing boards and creating a well engineered, well manufactured and highly automated process for that. So, literally taking it from the drawing and making it into a real high-end commercial product, that’s where we spend most of our time that’s 80% of that business. There is also about $80 million or 20% of the business that is associated with our own proprietary products into delivery system space and we’ll talk about the importance of that in the future.

If you think about the markets that we serve, you can see that we serve, you can see that this is an outlook from IMS and other data that shows that markets are growing but in the Western world where we have our largest market shares they’re not growing that great either pretty close to zero in Europe or somewhere in the 2.5% range for the United States and Japan.

Read the rest of this transcript for free on seekingalpha.com