West Pharmaceutical Services, Inc. · NYSE:WST
West Pharmaceutical Services — Investor Day (May 2012)
93 slides from West Pharmaceutical Services's investor day presentation, May 23, 2012
Slide 1: Welcome and Introductions
Welcome and Introductions Presentation Background and Agenda Donald E. Morel Jr., Ph.D. Chairman and Chief Executive Officer © 2012 by West Pharmaceutical Services, Inc., Lionville, PA. All rights reserved. This material is protected by copyright. No part of it may be reproduced, stored in a retriev
Slide 2: Safe Harbor Statement
Safe Harbor Statement Cautionary Statement Under the Private Securities Litigation Reform Act of 1995 This presentation and any accompanying management commentary contain “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements inc
Slide 3: Agenda
Agenda Introductory Remarks Don Morel Chairman and Chief Executive Officer Pharmaceutical Markets Update Mike Schaefers Vice President, Marketing-Europe Pharmaceutical Packaging Systems Jeff Hunt President, Pharmaceutical Packaging Systems Asian Growth and Expansion Warwick Bedwell President, Asia-P
Slide 4: Who We Are
Pharmaceutical Packaging Systems Pharmaceutical Delivery Systems • A globally diverse manufacturer of products used primarily in containing and administering small-volume parenteral drugs • Strong competitive position § Diversified customer base § Proprietary technology § Global footprint § Signific
Slide 5: The West Transition
2002 $420 M 2011 $1.2 B The West Transition • Founded in Philadelphia (1923) and listed on NYSE since 1980 • Initiated strategic transformation in 2001 to become a leading global supplier of value-added pharmaceutical packaging systems and components ‘ 03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 Kinston reco
Slide 6: Sales and Income from Continuing Operations
Sales and Income from Continuing Operations $ millions
Slide 7: Business Environment
• Global economic conditions remain unsettled • Global pharmaceutical revenue and unit growth will vary by region • Further consolidation is expected • Unknown : Status and impact of US healthcare legislation • Tougher regulatory enforcement • Our customers are under pressure to produce earnings gro
Slide 8: Summary Results
Three Months Ended March 31, 2012 2011 Net Sales $ 316.3 $ 295.4 Gross Profit 101.1 88.0 Reported Operating Profit 41.7 28.8 Adjusted Operating Profit (1) 42.3 30.7 Reported Diluted EPS $ 0.81 $ 0.56 Adjusted Diluted EPS (1) $ 0.83 $ 0.60 Summary Results $ millions, except per-share data (1) These a
Slide 9: Business Segments
Packaging Systems $ 857 $337 Business Segments 2011 Revenues ($ millions) Delivery Systems • Established leadership • High market shares • Steady growth in base
Slide 10: Pharmaceutical Packaging Systems Business Unit Focus
Pharmaceutical Packaging Systems Business Unit Focus • Small-volume parenteral packaging • Large-volume parenteral packaging • Prefillable syringe components • Disposable medical device components • Diagnostic, dental, veterinary packaging Jeff Hunt President
Slide 11: Packaging Systems Growth Strategy
Pharmaceutical Packaging Systems Our Growth Strategy • Generate incremental value per unit • Leverage changing regulatory environment • Global quality initiative • Optimize manufacturing productivity • Strategic acquisitions • Geographic expansion
Slide 12: Pharmaceutical Delivery Systems Business Unit Focus
Pharmaceutical Delivery Systems (How drugs are administered) Business Unit Focus • Safety systems (B.Safe ® , NovaGuard™, Eris™) • Reconstitution systems - Medimop • Crystal Zenith ® prefillable syringe systems • Advanced injection systems (SmartDose ® and ConfiDose ® ) • Tech Group contract manufac
Slide 13: Delivery Systems Growth Strategy
Pharmaceutical Delivery Systems Our Growth Strategy • Concentrate on systems for unmet market needs • Build market share in multi-component systems for drug administration utilizing Daikyo Crystal Zenith as a platform technology • Production supported by existing design, multi- material molding, and
Slide 14: Key Take-aways
• Our global position • Strength of the franchise • Key therapeutic catgeories and growth drivers • New product pipeline and opportunities • Risk factors • Strong, experienced management team • Substantial progress since 2010 Key Take-aways
Slide 15: Global Pharmaceutical Market Updates
Global Pharmaceutical Market Updates Mike Schaefers, Ph.D. Vice President, Marketing, Europe
Slide 16: Global Pharmaceutical Market Trends
• Global pharmaceutical revenue growth slowing down § CAGR ‘11 - ‘15 of 3% - 6% § Developed markets with moderate growth of 0 - 4% § “Pharmerging markets” ( BRIC, MENA) with increases of 12 - 17% § While unit growth remains moderate • Dynamic growth in “Pharmerging markets” fueled by § Increase in s
Slide 17: Global Pharmaceutical Market Trends
• Globalization and consolidation of pharma industry progressing • Trend towards outsourcing of production to contract manufacturer or partner in India and China • Growing regulatory pressure and closer scrutiny of new products • Recent drug recalls have led to shortages of injectable drugs • Qualit
Slide 18: Global Pharmaceutical Market Trends
• Paradigm shift from batch production to small scale manufacturing driven by diversity and clinical trial needs • Price cuts and reimbursement restrictions in developed markets • Patent cliff and lack of “blockbuster” drug innovations • M&A shaping leading pharma companies and continuing as the new
Slide 19: Global Pharmaceutical Market Trends
• But growth opportunities remain, such as • Pharmerging markets • Generics • BioTech, speciality drugs and biosimilars products • Continuously expanding prefillable systems market • Trend towards injection devices § Enabling new treatment and application options § Allowing home administration § Pow
Slide 20: Generics
• Generics • $142 billion in global branded drug products losing patent protection in the near future • Significant policy changes encourage use of generics § Affordable Care Act in US § Drug price cuts in i.e. China, Japan, Spain, Italy § Cost benefit evaluations of new medicines • Generics will ex
Slide 21: Biotech drug sales on the rise
• Sales from commercialized biotech drugs are on the rise • Revenue CAGR of 6% - 9% over the next several years § Strong pipelines for biologic products § Increase in long-acting or depot injections • Technical constraints of new biologics drive need for innovative injectable packaging and delivery
Slide 22: Biosimilar regulations and affordability
• Biosimilar regulations and affordability • More and more patents of biologic drugs expire § Major target for cost savings in health care • Leading pharma companies such as Merck, Teva, Novartis established biosimilar divisions • Mature European markets for biosimilars § Clear approval path but low
Slide 23: Parenterals for biopharmaceutical administration
• Parenterals continue to be important for administering biopharmaceuticals • Oral delivery § Poor bioavailability due to challenges posed by the gastrointestinal tract • Nasal delivery § Potential safety issues for large molecules due to need for permeation enhancers to deliver sufficient dose • Pu
Slide 24: Extra Protection for Parenterals against Generic Threat
• Extra Protection for Parenterals against Generic Threat Scrip 100, 2011 Special Report Global Pharmaceutical Market Trends
Slide 25: Therapeutic areas driving parenteral growth
• Therapeutic areas Oncology, Diabetes, Autoimmune ( RA, MS, etc.) and Vaccines driving parenteral growth • High unmet medical need • High cost burden of diseases • New drugs enabled through biotechnology • Innovative container and delivery systems allowing new treatment options • Patient access exp
Slide 26: Therapeutic Category Growth Drivers
Category Key Customers Projected Growth Diabetes 4 - 7 % Oncology 5 - 8 % Vaccines > 10 % Autoimmune 6 - 9 % • Therapeutic Category Growth Drivers IMS, The Global Use of Medicines , May 2011, market & research.com Global Pharmaceutical Market Trends
Slide 27: West Solutions
West Solutions Requirements • Therapeutic Targets and West Solution Portfolio - A Perfect Match Therapeutic Targets • Stability of demanding pharmaceuticals/ biopharmaceuticals • Manage silicone sensitivity of proteins • Solutions to avoid glass delamination and breakage • Need for lifecycle managem
Slide 28: Greystone 2012 PFS Report; Market Intelligence
Greystone 2012 PFS Report; Market Intelligence § Cartridge based devices gain importance for biologic drug delivery Global Pharmaceutical Market Trends
Slide 29: Providing Solutions to a Changing Market
Providing Solutions to a Changing Market
Slide 30: The Potential of Generics and Biosimilars
• Significant growth potential for generics and biosimilars in developed countries and emerging markets • Proactive support of lifecycle management activities at pharma/ biotech § Product and brand differentiation through West solutions • Support generic and biosimilars customers globally with diffe
Slide 31: Summary
• West is well positioned for future growth • Focus on strongly growing therapeutic categories diabetes/insulin, vaccines, oncology and AIID • Importance of parenterals and biological drugs in these categories • Growing need for high value pharma and world class packaging • Growth opportunities thro
Slide 32: Pharmaceutical Packaging Systems Overview
Pharmaceutical Packaging Systems Overview Jeff Hunt President Pharmaceutical Packaging Systems
Slide 33: Pharmaceutical Packaging Systems 2011 Revenues $857 million
Pharmaceutical Packaging Systems 2011 Revenues $857 million
Slide 34: Pharmaceutical Packaging Systems 2011 Operating Results
Pharmaceutical Packaging Systems 2011 Operating Results
Slide 35: Strategic Objectives
• Create profitable and sustainable growth platforms • Strengthen market leadership position via innovation • Accelerate growth through: • Value-added products • Geographic expansion • Optimize global profitability Strategic Objectives
Slide 36: Market & Growth Drivers
Market & Growth Drivers Pharmaceutical Systems Products Safety NovaGuard™ Medimop Market Needs Silicone-free Daikyo CZ PFS Systems Solution NovaPure® Westar ® RU Lined seals Ready Pack™ Regulatory VeriSure™ CCS™ TrimTec ® Material Science Quality Vision inspection cGMP Demographics/Convenience Auto-
Slide 37: Long-Term Outlook
Long-Term Outlook • Long-range plan delivers $300 million of incremental sales and $100 million operating profit • High-value products and prefilled syringe components • Optimize supply chain and manufacturing operations • Global expansion in China and India
Slide 38: Asia Pacific Region
Asia Pacific Region Warwick Bedwell President, Asia Pacific
Slide 39: Markets in Asia Pacific
Markets in Asia Pacific • 50+% of the World’s population • Fastest growing in the World, GDP 6.7% growth in 2011 1 • Rising healthcare spend and urbanization • Focus of global healthcare/pharmaceutical industry § Large & growing population with increasing level of disposable income § Improving acces
Slide 40: AP Pharma Markets by 2015
AP Pharma Markets by 2015 • Region (incl. Japan) will represent close to 1/3 global sales 1 • China alone expected to bring over 1/4 global growth 1 • Within APAC China, India, Indonesia and Vietnam will outpace all other countries in growth 1 • Markets look attractive for biosimilar penetration 2 §
Slide 41: Annual consumption growing >15%
• Annual consumption growing >15% with India and China as market drivers • 6.5 billion IV infusions p.a. • Emerging PFS and cartridge markets • Est. in 2010 that globally 285 million diabetics, over 50% in AP § 92 million in China § 51 million in India • Highly fragmented § 60+ competing manufacture
Slide 42: West in Asia Pacific Core Business Strategies
Do best what matters most to customers Market assessment and prioritization, WCSO/SFE and GKAM West in Asia Pacific • Region Business Objectives - “Double+ in 5” • Region Operations Objectives - Selectively invest for growth Core Business Strategies
Slide 43: China Strategic Rationale
China Strategic Rationale • Largest global pharma market in volume and 3 rd in value § 60% of total APAC injectables § More Drugs to be reimbursed § Foreign players are challenging domestic stronghold in generics § Increase in alliances of domestic companies with MNC s • Business strategy § Defend a
Slide 44: India Strategic Rationale
India Strategic Rationale • Key location to drive growth § Large market at USD 25b (>50% export) and 15.7% CAGR to 2015 § Generic production - Western markets § Asia Pacific and MENA markets • Business strategy § Defend and build share of MNCs/branded generics § Support generic producers with short
Slide 45: Region Operations Strategy
Region Operations Strategy Singapore 1. HVP Focus 2. AP market & special items 3. R&D hub & technical center China IV Plastic 1. Global supply China Elastomer 2. China Market, Efficiency focus India Elastomer 1. Domestic standard products & MNC support 2. ROW standard product India Metal 1. AP marke
Slide 46: Summary
Summary West in Asia Pacific • Forecast mid-term market outperformance in sales and solid operating profit • Making the strategic investments to meet regional growth and competition • China and India are key to future regional and global growth
Slide 47: NovaPure Components
NovaPure ® Components Fran DeGrazio Vice President, Marketing & Strategic Business Development
Slide 48: Industry Challenges in Respect to Packaging Component Issues
Industry Challenges in Respect to Packaging Component Issues • Total cost of ownership is too high • Packaging component quality is too variable • Pharma industry understanding and perspective is needed • Transparency of information should be improved • Requirements by regulatory agencies are more s
Slide 49: Revenue Opportunity ($ per unit)
Revenue Opportunity ($ per unit) Plungers and Sleeve Stoppers Stoppers Seals RU Seals Westar ® RU Standard Products High-Value Products
Slide 50: Industry Desires These Features
Competitive Offerings Process designed using QbD principles þ ý Knowledge management þ ý Shortened lead times þ ý Global sourcing þ ý Paradigm shift in quality specification þ ý 24/7 access to technical information þ ý Minimized drug compatibility issues þ ý Industry Desires These Features
Slide 51: Lower Filling Line Rejection Rate for NovaPure Components
Lower Filling Line Rejection Rate for NovaPure Components 3.0% 0.5% - 1.0% Typical rejection rate at pharma company 1.5% Westar RS + Envision NovaPure
Slide 52: Cost of Ownership Case Study
Cost of Ownership Case Study Benefit /Cost Relationship
Slide 53: Accelerating Adoption of West NovaPure Components
Drugs already on the market Seeding for drugs in development Accelerating Adoption of West NovaPure Components
Slide 54: Expected NovaPure Growth
Expected NovaPure Growth Like FluroTec, Westar and other fundamental improvements in pharma packaging, NovaPure growth is expected to be long- lasting and persistent
Slide 55: Why NovaPure Components?
Lower Total Cost of Ownership Improved Transparency Why NovaPure Components? Hidden Costs
Slide 56: Pharmaceutical Delivery Systems
Pharmaceutical Delivery Systems John Paproski President Pharmaceutical Delivery systems
Slide 57: Pharmaceutical Delivery Systems 2011 Revenues: $337 million
Pharmaceutical Delivery Systems 2011 Revenues: $337 million
Slide 58: Pharmaceutical Delivery Systems 2011 Operating Results
Pharmaceutical Delivery Systems 2011 Operating Results
Slide 59: A Proven Track Record for Device Manufacture
Contract Manufacturing Proprietary Products Synergies • 2011 sales: $264 million • 20 million injection devices pa • >1.3 billion plastic components for Insulin Pens • 2011 sales: $73 million • Reconstitution, CZ systems, syringe safety, self-injection • >50 million reconstitution systems • >100 mil
Slide 60: Portfolio Expansion to Meet Market Needs
2005 2006 2007 2008 2009 2010 2011 Acquisition of Medimop: Administration Systems Licensing of NovaGuard ™ : Safety System Acquisition of PharmaPen: Auto-injector Daikyo CZ Insert Needle License: Prefillable Syringe Systems Acquisition of Plastef: Prefillable Syringe Safety Acquisition of LaModel: E
Slide 61: Positioned to Respond to Market Trends
Positioned to Respond to Market Trends • Continuing growth in Injectable therapies § Remains preferred route for biologics § Prefilled systems (2.4 billion in 2011 growth of 10% p.a.) • Growth of combination products § Drugs with Injection device quadrupled in last decade (from 15 to 60 ) § Driven b
Slide 62: Biotherapeutic Drug Delivery Remains our Focus
2000 2008 2012 11% 28% 50% * Tufts study, 2010 ** Evaluate Pharma, April 2010 Biotherapeutic Drug Delivery Remains our Focus • Proteins • High concentrations • Large molecules are more sensitive • Stability tested on drug and device • Cold chain to maintain potency • Combination Products • In 2010,
Slide 63: Subcutaneous RA drugs: A Competitive Market
Subcutaneous RA drugs: A Competitive Market Enbrel ® Humira ® Simponi ® Cimzia ® Smartject ® Vial “pack” Kineret ® PFS (extended flange) (40mg/0.8ml) Humira ® Pen PFS 50mg (extended flange) PFS 25 mg SureClick™ PFS ( with optional Simpleject reusable auto-injector) PFS (20mg/0.4ml) Orencia ® PFS - S
Slide 64: Challenges Faced by Biotech Companies
Challenges Faced by Biotech Companies • Glass issues § Functional, quality, breakage § Trend towards plastics • Increased sensitivity to various materials § Silicone oil, tungsten, extractables • Increased demand for high-dose biologics § Driving drug product viscosities and dose volumes higher § Co
Slide 65: Need for an Integrated Drug Delivery System
Need for an Integrated Drug Delivery System
Slide 66: West Provides Integrated Solutions from Concept to Patient
West Provides Integrated Solutions from Concept to Patient Discovery (ideation) Concept Development Product & Process Development Industrialization Life cycle management
Slide 67: Well Positioned to Partner with our Customers
Well Positioned to Partner with our Customers • Extensive product portfolio • Internal capabilities combined with Industry collaboration • Building on established market position and experience • Focus on the patient and the needs for an integrated system approach • Proactive support for customers’
Slide 68: Self-Injection Systems
Self-Injection Systems Bart Burgess Principle, Business Development
Slide 69: A Platform Partner for Self-Injection Systems
A Platform Partner for Self-Injection Systems • West ConfiDose ® § Auto-injector platform for delivery from 1mL long glass or CZ PFS § Expanding system offerings to meet new identified market needs • West SmartDose ® § Electronic patch injector system incorporating a proprietary CZ container § Addre
Slide 70: SmartDose Electronic Patch Injector
SmartDose ® Electronic Patch Injector Platform Technology* § Designed for subcutaneous delivery - 2.5 mL and 3.5 mL versions in development § Uses Daikyo CZ prefilled cartridge § Focuses on the user experience § Integrated needle safety § Simple push-button operation § Electronically controlled deli
Slide 71: Self Injection Systems Portfolio
Self Injection Systems Portfolio 4.0 Future SmartDose Iterations SmartDose 3.5 SmartDose 2.5 ConfiDose 1.2mL ConfiDose 1mL ConfiDose 1.5mL Additional Platform Expansions Coming Soon…
Slide 72: An Example of a Fully Integrated System
An Example of a Fully Integrated System
Slide 73: Daikyo Crystal Zenith
Daikyo Crystal Zenith ® Scott Young, Ph.D. Director, Crystal Zenith Products Daikyo Crystal Zenith ® is a registered trademark of Daikyo Seiko, Ltd. Daikyo Crystal Zenith technology is licensed from Daikyo Seiko, Ltd.
Slide 74: CZ Solutions Across the Product Lifecycle
Vials and bulk containers Prefillable Syringe From drug discovery to self-injection system Self-injection System* Discovery CZ Solutions Across the Product Lifecycle *For investigational use only by our pharmaceutical or biotechnology development partners.
Slide 75: Daikyo Crystal Zenith Product Approvals
Daikyo Crystal Zenith Product Approvals hyaluronic acid MRI contrast media bone cement 6 Contrast Media 5 MRI 2 Hyaluronic Acid 1 Calcitonin 1 Proton Pump Inhibitor fluconazole oncology anticoagulant 2 oncology 1 acyclovir hyaluronic acid 3 oncology API Container Japan MHLW Europe EMEA US FDA Calcit
Slide 76: Crystal Zenith product advantages
• Highly break resistant • Superior quality § Reduced Particles vs glass § Reduced cosmetic defects § 100% vision inspection, including needle • No Silicone oil for system lubricity • Tungsten and glue free • Compatible with filling lines • Consistent functionality • Tight dimensional tolerances • M
Slide 77: Daikyo Crystal Zenith Competitive Advantage
Orange color indicates Flurotec ® film coverage Complete coverage with inert film on drug contact surfaces Flurotec Film • Patent Protection from Daikyo Seiko • Trade Secret Molding / Processing • Silicone-Free System Daikyo Crystal Zenith Syringe Barrel • Custom Formulated Resin exclusive to Daikyo
Slide 78: Potential Glass Syringe Risk Areas
Tungsten residue Breakage Silicone oil variability Auto-injector failure Cosmetic defects Particles Potential Glass Syringe Risk Areas
Slide 79: Pharmaceutical Market View of Risk Mitigation
Pharmaceutical Market View of Risk Mitigation • FDA cautionary statement; potential results of glass particles*: § Vascular events § Foreign body granuloma § Local injection site reactions § Increased immunogenicity • Multiple companies evaluating CZ at various phases § In 2011 Rx360 surveyed compan
Slide 80: Illustrative Estimates of Costs Associated with Drug Recalls
Action Associated with Breakage Issue Associated Costs Total Cost Investigation and inspection of issues, complaints and syringe products · Field complaints inquiry · Investigation and resources · Inspection > $50 Million Loss of market share Loss of sales until re-launch, and loss of 5% of share at
Slide 81: 1mL Long Insert Needle Syringe
1mL Long Insert Needle Syringe Ready for Commercial Supply • Validated, sterile product • Scottsdale capability at 6 million unit per annum § Expandable to 20+ million units in existing space § Plans to add capacity in US and IRE as needed in future • Vetter collaboration § Combining expertise to es
Slide 82: Summary
Summary • Pharma customers and regulatory personnel are demanding Daikyo Crystal Zenith to reduce recalls due to glass defects. • Daikyo Crystal Zenith vial and syringe systems are a global market-proven option. We believe that all of our major biologic customers are evaluating Daikyo Crystal Zenith
Slide 83: Wrap-up
Wrap-up Don Morel Chairman and CEO
Slide 84: Strategic Execution 2010 - Present
2010 - Present Strategic Execution • Revenue and earnings growth • Capacity investments for new markets and products § Envision and NovaPure components § Daikyo Crystal Zenith and SmartDose • Improved management bench strength • Maintained strong balance sheet
Slide 85: Our Long-Term Focus
Our Long-Term Focus • Expand and strengthen packaging franchise § The Global Quality Initiative § Capacity expansion in key markets § Technology and product acquisitions • Invest to ensure proprietary product success • Conservative Financial Management § Operating cash flow § Prudent spending: discr
Slide 86: Five-Year Growth Opportunity: 2016 Strategic Planning Goals
Pharmaceutical Packaging Systems Pharmaceutical Delivery Systems Consolidated 2016 Strategic Planning Goals Five-Year Growth Opportunity 2016 Strategic Planning Goals: • Sales: $0.7 billion to $0.8 billion • Operating margin: 20% 2016 Strategic Planning Goals: • Sales of $1.0 billion to $1.1 billion
Slide 87: Selected Risk Factors
Selected Risk Factors • Eurozone economic uncertainty • Healthcare reform (U.S.) • Supply chain stability • Timing of new product commercialization • Currency risk • Regulatory risk
Slide 88: Summary
Summary • A terrific franchise • Significant growth potential • The financial strength to invest • An experienced team Injectable Container Solutions Advanced Injection Systems Prefillable Syringe Systems Safety and Administration Systems
Slide 89: Each and every day
Each and every day over 100 million West products are used to enhance the quality of healthcare around the world
Slide 90: West
Westé
Slide 91: Non-GAAP Financial Measures
As Reported March 31, 2012 Restructuring and related charges Acquisition- related contingencies Discrete tax items Non-GAAP March 31, 2012 Operating profit $41.7 $0.4 $0.2 $- $42.3 Interest expense, net 3.9 - - - 3.9 Income before income taxes 37.8 0.4 0.2 - 38.4 Income tax expense 9.8 0.1 0.1 (0.3)
Slide 92: Notes to Non-GAAP Financial Measures
NOTES TO NON-GAAP FINANCIAL MEASURES For additional details, please see today’s press release and Safe Harbor Statement. These slides use non-GAAP financial measures. West believes that these non-GAAP measures of financial results provide useful information to management and investors regarding cert
Slide 93: Notes to Non-GAAP Financial Measures
NOTES TO NON-GAAP FINANCIAL MEASURES For additional details, please see today’s press release and Safe Harbor Statement.
West Pharmaceutical Services — Investor Day (May 2012) on 6ix