West Pharmaceutical Services posted another flat quarter of proprietary delivery product sales but is predicting “notable increases” in 2012.
Proprietary product progress was hindered by several factors last year and West expects significant growth to lie beyond 2012. However, having cleared an obstacle to growth, West is predicting an uptick in sales in the coming year.
“We believe that [revenue growth of four to seven per cent] will be led by…notable increases in pharmaceutical delivery systems sales of proprietary products”, Donald Morel, chairman of CEO of West, said. A year ago Morel said proprietary products will “accelerate growth” beyond 2011.
In the first three quarters of 2011 sales of proprietary products accounted for 19 to 20 per cent of revenues at the delivery systems unit. The figure was up slightly at 21 per cent in the fourth quarter but Morel said proprietary product sales were flat year-on-year.
A lack of validated filling capacity restricted growth of a proprietary product, the Crystal Zenith 1ml long syringe, and led to its 2011 sales being below expectations at $7.6m (€5.7m). West has now secured capacity through a deal with Vetter and expects stability tests to begin in the coming weeks.
In October David Windley, equity analyst at Jefferies & Company, wrote: “We continue to expect an increase in sales of higher margin products in the delivery segment, but that has proven somewhat slow to ramp.”
In its guidance for 2012 West predicts emerging proprietary products will generate new sales of $10m to $15m. However, Morel said timing largely depends on when clients decide to move forward with projects.
Contract manufacturing expansion
Sales at the contract manufacturing business, which accounts for the rest of delivery systems, were up year-on-year and drove a small increase in the unit’s revenues in the quarter. Quarterly delivery systems’ revenues totalled $85.3m.
West plans to add two new contract manufacturing production lines in 2012. The lines will handle two products that clients expect to win approval in the second and third quarters of the coming year.
Pharmaceutical packaging systems also grew in the quarter, with high-value products driving the 8.6 per cent rise. Morel said continued demand for diabetes and vaccine products will underpin revenue growth of two to four per cent in the coming year.
Shares in West rose 3.6 per cent on the day it released the results and guidance.