West raises outlook as client conservatism drives sales

By Nick Taylor

- Last updated on GMT

West raises outlook as client conservatism drives sales
West has raised its outlook for 2012 after a shift in supply chain attitude by clients drove strong first quarter sales.

Net sales at the packaging unit were up close to 10 per cent year-on-year as client demand for injectable products grew. Growth was driven by the evolution of some customers approach to supply chain risk management.

Management attributes much of the strength to customer inventory building as a result of more conservative supply chain management​”, David Windley, equity analyst at Jefferies & Company, wrote.

Building inventories gives biopharma firms a secure, easily accessible stock of components and suggests a move away from a ‘just in time’ supply chain management approach. The downside is the companies must use more warehouse space, which generally means higher costs.

West benefits though. Donald Morel, CEO of West, said: “The resulting increase in orders contributed to the sales and volume-driven efficiency included in our current results, but also to lengthening lead times and, in turn, much of the continuing growth in our order backlog​."

Growth of backlog and lead times gives Morel confidence the strong first quarter, traditionally a big period for West, will continue throughout the first half of the year. Based on this belief West has raised its outlook for full year sales by almost three per cent.

Drug delivery dreams

Over the next five years West expects the rise of its proprietary drug delivery technologies to underpin growth. Morel is targeting annual sales of $150m but today the products bring in little more than one-tenth of the long-term goal.

West only sold ~$0.5m (€0.4) of Crystal Zenith. Demand remains limited to only what is needed for performing stability and validation tests. Despite weak Crystal Zenith sales, West believes its proprietary product sales will grow double digits this year​”, Windley wrote.

Related topics: Delivery technologies, Drug Delivery

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