Dear Shareholders,
This year’s letter comes as we celebrate 100 years in business. In that time, West has grown and expanded from manufacturing primary containment components to designing and manufacturing medical systems, but our purpose of improving patient lives through the containment and delivery of injectable therapies has always been at the heart of what we do. For the past three years, we have been battling the COVID-19 pandemic—supporting our customers to deliver the treatments, vaccines and diagnostics that were required to help patients. At the same time, the needs of the healthcare industry have been changing and growing in complexity, with treatment options shifting from the hospital to home settings and complex biologic treatments being developed that require more sophisticated delivery systems. Throughout it all, West has been by the side of our customers, meeting these unprecedented challenges and preparing for a future in which we can continue to improve patient lives through our commitment to scientific innovation.
Business Highlights
In 2022, we reported net sales of $2.887 billion and 7.7% organic net sales growth over the prior year. This growth was generated despite a rapidly shifting pandemic landscape, which led to a decrease in COVID-related high value product sales. Our core growth was driven by demand for our high-value product (HVP) offerings for both legacy drugs and recently launched therapies. Sales in our Contract Manufacturing market unit declined by 2.0% organically in 2022 but returned to growth in Q4.
Along with this solid sales growth, we focused on operational excellence and fiscal discipline, while continuing to invest in our business. This resulted in 24.0% growth in operating cash flow, which funded capital expenditures and returned cash to the shareholders through a Board-authorized share repurchase program and an increased dividend for the 30th year in a row.
Execute, Innovate and Grow
We remain confident that our long-term enterprise business plan, centered on our ability to execute on our market-led strategy, innovate with new products and services and invest in our growth, will enable our business to continue to be poised for the future. The execution of our market-led strategy, which matches market and customer needs with unique product and service offerings across our Pharma, Generics, Biologics and Contract Manufacturing market units, has been the center of our business strategy for the past several years. A highlight of 2022 was the initiation of our landmark collaboration with Corning to build the next generation of leading elastomer-glass containment system solutions, which will produce new product offerings in 2023. We also saw the launch of our Daikyo® CZ 2.25 mL insert needle syringe in 2022, along with the FDA approval of three drugs using our SmartDose® technology. These are all examples of West’s strategy to serve the unique needs of the growing biotechnology market.
We have worked across our business to underscore the value of innovation—whether that be in the products and services we deliver to our customers, or the way we conduct our business. In 2022, we announced several exciting partnerships that will continue to fuel this innovative culture. Our partnership with Latch Medical, a leader in next-generation vaccine and biologics delivery technology, is pioneering a new approach to intradermal delivery which complement’s West’s internal efforts to pursue patient-friendly and effective drug delivery devices. We also formed a partnership with TECHIN, a Technology Innovation Foundation of IIT Palakkad, which focuses on assisting innovation and incubation with academia, hospitals and industry to promote local entrepreneurship in pursuit of seeking new ideas for better drug delivery for patients.
Over the past three years, West has invested more than $700 million globally towards expanding capacity and deliver on the unprecedented demand for the Company’s products and services. These capital investments will expand our HVP manufacturing capacity, allowing us to stay ahead of our accelerating and anticipated customer demand and enable our future growth.
Sustainability
The advancement of our ESG (Environmental, Social and Governance) goals over the last five years has been at a time when we have seen our business grow significantly in annual revenue. While many factors have gone into this success, I credit our commitment to ESG among them. Focusing on building a more diverse team, putting product quality at center stage, operating with integrity, giving back to our communities, managing our environmental footprint and caring for the safety of our team members makes for a better-performing business now and into the future. I am proud to report that West has once again been recognized for our ESG business practices with a listing in Newsweek’s America’s Most Responsible Companies for 2022 and a top 50 listing in Barron’s Most Sustainable Companies.
One West Team
The results we achieved in 2022 were the result of the dedication and relentless focus of our team members across the globe, which continues to grow and evolve to meet the challenges and opportunities that lie ahead. We welcomed 600 new team members over the past year and added new senior leaders including a Chief Quality Officer. What has remained constant is the team’s enduring commitment to our mission. I would like to thank the resiliency of our team members in Puerto Rico and Florida who were impacted by hurricanes that devastated those areas in 2022. Despite the personal impact to our team members there, they ensured that our plants continued to produce and ship product with minimal impact—an amazing testimony to the strength of our One West Team.
Our Board of Directors has experienced change too. Last year, after 20 years of service, our Chair, Patrick Zenner, retired from the Board. We are grateful for his leadership and service to the Board, which has served as an excellent example for both me in my new role as Chair and to Paolo Pucci, who was elected our Lead Independent Director. We also elected an 11th member to the Board—Stephen Lockhart, M.D., Ph.D., a board-certified anesthesiologist and former Chief Medical Officer of Sutter Health, whose contributions have already proven indispensable.
Looking Ahead
Our financial performance in 2022 continues to affirm that our long-term growth strategy is working and will serve to drive our future growth in 2023 and beyond. We have a strong portfolio of products and services that our customers value, with additional assets and opportunities in the pipeline, and we have made investments that will increase our capacity and further build out our capabilities to meet future customer demand. Importantly, we have a strong team that is connected by a purpose that has been at the center of our Company for more than a century. Through our work to deliver thousands of injectable therapies to millions of patients daily, West has made an indelible mark on the healthcare industry and in our view, we have only just begun.
Thank you to you, our shareholders, for your continued investment and support of West and our shared purpose to improve patient lives.
Sincerely,
Eric M. Green
Read the original letter here.
