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TMFHelical (99.00)

West Pharmaceuticals - Still Bullish

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May 20, 2008 – Comments (1)

West is still one of my favorite holdings.  They recently announced results for the quarter and the transcript is here.

The quarter was modest, with single digit sales growth but a drop in earnings ignoring adjustments.  Factors weighing included drops and questions regarding future volumes of ESA drugs (like Epo) and the market failure of inhaled insulin, which would have been a big cash generator for West.  Raw materials costs and plant capacity issues exist as well, though margins maintained pretty well.

But the lining is silver (or rather butyl grey).  West, if you're unfamiliar, makes closure systems for pharmaceutical packaging - particularly injectables.  This is a market on the upswing as more and more drugs are biologically based.  The nature of the business is such that barriers to competition are very high, as changing packaging components involves regulatory filing.  This also enables West to more easily pass materials costs on to customers.

New products, added plant capacities (low cost), and other efficiencies are coming on-line - so

This isn't a pharma drug-developing operation, but rather a supplier that they pretty much all use.  It won't double in a year, but is as good a chance at solid long-term 15% returns as I think you'll find.

Real good company.

Zz (Ralph)

1 Comments – Post Your Own

#1) On May 20, 2008 at 11:07 AM, madcowmonkey (< 20) wrote:

Thanks for the update and info. I have never taken a look at them, but the packaging/supply chain for pharm companies would be an interesting play. They all use this company? That is really interesting.

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