West’s operating income drops in Q2

By Nick Taylor

- Last updated on GMT

Related tags: Revenue, West

West Pharmaceutical Services’ operating income fell by 33 per cent in Q2 but the company reported that demand for some of its drug delivery technology is strong.

Although the company’s overall business is down on 2008 West reported growing demand for some of its healthcare products, including injection pens and auto-injectors.

This helped West’s Tech Group, which manufactures drug delivery technologies, record a 29.8 per cent rise in operating income. Despite a slight decline in revenues the Tech Group had an operating income of $6.1m (€4.2m) in the quarter.

However, demand is expected to soften in the second half of the year but West is anticipating that this decline will be offset by an upturn in the Pharmaceutical Systems business.

This segment of West’s business had a less successful Q2, with operating profit falling from $40.3m in the corresponding period of 2008 to $34.2m this year.

West attributed this decline, which was accompanied by a drop in revenue, to reduced demand for lyophilised drug products and medical devices. Furthermore, production costs were higher than in Q2 2008 and this increase is outpacing rises in selling costs.

Higher raw material prices are one factor that has raised production costs but they have declined from their peak at the end of 2008. West believes that this downward trend will continue and that this, coupled to its implementation of lean-manufacturing, will help it in coming quarters.

Further reasons for optimism came from Asia where sales grew by $2.3m, although there was little increase in the US or Europe, and some products in the Pharmaceutical Systems business.

West recorded a substantial increase in sales of components for prefillable syringes and lining materials used for vial, syringe and cartridge seals. Demand for insulin products underpinned the growth.

There was also increased demand for drug reconstitution systems, and seals for vials and cartridges. Improvements in these sectors helped West beat its expectations for the quarter and raise its guidance for the year.

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