West Pharmaceutical Services (NYSE:WST) raised its full-year 2026 outlook after reporting second-quarter results that topped management’s expectations, supported by strong demand for high-value product components, biologics-related offerings and GLP-1 elastomers.
Chief Executive Officer and Board Chair Eric Green said revenue reached $872 million, up 13% organically, while adjusted earnings per share rose 29% from the prior year to $2.37. Green said the performance reflected “execution of our strategy and continued operational excellence initiatives,” as well as recovery efforts following a cyber incident during the quarter.
High-value components drive quarterly growth
West’s Proprietary Products segment delivered 16% organic growth, led by the biologics market group, which rose 29% organically. The company’s high-value product, or HVP, components business generated $424 million in revenue and grew 18.4% organically, according to Chief Financial Officer Bob McMahon.
Green said HVP components now account for 49% of total company revenue, up from 46% in the prior-year quarter. He pointed to three main growth drivers: biologics and biosimilars, HVP upgrades including Annex 1-related demand, and continued strength in GLP-1 elastomers.
Non-GLP-1 HVP components grew in the high teens on an organic basis and were the largest contributors to the company’s outperformance in the quarter, Green said. He added that West continues to see win rates above 90% for new biologic molecules, which often require higher-quality containment products such as FluroTec and NovaPure.
Management also emphasized the biosimilars opportunity. Green said biosimilar launches can expand therapy use and may allow West to maintain or increase component demand after commercialization.
Annex 1 upgrades and GLP-1 demand remain key themes
Green said West is seeing more customers upgrade to HVP components, often adding finishing processes such as Envision inspection. He described the Annex 1-related opportunity as being in the early stages of a multi-year transition and said it remains on track to contribute 200 basis points of revenue growth in 2026.
During the question-and-answer portion of the call, Green said West had “just shy of 800 total projects in hand” related to Annex 1 and other HVP upgrades, up 50% from the same period last year. McMahon added that the company is seeing possible “spillover” opportunities beyond Europe, including in the United States.
GLP-1 HVP component revenue increased in the high teens, slightly ahead of company expectations. Green said West believes global adoption of GLP-1 therapies remains in the early stages and that injectables continue to show efficacy advantages compared with oral alternatives. He also said oral GLP-1 products appear to be expanding the overall market rather than cannibalizing injectables.
Green said West is participating in generic GLP-1 rollouts in several countries and is encouraged by next-generation GLP-1 molecules in development for obesity, diabetes and other metabolic conditions.
Margins expand as mix shifts toward proprietary products
McMahon said total company gross margin was 37.7%, up 200 basis points from the prior year. Adjusted operating margin rose 230 basis points to 22.6%. The improvement was driven by stronger sales, positive mix shift toward HVP components, pricing and leverage across selling, general and administrative expenses and research and development, he said.
Price contributed four percentage points of revenue growth in the quarter. McMahon said pricing accelerated from the first quarter and was above the company’s 2% to 3% corridor, reflecting West’s effort to capture more of the value it provides to customers.
The West Vantage segment generated $150 million in revenue and grew 0.8% organically. McMahon said the segment was affected by the cyber incident, which pushed some revenue into the second half of the year. He estimated the impact at a mid-single-digit headwind to growth in the quarter and said the company expects to recover that revenue during the remainder of the year.
West reported $124 million in operating cash flow for the quarter. Capital expenditures were $43 million, down from $75 million in the prior year. The company repurchased just over 0.5 million shares for $157 million in the quarter and paid $16 million in dividends.
Company raises full-year outlook
West now expects full-year 2026 revenue of $3.345 billion to $3.38 billion, representing 10% to 11% organic growth, up from its previous 7% to 9% organic growth forecast. Reported growth is expected to be 8.8% to 10%.
The company raised its adjusted EPS outlook to $8.85 to $9.05, implying year-over-year growth of 21% to 24%. McMahon said the updated outlook incorporates a stronger dollar, with currency now expected to provide a 1 percentage point tailwind, down from a prior assumption of about 2 percentage points.
West also completed the sale and transfer of manufacturing and supply rights for the SmartDose 3.5mL on-body delivery system and associated facilities on July 1. McMahon said the company excluded SmartDose 3.5 revenue from organic growth calculations for the year. He also said the divestiture is expected to contribute 50 basis points of margin improvement for the full year, or 100 basis points in the second half.
For the third quarter, West expects revenue of $820 million to $835 million, reflecting reported growth of 1.9% to 3.8% and organic growth of 7% to 8.9%. Adjusted diluted EPS is expected to be $2.14 to $2.24, up 9% to 14% year over year.
Leadership transition ahead
Green, who is preparing to hand leadership to Michel Lagarde on Aug. 31, used his closing remarks to thank employees, customers, shareholders and the board. He said the quarter reaffirmed that West’s growth strategy is working and that the company remains focused on biologics, GLP-1s, Annex 1 and other HVP conversions.
“We have a durable business with a strong competitive moat, which delivers unique value to our customers,” Green said.
About West Pharmaceutical Services (NYSE:WST)
West Pharmaceutical Services, Inc is a global developer and manufacturer of components, systems and services that enable the containment and delivery of injectable drugs. The company focuses on high-quality packaging and delivery solutions for the pharmaceutical and biotech industries, producing primary drug packaging components and specialized drug delivery devices used for vaccines, biologics and other injectable therapies. West is known for its elastomeric closures, seals and polymer components that maintain sterility and compatibility with sensitive drug formulations.
In addition to component manufacturing, West provides engineered delivery systems and support services across the product lifecycle.
