West Pharmaceutical Services, Inc. (WST) Earnings Call Transcript & Summary

All right. Good morning, everybody. Welcome to the first fireside chat of the last day of the Stephens Investment Conference. I'm Jacob Johnson, Life Science Tools and Pharma Services analyst here at Stephens. Thanks, everybody, for joining us this morning. Great way to kick off the day to have the team from West with us. We've got -- we have the whole crew. We have Cindy Reiss-Clark, the Chief Commercial Officer; Chad Winters, Chief Accounting Officer; and Quintin Lai, VP of Corporate Development and Investor Relations. This will be a fireside chat format. So I'll be asking questions, but I'll try to pause along the way in case anybody in the audience has questions. Just if the audience asks any questions, I'll try to repeat it for those listening on webcast. So with that preamble out of the way, Quintin or Cindy or Chad, whoever wants to take it, I'll turn it over to you for any introductory comments, and then we'll start the Q&A.

Thank you, Jacob, and thank you to Stephens for the invitation to come to this conference. We always appreciate coming here. Unique venue, great mix of investors and companies that you have here. We really appreciate it. We look forward to a productive day today. West is celebrating its 100th anniversary this year. We are the market leader in primary containment and delivery of injectable drugs. Those are words chosen very carefully because, first of all, injectable drugs, we're talking about one of the fastest-growing segments in the drug industry, led by biologics or large molecules. They need to be contained. And so that means that whatever that drug is -- comes in contact with, it needs to be stable, it needs to keep its potency, prevent it from any type of contamination and not have any adverse interactions. And we are the market leader of elastomeric components, plungers, stoppers, for the containment -- primary containment of those injectable drugs. We also do delivery devices, both wearable and auto injectors. And then we also have -- we have a business of administration systems, the transfer of injectable drugs, to prepare them to get ready for the patient. And then we have a contract manufacturing business, which does, on behalf of a customer who has their own IP, we will do plastic injection molding in high-volume, high-precision manner to help support them. So we look forward to your questions today, Jacob.

Got it. Thanks for that, Quintin. Since we've got 45 minutes, I figured, maybe just kick off with like a couple of higher-level questions and kind of for those maybe less familiar with the story, which I think most people are, but for those who aren't, just the first kind of value proposition, it seems to me on the high-value product side is sterilization. Are any customers sterilizing their products themselves anymore? And is that how you kind of initially got your foot in the door on high-value products?

So great question. So it's important -- it's really important, I think, to recognize that our high-value product spectrum is really correlating and relates to the changing regulatory environment of the industry, and so -- and the impact that, that has on our customer and their drug. And so when we think about our products, we can either wash the product, which basically is cleaning it to a certain level of quality, which is ready to sterilize at the customer's location or we can wash and sterilize the product and then it's ready to use at the customer's location. And so basically, that whole spectrum, we continue to work very closely with customers. And with the changing regulations, we are certainly seeing, like in the past, customers may have invested in these type of processes themselves. But the trend for many years has been that this is our core business. And they expect us to manage those processes, improve the quality of those processes, so they can obviously focus on their resources investments on the drug.

Got it. That's helpful. And maybe thinking, moving up the higher end of the high-value products, on your earnings calls, we hear FluroTec and NovaPure a lot. And I think NovaPure is a focus area and we can talk more about that later. But can you just talk about what those products are and the innovation there and why customers are going to those products?

Right. So as Quintin said, that the fastest-growing part of the injectable space is in biologics. And the nature of the biologic drug is that it has a sensitive nature. And -- so when we think about that higher end, that's really where -- that's where that higher end spectrum plays is in support of those biologic drugs. So when we think about FluroTec. FluroTec is a barrier technology which is on most, if not all, of the biological drugs. And it's really a protective coat -- it's a protective technology that protects the nature of that sensitive drug. When we think about NovaPure -- so NovaPure is a broader offering. And FluroTec is embedded in NovaPure. However, NovaPure was created with quality by design principles which really is resulting in it is at our highest level of quality. In addition, it has our highest performance attributes for the containment system.

Maybe just on -- I hear quality by design, I hear high quality, and that all make sense, but why does that matter for customers? Is it all about risk mitigation or...

So quality by design is a manufacturing philosophy where you are doing checks and balances on every stage of the manufacturing process, including the supply chain. So if you can imagine, if you just do quality checks at the final product, you have a certain variability that will have plus or minuses in terms of tolerances or the dimensions. In the case of quality by design, we are engineering in checks and balances along every way to tighten the tolerances, both on chemical composition, mixture, processing, dimensioning all the way through. And so then when you get to the final product, you have the tightest tolerances that you can possibly get through that type of step-by-step process. It is a lot of work, but we believe that by doing so, you can get a better product, you can get better performance for that product. And we think that the customers get value and risk assurance that they're getting something that has been manufactured as carefully as possible.

Maybe -- I was just talking to investors newer to the story the other day, and I think people say you have roughly 70% market share, and I think it's higher in biologics. And this person was asking, why is that? And I was like, well, they're really good at what they do in quality and maybe it's this innovation. Maybe the answer is Cindy is really good at what she does. But I'm just curious kind of from your perspective, how do you maintain that market share and get even higher share in biologics? Why do you win?

So as I stated, I mean, a bit of it is that offering, right? So they're a sensitive nature and we like to say that the molecule picks the container. And it's about being able to protect the integrity and the quality of the drug, so it's safe for patients. And that is really what we do well. And that higher end of our -- that upper end of the high-value product spectrum, that is really where we focused. And the technology and the quality levels that we just spoke about, that is a clear value proposition, and it continues to resonate with our customers and we succeed that way.

Well, and as we all know, Jacob, this industry feels fragmented. But, I mean, when we look at some of our customers and some of the players and various customers, they started someplace else or maybe 2 other different places. They talk among themselves and they know. So as they're preparing their new molecule, right, molecule X to get ready to go through Phase II, Phase III. All right. So they're going to sit there and go, well, what was the industry standard? What was -- what is the -- what do most people use? And you'll probably start from there and then you do -- you have to do your testing. You don't ever cut corners. We never cut corners. You have to do it. And then when you come up with the results, then you're ready for the filing. And so we believe if you lead with quality, if you lead with science and then if you lead with scale, we think that we covered the bases.

That's helpful, Quintin. Maybe just on high-value products. I think it's, call it, 2/3-ish, maybe a little bit less depending on the quarter of proprietary products revenues. From a unit -- can you remind us where you are from a unit perspective on high-value products?

So from a proprietary products, which is what we make on the primary containment and delivery side, not the contract manufacturing, it's about 40-some million components a year. And of that volume, it's about 23%-24% high-value products. But as a percent of sales, it's like 76%. And the reason being is that the average selling price of a standard bulk component could be in the $0.01 to $0.02 a piece. And a high-value product, whether it's, as Cindy said, washed, to sterilized, to envisioned, to coated, to know -- your -- can go from $0.05 to $0.10 to $0.25 to all the way up maybe even to above $1 a piece.

Got it. I wasn't giving you credit for delivery devices, that's the delta between our numbers. Maybe for Chad or Quintin, just -- you talked about the revenue per component margins as we move up that spectrum.

Yes, sure. So think of the same lot that Cindy and Quintin took you off the spectrum. If you think of margins, standard product could be 20%-25% margin. Move into a Westar RS, which is washed Westar RU, which is ready to use, washed, sterilized, those are going to be in the 40% to 50% margin-ish range. And if you're all the way at the top of the house to like a NovaPure, you could be at 70, 70-plus percent. That's the way to think of that range.

Got it. And then, Quintin, going back to the unit mix, 23% to 24%. I feel like, I don't know, last I heard, maybe it was 21%-22%, something like that. Is that shifting maybe 1% or 2% a year kind of a reasonable way to think about it?

Yes. So if you look historically, it's been about that, about 100 bps a year. But let's look at the math. And because it's not like the -- what we would call mix and mix shift comes in 2 flavors. The first is new drugs that have been released. There are no prior volumes that are precedent. So all those incremental volumes are what we would call mix shift. And that usually comes at higher ASPs because a lot of those are biologics. So you're going to get a nice sales bump from that mix and certainly volume. So that's going to be new HVP volume that's coming. The other flavor is legacy products. And so every year, we have some customers who move from maybe a bolt to us doing a wash or a sterilize. Some years, it's more than others, but what we -- the trend that we see is we see customers moving up. They rarely decide, "Oh, you know what, we decided to go to a cheaper product, less good product." So they all move up. So that's what drives that overall volume. It's new products and mix shift, the legacy.

Something I wanted to tackle is restocking and destocking and, Quintin, maybe for you and maybe we can get Cindy to chime in, too. But -- so you moderated the guidance last quarter due to, I think, a slowdown in restocking trends from some customers. So you're expecting them to build up inventories and maybe it didn't play out as much as you thought. But that prompted inevitable destocking concerns, which has become -- we've lived it this year in bioprocessing. So maybe can you just talk about what happened and what surprised you from these customers?

Yes. So let's kind of wind back to 2020, in the pandemic. When the pandemic started, it became apparent that, first of all, people were getting sick and there were a lot of drugs that were being used especially on the generic side to help people that were in the ICU. And so we prioritized them because we wanted to make sure that people were getting drugs so that they go because so many people were getting sick. Then as the year progressed and the vaccine manufacturers started to have success, they started to have conversations with us at West, "Hey, you need to be ready." So we then said, okay, we put some CapEx in flight, but we also then made plans to where we would prioritize components for vaccines and we'd have to put everybody else on some type of allocation. And so that happened through '21 and '22 where there were a lot of vaccines being made. Meanwhile, we had some customers who were on allocation, those -- the products that we provided to them, they had long lead times, which then forced them to have to bring their safety stocks to levels that are very uncomfortable for them. And I'll -- when I turn it back over to Cindy, she can give you those stories. So now here we are in 2023, what we see are 3 kind of areas for inventory management. On COVID-19, we are seeing a destocking, and I think others in the industry are seeing a destocking. That is demand related. The demand for vaccines and boosters is a lot less than what it used to be. So therefore, those vaccine manufacturers no longer need to have so much safety stuff. They can start to draw those down. And we're certainly seeing that in both our performance and our order book. Then there's another area, what we would call disposable medical devices. These things are standard products for us. We were not capacity constrained through the pandemic. And some of our larger customers probably went to the upper end of their safety stock, which is not uncommon because I think a lot of us, all, went to the top end of our safety stock during the pandemic, whether it be for laundry, detergent or whatever. But anyway, they informed us earlier this year that they were going to start to do inventory management, and we started to see the impact of that. We saw some of it in Q3 and we expect some of it in Q4. So we don't think that's demand related. We think it's just more of the customers managing their inventory, especially as they -- we get to the end of calendar 2023. Then the other one is this restocking, right? Remember, we had this list of companies who -- we had long lead time items, we're -- they were having to deal with being on the lower end. Through the first 9 months of this year, we were able to help them restock. And then as we got into Q4, some of those customers said, they're at sufficient places and that they'll probably resume ordering next year. We knew that eventually the restocking goes up. And if you take a look at our lead times, they have come down. And Cindy, maybe you can tell stories of like how the customer spoke before and after in terms of lead times.

Yes, I can. Well, I think as you can imagine, when you are in need of something and you can't get it, those are very different conversations than when you're talking about potentially new opportunities and assurance of supply. And so what I can tell you is we recently just came back from a very large conference in Barcelona. And that is an annual conference. And a year ago, the conversations that we were having with customers was very much around when are your lead times going to be reduced and when am I going to be able to get my supply because obviously, they've got to manage their business and manufacturing. Well, fast forward to just recently in '23, the conversations are very different. We're seeing the effect of our capacity coming online and the customers are seeing the benefit of that. And so the conversations obviously were very different because now they're looking at it more as how do they continue to have supply chain resiliency. And so the conversations are really more around how do we leverage the West network versus how do you reduce lead time. They're really much more forward looking.

Got it. And then Quintin, you guys aren't guiding to 2024, but you kind of proactively said that you think you will be within your long-term construct of 7% to 9% growth next year, which seems to be kind of a preliminary indication of demand trends. How much visibility do you have into that outlook? And why would you end up above or below that range?

I mean visibility is always -- I mean it's a combination of committed orders, conversations we have with our customers, our own internal forecast and analytics, and that's how we pull all this together. But let's kind of put it as a reminder here. Even in the fourth quarter, even though we did drop full year guidance, we still plan on growing ex-COVID-19 in the fourth quarter. So again, it's not like that we're hitting a negative wall because you mentioned some of the other bioprocessing customers. What they're experiencing, I can't really attest to since I don't know what their issues are. But what we're seeing is that we're seeing more typical growth patterns with biologics being higher and generics and pharma being a little bit lower. That's just -- that -- it is starting to fall within our construct. And that's what we -- that's really -- as we look out to next year, we expect kind of more of the same.

Got it. Moving on to the inevitable topic. First question, is that GLP-1 or GLP-1; and two, can you talk about West's history in the diabetes space?

So maybe I can take that first. As Quintin said, we are -- we turned 100 years old this year. And our mission during that time really hasn't changed, which I think is a pretty remarkable milestone for any company. And we have really been a critical part of the delivery of insulin really since the beginning. And obviously, diabetes and the treatment for diabetes has changed over the years, and we continue to support that evolution, including GLP-1. And I think -- again, it's important to kind of recognize that GLP-1s, they're really not new, right? I mean they've been around for some time. And however, right, the new versions of GLP-1s are certainly showing some pretty impressive results in different and new treatment areas. And just West is committed. West is committed to support our partners as they grow and expand their business just like we would with any -- like any indication, whether it be diabetes, new treatment areas, oncology, immunology because we certainly want to enable the success of our clients.

Got it. I guess a couple of kind of general questions around the subject that we get asked about to the extent you can answer some of these. I guess when a customer orders stoppers or plungers, are these things that they order in bulk ahead of a campaign or is it kind of like a ratable order flow, especially, maybe as we're thinking about like the initial launch of a therapy?

So it really depends. As you can imagine, that we work with -- we have various different types of customers. And if -- we've got some clients that they're relying on their own internal network. They're also relying on external networks to manage that supply. And so we've got to work very closely with them to be able to onboard their partners, and that could be more intermittent or kind of more choppiness as that goes. We've got other customers that are pretty steady. They've got dedicated facilities for certain drugs, and that's more level-loaded throughout the year. And so it really is going to be dependent upon the customer and kind of the life cycle of the drug.

Got it. That's helpful. And then I guess something maybe for Cindy, but Quintin, feel free to chime in. Just what did you learn about capacity addition and demand planning from COVID? I'm guessing that was a very unique -- it was a very unique time and I'm guessing Cindy for you is very, very unique.

Yes. I think we all learned things that we didn't know we needed to learn during the uncertainty of the pandemic. I would -- I can start and then I'll let you look at capacity. Working closely with clients, just being able to understand more about how they're thinking about their business and what's required, when we were looking at the capacity investments, we wanted to ensure that we were able to put in capacity to support that ramp, but also be able to support all of our customers base. Because we support a lot of different critical treatments, and we certainly didn't want to be the reason a patient didn't get their medicine. And so it really is -- our philosophy is we work very closely with our partners. And in turn, with that, we make decisions to ensure that we've got the capacity around the globe where we need it and where they need it to support the different scenarios. So in that regard, it wasn't different during COVID. I think the -- I think what was different was just the speed in which everybody was having to make decisions and put the capacity in the ground. But I'll let you...

Yes. And I think the level of communication and cooperation that we had with our customers and them understanding our limitations, what it takes for us to increase capacity and understanding their -- when their demand is coming in, I think that's something that Cindy's teams and the supply chain team really did well with the customers. And I think that's one of the lessons that we're -- all of us are coming out of the pandemic is supply chain matters. And so as we are now looking toward the future, on our proprietary side, we are building and expanding. And it's not that if we build it, it will immediately go to 100%. In fact, that would be the wrong way to build. We're trying to build so that we have uplift capacity because we're always talking to customers that have something in the pipeline that they go, "West, this could be big. This could be big." Every customer says, it could be big. And then we have to be prepared for it. And if we have no -- if we're running at 95% capacity and some of these actually hit, then we're wrong-footed again and everybody goes back to allocation and then people are starting to yell again. So that's what -- that is the plan. And so when you look at that and -- maybe I'll hand it over to Chad to talk about some of the CapEx that we've got going on, I mean, that's what -- that's how we're trying to stay ahead of capacity.

Yes. No, absolutely. And if you think of last year, it was HVP processing, and we brought in washers and we're seeing -- we saw the benefits of that through our lead times this year. I mean as everyone's heard about Kinston and the plungers for that need within the biologics space primarily. But yes, I mean, to Quintin's point, looking forward, it's uplift capacity, it's mixed shift conversion capacity and its network flexibility, making sure we have it at multiple HVP sites, but active projects at all of our HVP sites right now.

Got it. That's helpful. Maybe I wasn't -- I was going to wait to get there, but you mentioned Kinston and, Quintin, you said it just doesn't magically get filled up immediately. But how quickly can that facility ramp and where does it stand right now?

Well, it's ramping right now. And there'll be even more in 2024. So again, it's trying to stay ahead. And then what we try not to do is, we try not to externally forecast what our customers are going to do, right? We obviously have to prepared. But that's why we always referred and say, "Look, you need to talk to the customers of what's going to happen." And so -- but our job is to be ready. And again, we're hoping that as we look toward early next year, we will be even more ready.

Even more ready. Got it. Maybe I'll pause there to see if anybody in the audience has any questions.

When you move to the situations where you have to allocate, do you experience more customer loss in some way there when you have to step down and allocate the supply and [indiscernible], everything's working great, I mean, you have a higher turnover or is there [indiscernible] that happens there?

So the question is when West has to allocate for customers, if capacity is tight, does that cause any issues with existing customers? Do you lose anybody? How does it impact them?

So for the elastomer components, it's not a common practice to have multiple formulations on a drug just because of the nature of what you actually have to do in order to get on to the filing. And so during that allocation, that's where we are having those deep conversations to ensure that we're at least allocating enough to multiple parties to ensure that it's not disrupting their drugs. So they may not have the safety levels of inventory that they would normally have, but it's just very imperative during that time that we're able to allocate to many partners, so there's no disruption to the drug on the market.

Just a couple of other follow-ups on the topic kind of generally. Just how does participate -- participation rate change for small versus larger indication therapies? For larger therapy, is there a -- do you -- is it more likely for there to be another supplier or you're not getting 100% share? I'm just curious.

So maybe I can answer this kind of in the 2 parts of our business. When you think about the proprietary business on the elastomer side, as I stated, it's just not common practice to have multiple formulations on a drug. And so really there, it is about the scale. It's about the flexibility of the network and being able to assure that supply. When we think about our contract manufacturing business, however, when we're making the device and doing the injection molding and assembly, that is where it's very common practice to have multiple suppliers to be able to assure the supply of the device.

Got it. And then kind of a higher-level question. Cindy, you mentioned talking to customers about leveraging the network. How important is it to have kind of these multiple -- having multiple sites producing the same product for customers?

So I think -- as you can imagine, I think everybody it's top of mind, supply chain resiliency. And I think that's not just within the health care industry, I think that's every industry, right? And so the conversation that we have is when you think about like what's most important to our customers, it's assurance of supply and quality and regulatory compliance, right? Those are the 2 basic things. And so when you look at the robustness of a supply chain, we're looking at, if a customer is single sourced in only one of our manufacturing facilities, that could be risky, right? But -- so we're leveraging the network because we do have multiple facilities around the globe. And it really is important to be able to flex that network. So that way, we can kind of flex with their demand and ensure that we have a network that supplies the product with consistent quality regardless of where you get it.

This is a -- this industry has kind of grown up. And we've grown up with the industry. And we've grown up with the regulators. We were there before the regulators even existed. And then we've -- then after they existed, we've all grown up. One of the hallmarks in prior years is that when a drug company spec-ed in a component, it was very specific. It was elastomer, it was processing, it was dimension, it was site; not just company-specific, site-specific. And so there's still lots and lots of drugs that have that type of specification. What we have been doing, and this is a -- it's going to be a multiyear process, it's already been a multiyear process, by moving from a regional operations to a global operation network like we did 8 years ago. That was the first step, right? To say we're going to go down this path. Then we started to say, as we upgrade and put in new capacity around the network, we're going to do it on a standardized fashion. And we're going to create a new class, something that is not site-specific, but more process-specific so that you can now just take it from wherever, and that's our Westar Select brand. And that is a process that is going on, and we're seeing more and more embracing of that. Now today, we still have lots of legacy customers that are very tightly spec-ed in. And -- but we think that, like I said earlier, they'll move and they'll move. We're not seeing anybody going, "Hey, we like having the global network. We want to go back to being site-specific." No one goes backwards. That's what we're trying to say here. But people could move forward and sometimes it just takes a while.

Got it. Kind of pivoting to a different topic, drug delivery devices. We've seen some really strong growth there this year. I think that may be related to some commercial approvals, but could you unpack that a bit?

Do you want to take that?

Sure. Yes. So first of all, in our delivery devices, it kind of spans various things. We've got admin systems. Those are the transfer devices that you have a lyophilized drug -- freeze-dried drug. You can have a transfer device to be able to add saline and avoid having any kind of finger sticks. We have Crystal Zenith, which is an alternative to glass and is really good for places where glass are suspect and -- whether it be breakage, silicone oil, et cetera. And so we make cartridges and syringes and vials. That's had some good growth. And then on the delivery device side, we have SelfDose, which is a self-powered auto injector. And then we have SmartDose, a wearable device. And last year, we had 3 commercial approvals. And so when you look at it in totality, we don't give breakdowns, but we're seeing growth in all of those categories here this year.

Got it. And is there any way to think about margin across those categories?

Yes. It varies. But as Quintin laid out there, right, I mean, different levels of maturity of those products, different levels of volumes, obviously. So we see them continue to move up that HVP margin curve that I talked about earlier. So as our volumes grow, we'll see that margin improvement follow.

Got it. All right. We've got 10 minutes-or-so. Contract manufacturing -- sorry, question.

Quintin, can you just remind us, or one of you, CapEx this year and how should we think about it next year?

Question was on CapEx this year and how to think about it for next year.

Well, we've said $350 million for this year is our estimate, and we'll talk about next year on the February earnings call.

Is it fair to say -- I mean just given the growth that await some of these larger molecules that currently you're serving should require more CapEx? Or like what's the capacity situation for all these?

So on the question, maybe I'll ask it -- similar question, maybe in a slightly different way. Can you just remind us what normal CapEx load is for you all? And then the question was, if you're -- given the demand trends that are out there right now, is it safe to assume that you'll probably be above maybe that construct next year.

[ Jeff ], thanks for the question. So as a reminder, a lot of the CapEx that we do, the projects can take up to 2 years to get done. So a lot of the projects that were initiated this year are probably going to be finished into 2024, into 2025. The projects that we had for last year are probably getting finished into this year and early -- some into next year. That's kind of the way we do it. We do everything in phases. And so if we try to look and when we take a look at our long-term construct of 7% to 9% organic sales, we think that about 6% to 7% of CapEx can support that with the majority of that 6% to 7% being growth CapEx and then the balance of it being maintenance and IT. So that is our construct. If we see that there is a need and if we get that signal from our customer base that there's more to be had, just like we've done in prior years, we are committed to putting that capital.

So my question is on contract manufacturing, but maybe, I mean, we're talking about CapEx and capacity, I think you are adding some capacity on the contract manufacturing side. It's a business that's bounced around a little bit, but it's had a strong growth this year. I think there's probably some belief that some of that's related to weight loss demand. So in areas you're adding capacity there, kind of what commitments or contracts do you have with customers when you're adding contract manufacturing capacity?

So let me start and Cindy can always come in. But let's not talk about any specifics. But let's just talk about contract manufacturing as a business. As Cindy said, this is a case where we're doing it on behalf of the customer, we're probably one of the several other suppliers. The way those contracts work is that we have -- we'll dedicate a part of our plant or a section, and the machines in there are going to be dedicated to be making that one product. It's expected to be able to do it for multiple years. And unlike proprietary, it's not designed for a lot of uplift. It's designed to be run efficiently and at good capacity so that you can get your margin out of it. That's the -- that is the math. So the way you grow in contract manufacturing is you add a new project in, which means maybe building a new building or an extension or this or that and having to put equipment and validate. So there is a cycle to grow. So if you remember 2 years ago, we had negative growth as we had to -- we were transitioning away as one customer was winding down a project. And then in Q4, we brought online a new project, and we saw growth. And we're about to anniversary it here in this quarter. So whereas we had double-digit growth here in Q1, Q2, Q3 as we anniversary, it will be high single-digit growth. That's just the math in it all. We have projects in flight, nothing to mention here, nothing to talk about. But our 7% to 9% presumes no major projects next year.

Just to follow-up. Did that capacity that was brought online during 2020 for a specific customer, was it -- has that -- most of that been used or you've been able to reallocate or redeploy to other areas around the customers?

Yes. So the question was the capacity that we brought on in 2020 for a single customer. So a lot of the capacity we're talking about there, [ Jeff ], is proprietary, and it's not dedicated to a single customer. It's more fungible within our customer network. And so a lot of the CapEx in 2020, '21, '22 was on our proprietary side and our HVP side.

Maybe...

Can I ask just why be in the contract manufacturing business? How does that kind of fit?

Question is why be in contract manufacturing.

First of all, there -- it is -- there is a set of customers on the injection devices. Some of them have their own IP, they're looking for help. Some people don't have their IP and they're looking for someone with IP to help. Either way, we can have a conversation with them. And either way, they're going to most likely be a proprietary products customer of ours. And so there's a lot of leverage there.

And just something to add. I think it's also good to -- there's a couple of market trends that are lending itself to greater devices, right? And so when you think about some of the current molecules on the market, they're looking for life cycle management and they see delivery devices start to be that play. In addition, you also see the trend just in health care overall to manage health care costs, the move into more home treatment. And that's really where we're having far more discussions around devices. And so how you -- how customers think about that is some customers have their own device development teams that they're developing their own devices, and they want to partner with somebody to the manufacturer of those devices and then others are actually looking for kind of on the market devices. And so we look at the offerings and the portfolio that we have is that we can be a partner regardless of the choice of our customer. And to me, that benefits the relationship as well as to be able to provide that type of service.

With that, I think we've hit our time. So Cindy, thank you so much for being here, Chad and Quintin as well. Really enjoyed the conversation and have a great conference.

Thanks, Jacob.

Thank you.