Conference Transcript - ATR 2026-09-15

Daniel Cohen, Analyst — Morgan Stanley

Okay. Good morning, everybody. I'm Daniel Cohen. I'm a managing director at Morgan Stanley. It's my pleasure to host this fireside chat with the leadership of Aptar Group. Aptar Group is a global leader in drug delivery and active material science, the technology behind the nasal sprays, inhalers, injectables, and dispensing systems that get critical medicines to patients. Before I introduce the team, just the disclosures that I need to read, for important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com slash researchdisclosures, and if you have any questions, please reach out to your Morgan Stanley representative. With me here today, Guy Altuya recently stepped into the role of president and CEO, capping more than three decades at Aptar and most recently leading the pharma segment. Vanessa Canu joined as Executive Vice President and CFO in January 2025, bringing a deep track record as a public company CFO. Gael, Vanessa, welcome and thank you both for being here. Thank you, Daniel, for the invite. Gael, congratulations on this next chapter as CEO. How should we think about Aptar priorities going forward under your leadership? What carries forward, and perhaps where will there be changes?

Gael Tuya, CEO

Yeah, so look, the first priority is really to execute on 2026 and our commitment. So no question. We need to deliver our best upon our commitment. And at the same time, prep the company for our future long-term growth. So this being said, I mean, priority one would be to stay focused and close to the pharma segment. You know, this is the growth engine for the company, looking for my successor for the segment. So I'm going to stay close to it because we need to keep on delivering where we are. And we've got a good business, a good pipeline, and customers are expecting on our partnership with them. And then, look, I've been, okay, three decades with the company, but it's been a long time. I was a beauty guy or a food and beverage guy. So as we speak, I started my listening tour with the organization. So reengaging with customers, reengaging with the team, visiting the sites. We've got a global footprint. So I'm starting, I will continue, and priority will be to make sure that from an Aptar standpoint, we allocate resources, energy, and our capex to the opportunities where we've got the greatest returns, value, not only for customers but for shareholders.

Daniel Cohen, Analyst — Morgan Stanley

Thank you. Vanessa, you've been with the company for going on two years now. Some of the market still describes Aptar as a packaging company. When you first looked under the hood over the past two years, what surprised you most about the business, particularly about the economic side of the business?

Vanessa Kanu, CFO

So first of all, I definitely would not describe Aptar Pharma as a traditional packaging company. So when I first joined the company, you know, I have to tell you, I was very impressed by the breadth of the portfolio. So spanning everything from our proprietary drug delivery devices to our injectable solutions, to active material science solutions, to the services that we offer, going from formulation expertise to development support, regulatory support. I'm sure we'll talk a bit more about those services in our discussion. But when you look at the breadth of the portfolio and you look particularly at the products that we offer, these are products that are very technical, highly regulated, where safety, quality are super important, very, very important, because we cannot compromise patients' lives. And so this is where our technical expertise, our intellectual property, and our decades of know-how in this space really do form a competitive differentiator, so to speak. And you do see that in our margin profile. In the pharma business, our EBITDA margins, I should say, are 32% to 36% is our target range, and we have consistently been in that target range. And, I mean, these are EBITDA margins that are best in class. And so I would say it's really more reflective of a differentiated technology platform than a traditional packaging business.

Daniel Cohen, Analyst — Morgan Stanley

So not even simply a component supplier either. There's more of a platform around that. Maybe just to talk a little bit about the transition. Obviously, you've been, Gael, in the job for a couple weeks now. Stéphane would say I think was known for saying if it goes through the nose, Aftar is involved. Is that still how we should think about Aftar?

Gael Tuya, CEO

He was making a comment for Aftar Pharma and I will say it's a colorful way to describe the group. In the Pharma space, we are way more than a component players. That was one of your questions. And nine years ago, I'm taking over the segment, this is all the work done to transition from a strong product vertical where I believe we've got the best-in-class drug delivery solutions for the nose, for the lungs, for ophthalmic or dermal-type application. and we added a lot of capacity in order to make sure that we could become the partner of choice of customers and it does require that you start as soon as possible in the drug development program of our customers. And then you follow the molecules. So we've got, as we speak, nine years after, the ability to do formulation strategy, formulation development, predominantly for the respiratory tract and then to add the analytical support, the regulatory expertise for our customers, big, large, and all the early stage biotech companies to be in front of regulatory bodies and to be approved. So I would say we are way more than just a component. We are really part of the overall drug development program with our customers. With a lot of humility, we know where we stand. where we can support them when we can de-risk and accelerate their drug development program. More broadly, Aptar is not only a pharma player, we are a long, long standing relationship and very strong competitive advantage in beauty, in food and beverage. So everywhere where you need to protect formulation and dispense complex formulation, Aptar is the partner of choice. And this is what I'd like to emphasize, the proximity, the long-lasting relationship with customers because we know how to solve their most complex dispensing challenges.

Daniel Cohen, Analyst — Morgan Stanley

And do you see, given your recent tenure leading that pharma business. Do you see opportunities in your new role to bring some of that, some of the learnings or some of the expertise from pharma to the other parts of the business?

Gael Tuya, CEO

One of the learnings, if you really want to be a partner of Troves and if you want to be, let's say, mission critical for your customers, you need to bring way more than just a dispensing platform. You need to create value beyond products. So from components to integrated solutions, to service capabilities, digital support, where you're going to be supporting your customers during their development program and whatever the kind of development program. And the objective is for us to become the most trusted collaborators where we're going to be part of their success. So depending on the business categories, we will have to create that value beyond just a technical platform. I could mention, for example, in the beauty world, you've got a lot of evolutions around the nature of fragrance without ethanol and so on and so forth. I mean, how are we going to provide them the maximum support to find the right solution? I was with L'Oreal not long ago. They've got a segment called Beauty Dermatology. L'Oreal is the number one beauty player in the world they were talking prescription, patients this blurred frontier between the pure skin care and the consumer health care where to navigate and the co-CEO of L'Oreal was telling me you've got the unique expertise where you can really support a skin care player to transition to become way more So an healthcare player where tech and science are so critical because consumer, at the end of the day, we are patient and consumer at the same time, we want effective results.

Daniel Cohen, Analyst — Morgan Stanley

Thank you. Maybe turning a little bit to diving into the business a bit, the last 18 months have been, there's been some volatility in the business. Could you talk about that, reflect on that, and perhaps how you think about the longer-term 7% to 11% pharma growth rate I think that you've put out there?

Gael Tuya, CEO

Yeah, so if we step back, the last nine years, we've been growing top-line at a CAGR growth rate of 9%, but in the last 18 months, we've been facing some volatility, and that's due to the emergency medicine. You know that we are a strong partner of the opioid overdose issues, I mean trying to make sure that you've got naloxone drugs all over the place in the U.S., and this market is facing inventory readjustments. So we qualify the kind of negative impact we're going to face in 2026 with a 65 million top-line impact, and obviously we are losing the contribution for. We are trending pretty in line with what we share with you, and we are very close to our customers. So we believe by early 2027, we will know where the baseline of this market will be. This being said, and if you look at our Q2 results, excluding emergency medicine, that is a major impact, the pharma segment grew by 8%. If I look at the different divisions, injectable grew by 9%, and Q2 2025 was a very solid comparison way of challenging, and following two quarters with a plus 20% growth rate. Consumer health care down plus 15%, and prescription, pharma prescription, excluding the naloxone impact, I mean the emergency medicine impact, at plus 8%. So, behind your question, should we change our framework and the algorithm? The answer is no. The 7-11 long-term growth remains the framework, we believe, strongly. Market conditions are good. The overall pharma market is growing. Some segments are growing faster than others. and then you combine or you accelerate that growth with your innovation and with your pipeline build and pipeline conversion. One example, the Coffin Coat market has been quite challenging for us. The growth rate is a GDP plus. You've got the ability to accelerate that growth thanks to your innovations because you're going to convert some dispensing solutions to your innovation. And this is what Helion, one of the leaders in the market with TerraFlu in the U.S., or outriving outside of the U.S., is grabbing significant market share with our new innovation. So that's where natural market growth, accelerated by innovation and innovation, critical for us, and the pipeline build and pipeline conversion, make us being confident with the 7-Eleven long-term targets.

Daniel Cohen, Analyst — Morgan Stanley

Just a question on margins as your pipeline expands into other therapeutic areas, cardio, neuro, and biologics. How do you, how does the margins of that business compare to existing margins?

Gael Tuya, CEO

So, you know, we share with you, We've got four divisions. Prescription is the most profitable division of Aptar Pharma, followed by consumer health care, active material science, and then injectable. The nose-to-brain or the central nervous system type where we are doing work by the prescription division, so to give you some color and maybe some some indications about potential margin expansion for this pipeline conversion part of the pipeline conversion and that's why we are comfortable with the 32 to 36 percent profitability range what would I characterize for you years back after and after pharma enter the the nasally-deliverant drug to treat local issues. You've got your nose running, you've got your nose blocked, you've got your allergies. But in the last nine years, we have been working a lot in order to use the nose as a different pathway to treat chronic disease, to treat emergency disease. And this is what we see with naloxone being one example. You take Baximi for severe hypoglycemia. You take Spravato for depression-resistant treatment. You take Neuralis or UCB for severe, I would say, epileptic seizure or epinephrine with nephi. So the more and more you're going to use the nose as an alternative pathway for chronic and emergency treatment. And part of the pipeline is more and more for the nose to brain, where we are working actively with different scientific organizations in order to characterize the science behind the nose-to-brain delivery pathway. We published yesterday a joint collaboration with the Mass General Hospital. What is the job there with them? is to characterize the pathway to understand the kinetics of the drugs moving from the nose to go through the brain and to avoid the blood-brain barrier that is highly protecting, I mean, every brain. So we are characterizing the science. We want to evaluate different compounds or different potential candidates to go through the nose for CNS treatment and that's the work we are doing and that's the quality of our pipeline and that's why we were indicating with Vanessa we are not just the component we really play with them to understand the science behind to understand the regulatory standpoint or to build the regulatory with authorities and the analytical science the objective for us is to demonstrate to the hundreds of early stage biotech that nose-to-brain might be a very interesting delivery pathway.

Vanessa Kanu, CFO

If I can just add, because I wanted to make sure we hit your margin comment also, just to complement what Gael was saying, the pipeline is very diversified. If you kind of look at the weighted pipeline in terms of what does it comprise, right? It's respiratory, it's biologics, it's the systemic nasal drug delivery that Gael is talking to, It's injectables, ophthalmic, et cetera. And the reason I really wanted to complement Guy said to add that on is because it's not going to be any one molecule, any one therapeutic area, any one delivery route. It's very diversified. And when you think about the top items there, these are the highest margin parts of our portfolio. So when you think long-term margin profile, which is kind of where you're going, it is well-supported just based on what is in our pipeline today and the weighted value actually skews up work.

Daniel Cohen, Analyst — Morgan Stanley

One other exciting area of pharma is the GLP-1 space. Can you talk about the opportunity in intranasal or pulmonary delivery and if Aftar is playing a role there?

Gael Tuya, CEO

So our business model is customer-led. I mean, we work with pharma companies. We support them to accelerate and de-risk their drug development program. In the space of GLP-1, everybody is focusing on injection and overall, we participate to that growth. But nobody was really moving there. So because we've got the capability, why not taking an API and working around the formulations to easily deliver GLP-1 or to look through the logs? We've got the formulation capabilities. We've got the technical platform capabilities. Why not doing this? So we've done it. We find the pattern and so on. We're going to be looking whether we can partner with some companies because we don't look at going to the end. That's not who we are. And that was also a way, Daniel, to prove our thought leadership. Whenever it goes through the nose or the lungs, we are more than a component and we can really support you guys in your drug development. So will GLP-1 deliver through the nose will be a new huge administration pathway? I don't know. It's a good example of what we can offer. Let's look pragmatically speaking how can we support a biotech, a big company that could be interesting by the way we have done and let's look at that one. I mean there's many cases when you think about NBMIST where we work with the lab. I mean when you do excess body fluid you can take your pill or you go to the hospital and you've got an IV. We work with them to say maybe you can have a treatment through the nose. So that's the same principle. How to support customers whenever they consider a potential alternative pathway.

Daniel Cohen, Analyst — Morgan Stanley

Sounds like some of that early work may start on your own, but you will look to partner that with the customer.

Gael Tuya, CEO

Ideally, we want to start with early stage biotech. How can we support you? Obviously, the earlier we start, the earlier we're going to spec our drug delivery platform, once you start generating data and if you do a good job and you are a true partner of choice you're going to continue in the course of the developments and then you look at your revenue extraction model being slightly different fees for service but why not also extracting your fair value from the work you are doing through access fees milestone payment change of control and you know, drug royalties. So that's also a way to strengthen our pipeline, have a defensive moat around our product, and to generate different revenue streams.

Daniel Cohen, Analyst — Morgan Stanley

Got it. Maybe talk a little bit, because you do play across the life cycle of a drug, maybe talk a little bit conceptually about how the economics for APTAR evolve as a drug goes from brand to generic, maybe to OTC. There's evolution that's going on in the respiratory market with the new propellants. How does that all interplay in your business?

Gael Tuya, CEO

Okay, so we are actively focusing on the life-saving, the life cycle management story of our customers so you're right a drug will start with an originator some years after you're going to get generic players and maybe the regulatory bodies will say from prescription we can move OTC this is what happened with with Naloxone with emergent the originator but this is also what happened with many many customers with whom we are working so So our algo is 90% of our business is really with the natural growth of the molecule and the ability to support this lifecycle management and to provide support to generic companies to enter that space. and they are working with us and then the additional growth rate will be really back to this innovation accelerator, convert additional market to our solutions and the pipeline conversion. In the example of the new propellant, the world is going to switch from current propellant to a new one having less of an impact to global warming, the entire world is going to change. Where Aptar is playing a role is to define the right technical platform that's going to be compatible with the new formulation, because the formulation with the new propellant will behave differently, how to make sure that we're going to be fully compliant, number Number two, the regulatory pathway might be different, and we are, Aptar, working with the FDA in the U.S. to define the guidelines for pharma to come with an approval for a propellant switch, because at the end of the day, it should be fully compliant, fully safe for the patient. So we are supporting our customers there, not only with the device, but with the services. And that's our business model, you know, this from formulation to patient.

Daniel Cohen, Analyst — Morgan Stanley

And then maybe just turning to the injectable side, I think there's also an evolution, particularly in Europe, with respect to Annex 1 compliance. How does that impact you?

Gael Tuya, CEO

So the European regulatory agencies are raising the bar. The Annex One is really a requirement for all players in that ecosystem to be more, I would say, in line with the best product to be delivered on the market. So we are fully compliant with Annex 1, number one. We read the bar everywhere in our different manufacturing sites. We've got a good pipeline built with Annex 1 because all our customers should comply with the regulation and they are looking at partners, Aptar being one of them, to make sure that we've got the organizations to be in line with Annex 1 in order to give them the comfort that Aptar is the right partner to be fully Annex 1 compliant. So that's a good pipeline build for us, and that's where we are fully committed to. Got it.

Daniel Cohen, Analyst — Morgan Stanley

Maybe, Vanessa, just talk a little bit about balance sheet. Aptar has relatively low leverage as a company, low amounts of debt. How do you, as a management team, prioritize returning of capital, organic investment, and M&A as you look to the future?

Vanessa Kanu, CFO

Yeah, so we have a very strong balance sheet, as you've pointed out. So we have discussed our leverage corridor being between one times to three times EBITDA. Think of the leverage corridor as, you know, the range of leverage that we would expect to be within under normal, you know, steady state conditions. So if we went above three, we would expect to deliver back down to be in that range. If we went below one, we would expect to get back within the range. So that's our corridor. And, you know, as of the end of last quarter, we're about one point, just under 1.5 in leverage. So low on the leverage scale, as you mentioned, which gives us a lot of flexibility. In terms of how we deploy capital, in terms of our priorities, you know, our first priority is always to invest in business. Invest in the business, in R&D, in innovation, digital technologies, you know, capital investments that will help to not only sustain the business, but also drive profitable growth and obviously returns. So that's always the first priority, organic and inorganically, in terms of where we deploy our capital. And then once we have done that, we obviously then prioritize return of capital back to shareholders. And in that vein, we're actually very proud of our dividend program. We are in 32 years of annually increasing dividends. We do participate in share buybacks. I would say that is the more flexible, discretionary part of our capital allocation framework. Although, if you look at the last 18 months alone, you know, we've returned about $700 million of capital just in the last 18 months to shareholders, roughly $180 in dividends and, you know, the rest being in share buyback. So we've been pretty active on that front. But what I would say, you know, just to your question about, you know, looking forward is, you know, what you can expect from the management team is to continue to prioritize those opportunities where we see that, of course, we're going to generate, you know, significant returns to the organization and ultimately our shareholders.

Daniel Cohen, Analyst — Morgan Stanley

We've talked about a lot of different, Aptar's exposure to a lot of different therapeutic areas, modalities, whether it's nasal or pulmonary, ophthalmic, injectable. If you look out, you know, you're at the kind of beginning of a new journey. If you look out three or five years, where would you expect to see the most exposure impact to your business? And also, in addition to the modalities, there's also therapeutic areas that we talked about that's pretty wide-ranging. Where would you prognosticate into the future that will have the impact?

Gael Tuya, CEO

So from a pipeline perspective, I would say three years, I don't know whether this is a good indicator. You know that in pharma, everything is taking a little bit longer. But all the work done around the nose to brain is pretty exciting. So building the science, building the analytical framework to support the company. I mean, when you think about some neurodegenerative issues, with the Wake Forest University School of Medicine last year, I mean, we published a joint research and demonstrated that nose to brain, we've got a way better deposition rate of insulin than taking a pill or an injection because you need to bypass the blood-brain barrier. So, there's a lot of very interesting tractions, where not only this is a new pathway, but also the technical platform being different because you need to have a different delivery mechanism. So, that's one area of interest. Obviously, all the SNDD, chronic disease treatments through the nose, through the lungs. We are working a lot around biologics as well. That could be an alternative pathway. and we are pretty excited to continue the work in the injectable space. In the injectable space, we are a component player. We have to be clear there. We supply stopper, plunger for pre-filled syringe or needle shield protection. We provide a certain level of services behind and we participate in the growth of that market. And it's strategic for us, but I want it to be fair on that one. So we see the injectable having a lot of potentials because the market is looking for good, reliable partner, working with them for biologic strengths, for Annex One, having a global footprint. You know that we invested a lot in order to be present in China and the U.S. on top of Europe. so so we're going to be pretty exciting looking at injectable moving up and it's going to be a lot already yeah and I think the market to transition to the new propellant we are also investing a lot through the lungs for the lungs with biologics larger molecule that does require different payload system and we are actively working on this?

Daniel Cohen, Analyst — Morgan Stanley

Well, I think, look, this is a healthcare conference, so we've spoken a lot about the pharma business, so I appreciate that. I mean, what certainly comes across is, and perhaps is underappreciated, is how deeply embedded Aptar is in the development and delivery of critical medicines, and so both from a components, supply standpoint, services as well. So that certainly came across in your remarks today. Any final thoughts for you, Gail?

Gael Tuya, CEO

I will add something. I mean, we have not discussed patience, but that's maybe something that is underappreciated. I mean, everything we are doing at Aptar is patient-focused. And when you look at the developments, we are offering user experience back to our customers. the ergonomics about a product we are providing human factor to our customers we are providing onboarding solution the complexity of the world and with the shift from clinics to at home or to virtual settings very challenging for a new patient to onboard and to have a good adherence rate so we are working a lot on many times where you've got big players after the one in the room with their commercial and their business development team to discuss patients because we do understand how the patient is going to behave and what kind of onboarding solution and we've got that data showing that the better you are onboarding the the longer you stay the course and the sooner you're going to refill your script and last all the digital all the digital elements we've We've got patient communities. For example, we've got an app that is used by over 3 million patients on a worldwide basis for migraine treatment. So how to track, how to understand, how to improve potential issues. We've got this patient community. We are operating on behalf of Biogen. I mean, we are the operator from a digital standpoint. So I truly believe that better understanding a patient in its environment, better supporting remote monitoring, having patient community is helping really to position APTA as a trusted partner with companies, not only as a drug delivery expert, having the ability to provide formulation, analytical and regulatory support, but also to put the patient at the center of everything.

Daniel Cohen, Analyst — Morgan Stanley

On that note, thank you, Gael and Vanessa. Thank you very much. Thank you.