Aptargroup, Inc. (ATR) September 2026 Conference Transcript

Joining us today is Gael Toya, who is, as of September 1st, President and CEO, congratulations once again, and Mary Scafidus, IR. So this session or these sessions are intended to be interactive to the extent there are questions in the room. Please do not hesitate to ask. And with that, I would like to just maybe give you a moment to a quick introduction. And you're nine days on the job, but you've obviously been at Aptar for a long time.

Nobody expects a strategic overhaul this afternoon, but as you've kind of prepared yourself for the new role, what are some maybe two or three things as you look across the organization that are sort of core to what Aptar is and non-negotiable in terms of you know we're not going to change we know we're not going to change this if you will thank you okay so thanks Gabe I'm first pretty excited to be with you so thanks for the invite uh nine days into the job and still alive so good uh but as you rightly said I mean more than 30 years with the company in different part of the organizations all the three segments on different uh working and living in different regions but uh i will share with you three elements i mean the first one being uh the customer centricity i mean i want us to continue to be perceived as the preferred partner for our customers and and and to develop this kind of uh very tight uh relationship so for me that's not negotiable. I'm not there to be a supplier. I'm there to be a partner of choice with whom as a customer, because we bring the right value proposition, expertise, and capabilities you're going to co-invest with. That's number one. Number two is innovation. In that space, I mean, for me, innovation is one of the only sustainable competitive advantage of any company. So, for me, innovation is what will give you that ability to be perceived as a preferred partner and number three I mean performance mindset execution I'm coming with an earlier decade in pharma when you play in the pharma space you know that your quality of supply your your your your your your safety of supply is non-negotiable and this is the same for the other segments when L'Oreal is waiting for your product because they've got a new product to be introduced on the market and they sign already with all the, I don't know, Sephora of the world that they're going to get product on time for their product launch. I mean, you better have as a partner to be on time with good quality product. So that will be the three elements. And me as CEO, cross segment, I'm going to be looking at where we need to really strengthen our leading position but that's sometimes where we need to look at course correcting and to improve performance and how we can unlock value crowd the organization got it on the Q2 call you talked about visiting some factories and again I maybe some preliminary groundwork for setting the stage to step into the new role.

You obviously ran pharma I think since 2017. Correct. So maybe not as close with Beauty enclosures necessarily.

Again not asking you to grade anyone but as you're going through that process and I guess in fairness Beauty has had a couple of stumbles here in the past couple years some of which were outside of Aptar's control but just things that you're looking at within those two segments that you're like I said maybe couldn't see from pharma that you're paying attention to yeah so so I've been I've been I started my listening tour and I will continue and that listening tour is putting me in front of the business I mean at any level of the organizations but also with customers and partners And what I will say for the two segments, I mean, there's a very strong technical capabilities. You've got people extremely committed and engaged for their business and had very interesting conversation around talent management, for example. Our people are asking us to be way more agile and to accelerate some process decision approach. But when I look at the two business and there's two different realities. I mean on one hand beauty is outside our long-term target and outside their potential. This being said I've seen regions that are well within the long-term target and I could say Asia is well within the long-term target but also Europe knowing that Europe is our largest market from a beauty perspective. America's is a problem I mean LATAM for me is temporary they're gonna they're gonna they should rapidly be back on track where they should be. The number one problem for us is really North America beauty. I'm not satisfied at all with the performance over there and we need to be way better from an execution standpoint. So everything will come down to you set the expectation, you've got a culture of execution with discipline and clear accountability and sense of ownership through the organization. So that's what I've seen. Closure, they've been within the long-term target, they've been off, they've been within. We need to be reliable from an execution standpoint and we have been facing two problems for production ramp up and the other one was for a maintenance issue in one of our main factories. Performance is a little bit lower than the long-term target but the top line is there. The business category, the pipeline and the mindset and for me I'm confident that they're going to be back within their long-term target.

Okay. Maybe we'll come back to beauty in a second. But I think you closed the second quarter call talking about three priorities, profitable growth. You've talked already a decent amount about execution. So I think that's pretty clear. And then allocate capital. And I guess what's becoming more evident to me over time is companies that consistently are profitable, they're capital aggregators. And then it ultimately rolls up to you to decide where that goes, reward shareholders, share buyback, et cetera make acquisitions if you had to kind of pick one today that's maybe been a little bit of a binding constraint looking backwards on I'll say the avatar value creation which one would you think was kind of a little bit of a thorn execution I mean we don't control the weather conditions but we need to control the way we navigate those different weather conditions also So, Beauty and Closures, I mean, two of them, they've got good fundamentals from a market standpoint.

The market is growing, so we've got long-term relationship with customers. They want more of APTA with more listening tool. We've got good technology. We need execution. We need to make sure that through accountability, we need to make sure we lead with accountability. So, we set the expectation. We control transparently the performance, and we deliver based upon our commitments. We need to move with agility. We need to simplify the way we work internally. We need to reduce complexity. We need to accelerate decision-making process. And we need to win through accountability. And we need to transform or to turn what I will say our great market position into market leadership, what we have, but into sustainable profitability for the organization. So execution by far.

Love it. It's obviously a healthcare conference. Turning to pharma. Hopefully this is one of the last quarters that we're talking about this emergency medicine de-stock issue. Last update, it was on track. We knew it was going to be about a $65 to $70 million dollar top line hit, abating, starting to abate in Q3, mostly gone by Q4. Some of the data that I look at actually says, suggests the molecule has started to inflect positively from a Scripps standpoint, and I appreciate that's not the only channel in which this kind of drug gets distributed. So any updates for us there, funding-wise, or just, You know, we've got line of sight, feel good about it.

You know, you've got a good public health program. You've got good funding programs that are critical to tackle the ovioid operandose situation. We are on track with the 65 million to third impact in the H1 and the remaining for the second part of the year. you know that we have to rely a lot on our customers because you don't have any public information. I mean, I can't go to a Nielsen and to buy a Nielsen to get the sellout of the product. I mean, it doesn't work that way because the number one market is public market interest. So when you listen to those different players, they are telling us low, mid, single digits. So we have to track on that one. early 2027 we're gonna better know where the baseline has been reset up to build from but fundings public market interest discussing with our customers they are all trying to make sure that you've got let's say opioid overdose using our technology everywhere on the market. And yes that's a 65 percent, 65 million top line hit and margin-wise also we are losing that contribution. Maybe I could share that we factor in early on this kind of navigative impact. If you if you exclude the margin from this emergency medicine, pharma margin that went up and And also, you don't have any, I don't have magic recipe over there than being disciplined on the execution and making sure that we prioritize, we execute, we deliver on time to make the overall machine, I mean, more performant. So I was very pleased to see that excluding emergency medicine, prescription is at 8%. I mean, in Q2, injectable is at 9%. following two quarters where they were in the 20% because the market is growing and the market is asking for solutions. CHG has 15%. So excluding emergency medicine, yes, the 7-11 algorithm and that framework still solid for us. Perfect. And it's a long-term commitment.

I was going to go to the 7-11. So what excites me and we're overweight on the stock and it's one of our favorite ideas as we sit right now, particularly given we want to lean into defensive names in the moment. Your model is a little bit unique relative to maybe some other folks that are here at the conference or even packaging in general. You've talked about roughly 90% of kind of your revenue is recurring and growing. And then you get the remainder contribution from the pipeline of new molecules new product introductions things like that can you talk about sort of the magic of I mean you said we don't have a secret sauce but there is a little bit of a unique strategy that you have or so you know when I come on that business back in 17 I mean we were what 750 million US dollar, good technology, but we were predominantly a product-driven organization.

You need a product to dispense your solution for a specific route of delivery, nasal, pulmonary, ophthalmic, and so on and so forth. Here are our products. And fantastic technology. I mean, fantastic technology. So we have been keeping evolving and developing and strengthening our technology. Don't get me wrong. But the point was to gain flexibility in the value chain and to say, well, if 70% of all the R&D work is done by 2% one molecule, early stage biotech company, I mean, maybe we could partner with these guys in the early stage of their development. And then to follow the molecule from formulation, from analytical support, but also whenever they're going to face the FDA or any regulatory bodies. And that was the decisions taken by them to say, yes, we're going to be on top of a drug delivery devices, a combination product player that will be able to provide formulation support for any drug to be repurposed through the nose or the lungs. From an analytical standpoint, and the regulatory guys, they are raising the bar always. So we've got that expertise. We strengthen a lot our regulatory capabilities in order to support our customers to navigate such complexity. So when you are in the early stage, they're going to specify your product. They're going to generate data to demonstrate compliance, efficacy, safety to the FDA. and they're going to stay the course with you. And we went event a year ago or a little bit more than a year ago. We went event to acquire the company doing clinical testing phase one and phase two. So the ability to work direct substance and to fill the substance with our product for our customers to do clinical testing. And guess what? They stay with us. So the magic recipe is maybe to follow the molecule, to be the partner of choice and to look at different ways to extract value with them. Why not? Instead of waiting edges to get your product on the market, we can have fees for service. Or we can discuss differently saying, well, you know, guys, maybe we would like to have a kind of biotech value extraction model. Why not for your different milestone payment? well, I'm going to put resources to support your program. Phase one, you're successful, I want to cash in. Phase two, you're successful, I want to cash in. Change of control, I want to cash in. Because I've been supporting you early stage biotech company to be acquired by a big guy. So that's some of the magic ingredients, if I may say, not so magic, but that is making our value proposition so robust. And it's one side. The other side of this magic recipe is we are a customer and a patient-centric organization. Everything we are doing within patients. We've got user experience capabilities, how to onboard patients, how to remote monitor patients in a world where the healthcare market is moving a lot from clinics to virtual settings or at home. How to support them? We bring this element of differentiation, and we extract value from.

I'm an analyst, so I have to ask the question. You talked about maybe six or seven years ago, the change in mindset to maybe co-invest. I'm going to say co-invest, but with some of those customers on the molecule. Presumably, you've got scientists on staff that are saying this one has a higher probability of efficacy than this one or something like that. do you guys track I suspect you do the number of projects that you know maybe starting point indexed to some level and now you're 200 you know you're up 2x on opportunities sort of in the pipeline irons in the fire if you will conversion rate things like anything that and a little off script but I'm just curious if there's something like since you're running pharma how much we can share I mean to support the algorithm and so that's something we are working on because when you listen to pharma company they're going to openly share this is the number of phase one I've

got number of phase two this is the readout for phase three that I'm expecting and so on so forth so that's something we are working with Mary to improve the way we could disclose our pipeline Because, yes, we are very strict on our pipeline build and pipeline conversion. And we follow all the steps and so on. And at the same time, because in many routes of delivery, as we've got a leading position, I don't want to give indication to my competitor. That's where I do sub-tar guys. They are sniffing around. There's maybe something interesting. What I will say, though, is that everything that goes through the nose, that goes through the lungs, we are behind any kind of development. And we are trying to support our customers at best. And this building of drug capabilities behind have been helping us to move from, I will say, kind of decongestant. You know, you spray through the nose to treat a local issue. Nose is running, your nose is black, you've got some allergies. And now we've got more and more through the nose to your blood system for different kinds of products. And you know, tachycardia, I mean, edema for water retention problems, opioid overdose, severe hypoglycemia and so on. And we are also working a lot around the nose to brain. We all have a blood-brain barrier that are, this blood-brain barrier is protecting basically our brain. You take your pill, it goes through your GI tract, only a fraction will go through the brain for different kind of treatment. Through the nose, you can directly go to very specific part of the brain.

That's where we are working, to develop the science and the analytical capabilities to provide the support to, of the early stage biotech to work and develop their solution so you mentioned a couple of drugs I had it on the list and you missed Cardamist Nephi a couple of these products I know it's difficult to say in terms of uptake and how physicians are gonna adopt different drugs and treatments and things like that but just as you look across the addressable markets maybe internally are there one or two drugs that you're more excited about today than maybe you were six months ago is kind of question number one and then anything in the

pipeline on the generic conversion opportunity because I think that's unique again to Aptar as drugs go from you know patent-protected generic and then maybe over-the-counter sort of the multiplier effect if you could talk about that a little bit yeah so the very first part of the you've got two questions so again so first first question I will say we are not predicated on any single drug like to say we it's a lot of singles or doubles rarely homerun we are not against so what we are exciting about is is really to see the attractiveness of the nose or the lungs for therapies to be repurposed from one route of delivery to another one be oral or injection so that's one and there are some interesting interesting programs the adoption level varies a lot I mean the one way I believe we could have some potential success I mean I'm still very big on I'm not going to name nephi but the epinephrine I mean you've got an anaphylactic shock I mean you need to carry your epipen it's bulky it's very painful if you discuss with patient you go to a restaurant I mean they don't have any epipen I mean I hope they're going to carry a nephi somewhere or the new nephis coming and so on but but I see I see potential for scalability for that product. Now we see the success and it will depend on the success of our customers. The second part of your question is the kind of from originator to generic and from prescription to OTC. What would I say? We've got a long experience around moving drug from through the life cycle and everywhere we are there to support our customer. So with the originator day one, if it's successful, it's going to attract generic company. This is the way it works. And the generic company, they are all fighting to get the first mover advantage because they know that they're going to grab most of the market share. I mean, a drug per se from an originator is going to lose a lot of market share after two, three years with a generic company. That's why all the big pharma, they are a lot discussing about loss of exclusivity. That's why they are fighting hard to reshape their pipeline. So we are the partner of choice for the generic because they want to be the first one, and they're going to work with as much as possible the originators. So they develop their formulation, but from a drug delivery standpoint, They're going to work with us also because we're going to support them to be in front of the regulatory guys to be approved. And then all the switch prescription OTC market. I mean, yes, Daloxan has been the first one to blur Frontier because it's a prescribed drug that was available over the counter. and you've got additional drugs whenever it's critical to reach at scale number of patients. And there also we have to be well prepared for the scale volume. So we have to discuss clearly with the customers what does it mean.

Because between a drug being prescribed and being over-the-counter, you multiply the access or the accessibility of the drug. so you have to discuss your supply chain resilience with your customer and you have to a very tight connection with them as we learned during the pandemic okay I wanted to ask about something specific and I know it's sort of more in developmental phases and maybe difficult to comment I think May you announced a patent application pre-clinical data supporting intranasal delivery for GLP one I think a lot of people are trying to draw a correlation or use you as a proxy for how successful West may be on the injectable side as it relates to GLP one but just maybe where that is in the stages sounds like early stage but could be wrong and then you know as you look at your drug delivery versus it being injectable I mean that seems like at least based on the script data that we look at would be a pretty big opportunity way to scale it think about it right okay so so first whenever you deliver a drug through the nose or the lungs and so on that we want to be

involved so we are scouting the market and we are scouting if it's starting somewhere in a two person, one molecule somewhere. We want to be their partner on the discussion. And because we have not seen any early-stage biotech, I mean working on that one, we decided why not us? So yes, we develop formulations because we've got that capabilities, but the intent for us is not to go to commercial. I mean we know where we are, but we've got the ability I mean, to reformulate a drug being either orally taken or injected to be delivered through the nose. Which kind of excipient, which kind of, can you characterize the deposition, the dissolution to the human tissue, how you build the analytical support on that one, we know this. So the job is, well, let's look at that one, let's patent that route of delivery, and let's shop around and to see whether some company could be of interest or not. And obviously, we spec our delivery solution. So that's also another way to demonstrate the kind of capabilities we have in terms of being a partner of choice for the market. Now, will that negatively delivered GLP-1 be impacting the injectable space? I think it's not going to be on market before years. That's a long road. at first and we are very humble with that program. Very humble. That it demonstrates that we are more than just a device player and this is what I wanted to demonstrate.

If I could add because this is really a capability that Gael started the services part so this ability to reformulate an injectable into something that's measly delivered, respiratory delivered. If you talk to the team, they say, we usually wait for customers to come to us. They need formulation help. But if we see an idea now, why don't we reformulate it? Take it to maybe a phase one, maybe a phase two, and see then who might be interested in the market. But right now, it's exploratory, right? Very early stages.

And that's a way to demonstrate the strength of your expertise and capabilities. In the asthma and COPD market, using our valve, we've done more or less the same. I mean, you know, guys, that we contracted with the FDA, and the FDA is developing the guidelines for the new propellant switch because the entire market will transition to a new propellant with apt-up because we developed the methodologies and the clinical expertise, and we've got the formulation capabilities. It is, I mean, to be the right partner with the FDA to define the guidelines for new drug approval. That was not our job before. We were just a product player. You want my product? You want my product. No. You want my product? Yeah, but I can offer way more.

Switching gears to injectables. Last year you completed, wrapped up, qualified $170 million-ish investment in injectables. I don't know if you guys have talked about the the I guess objective to maybe double that business over five to seven years but just as you look across again the pipeline and thinking about just that market itself the pace at which is growing can you lay out for us you know you're fully done you're qualified selling product any new updates incremental margins that we should think about there and then you know as that utilization rate comes up um maybe does that change anything so so different questions so number one are we done with the uh the big investment program uh as we

speak the answer is yes i mean no more big bucks uh on the capex road map this being said within those big bucks if we need to add additional lines and manufacturing lines we're going to do it based upon the different programs so number one number two do we maintain our vision to develop the business for the next years what we share we are confident and pretty confident to be in the high single low double digit growth some quarter would be better than others and so on that's directionally the comfort where we are and this is where we've been Q2 at nine percent and that That was a pretty solid Q2 2025, following two quarters where we've been at 20-plus percent. So confident on that one because customers, first, the market is growing faster than the overall pharma market. I mean, the injectable segment, biologics, more sensitive type formulation, GLP-1. I mean, people are looking for a reliable partner to sustain that growth. and this is where we are and what was the last question margin expansion so and margin expansion because our strategy is very much to focus around high-value products where once again try to be the right partner and try to be selective on our markets I mean to extract best value as possible and remember we represent a fraction of the overall drug product so yes we believe good execution market segmentation pushing a high-value product will contribute to margin expansion now you know that we share that prescription is the highest profit engine of the TV of the segment followed by consumer healthcare then after material expertise CSP and then and then injectable but confident that we're gonna move and profit margin expansion from an injectable standpoint as well understood last one as we wrap up and a little bit of a sensitive topic I appreciate that but intellectual property is the lifeblood of what you guys do there's a couple of cases out there right now

maybe not necessarily anything specific but any updates I think that there is a case in California that got consolidated to New York so that's that's good I think generally speaking but just maybe for investors that are worried about this or paying attention is it possible that it's wrapped up in 2026 too hard to tell can't say so I mean first I mean the decisions taken by the judge from our from our landscape is positive decision after after strongly value innovation and

we are not there to be expert in litigation and so on that's not the point but whenever we believe that we have to defend our know-how expertise which is an IP, we will be present. We've done it, we are doing it, we're gonna do it. I'm sure this is, pharma environment is behaving that way. And so to give you now the outcome of those two cases for 2026, or to give you more color, I can't. And for many kind of reasons, but I can't share more. Fair enough.

All right, that wraps it up for today. Thank you very much.

Thank you very much, Gabe.