西式醫藥服務 (WST) 2011 Q1 法說會逐字稿

Welcome to the West Pharmaceutical Services first-quarter 2011 conference call. At this time all participants are in listen-only mode. (Operator instructions). Later we will conduct a question-and-answer session. This call is being recorded on behalf of West Pharmaceutical Services and is copyrighted material. It cannot be re-recorded or re-broadcast without the Company's express permission. Your participation in this call implies your consent to our statements. If you have any objection, you may disconnect at this time.

And now I would like to turn today's meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may now begin.

Good morning, everyone, and welcome to West's first quarter of 2011 results conference call. We issued our financial results this morning, and the release has been posted in the investors section of the Company's website located at www.WestPharma.com. If you have not received a copy of this announcement, please call Westwicke Partners at 443-213-0500, and a copy will be sent to you immediately.

Posted on the Company's website is a slide presentation that management will refer to in their remarks today. The presentation is in PDF format. Should you require it, a link to a free download of software that will enable users to view the presentation is also available on the website.

I remind you that statements made by management on this call and in the presentation will contain forward-looking statements within the meaning of US federal securities laws and that are based on management's beliefs and assumptions, current expectations, estimates and forecasts. Statements that are not historical facts, including statements that are preceded by, followed by or that include words such as estimate, expect, intend, believe, plan, anticipate and other words and terms of similar meaning are forward-looking statements. West's estimated or anticipated future results, product performance and/or other not historical facts are forward-looking and reflect our current perspective on business trends and information.

Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These statements are subject to known or unknown risks or uncertainties, and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement. You should bear this in mind as you consider forward-looking statements.

For a nonexclusive list of factors which could cause actual results to differ from expectations, please refer to today's press release. Investors are also advised to consult any further disclosures the Company makes on related subjects in the Company's 10-K, 10-Q and 8-K reports. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, during today's call management may make reference to non-GAAP financial measures, including adjusted operating profit and adjusted diluted EPS. These measures and their component parts have no standardized meaning prescribed by US GAAP and therefore may not be comparable to and should not be viewed as a substitute for US GAAP operating income and diluted EPS. Reconciliations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in materials accompanying this morning's earnings release.

At this time I would like to turn the call over to Don Morel, West's Chairman and CEO. Don?

Thank you very much, John, and good morning, everyone. Welcome to West's first quarter 2011 analyst conference call. In our prepared remarks today, Bill and I will use slides to highlight our discussion points. The slides can be accessed through our website, www.WestPharma.com, by selecting investors and then presentation. For those who are unable to view the slides during the call, the information they contain is covered in both the release and our remarks.

I will begin with an overview of our results for the quarter, give a brief update to our financial guidance for 2011 for the full year and report on our major development programs. Bill will then cover the financial results in more detail.

Starting with slide number three, which provides a high-level overview of our first-quarter results, revenues were up by a strong 7.3% excluding currency, which was only slightly positive in the quarter compared with Q1 2010, in which we also reported very strong growth. Sales for the quarter were just over $295 million, which was a quarterly record for us, despite some delayed shipments from Japan. At 29.8%, our consolidated gross margin was slightly lower than the prior-year quarter. Sales mix and production efficiencies were all positive but were in large part offset by higher material and labor costs.

We continue to increase R&D spending due to continued growing market interest in our CZ platform and also positive response to the Electronic Patch Injector. The substantial increase in our share price during the current quarter lowered earnings by approximately $0.03 per share versus our February guidance, solely due to the price-sensitive stock-based compensation component of our SG&A. And as a result, adjusted diluted earnings per share were $0.60 per share, an improvement on the $0.58 reported in last year's first quarter.

From a pure operations viewpoint, the major news event in the quarter was the tragic earthquake and tsunami that struck northeast Japan. I'm pleased to report that, while production was briefly halted in the immediate aftermath of the earthquake, Daikyo's facilities were not directly affected and sustained no damage. More importantly, all Daikyo workers and their families were unharmed. Other than a brief interruption to some scheduled shipments and testing of incoming raw materials and finished goods for radiation levels, plant production is running smoothly, and overall Daikyo had a very strong quarter.

Growth in the Pharmaceutical Systems segment was driven by more favorable mix in Europe and North America and very strong growth in Asia, where sales were up over 25% versus the first quarter of 2010 excluding currency.

On the contract manufacturing side of the Delivery Systems segment, we did implement two scheduled selling price reductions with two separate customer contracts, which reduced revenue and operating profits by over $2.6 million. We also benefited from accelerated Pharmaceutical Packaging sales to an Asian customer that has been building inventories in anticipation of a scheduled temporary plant shutdown of one of their facilities later this year. Well, these are normal variants, so this is the first quarter in sometime without dramatic impact from currency, H1N1 sales or similar items that can make revenue comparisons challenging.

Turning to the remainder of the year, as illustrated on slide number four, we are increasing our 2011 revenue expectations to between $1.16 billion and $1.19 billion, which equates to growth of between 5% and 8% over 2010 at currently forecasted exchange rates. Our book of firm orders is up by about 10% versus year end and Q1 2010 levels and provides very good visibility in the near-term, which is now typically about one calendar quarter.

Given our recent experience, we are trying to be pragmatic in our guidance update, solely due to the variability in orders we have seen in the second half of both 2009 and 2010. We now believe adjusted diluted earnings per share for the full year will fall in the range of $2.30 to $2.50 per share, a $0.05 per share increase in the range versus our February guidance. The increase largely reflects a change in our currency and sales expectation and the year-to-date impact of stock price on our SG&A. We do not expect that the higher first-quarter SG&A will impact the year.

Like many manufacturing firms, we believe our gross margin will be under some pressure due to rising energy and raw materials costs. But much like 2008, when oil prices spiked severely, we are evaluating a range of options to offset those rising costs if they persist. With the pricing structure in our major supply agreements, we would expect to recover material cost increases over time, but there is some risk associated with increases in market prices, and these do impact our costs sooner than we can implement compensating increases in our selling prices.

In short, from an operations perspective the first quarter of the year was right in line with our expectations, buoyed by stronger than forecasted sales and an improving mix. Our backlog for the second quarter is ahead of the prior-year period, and our plants are running well. In terms of risks to our guidance, clearly commodity costs are watching in the back half of the year, especially those materials that are based on oil feedstocks. All things considered, a good start to the year.

Now turning to slide number five and our ongoing new product development programs, we continue to make progress toward our commercialization objectives. In the Pharmaceutical Packaging segment our focus has been on the conversion of existing customers using Westar RS to Westar RU and preparation for the launch of the Nova line of products later this year. Both programs are right on schedule.

The rapid growth of sales in China and India continues, supporting our decision to continue with plans to add capacity in both of those markets. We expect to receive our land-use permit for construction of the China rubber facility in early June; and, subject to approval of our final plant design, should begin construction by the end of the month.

In India, we have entered negotiations with the local development authorities for the purchase of land for our facility there. We are on schedule to complete the land acquisition later this year and are targeting the start of construction in early 2012 at the latest.

In delivery systems sales of CZ products during the quarter were just shy of $2 million. For the full year we continue to forecast CZ sales in excess of $10 million. Market awareness of glass-related product recalls and stability issues has now grown to the point where these issues will be the focus of an industrywide conference in late May.

The validation of the second insert needle cell is on schedule to be completed in the second quarter and will support increased sales in the second half of the year. We've also begun the scheduled addition of cleanroom capacity in our Scottsdale facility that will house additional production cells next year and are planning for follow-on expansion in Ireland that will provide both capacity and a critical second source for customers if the product reaches commercialization.

The first phase of our lead ConfiDose program, including a human factors use trial, was completed during the quarter. Based on patient feedback from those trials, we're making small design changes to improve the ease-of-use of the device for mobility-compromised patients and are planning a second series of human use trials later this year.

We continue to be very pleased with market interest in the Electronic Patch Injector. The development program is fully underway and remains on schedule to begin delivering samples for initial clinical trials by the fourth quarter of this year.

I would now like to turn the call over to Bill for a more in-depth review of our first-quarter results. Bill?

Thank you, Don, and good morning, everyone. We issued our first quarter results this morning, reporting net income of $19.6 million or $0.56 per diluted share versus the $0.57 per diluted share we reported in the first quarter of 2010. Our first-quarter results are summarized on slide six of the accompanying PowerPoint presentation.

As explained in the release, results in both periods included restructuring charges, and this year's quarter included a discrete tax charge. Excluding the effect of these items in both periods, first-quarter 2011 earnings were $0.60 per diluted share versus the $0.58 per diluted share we earned in Q1 2010. Results were just shy of our expectations. The difference between our actual Q1 results and our previous guidance is primarily due to additional stock-based comp expense related to the Q1 increase in our stock price.

Turning to sales, slide seven shows the components of our sales increase. Consolidated first-quarter sales were $295.4 million, an increase of 7.3% over first-quarter 2010 sales excluding exchange effects.

Packaging Systems sales increased more than $16 million, representing a solid 8.1% improvement over same-quarter 2010 sales excluding favorable exchange effects. Sales price increases in Packaging Systems were relatively modest in the quarter, contributing approximately 1 percentage point of the increase. Higher volume and sales mix accounted for the remainder of the increase.

Geographically, increases were strong in our Europe and Asia regions with the largest portion of the growth coming in from our European unit. We saw modest price increases and slight unit growth, but we benefited from additional sales of our value-added washing, coating and vision inspection offerings. High-value product sales increased more than 13% over prior-year sales to $79 million, with the most significant increases this quarter for Westar-treated, FluroTec-coated and Envision-inspected components. Sales of disposable medical devices declined slightly in the quarter.

Delivery Systems sales increased $3.8 million or 4.9% over sales from the prior-year quarter, excluding exchange. Sales of proprietary products increased to 20% of the segment's revenues in the quarter compared to only 16% in the prior-year quarter. Sales of reconstitution products were higher, predominantly in Europe. Higher demand for various contract-manufactured healthcare and surgical devices also drove sales increases. Partially offsetting those increases were the effect of contract-based price declines for two European customers.

As provided on slide eight, our consolidated gross profit margin for the quarter was 29.8%, slightly lower than the 29.9% margin we achieved in the first quarter of 2010. Packaging Systems' first-quarter gross margin of 33.9% was 0.9 of a margin point below its first quarter 2010 gross margin. The decrease was due to higher raw material, labor and overhead costs. These increased costs were partially offset by plant, labor and material efficiencies, the effect of increased sales volumes on prices and the favorable sales mix.

Delivery Systems' first-quarter gross margin of 18.4% was 1.4 margin points better than the 17% prior-year margin, due to manufacturing efficiencies stemming from increased volumes and reduced overhead costs, mostly from restructuring-related labor reductions. Those efficiencies were partially offset by increased raw material prices, wage increases and reduced contract manufacturing sales prices.

As reflected on slide nine, consolidated SG&A expenses increased by $4 million in the current quarter versus the prior-year quarter. The increase was primarily due to a $700,000 increase in sales commission related to higher sales, a $1 million increase in stock-based compensation costs due largely to the first-quarter increase in the Company's share price, a $900,000 increase in compensation costs associated with the selective headcount increases, mostly in Europe and Asia, and annual salary increases.

As a percentage of sales, first-quarter 2011 SG&A expenses were 17.1% versus 16.9% in the first quarter of 2010.

Slide 10 shows our key cash flow metrics. We generated $9.5 million of operating cash flow in the first quarter, $2 million lower than in the prior-year quarter, mostly due to a working capital increase. Capital expenditures of $19.4 million were made in the quarter, $1.7 million more than in the prior-year quarter. $7 million of the capital was spent on new products and expansion efforts and included $3 million for expanding our capacity for manufacturing CZ syringes at our Scottsdale, Arizona facility. The remaining capital was mostly spent on equipment upgrades at our global manufacturing sites.

Our full-year CapEx budget for 2011 is expected to be in the range of $110 million to $130 million excluding the accrual of approximately $22 million of costs associated with our planned new corporate and research building, which will need to be funded in 2013.

Slide 11 provide some summary balance sheet information. Our balance sheet continues to be strong, and we are confident our business will provide necessary future liquidity. Our cash balance at March 31 was $94.6 million, a $16 million decrease from year end due primarily to our first-quarter capital spending and our first quarter dividend payment. We also moved $10 million of cash into short-term CDs in the quarter.

Debt at March 31 was $371 million, $13 million higher than at year end due to foreign exchange and additional net borrowings on our revolving debt facility. Our net debt to total invested capital ratio at quarter end was 29.4%, slightly higher than the year-end ratio due to our increased debt and lower cash balance.

Working capital totaled $298 million at March 31, $31 million higher than at year end, due largely to increases in accounts receivable and inventories. The increase in receivables was mostly due to the higher sales levels. Our days sales outstanding has increased by about one day versus the prior-year quarter. But we don't see any major collection issues.

Inventories continue to be higher than normal to support a higher anticipated level of sales and an increased raw material cost.

We revised our full-year 2011 guidance in this morning's release. That revised guidance is summarized on slide 12. We have based our revised guidance on an exchange rate of $1.45 per euro versus the $1.35 per euro utilized in our previous guidance. Full-year 2011 sales expectations have increased to $1.16 billion to $1.19 billion, primarily as a result of the weakening dollar and its effect on the translation of our international sales.

Consolidated gross profit margins are expected to decline slightly versus our previous guidance to 29.5%, taking into consideration our Q1 results, the mix of sales and raw material and production cost increase estimates, primarily in the second half of 2011. Adjusted diluted earnings per-share expect to be in the range of $2.30 to $2.50 and an assumed translation rate of $1.45 per euro. At March 31, 2011, our backlog is in excess of $280 million or roughly 11% higher than the prior year-end amount, excluding exchange.

I would now like to turn the call back over to Don Morel. Don?

Thank you very much, Bill. This concludes our commentary for this morning, and we would now be pleased to answer any questions you might have. Operator?

(Operator instructions). Andrew Hilgenbrink.

Can you speak to what you're seeing from competitors for CZ? Have you heard anything on what sampling for -- they might have been and what time line you expect competitors to be on relative to your own launch of CZ in the commercial market?

The only thing I can say is that the majority of our customers that are evaluating plastic would naturally put competing systems up as well. The anecdotal evidence we've gotten is that CZ performs better and that they have chosen in large part, when they go to formal stability, to go with CZ.

I can't comment specifically on their sampling activities; but, again, given the unique attributes of the CZ system, it's not just the resin; again, it's the fluoropolymer-coated plunger in combination with the resin that makes the system unique and the way that we manufacture it to stake the needle into place as opposed to glue it, we think, gives us an advantage of a couple years in the marketplace.

Thank you for that, that's very helpful. On the production and raw material costs that you're seeing increase, one, on the raw materials -- have hedged oil in the past. Is there plans to hedge any other raw materials? Are you seeing similar rises in rubber or aluminum? And then, secondly, on the labor costs can you speak more specifically what markets or where you are seeing labor cost increase?

I'll answer the second question first. We are seeing labor costs increase across the board in all of our regions, more heavily in Asia, as you would imagine. But both Europe and the Americas are seeing increases.

As it relates to hedging activities, we have hedged again this year, as we have mentioned. We have put in some hedges in deep out of the money at that time, contracts for the purchase of Brent crude, and those actually have resulted in an $870,000 unrecognized, unrealized gain that has been recognized in our P&L against costs of sales.

Aluminum -- yes, absolutely, aluminum has increased. But we generally see our ability to use our contracts with our suppliers to mitigate that increase -- most of that increase during the year. And as it relates to natural rubber, we do use a small amount of natural rubber. And due to both the limit of supply because of some production issues in that part of the world and demand in emerging markets, we have seen the cost of that material increased threefold, basically. And although it's a small amount, it is something that we are monitoring. There is very little we can do at this point in time to stop that increase.

Again, it's a small amount that we purchase. At this point in time, it's about $2 million, and so we don't think it's significant other than the percentage of increase, and we will continue to monitor it.

All that said, we continue to monitor material prices in general very closely as well as all of our other input costs. It's not only the materials that are impacted by the rise in oil, but also our plant costs in terms of overhead. Utilities in the quarter were up substantially over the same prior-year quarter.

So it bears watching, and we will continue to watch it.

And one more short one, if I may -- you spoke to minimal disruptions in Japan on the supply side. Have you seen any change from customers that you have in Japan?

Can you clarify that a little bit? Change in what respect?

Change in order patterns from Japanese customers.

No, not really. Typically, Daikyo would supply the majority of customers in Japan. We do have a small amount of sales into that market. But to my knowledge and through all communications with Daikyo, there haven't been any substantial shifts in their order patterns from their domestic customers, nor have we seen shifts in orders, I believe, from European and North American customers that consume quite a bit of Daikyo as well. Everything seems to be fairly normal now.

Thank you very much.

Ross Taylor.

I have just a couple of questions. First of all, some of the things you mentioned during your prepared remarks I might have missed. But I guess my first question is the change in raw material prices -- has that tempered or reduced your guidance for the year at all in terms of EPS?

The short answer is yes. And we continue to monitor it, but certainly in the back half of the year we put in hedges in place to slow it down. And as you know, our supply contracts work to slow down the increases. But we are going to, we believe, based on current levels that we will continue to have pressure on margins due to all of our input costs, especially raw materials and utilities.

And another question I had is, just looking at year end markets, whether you have seen any improvement in their performance compared to your expectations, say, three or six months ago.

It's interesting. In North America, in particular, you had relatively modest growth in scripts last year; I think it was only up of maybe 2.5% over the prior year. And we are pretty much accustomed to increases in that kind of 5% to 7% range.

Where we have seen improvements in our end market is with customers converting out of standard product and into the higher-value product. For us the first quarter continued those trends, which was one of the major things that we've focused on. So from that aspect it's a positive.

The other trend we're seeing, of course, is that you are seeing generic growth and substantial growth shifting into India, which continues to benefit us. We had very, very strong growth there. I think the only real downside is that you are not seeing the number of new therapies coming through that you need to see from our customers to replenish the drugs that are going to be coming off patent.

So we're going to continue to see growth because as things come off and go generic, we benefit. But we do need a stronger pipeline overall as an industry to maintain the growth levels of the past.

Okay, that's helpful. And my last question -- as I think I heard you all say you were planning to build a second CZ plant. Did I hear you say Ireland? I just wanted to --

It's actually not build a second plant, Ross, we have a facility in Dublin that we will expand. It will be predominantly adding on space to incorporate the cleanrooms necessary for the CZ cells.

Okay, that's all, thanks very much.

Arnie Ursaner.

My first question relates -- it's a couple of questions related to your backlog. Your backlog at the end of the year benefited by a number of sales that were deferred by your customers. So when you went into the year you thought your backlog had some almost unusual items, and yet you had a very sizable jump quarter over quarter. So a couple of questions related to that. Are you hearing different messages from your customers?

The other question I have is the margin profile of this backlog. In other words, as you are shifting, is the margin expectation on it higher?

And the third question related to the backlog is, to the extent you take in order and your raw material costs have escalated very sharply, which they did in Q1, can you adjust the price at which you accept that order and recover some of your margin, or are you locked into essentially bad pricing?

Let me try and answer the first question. You're probably going to have to remind us, given our attention span here -- in terms of the backlog itself, one of the things we are seeing is that as we go quarter to quarter, there are going to be a rolling series of orders that get deferred. So the composition of the backlog is very good. There's an increased percentage of high-valued products that are in that backlog.

But the last couple of quarters and, in particular, last year, Q4 2010 to Q1 this year, we saw a pretty good bolus of orders pushed into the quarter. In this quarter we also had a request for some orders to be delayed a little bit into the second quarter. So in addition to the changes that we've seen in terms of order quantity and timing of orders, this kind of rolling phenomenon may be something we have to deal with for a little bit.

And as I said, in terms of the composition, your second question, we are seeing an increased backlog in terms of the higher-value products, which were very strong in the first quarter, which was a positive for us.

And we anticipated that, Arnie, so the difference -- the rise in the guidance on the sales number -- most of that is currency. There is a slight amount in there that we expect now, based on the results for the first quarter and what we are seeing in the backlog. But this was not unanticipated; it's just that the levels are very strong, and we are happy to see that they continue to be running about 11% ahead.

There's also one other point there, Arnie, in that we are coming into a period where several of our customers are going to be going through planned shutdowns, and there will typically order a little bit of inventory in advance of that to be ready for the restart. So I think incorporated into that number you probably have maybe $1 million or so or a little bit more of products that fall into that category.

In terms of our pricing ability, it depends on whether or not the orders are actually covered by an existing supply contract. If they are covered by an existing contract at fixed pricing, we don't have a whole lot of room to move there. If they are based on a PO basis, then there are some things that we can do. But to be honest, I don't know the exact composition of the backlog in terms of what is covered by contract and what's not.

Well, the question I have is, if you have extreme movements of commodities which we are undertaking right now, do you have certain levels at which you readjust the contracts for extreme movements in commodity costs?

We certainly would take a look at that, and I think in my remarks I talked about looking at options that we would have. You may recall, in 2008, when oil spiked, we basically implemented an oil surcharge for a temporary period of time. And clearly that would be the route to go if these high prices persist.

Okay, in the prepared comments you mentioned that obviously the SG&A cost of the stock price moved, but you also mentioned the late shipments from Japan weighed on the results. Can you quantify the Japan impact?

It wasn't that large, Arnie. There was one shipment in particular which was launched in North America; it simply got pushed into the second quarter. I think from a revenue standpoint it was about $2 million.

And, Don, my final question relates to you having a whole paragraph about your new product development programs, which is obviously the key to your stock price and people's expectations. And you mentioned customer interest in the Daikyo product is growing, and you also mentioned that on the ConfiDose you are seeing increased interest. Can you give us some evidence of both of those, why you see growing interest? Other than just that we are getting more calls, is there any tangible evidence that you can cite for the growing interest?

Well, the CZ one is easy because it's a sampling activity and the fact that we are adding additional cells. For us, sometimes the evidence is anecdotal in terms of customers that are funding actual development, and on the CZ front that has been very positive.

One of the things I think we underestimated was interest within the customer base for custom solutions where you could mold CZ into a configuration that you couldn't do with glass. We are seeing a lot of interest for unique customer-specific designs that can be incorporated into additional platforms.

With regard to the other activities in ConfiDose and the Electronic Patch Injector, in particular, it's the customer demand for samples that can actually be used in clinical trials, especially in case of the Patch Injector. So when I look at the activity levels for those, four West, for a West product of this type, the levels are much, much higher than any other product I've been involved with, even during my development days.

Final question for me, if I could -- on CZ can you remind us what you -- well, or are you changing your revenue expectation for this year for CZ? And when you expect -- given all this incredible interest, when do you expect meaningful impact on the financials of West from a commercialization point of view? What's your best sense on that?

We haven't changed our guidance with regard to CZ expectations this year. We do believe they will fall in that $10 million or $11 million range for sampling activity, predominantly. And we haven't changed our expectations with regard to our long-term objectives. And with regard to CZ in particular, given the stability requirements and where we believe our customers are today, we do believe that the first products will get approval and go to market sometime in the late 2013/early 2014 time frame. And that ties into a two-year stability for formal samples off of the manufacturing cell, which has already started. It started late last year and has continued into this year. So late 2013/early 2014 for commercialization is still the time frame we are holding to.

Thanks very much.

Derik De Bruin.

This is Rafael in for Derik. A couple of more questions on the backlog. I think last quarter you mentioned that some customers delayed some shipments which were to be recognized this quarter. So can you just give us a sense of how much that benefited growth this quarter?

It was relatively small, Rafael. Coming into 2011 from 2010, it was about roughly $2 million or so. And you had the same rough number out [into] the first quarter into the second quarter of 2011.

Okay, and with backlog now up about 11%, how should we think about, I guess, the revenue flow for the rest of this year? I think initial comments were that Q1 was likely to be one of the strongest quarters in the year. So does that still hold true, or have things changed?

Well, Q1 was a very -- like we said in the commentary, it was really a record revenue quarter for us at $295 million. The backlog as it currently stands, given this compression phenomenon where we are seeing, where the backlog now effectively is a quarter's worth of sales indicates that we will continue to have pretty good growth. Right now we don't have as good a visibility as we would like into the second half of the year. Our expectation based on the last couple of years is that we are probably going to see some slowing as we watch customers manage inventories and working capital.

So when you look back a couple of years, first half of the year strong, second half of the year a little bit more difficult to predict. And we think this year is going to hold to that pattern.

Okay, and switching gears a little bit, on this FDA Glass Quality Conference for later this year, just curious to know, what do you think the outcome is going to be? Do you anticipate some sort of a draft guidance or any other sort of advice from the FDA?

No; I think it's really going to be a series of suppliers and customers getting together and, A, talking about the issues they are experiencing in manufacturing; and, B, looking at the time line for alternatives. Again, CZ and the other systems under development are not going to be panaceas to replace glass totally. It's still a terrific material that's going to be used for the bulk of injectables that are sold. But for the biologics guys who are concerned about contamination, the conference certainly will put a spotlight on an issue that has been raised recently and, I think, will give added impetus for hopefully going commercial with a plastic system here in the near future.

So I wouldn't expect any formal guidances out of it, but I would expect kind of an increased focus on the issue for the major biologics folks.

Okay, and one more from me. Earlier this year you mentioned a deal with CareFusion. Just wondering if you could talk a little bit more about that deal and how we should think about the potential impact to the top-line from --.

Yes; it would be very, very tiny in terms of impact to the top line. As you know, our business model is basically business-to-business, predominantly. This is one where, for the devices that are being handled by CareFusion, we are looking at a sale going directly to the hospital or to the distributor, as opposed to another business. So not a big impact on the top line.

Great, thank you, I'll jump back in the queue.

We currently have no further questions in the queue. (Operator instructions).

Well, if there are no further questions, we will thank everybody for their time. We appreciate your consideration today. Thank you very much.

Thank you. Ladies and gentlemen, that concludes your conference call. You may now disconnect and enjoy the rest of your day. Thank you.