Art Beyond the West Kampen Ch 1 Flashcards Slide Id

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West Pharmaceutical Services(WST -iii.17%)
Q1 2022 Earnings Call
Apr 28, 2022, nine:00 a.thousand. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Telephone call Participants

Prepared Remarks:

Operator

Skillful solar day, and thanks for standing past. Welcome to the Q1 West Pharmaceutical Services earnings briefing phone call. [Operator instructions]. I would at present like to paw the briefing over to your speaker today, Quintin Lai, vice president of investor relations.

Please get ahead.

Quintin Lai -- Vice President, Investor Relations

Thank you, Didi. Good morning, and welcome to W's first quarter 2022 conference telephone call. We issued our financial results this morning, and the release has been posted in the investors section on the company's website located at westpharma.com. This morning, CEO, Eric Light-green; and CFO, Bernard Birkett, will review our fiscal results, provide an update on our concern and nowadays an update on our fiscal outlook for the total year of 2022.

There'southward a slide presentation that accompanies today'southward phone call and a copy of that presentation is bachelor on the investors section of our website. On Slide 4 is our safety harbor argument. Statements made by management on this phone call and in the accompanying presentation incorporate frontwards-looking statements within the meaning of U.S. federal securities law.

These statements are based on our beliefs and assumptions, electric current expectations, estimates and forecasts. Future results are influenced past many factors beyond the control of the company. Actual results could differ materially from past results as well every bit those expressed or implied in whatever forward-looking statement made here. Please refer to today's press release too as any other disclosures made by the company regarding the take a chance to which it is subject area, including our 10-K, 10-Q, and eight-Thou reports.

During today'due south call, management will make reference to non-GAAP financial measures, including organic sales growth, adjusted operating turn a profit, adjusted operating profit margin, and adjusted diluted EPS. Reconciliations and limitations of the non-GAAP financial measures to the almost comparable fiscal results prepared in conformity to GAAP are provided in this morning time's earnings release. I at present plough the telephone call over to West CEO and president, Eric Light-green. Eric?

Eric Green -- Chief Executive Officer

Thank you, Quintin, and good morning, anybody. Cheers for joining united states today. We will outset on Slide 5. I'm pleased to written report that we delivered a strong beginning quarter.

This was driven by double-digit organic sales growth with increasing demand for our loftier-value products. Our confirmed order book for the rest of 2022 and into 2023 remains equally strong as ever, primarily driven past not-COVID-based business. And to provide you more than color, over one-half of the club book is coming from biologics demand. These results were delivered despite several macroeconomic challenges that are impacting all companies and sectors.

Nosotros have taken proactive measures to mitigate the risk of these challenges and ensure the continuity of disquisitional components to our customers. For example, inflation, we're adjusting our pricing strategy and have enacted surcharges as a pass-through to offset increasing costs of raw materials, free energy, and transportation. Supply concatenation. Our raw material and proprietary medical device components are sourced from beyond the earth.

We have increased our inventory of these cardinal raw materials to minimize any supply disruption. And we continue to execute and monitor our business organisation continuity plans with respect to these issues, including the war in Ukraine and the contempo pandemic surge in Prc. Turning to Slide 6. Our team members across the globe continue to demonstrate their passion to improve patient lives that remain focused on our strategic initiatives of execute, innovate, and grow.

Starting with the first pillar of execute. We go on to deliver the key drivers of growth in Q1 with strong client need of HVP components, including NovaPure and Westar. There was solid demand in the quarter beyond all market units and a positive outlook remains for the rest of the year. And in particular, for our biologics market segment, which is now greater than 42% of our full sales, we run across both existing and new customers continue to spec our highest level of components past West or our partner, Daikyo, for their sensitive molecules.

Our upper-case letter spending investments through expansions and optimizing productivity across the global operations remain on rail. To date, almost all of our 2020 expansion phases have been installed, validated and in production, and nosotros're making good progress on the 2021 capital expansion plans, some of which volition come online in the second half of 2022 and throughout 2023. With the accelerated biologics demand for NovaPure, we take executed additional support for NovaPure time to come demand as well as other HVP finishing capabilities. Expansion construction is underway and will be online toward the back half of this year with commercial production in 2023.

Shifting to West team of scientific and technical experts. We continue to brainwash and share insights in biologics, combination products, and container closure integrity, which are priority areas in pharmaceutical packaging. At the contempo PDA annual meeting, several of our West experts were recipients of prestigious awards. Now to innovate.

We demand to fuel innovation to develop future products, solutions, and services that connect the dots across science and engineering to create client value. We're doing then past investing in external opportunities that complement our current business organisation needs such as our partnership with Techin to create a research center of excellence in combination with Westward scientific expertise. The Corning collaboration as we expand our HVP value suggestion to lead the industry from components to a truly integrated system of elastomer in glass and building technologies similar the recent collaboration with Pneuma Systems to develop a family unit of fluid flow technologies for drug delivery. I'm pleased on the progress on our R&D team is making around introduce.

Moving to the final pillar, growth, which includes uses of cash. Nosotros're working from a position of strength equally we believe we have a long horizon of continued stiff organic sales growth and margin expansion. Equally we have demonstrated over the past two years, we have increased our uppercase spending for capacity expansion at existing sites across our global network to support our organic growth initiatives. In add-on, we have made inorganic investments such equally partnerships with Corning.

Our continued focus within these iii strategic pillars, execute, innovate and grow, allows usa to exist more than responsive, leverage our assets more than effectively and support the trends that are happening in the industry today. This was nearly evident from our recent site visits in Dublin and Waterford, Ireland. For example, in Dublin, I saw firsthand how the digitalization of our manufacturing technologies is providing real-time data, enabling our team to raise the bar in operational performance with higher yields and efficiencies. At Waterford, the uppercase investments over the concluding one and a half years have significantly increased capacity with additional lines producing HVP product to meet increased need.

And nosotros're seeing early success with our next-generation fully integrated automation that we believe will scale and transfer beyond the network for a combined benefit of higher quality production and higher manufacturing throughput. Lastly and probably, the hard work of our Waterford squad was acknowledged by the Ireland-U.S. Quango as nosotros received the Global Public Service Honour for our delivery during the pandemic. Now I'll turn it over to our CFO, Bernard Birkett, who volition provide more detail on our financial functioning.

Bernard Birkett -- Chief Fiscal Officer

Thank you, Eric, and good morning time. Let's review the numbers in more particular. Nosotros'll first look at Q1 2022 revenues and profits where nosotros saw continued strong sales and EPS growth, led past stiff revenue performance in our biologics and pharma market units. I will take yous through the profit growth we saw in the quarter besides as some residuum sheet takeaways.

And finally, we will provide an update to our 2022 guidance. First up, Q1. Our financial results are summarized on Slide 7, and the reconciliation of non-U.S. GAAP measures are described in Slides xv to eighteen.

We recorded net sales of $720 1000000, representing organic sales growth of xi%. Looking at Slide 8. Proprietary products sales grew organically by xiv.4% in the quarter. Loftier-value products, which fabricated up approximately 73% of proprietary products sales in the quarter, grew double digits and had solid momentum across biologics and pharma market units in Q1.

Looking at the operation of the marketplace units, the biologics market unit of measurement delivered stiff double-digit growth. We continue to work with many biotech and biopharma customers who are using Due west and Daikyo high-value product offerings. The generics market unit experienced mid-single-digit growth, led by sales of FluroTec and Westar components. Our pharma market unit saw high-single-digit growth with sales, led past high-value products, including Daikyo and NovaPure components.

And contract manufacturing declined 3.8% for the first quarter due to a reduction in sales of components for diagnostic devices. We recorded $284.6 1000000 in gross profit, $12.7 meg or 4.7% above Q1 of last year. And our gross turn a profit margin of 39.5% was a 100-basis-point reject from the same menses last twelvemonth. Nosotros saw improvement in adapted operating turn a profit with $189.9 million recorded this quarter, compared to $179.2 million in the same period last year for a 6% increase.

Withal, our adjusted operating profit margin of 26.4% was a 30-footing-indicate decrease from the aforementioned period concluding year. Finally, adjusted diluted EPS grew 12% for Q1. Excluding stock-based compensation tax benefit of $0.12 in Q1, EPS grew by approximately fifteen%. So let'due south review the drivers in both revenue and profit.

On Slide 9, nosotros show the contributions to sales growth in the quarter. Volume and mix contributed $49.9 million or 7.4 percent points of growth. And sales price increases contributed $23.6 million or three.v percent points of growth in the quarter. Looking at margin performance on Slide 10 shows our consolidated gross profit margin of 39.five% for Q1 2022, slightly down from 40.5% in Q1 2021.

Proprietary products first quarter gross profit margin of 43.4% was 290 basis points lower than the margin achieved in the kickoff quarter of 2021. The pass up in proprietary products gross profit margin was acquired by several factors, including lower levels of absorption during the early on part of the quarter due to short-term labor constraints, increases in raw material and overhead costs. In add-on, our 2021 gross profit margin included approximately 150 basis points of do good in the prior twelvemonth associated with onetime fees from COVID and other supply agreements, which did non reoccur in the get-go quarter of 2022. These fees had approximately 160 footing points of do good on Q1 2021 operating margin.

Contract manufacturing start quarter gross turn a profit margin of twenty.ane% was 440 footing points above the margin achieved in the outset quarter of 2021. The increase in margin is largely attributed to laissez passer-through of inflationary costs and components in the quarter. At present allow's look at our rest sheet and review how nosotros've washed in terms of generating more cash for the concern. On Slide eleven, we take listed some fundamental greenbacks flow metrics.

Operating cash flow was $151.two 1000000 for the first quarter of 2022, an increase of $62.v million compared to the same period last year, 70.5% increase. Our operating cash menstruation in the menstruation benefited from our working capital functioning. Our first quarter 2022 year-to-engagement majuscule spending was $65.8 million, $11.one million college than the same menstruation last year. Working uppercase of approximately $1.1 billion at March 31, 2022, decreased slightly past $42.two million from December 31, 2021, primarily due to the net reduction of our greenbacks offset past an increase in inventory levels.

Our cash balance at March 31 of $667.7 million was 94.9 million lower than our December 2021 balance. The decrease in cash is primarily due to our share repurchase plan and higher capex, start past our strong operating results in the menses. Turning to guidance. Slide 12 provides a loftier-level summary.

We are reaffirming our full yr 2022 net sales guidance. Nosotros expect internet sales to be in a range of 3.05 billion to $3.075 billion. At that place is an estimated FX headwind of $115 million based on current strange exchange rates, compared to a prior estimated headwind of $70 1000000. We wait organic sales growth to be in the range of 11% to 12%, compared to our prior guidance of approximately 10%.

We expect our total twelvemonth 2022 adjusted diluted EPS guidance to be in a range of $9.30 to $nine.45, compared to a prior range of $9.20 to $9.35. This revised guidance includes our showtime quarter $0.12 EPS positive affect of tax benefits from stock-based compensation. Also, our capex guidance remains at $380 million for the yr. At that place are some key elements I want to bring your attention to equally y'all review our guidance.

Estimated FX headwind on EPS has an increased impact of approximately $0.38 based on electric current foreign currency exchange rates compared to a prior estimated headwind of $0.21. And our guidance excludes hereafter tax benefits from stock-based bounty. So to summarize the primal takeaways for the first quarter, strong top line growth in proprietary, growth in operating turn a profit, growth in adjusted diluted EPS and growth in operating cash flow, delivering in line with our pillars of execute, innovate and grow. I'd now similar to turn the remember over to Eric.

Eric Green -- Chief Executive Officer

Thank you, Bernard. To summarize on Slide 13, our execution in Q1 has positioned us well for the year ahead. We continue to have a strong base of operations business organisation despite the current macro environs in which we operate. We remain well positioned with the right market place-led strategy around execute, innovate, and grow.

We have a robust book of committed orders with momentum in 2022 and standing into 2023. We go on to realize the benefits of our global operating model, and nosotros're continuing to advance capital spending across our operations to meet current and predictable future growth. With neat pride, we realized the criticality of our products for healthcare across the globe, which is why our purpose to improve patient lives propels us each and every twenty-four hour period. Didi, we're gear up to take questions.

Cheers.

Questions & Answers:

Operator

[Operator instructions]. Our first question comes from Larry Solow of CJS Securities. Please go along.

Larry Solow -- CJS Securities -- Annotator

Did yous give the -- real quick housekeeping question. Did y'all give the COVID sales, COVID-related sales number? Did I miss that?

Bernard Birkett -- Chief Fiscal Officer

We didn't call it out, simply information technology was approximately $110 one thousand thousand, which shows growth over Q1 2021.

Larry Solow -- CJS Securities -- Analyst

Got it. So there's no alter to this year's outlook for that, it sounds like. OK. First question just on the cost side.

Clearly, everybody is facing this varying degrees of -- from inflation and supply chain issues. And yous guys take done a fabulous job offsetting a lot of them, I recall. But, obviously, you can only offset so much. I'one thousand just curious what the -- the surcharges you lot put in today, weren't you already kind of -- is this merely sort of expediting increases to keep up with the rapid -- to the fluid state of affairs with the cost coming up? I know normally, I remember yous have like kickers in there and you're selling a lot of your contracts.

Is this more than of a broader-based, more aggressive reaction to some of these inflationary issues?

Eric Green -- Chief Executive Officer

Larry, in that location'south 2 elements. Y'all're right, on the contract manufacturing side of our business organization, which is a petty flake less than twenty%, we do have -- with our agreements with our customers, we are passing on inflationary costs for the most part, whether it'southward raw materials and etc. On the proprietary side, that'due south more than of a contempo phenomenon. There's elements of that, though.

One is we've mentioned earlier that we are revisiting our pricing strategy and we started executing upon that last year edifice upwards for this year. So nosotros're seeing the element of more long-term pricing strategy around value capture that is now coming into the equation. In add-on to that, in the proprietary business organisation, we accept implemented surcharges as well. And that typically is really around transportation and increase in raw materials.

So in that location's 2 levers that have occurred. But I just want to be very clear that at that place is an element, underlying base toll increased strategy is now beingness rolled into the ongoing business.

Larry Solow -- CJS Securities -- Annotator

OK. And was this kind of just enacted at the beginning of this twelvemonth, I guess? And I presume there's some kind of a lag, correct? I hateful margins were downward a piffling chip. I know year over year, in that location was some more. You had this onetime $12 million onetime payment.

I know that's skewed the margins. Only fifty-fifty if we wait sequentially, margins are downwards a little fleck, right? Is that mostly a function of these higher costs and maybe you tin can't starting time all of them, but hopefully, mayhap yous get a little improvement every bit we expect out -- every bit you enact some of these surcharges?

Bernard Birkett -- Chief Financial Officer

It's partly related to the price and the lag in passing them on, and then it's not always instantaneous in the quarter. When you run across the pricing or the cost increases, and so nosotros work with our customers to layer that in over time, and that'due south what nosotros have been doing. And the other thing that we called out, Larry, too, nosotros did see some lower levels of absorption in the -- probably the first half of the quarter based on labor supply in one of our ii of our plants, and that was a brusk-term blip. And we've seen the assimilation levels become dorsum to normal where nosotros would expect them to be in the latter half of the quarter.

But again, that does affect margin in the short term.

Larry Solow -- CJS Securities -- Analyst

Right. Yes. That was kind of my side by side question, was other than the cost impact and the labor event you chosen out as sort of temporary, are you guys having any major or increasing bug just retaining labor or supply chain issues where you lot've been able to sort of -- fifty-fifty though things are not getting any ameliorate, I know?

Bernard Birkett -- Chief Financial Officer

I wouldn't call back there's increasing problems retaining labor. Information technology has been challenging, I think, for everybody, but we haven't seen any spike in that. And then nosotros have a number of initiatives with our Hour teams to make sure we have the labor in the correct places. So it wasn't really around retention problem.

So that's -- long term, that'south not a big consequence for us. And and so if you look at the implied guidance, we are forecasting operating margin expansion. And to do that, we have to be able to do gross margin expansion at the same fourth dimension to feed into information technology. So we believe some of these short-term impacts we saw at the really early part of the yr are kind of at present behind us.

Larry Solow -- CJS Securities -- Analyst

OK. OK. Cracking. And then just terminal question on -- simply on dorsum to the COVID.

Any -- patently, there's a lot of chop-chop changing situation. Simply it sounds like for you guys, again, we've talked about it. It'southward not a thing of overall volume, but sort of that shift in life cycle management. Have y'all seen any incremental evidence that this is occurring? Or any thoughts, any update on that front end?

Eric Green -- Chief Executive Officer

What we can share with you is that we are seeing the -- more of the forecasting, looking after into 2022 of a shift from larger vial configuration to a smaller vial configuration. Just that hasn't flown into our operations as we speak today, simply that'south more than forecasted working with our customers throughout the yr.

Larry Solow -- CJS Securities -- Analyst

Right. OK. Great. Thanks, guys.

Appreciate information technology.

Eric Green -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Justin Lin of William Blair. Please go on.

Justin Lin -- William Blair -- Analyst

Hi. Skilful morn. Cheers for taking my questions. I guess Repligen came out yesterday and saw COVID vaccine cancellations and orders as we push to 2023, at least some of information technology -- some of them.

I guess what are you lot seeing in your order books? And if you could share your outlook for COVID, both brusk term and long term, that would be slap-up.

Eric Green -- Chief Executive Officeholder

Well, two ways to look at it. One is, if we retrieve about for 2022, our confirmed social club book for the balance of the yr, as we mentioned earlier, it'southward a very -- it'southward much stronger than it was the same time menstruum as final year. But if you divide that out, the COVID ratio within that larger club book is relatively the same equally relatively steady as it was concluding year. Actually, the expansion of that order book is really heavy effectually the HVP and also due to over half of information technology is due to the success of various drug launches in our biologics infinite.

So at that place are some COVID-19 customers that are adjusting their forecast, simply overall, we're seeing a steady flow throughout the residual of the yr.

Justin Lin -- William Blair -- Analyst

Got it. So you're currently not sort of changing your outlook for 2023, it sounds similar?

Eric Green -- Chief Executive Officer

No, nosotros're not based on what we -- current conversations with customers.

Justin Lin -- William Blair -- Analyst

Got it. And I think your margins, both gross and operating, came slightly below The Street. Can y'all help us think through how much of that is product mix versus currency versus supply concatenation headwinds? I think gross profit is a bit lower than your use is same, but some of that is offset by a lower SG&A spend every bit well.

Bernard Birkett -- Chief Financial Officer

Yep. So on the gross margin, actually, what I chosen out earlier in response to Larry's question, office of that was on the lower levels of assimilation that we did see in the first half of the quarter. Again, that was more of a onetime upshot. And what we're actually seeing in operating margin, if you expect at our business on a normalized basis, if you back off the sometime have-or-pay that nosotros got in Q1 2021 and compare operating results, excluding that, operating margin would have expanded by well-nigh 130 basis points.

And so that -- it had a 160 basis point touch on on operating margin. So that -- so when we wait out for the balance of the twelvemonth, we are forecasting continued operating margin expansion. So that comp made information technology very, very hard to expand the margin in that period.

Justin Lin -- William Blair -- Analyst

Got information technology. That's it for me. Give thanks yous very much.

Bernard Birkett -- Primary Financial Officer

Thank y'all.

Operator

Thank you. Our adjacent question comes from Paul Knight of KeyBanc. Please proceed.

Paul Knight -- KeyBanc Capital Markets -- Annotator

Eric, your $380 one thousand thousand of capex patently shows, I approximate, a very strong building book for biologics ex COVID. Can you talk about 42% of biologics -- of sales of biologics this year? What was information technology terminal twelvemonth? And tin can yous talk about what yous're seeing that's driving your capex levels?

Eric Greenish -- Chief Executive Officer

Yes. And so when you look at information technology, Paul, it'due south less than forty%, and we're seeing the biologics become a larger piece of the -- apparently, it's the largest unit today, but with the highest growth, even ex COVID in the equation. And so when you think nearly our investments that nosotros're currently making, a lot of the uppercase -- over seventy% of the capital is really growth orientated, which I think historically was probably closer to the 50th percentage. And it's actually focused effectually NovaPure and FluroTec, specially plungers and stoppers.

And what we're seeing is really a buildup -- every bit we talked earlier most the capital that we're spending in the last couple of years really is -- was already built in our five-yr plan, and we're only bringing it forrad to support the COVID vaccines. Merely now what we're seeing is that the demand and the biologics continues to increase and accelerate. And I mentioned a trivial bit before, only just to reiterate, I mean, if I look at the details of the confirmed society volume, over half of it is of drug molecules in market that we're seeing a ramp-up or acceleration of adoption. And and so -- and it's not only i molecule equally many.

And so we're seeing that pull effect of increasing volume out of West to support those -- the continuation of the drug in the supply chain. So we're very, very excited to see the focus around biologics, the high penetration of successes of new BLAs or NMEs and our participation remains very, very high, and this is the touch that we're seeing.

Paul Knight -- KeyBanc Majuscule Markets -- Analyst

And regarding the Corning JV, what'southward -- I know you've indicated capex of xv million, simply what'south the multiyear kind of time line in your view with that JV?

Eric Green -- Chief Executive Officer

Well, the investments are more in the next couple of years. I hateful, information technology's a very long-term arrangement. Nosotros volition accept various launches over the next couple of years, starting this year in 2022 of new solutions to customers. Simply these investments will take identify on the capital side over the side by side couple of years to increment capacity, particularly around prefilled syringe.

Bernard Birkett -- Chief Financial Officer

Yes. Then that'due south going to be a number of years earlier we come across from a revenue and profitability perspective. That'southward not immediate. Then it'southward going to have time to build that out.

But in the acting, there are other configurations, every bit Eric said, that we're putting together, but they won't be overly material on our numbers in the short term.

Paul Knight -- KeyBanc Capital Markets -- Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from Jacob Johnson of Stephens. Please go along.

Jacob Johnson -- Stephens Inc. -- Analyst

Cheers. Good morning. Maybe first, just a couple of clarifying questions. Outset, simply on the COVID side, if I heard you lot correctly, it sounds similar your expectations for 2022 on the revenues there are unchanged.

But has the limerick of those revenues changed? Are yous bold, information technology sounds like maybe the back one-half of the yr, y'all're going to get peradventure a fiddling more of a benefit from a configuration change? Is it fair to say that perhaps the limerick of those revenues have shifted versus prior expectations?

Eric Greenish -- Principal Executive Officer

No, I retrieve information technology'southward pretty consistent. I call back what we're seeing is, absolutely, when you do life cycle management, unlike bio configuration, in that location volition be a change, and that was really more toward the back half of the yr. But when nosotros look at the growth orientation of where we are today and wait at balance of 2022, the ex COVID or the non-COVID-related growth volition outpace the COVID growth. And as you recall, last yr and the year before, information technology was really quick acceleration considering of our response in the market.

But it'south more steady -- if I say steady to country, it's more of a lower end, merely still growth overall for West. But the college element of growth in proprietary is definitely going to come up from, correct now, our view is non-COVID related.

Jacob Johnson -- Stephens Inc. -- Annotator

OK. Got it. Thank you. And the Bernard, just on the decline in gross margin sequentially, it sounds like this was largely related to labor and absorption.

And if I heard you correct, it sounds like that was the starting time half of the quarter, and that'southward been resolved. So is it fair to assume that we should run into gross margins kind of bounciness back at present that that'south over with as we think 2Q and beyond?

Bernard Birkett -- Main Financial Officer

Yeah. And that's implied in the guidance for that to happen. And we're confident that, that will take place. And every bit Eric has alluded, we're continuing to see very strong growth inside Biologics and that mix shift within our business.

And that drives a lot of that margin improvement and nosotros're also picking upwards various levels of efficiencies throughout our operations. And so we would await to meet margins continue to improve throughout the year.

Jacob Johnson -- Stephens Inc. -- Analyst

OK. That's helpful. And then just last question, kind of getting to the point, I think, you both want to make. Eric, yous mentioned a long horizon of organic growth.

I judge the question there, what would be helpful? Just remind u.s. kind of where loftier-value product units stand in terms of per centum of units today, what that number looks like? And perchance how that could -- what that could await like maybe five years from now?

Eric Green -- Chief Executive Officeholder

Yep. If you lot remember about the algorithm that we have with the greater than 70% of our sales in proprietary is high-value products. The units -- number of units that we are producing for high-value products is roughly around 22%, 23%. And the way it works is about 100-ground- point expansion on units is strong double-digit growth on high-value products.

If you retrieve nearly how biologics is becoming a larger portion of the portfolio, again, across many different customers, so it'due south not really concentrated on i customer or one drug, it'due south across the whole portfolio of the market, that volition continuously drive higher revenues, higher profits with non a lot of increase on units per se, 100, 100-plus basis points. So that's the equation. And we await that to proceed. It's the fastest-growing subsegment with the injectable medicine infinite.

The pipeline is very robust. It was very encouraging to see the number of new approvals over the last 12 -- 18 months in this detail space, and our participation rate is as loftier as ever. Then all this equates to -- and it translates into our confirmed gild volume for future launches. So this all translates into continued growth for the next 5 years of HVP for West.

Jacob Johnson -- Stephens Inc. -- Analyst

Perfect. I'll get out it at that place. Cheers for taking the questions.

Eric Dark-green -- Main Executive Officer

Thank you.

Operator

Our side by side question comes from Derik De Bruin of Bank of America. Please continue.

Derik De Bruin -- Banking concern of America Merrill Lynch -- Analyst

Hi. Good morn, anybody. I just jumped on so my apologies if I'm going to echo some stuff. But can y'all simply sort of talk about the organic acquirement growth guide? You're a lilliputian bit beneath in our numbers in the first quarter, yet you're raising it for i% to ii% for the full yr like that, which is -- which is surprising given the Q1.

Tin can you lot only sort of walk through me -- if you lot sort of walk through the math on your confidence every bit we're getting that increment given the quick starting time?

Bernard Birkett -- Chief Financial Officer

Yes. And so the -- when we look at it and information technology goes back to the point I made earlier nigh the absorption rates that nosotros experienced in the first one-half of the twelvemonth due to some of our labor constraints, and that was primarily around omicron, it impacted the states in a couple of different sites. Again, that was a short-term trouble. That impacts our ability to produce in the brusk term.

So and then that kind of leads into some impact on our revenues in the outset quarter. And so information technology'south not that nosotros're seeing a drop or a shift in our demand down. Information technology's mainly what we could actually produce in the quarter and deliver to customers. So that was a little bit low-cal.

But as Eric said, our gild book is still very, very strong. And we as well had -- when we had spoke earlier on in the year, we were saying nosotros were going to see more of our growth will come in the back half of the year versus the first, and that's still what we're seeing. And then there's really no change.

Derik De Bruin -- Depository financial institution of America Merrill Lynch -- Analyst

Great. Thanks for clarifying that. That'due south really helpful, and I didn't become to that. Have y'all -- I've got a couple of clients request, tin can yous just sort of confirm that you're looking for greater than 100 basis points of overall operating margin expansion this year?

Bernard Birkett -- Primary Financial Officer

Yes. And again, that's unsaid in the guidance. And so information technology will exist greater than 100 basis points. And getting back to the point I fabricated before, if you wait at the fundamentals of the business, if y'all have that take or pay that we had in Q1 2021, if you back that out and then look at the comp on that basis, operating margin would have expanded about 130 footing points.

Then from a comp indicate of view, you had that level of claiming hither in the commencement quarter. So when I look at that, information technology gives me confidence to be able to say, yes, we are going to go along to expand that operating margin.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Practise you think the production constraints are largely alleviated at present?

Eric Green -- Chief Executive Officer

I'll comment. I would say, merely based on the terminal couple of months of performance, I would say yes. I hateful, there'south always challenges in this environment today. The couple of plants that Bernard is referring to, we were hit hard on the omicron and that did touch on assimilation.

Information technology also impacts on productivity. But over the last couple of months looking at the productivity levels, the output, nosotros do believe nosotros have a very skilful command around this. And we're able to build flex to make sure that nosotros're able to deliver going forwards. But it was a brusk-term hit.

Bernard Birkett -- Primary Financial Officer

Yeah. Then we did see comeback every bit nosotros movement through the quarter. And we're forecasting that to continue based on what's in place now.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Slap-up. And I've got some people asking on your China exposure and merely sort of any commentary in that region. Has that been a headwind to the concern at all?

Eric Green -- Master Executive Officer

Yes. So our operations was impacted in the sense that our Qingpu manufacturing facility isn't within the region of Shanghai, and obviously, our offices, too. So nosotros did have a site closure for a short period of fourth dimension. And we're working through that now.

As far equally materiality for West, information technology's very low percentage for Due west coming out of that facility for the local marketplace. But nosotros're keeping an eye on it, make sure that we can pivot and potentially import where necessary versus having materials coming out of that specific site. We practice expect to see a recovery in this quarter with the demand, but we need to stay tuned because that's kind of a dynamic environment right now.

Derik De Bruin -- Bank of America Merrill Lynch -- Annotator

Great. Thank you very much.

Eric Greenish -- Main Executive Officer

Thank you.

Operator

Our next question comes from Dave Windley of Jefferies.

Dave Windley -- Jefferies -- Analyst

How-do-you-do. Good morning. Thanks for taking my question. I want to follow up on Derek and several of the other questions, the line of questioning around the capacity.

Wondering if your assimilation commentary on productivity issues affected your ability to deliver to clients. Like should we retrieve well-nigh revenue would have been higher in the quarter if you had been able to produce equally much as you expected in those facilities? And like did the lag times to clients change at all?

Bernard Birkett -- Chief Financial Officer

Yes. It impacted it slightly, only it didn't actually bear on lead times overall. Nosotros were able to kind of get that product out to customers in the early office of this quarter. And so in that location was -- nosotros tried to minimize any client impact.

As we said, it happened earlier in the quarter, only at that place's no kind of long-term impact to that. Information technology was a once-off and it was something nosotros've been able to deal with. And we've been able to proceed supply to our customers. Information technology did -- could touch revenues slightly but not overly material, I will put information technology that way.

But there was some affect effectually that.

Dave Windley -- Jefferies -- Annotator

OK. On the -- it seems as people accept already highlighted the gross margin impact and somewhat start by SG&A being a niggling lower. Should we think nigh that SG&A level as durable? Is that a result of kind of some permanent productivity step-ups?

Bernard Birkett -- Chief Fiscal Officer

Yes, information technology is durable. It'southward productivity. And over again, it does looking at what is the appropriate level for SG&A of our business organization. And that'southward something that nosotros manage very, very tightly.

Dave Windley -- Jefferies -- Analyst

OK. And and then just somewhat longer-term question around capacity. I apologize, I'm probably non keen at keeping upwards with all this, but y'all've pulled forward quite a bit of capex, not only kind of at present, but over the COVID period and have a number of initiatives in place to bring more capacity online. Could you merely help u.s.a. sympathize in broad strokes when those capacity expansions are supposed to hit? And I recall it's mostly FluroTec and NovaPure as you've highlighted, Eric.

And then also ostend what you said in the by that you lot basically expect that capacity to exist taken up by order demand correct away. In other words, no dilution to productivity, absorption, etc., as you're bringing on slugs of new capacity? Thanks.

Eric Green -- Chief Executive Officer

Yes. So the last part first and say that nosotros don't anticipate whatsoever bear upon if there'southward very variability effectually the COVID piece. Because if nosotros wait -- once again, await at our -- the demand that we're getting with non-COVID related, particularly in the biologics space, which is -- overlaps 100% with the investments that we are putting in, the growth is actually -- is a little bit higher than we anticipated. So therefore, we're in a position we can absorb that.

But to your first point, the initial launch that we communicated back in -- early in the pandemic, let's just call it 2020, that investment is now finalized and in place and at present through is producing commercial product this yr. And it was kind of weaved in throughout 2021. So that's 100% installed. The 2d phase that nosotros communicated actually toward the early part of 2021, we're seeing that being layered in, as we speak, and might leak some parts of it, not all, a portion, a small portion might go into 2023.

But the focus of the remaining HVP is exactly what you stated. It's really focused around NovaPure and FluroTec capacity, and it is beyond multiple plants within our network. And again, it lines upwards very nicely with the growth in biologics and it also does support pharma and generics, but most of biologics. So growth in biologics in our order volume is extremely strong as nosotros speak today.

So I'm pretty confident. Now nosotros demand to get that equipment in, installed, validated, and nosotros've been doing a great task beyond the earth. We too need to add together some resources to exist able to run those, the new equipment, and that is ongoing every bit we speak. So we're seeing a very good uptick in attracting new boosted talent to our organization, but also doing a good chore of keeping in pace of the capital expansion.

Dave Windley -- Jefferies -- Analyst

Thanks. Capeesh those answers. Give thanks you.

Eric Green -- Principal Executive Officeholder

Thank you.

Operator

Cheers. I would now like to turn the conference dorsum to Quintin Lai for further remarks.

Quintin Lai -- Vice President, Investor Relations

Thank you, Didi. Thank you for joining u.s. on today's conference call. An online archive of the broadcast will be available on our website at westpharma.com in the Investors section. Additionally, you lot may access a replay through Thursday, May 5, past using the dial-in numbers and conference ID provided at the terminate of today's earnings release.

That concludes this call. Accept a nice twenty-four hours.

Operator

[Operator signoff]

Elapsing: 47 minutes

Call participants:

Quintin Lai -- Vice President, Investor Relations

Eric Light-green -- Principal Executive Officeholder

Bernard Birkett -- Principal Financial Officer

Larry Solow -- CJS Securities -- Annotator

Justin Lin -- William Blair -- Analyst

Paul Knight -- KeyBanc Capital Markets -- Analyst

Jacob Johnson -- Stephens Inc. -- Analyst

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Dave Windley -- Jefferies -- Annotator

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Source: https://www.fool.com/earnings/call-transcripts/2022/04/29/west-pharmaceutical-services-wst-q1-2022-earnings/

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