WST Q3 Deep Dive: GLP-1 Demand, Annex 1 Upgrades, and Margin Expansion Shape Outlook

Healthcare products company West Pharmaceutical Services (NYSE:WST) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.7% year on year to $804.6 million. The company’s full-year revenue guidance of $3.07 billion at the midpoint came in 0.5% above analysts’ estimates. Its non-GAAP profit of $1.96 per share was 16.3% above analysts’ consensus estimates.

Is now the time to buy WST? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

West Pharmaceutical Services delivered third quarter results that surpassed Wall Street’s revenue and profit expectations, sparking a strong positive reaction in the market. Management attributed this performance to double-digit growth in High Value Product (HVP) components, particularly the elastomers supplied for GLP-1 therapies, and a robust pipeline of Annex 1 upgrade projects. CEO Eric Green highlighted the company's “trusted reputation for high-quality scale and reliability” as a key factor supporting continued momentum in its core business segments.

Looking ahead, West Pharmaceutical Services’ raised guidance reflects confidence in sustained growth drivers, especially from GLP-1 drug components and regulatory upgrades. Management expects continued demand for HVP products and a return to expanding margins, supported by operational improvements and ongoing capacity investments. CFO Bob McMahon noted, “We expect gross margin to be an area of opportunity for us to expand margins,” while Eric Green emphasized that the company is “well positioned for Q4 and into 2026” as visibility into end-market demand improves.

Key Insights from Management’s Remarks

Management identified accelerating demand for GLP-1 drug components, progress on regulatory upgrades, and ongoing operational efficiencies as the primary drivers of Q3 performance.

• GLP-1 elastomer growth: Sales of elastomer components for GLP-1 therapies reached 9% of company revenues, driven by strong customer partnerships and increasing adoption in obesity and diabetes treatment markets. Management expects this segment to remain a significant contributor as the GLP-1 market evolves.
• Annex 1 upgrade momentum: The company is ahead of schedule on regulatory-driven Annex 1 projects, with 375 active engagements supporting pharmaceutical customers’ compliance with European manufacturing standards. Management estimates these upgrades will add 200 basis points of growth this year, up from prior expectations.
• High Value Product (HVP) mix benefits: The shift toward HVP components boosted gross margin, supported by a positive sales mix and improved manufacturing efficiencies. CFO Bob McMahon cited ongoing efforts to reduce costs and optimize yields, which are expected to sustain margin improvements.
• Contract Manufacturing transition: The Contract Manufacturing segment benefited from increased self-injection device sales for obesity and diabetes, partially offset by lower healthcare diagnostic device demand. Management is preparing for the conclusion of a key CGM contract in mid-2026, with plans to backfill capacity with higher-margin business.
• Leadership appointments: West strengthened its executive team with the addition of Bob McMahon as CFO and a new Chief Technology Officer, both tasked with accelerating operational execution and new product introductions.

Drivers of Future Performance

West expects continued growth to be driven by strong demand for GLP-1 and biologic components, regulatory upgrades, and operational optimization, although contract transitions and macro uncertainties present some risks.

• GLP-1 and biologics momentum: Management anticipates healthy growth in GLP-1 elastomer demand and ongoing biologics expansion as new drug approvals and clinical trials drive customer needs. While growth may moderate from recent highs, the company expects injectables to remain the dominant delivery method, supported by global manufacturing capabilities.
• Annex 1 and HVP upgrades: The ongoing conversion of standard products to HVP components through Annex 1 compliance is expected to deliver multi-year growth and expand margins. Management highlighted that only a fraction of the addressable market has been converted, suggesting significant runway for future projects.
• Contract Manufacturing backfill and margin focus: With the upcoming loss of a CGM contract in 2026, the company is working to repurpose facilities for higher-margin opportunities. Management also cited ongoing supply chain optimizations and cost control initiatives as key levers for margin expansion, while monitoring tariff-related costs and regulatory changes as potential headwinds.

Catalysts in Upcoming Quarters

Looking forward, our team will monitor (1) the pace of GLP-1 elastomer adoption and its market share within overall revenues, (2) the execution and timing of Annex 1 upgrade conversions as customers progress from development to commercial production, and (3) management’s ability to backfill the CGM contract with higher-margin business. Ongoing margin expansion and successful capital deployment will also be critical milestones.

West Pharmaceutical Services currently trades at $304.91, up from $276.80 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

Our Favorite Stocks Right Now

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.