West Pharmaceutical Services, Inc. Business Information, Profile, and History

Company Perspectives:

Our mission is to provide our customers with products and services that continuously improve the safety, comfort and convenience of pharmaceutical, healthcare and consumer products. We will do so by anticipating and creating products and services to meet market needs and challenges; achieving preferred relationships with customers, suppliers and other partners; being good corporate citizens and environmentally responsible; providing the West team with a challenging, rewarding and supportive environment. By serving our customers well, we will be profitable and will provide a reasonable return to our shareholders.

History of West Pharmaceutical Services, Inc.

West Pharmaceutical Services, Inc. is a world leading supplier to the pharmaceutical and healthcare industries, offering products to package, deliver, and dispense drugs. It began primarily as a packaging company but has moved, in recent years, into medical testing and medication delivery systems to better serve its customers. Its client list reads like a "who's who" of the medical industry.

1920s-30s: Early Years

Herman West was born in 1893 and raised by his mother in Minnesota after his father deserted the family. After working for two years after high school graduation to earn money to attend college, West traveled to the University of Pennsylvania. After a World War I tour in the Navy, he finished school, got married, and began working in a dental supply house.

It was in that first post-college position that he decided to begin his own dental supply firm. Thus in 1923, he, Frank Mancill, and two former university classmates, Jesse R. Wike and Norman F. Wiss, founded The West Company. Located at 1117 Shackamaxon Street in Philadelphia, the company manufactured rubber "Burlew" grinding wheels for the dental trade as well as droppers, plungers, and stoppers for pharmaceutical companies. The company grew quickly and soon occupied more of Shackamaxon and nearby Day Streets. Although it was a manufacturing company, The West Company, because of its products, was closely related to the medical industry and innovations throughout that field.

In 1930, Dr. R.B. Waite, the founder of Cook-Waite Laboratories, Inc., acquired a 100-share interest in West and began collaborating on rubber closures that were compatible with medicinal solutions such as Novocain and insulin. Dr. Ralph Grafton was the head of the research and development at the company.

In 1931, The West Company purchased Simonds Abrasive Company. The new division manufactured wheels, measuring up to 20 inches in diameter, as well as a cut-off machine for foundry operations.

1940s: The West Company, Penicillin, and the War

Penicillin, discovered by Dr. Alexander Fleming, became a lifesaving antibiotic that The West Company helped to package. Because of World War II, the U.S. government soon became the largest customer for penicillin, but to deliver it at the speed and in the quantity the government required, new packaging had to be developed. A joint venture between The West Company, Alcoa, and Owens-Illinois created packaging (with The West Company providing the rubber stopper for the bottle). The packaging and collaboration made it possible for the troops and, later, civilians to receive the new "wonder drug." The abrasive division also was affected by the war and provided wheels for use in the production of army tanks, planes, and ships.

After the war was over, The West Company embarked on yet another venture—aluminum closures. The penicillin packaging used in the war had utilized aluminum closures from Alcoa, but after the war, The West Company hired Jim Underwood, an engineer at Alcoa, to work with Frank Andersen and Lee Rohde to develop aluminum caps that would be closely tied with the rubber sealing on the packaging. To achieve this goal, Jim Underwood designed a new piece of machinery, the Westcapper, in 1946. The Westcapper was an automatic cap-ping machine used by the company for many years.

Herman West and one of the first investors in the company, Dr. Waite, had experienced conflict about the direction of the company. In 1945, Herman West, with the assistance of Eli Lilly, purchased all shares held by outside stockholders so that he could control the company.

With this new control, West obtained financing from Fidelity Bank and began construction of a new manufacturing facility. The facility, in Phoenixville, Pennsylvania, was completed in 1948, and the company vacated the Shackamaxon Street location that had been its home since the 1923 founding.

The company's product line had expanded as well. In 1947, the company produced more than 200 million individual rubber items, including penicillin stoppers, dental plungers, insulin stoppers, Burlew wheels, insert plungers for syringes, sleeve stoppers for parenterals (substances for cutaneous or intravenous injection), dropper bulbs, and other pharmaceutical packaging items. The company provided rubber goods to other industries as well, including golf ball centers and rubber bumpers for railroad cars.

1950s-60s: New Equipment and International Ventures

In 1951, a Millville, New Jersey plant was opened featuring larger production presses, designed by Herman West and created by John De Luca. The new presses could machine trim the rubber items, eliminating costly and time-consuming hand-trimming. Production capabilities increased by 300 percent, and in 1962, a third plant in Kearney, Nebraska, was built. By 1965, production increased to two billion rubber items and 560 employees.

Although the company grew in the United States, the international division took root in 1952. The older machinery from the U.S. plants was shipped to Mexico to be used by new subsidiary West Rubber de Mexico. Over the next 15 years, The West Company expanded to Argentina, Brazil, Colombia, Spain, England, Italy, Australia, and India.

In 1965, Herman West's son William S. West was elected president of The West Company. William had worked for the company for 15 years, and the year he became president sales reached $14 million. One of William West's first acts was to create a Corporate Management Committee to lead the company in future development decisions. Founder Herman West died after an illness in July 1965.

1970s: Going Public

In 1970, The West Company became a publicly held corporation through an initial public offering of $15 per share. The investment money was used to grow the company, with development of new products including pour-spouts for alcoholic beverages, intravenous packaging solutions, and dispensers for birth control pills. The H.O. West Foundation was formed in 1971 to provide college scholarships for employees' children. Sales grew from $26 million in 1970 to $43 million in 1973, with much of the growth in the international and pharmaceutical areas.

By 1975, The West Company employed more than 1,900 workers in the United States and 1,200 workers in international divisions. Many new products were introduced, including specimen collection containers, Flip-Off seals, and whiskey closure spouts. Sales in 1975 were $49.3 million.

In 1978, the company acquired Mack-Wayne Plastics. President Bill West wrote in the annual report, "Mack-Wayne is a leading producer of plastic threaded closures offered in a wide range of designs and sizes. We think there is a very good fit between our companies—by joining forces, we become one of the largest producers, if not the largest, of plastic threaded closures in the U.S. market."

It was in that same year that sales rose to more than $100 million. Also in 1978, the company was divided into six divisions—International, Mack-Wayne Closures, Medical Plastics, Metals/Glass/Machinery, Rubber, and Citation Plastics.

1980s: Changing with the Times

In 1980, the company became listed on the New York Stock Exchange, under the symbol WST. Two years later, a national scare helped fuel growth for the company. Tampering with Tylenol packaging created explosive growth in tamper-proof packaging, and stocks increased for packaging companies such as The West Company.

The early 1980s were consistently profitable for the company, but a downturn in early 1984 was attributed to reduced medical supply orders and a flood at one of the company's plants. The company responded to the downturn by halting the construction of a new packaging plant in Texas.

In 1985, William (Bill) West stepped down as CEO of The West Company, and for the first time a nonfamily member, Rene L. Guerster, was selected as the new president and CEO. Guerster had 15 years experience with the company, most recently serving as the president of West's Pharma-Packaging Division.

Despite a ten-year contract with Corning Glass and an increase in its plastics division, The West Company struggled to meet revenue goals in the middle to late 1980s. In early 1988, the company offered early retirement to its eligible salaried employees. Some 70 percent who were eligible accepted the offer.

At the end of 1988, the company realized an increase in sales to $285 million; in 1989, the trend continued, with sales rising to $308 million.

1990s: Forging Ahead with a New Plan

In 1990, The West Company, affected by an increase in raw materials and a softening European market, saw a decline in sales. In reaction, the company announced in January 1991 that it would be streamlining operations, consolidating glass production facilities, and reducing its salaried workforce further. The West Company's performance had another consequence for its CEO, Rene Guerster, who took early retirement in February 1991 after leading the company for six years.

In May 1991, The West Company selected its next CEO and president from outside the company's ranks. The new leader, William G. Little, had been serving in the healthcare division of The Kendall Company and had experience at Johnson & Johnson. Under Little's leadership, the company restructured its global operations and planned to reduce manufacturing, consolidate plants, and dispose of outdated assets. Sales increased slightly, from $323 million in 1990 to $329 million in 1991, while one-time costs associated with the restructuring netted a loss for the year.

In 1994, The West Company purchased Senetics, Inc., a Boulder, Colorado-based drug delivery company for oral and inhaled drugs. That, combined with other acquisitions, was aimed at adding service and testing businesses to the company.

The company's new strategies began to pay off in the mid-1990s with increases in sales and net income. In 1999, the company completed its shift in emphasis when The West Company became West Pharmaceutical Services, Inc. "West has transformed itself from a designer and manufacturer of products that support the packaging and delivery of injectable pharmaceutical and consumer healthcare products, to a broad-based supplier of products and services that support our customers' entire product development cycle," said CEO William Little.

2000: Branching Out to the Future

In its new role of testing in addition to manufacturing, West Pharmaceutical Services was involved in Phase I trials in early 2000 for the development of nasal morphine for pain as well as another nasal administered drug for endometriosis. Despite restructuring and development plans, however, the company showed disappointing results in 2000 and a 47 percent decline in profits in the third quarter of the year.

Changes in healthcare, including drug companies conducting in-house packaging and consolidating with other companies, adversely affected the company. West Pharmaceutical Services even considered selling its assets and retained an investment bank, UBS Warburg, to review alternatives for the company.

In late 2000, the company announced a 4 percent workforce reduction as well as the closing of its Cleveland office and two plants in Puerto Rico. William Little said of the year's results that it had been "the Company's most difficult year in recent history." Despite the difficulties, the company decided in 2001 not to offer itself for sale and, instead, to focus on the company's long-term possibilities.

Principal Subsidiaries: West Pharmaceutical Services A/S (Denmark); West Pharmaceutical Services Cornwall Ltd. (U.K.); West Pharmaceutical Services France S.A.; West Pharmaceutical Services Deutschland GmbH & Co. KG (Germany); West Pharmaceutical Services Lewes Limited (U.K.); West Pharmaceutical Services Singapore Pte. Ltd.; West Pharmaceutical Services Brasil Ltda. (Brazil); The West Company Mexico, S.A. de C.V. (49%); Daikyo Seiko, Ltd. (Japan; 25%).

Principal Competitors: Kerr Group; Owens-Illinois Inc.; Tekni-Plex.

Chronology

• Key Dates:
• 1923: The West Company is founded by Herman O. West.
• 1931: The West Company purchases Simonds Abrasive Company.
• 1941: The West Company helps to package penicillin.
• 1945: An Aluminum Closure Division is added to the company.
• 1948: Operations move to Phoenixville, Pennsylvania.
• 1952: West International division begins.
• 1965: William S. West, son of founder Herman, becomes CEO and president.
• 1970: The West Company goes public.
• 1980: Company joins the New York Stock Exchange.
• 1985: Rene Guerster becomes president and CEO.
• 1991: Guerster steps down; William Little is named as his replacement.
• 1999: Company name changes to West Pharmaceutical Services, Inc.
• 2000: Disappointing results cause temporary consideration of sell-off.