All right. Good, everybody. Welcome to day two of the Stephens Conference. I'm Jacob Johnson, the Life Science Tools and Performance Services Analyst here at Stephens. Pleased to be joined by Catalent this morning. We have CFO Tom Castellano and Paul Surdez from IR, who made the trip from their, I believe, their annual executive meeting. So really happy to have you all here today. Thank you for joining us. Tom, maybe I'll turn it over to you for any opening comments you'd like to make, and then we'll launch into Q&A. Yeah, that sounds great. So thanks, Jacob. Thanks, everyone. Just want to first call out the normal forward-looking statements disclosure that can be found in our SEC filings available on our Investor Relations website. So look, I think coming off of what was clearly a little bit of a mixed print two weeks ago, since then we've received, I would say, some very helpful investor feedback. And I know we'll dive into some of Jacob's questions around fiscal 2023, but I really wanted to just take a step back to focus on some of the really strong underlying fundamentals within the business. First, we're obviously really excited about the organic and inorganic investments that we've made over the last five years to truly transform the company. The ultimate positive impact these investments will have on patients, as well as the shareholder value that they will create over time. Also, extremely proud of the role that Catalent has played through the pandemic to really be in a position to help the world return to normal. We produced over 2 billion doses of COVID vaccines and continue to produce over 8,000 products for over 1,000 different customers that we have. We've also been in a position to add parallel investments to build the right modalities that position us extremely well for long-term growth and give us the confidence to be able to support the strongest pipeline of development programs and funnel that we've ever had within the company. Understandably, I think some of our Q1 results, just given some of the noise, were missed. And I want to reiterate the strong Q1 non-COVID growth. We saw 25% growth from a revenue perspective, 20%, more than 20% on an organic basis. The biologics non-COVID business grew well in excess of those numbers, and we're expected to see growth at those levels throughout the remainder of our fiscal 2023. Also, wanted to add a clarifying point related to some of the guidance assumptions that we have, particularly from a top-line perspective. Our guidance does assume a constant currency organic growth that's essentially flat in line with where we were prior year. But when we take a step back, we're actually seeing nearly $750 million of non-COVID-related revenue growth that's being offset by a COVID-related headwind that's essentially the same dollar amount. Also, we've announced that we're going to be undertaking some cost actions to remain disciplined across our network and drive operational performance and efficiency. Those will be in place here as we exit the fiscal year and put us in a strong position to be able to deliver on our EBITDA margin guidance that we have in place, and I would just end by saying, again, continue to be extremely well-positioned, very confident about our ability to deliver on our 8%-12% long-term growth outlook based on the assets that we have in place and being extremely well-positioned to be able to meet the needs of our customers and ultimately the patients. Got it. Thanks for that. Thanks for that, Tom. Maybe just one follow-up, just quickly, and we'll probably talk about margins a little bit more later. But you called out $750 million headwind from COVID year- over- year on the revenue side of things. Can you just remind us kind of the margin dynamic on those revenues? Yeah, sure. Look, I would say at the end of the day, the margin profile of the COVID business, in terms of its pricing, was very similar to what I would consider to see out of a normal drug product product line within the company. However, there is a margin uplift that you see from running at high levels of utilization. And the level of utilization we're running on COVID assets was extremely, extremely robust. But the offset to that is the component sourcing dynamic, where we've seen anywhere between 15% and 25% of our COVID revenue, depending on the quarter, being tied to material pass-throughs. And those are coming in at EBITDA margins that are significantly lower, I would say, somewhere in that 7%-10% range. So the operating leverage being offset by the fact that we had the component sourcing dynamic, I would say yields an EBITDA margin associated with COVID business that is very much in line with what you would expect to see for a drug product program within our biologics division. Got it. Thank you for that. And then the one thing you didn't mention in your prepared remarks, but I think it's highly topical for investors, so let's get it out of the way, 483s, Bloomington, Brussels, maybe just any updates on those. And two, can you maybe compare and contrast where Brussels and Bloomington are in that process? Yeah. So look, 483s and observations that we receive through regulatory inspections, we take extremely seriously and look to address as quickly as possible. We did get some good news this week on the Bloomington front. The FDA did conclude that our response and the quality systems that we have in place were sufficiently robust and that no further regulatory action will be required. As a reminder, production at the facility never stopped, continues today, and did continue throughout the inspection process. With regards to Brussels, a little bit of a different story here. The status has not yet been determined. However, we continue to believe that our very robust comprehensive response there will address all of the concerns from the agency. Again, but have not heard officially from them and continue to produce product at that facility as well as we have here throughout fiscal 2023. As a reminder, we did take that facility offline proactively towards the tail end of our fiscal 2022 to be in a position to address some of the observations that the agency had brought to us through the inspection. Got it. So let's pivot back to kind of Q1 and the change in guidance. I think we're certainly in an uncertain macro environment, Europe, potential recession, capital markets, etc. I'd say those are probably concerns that have been around for some time. Obviously, it is a fluid environment. Can you just talk about from when you reported Q4 to when you reported Q1, kind of what changed in your thinking about the outlook for FY 2023? Yeah, sure. So I know it's hard to believe that so much could have changed in that period of time, but I can tell you it certainly has. The month of October is an important one for us. It's one where I would say we really feel the difference between the fiscal year in which we operate and the calendar year that many of our customers are on. And what we've seen this year, which quite frankly, we really see in every year, is the updates we get from our customers as in those summer months while we're preparing for our budget as well as our guidance, which, by the way, nothing has changed from a process standpoint. We continue to manage the business to a much higher target internally than what we commit to externally. But what we did see was just some more wider changes from some of our customers. And to put it in perspective, I would say we've seen more customers look at the second half of our fiscal year, the first half of their calendar year 2023, differently now than what they had thought or gave us some color on in those summer months. And the areas where we saw this were really twofold. I would say on where it impacts our Pharma and consumer health business, we've seen more of an impact on the consumer health side related to consumer spending primarily. We have nutraceuticals, we have consumer health products, we have OTC products, we have vitamins, mineral supplements, and we're seeing or hearing that that product is moving off of shelves at a slower rate here. These are products that are discretionary. Even if they're determined that consumers do want to purchase those, do they need to purchase the higher-end part of those products, the softgel dosage forms, the gummies? Those are the areas in which we play. We're certainly seeing a change in some of the customers' needs here related to consumer products. I would also say it's a little bit of an inventory impact here on us as well. We can't control how our customers manage their supply chain. What we've learned through this October update here is some of our customers are, because products aren't moving off shelves, willing to take a different approach to how they manage their supply chain and run on lower levels of safety stock inventory than where they were. Someone like Catalent as a producer really feels that on both ends, not only are products moving slowly off of store shelves, but you have customers with excess levels of inventory that are going to let some of that bleed in before needing to pick up demand with us. That was one change that's certainly been reflective. I'd say that's probably about 30% of the, call it, $350-$400 million call down from a top-line perspective. On the biologics side of the business, from a macro standpoint, this is where we're seeing, I would just say, slower decision-making from customers. We're believing that that is also driven by the macro environment. We're seeing them really take more of a cash conservation mode. Many of our customers have multiple programs. And obviously, their lead program or lead programs, they're continuing to move at the same pace, at the same pace. But there are several programs within portfolios where we're seeing just a slower decision-making process. And moving a program even three to six months for the customer even to continue to kick that off in the 2023 year can have an adverse effect on us, given that when we get to the second half of 2023, we're already into our fiscal 2024. So again, where that difference in our fiscal year and their calendar year comes in. And some of this may be biotech funding related, but we've seen enough change from some large customers, some large biopharma customers as well that are certainly not in a position where they're needing to raise capital, but still taking a little bit more of a delayed approach. We can only point to cash conservation-related decisions there. That's really, Jacob, what I would say where we're feeling it from a macro standpoint. Got it. That was really helpful. I guess just I'd like to kind of double-click on a couple of things. I think on the customer discretionary impact, I would think of some of those offerings as being things that people, if your back hurts, you're going to buy pain medicine. So can you just, I think you alluded to some of these things, but how much of this is maybe gummy-related? How much of this is kind of related to the formulation type of what people are purchasing? Can you just kind of expand on that? Yeah. No, good question. And I think you're right. When it comes to some of the gummies, these are Vitamin D, Vitamin E, Vitamin C, probiotics, melatonin for sleep. And the decision there is, do I need this at all? And if I do, do I need the gummy dose form, or can I go to a tablet or something I can sprinkle into my water and not have the gummy dose form? So that's what we're seeing a little bit on that side of things. But in some of these other areas, you think about cold cough, you think about pain relief. You're right. I mean, most consumers are going to continue to buy those products. At the end of the day, they help them feel better. But I think the decision point there is twofold. One, do I need the soft gel? Or, can I go to the tablet? And if I determine I still need the soft gel, do I need the branded version of the soft gel, or can I go to the local pharmacy version of the soft gel? And Catalent is tied to the branded side of soft gel manufacturing as you think about those ibuprofen, acetaminophen, pain relief products, but obviously cold, cough, sinus, even allergy medicines as well, again, being tied to the branded. So the higher end of the market has always been the part of the market in which we've been able to truly make a name for ourselves. And we can see some impacts from a consumer standpoint as a result of the macroeconomic environment. I would say this is not something we've really had to weather through as a public company. 2008, 2009, we were privately held. We saw some impacts from the consumer side of things, but the part of the business we had that was susceptible to that was smaller than where it is today. We did see parts of this business negatively impacted through the lockdown periods where consumers weren't getting sick and didn't need to purchase some of these products. But it was not something that we were not able to weather as a company, just given what we were seeing from a biologic standpoint, right, and the significant growth. But now that we're seeing COVID related headwinds here and that step down being more aggressive than I think what was originally anticipated, and a lot of the growth we were expecting to see on the pharma and consumer health side now being impacted by some of these headwinds. Got it and then the other big piece of this, biopharma prioritizing pipelines on the biologic side. I think we've heard from some of your peers who talked about strength in that end market, and generally, people are seeing pretty good results. So what you're saying, and you may be a bit of a leading indicator, and you're having to guide into next year, so that may be a piece of this. But can you talk about kind of what you're seeing there and why maybe your view could be different than what other people are seeing right now? Yeah. I think we need to take a step back and realize the reason why we're even talking about these items is not because the business is going to be flat next year or the business is going to be down. The reason why we're talking about these items is because we had an extremely bullish outlook on fiscal 2023 where we were going to be seeing growth in excess of 25% on a non-COVID basis. And these indicators right now are causing us to pull a little bit back on that, but we're still seeing growth on a non-COVID basis within biologics well in excess of the 10%-15% long-term growth outlook we're seeing as a company. So fundamentals remain extremely attractive. The market is robust. We've been growing from a non-COVID basis well in excess of 20% over the last three quarters. We saw it all the way going back to Q3 of the prior fiscal year, and the assumption was that we saw more of a ramp-up in the second half in the original guidance, just as a result of the new capacity and investments that we've made, but also the progression and maturity of the pipeline, and that progression and maturity is still there, but I would say it's just coming in at a slower clip than what was originally anticipated, so again, the reason why you may not be hearing this is just more around some of the assumptions we made going into the year, I think, than anything that I would say is causing the market to see some sort of overall pullback in growth. We're still seeing growth in excess of the long-term outlook for our biologics business. Got it. That's really helpful. Just certainly, these headwinds are contemplated now in your FY 2023 guidance, which I think inevitably leads to the question of how long do you see these persisting? It seems like customer feedback is kind of the back half of your fiscal year, first half of next year. Any thoughts beyond that as it relates to these things? Yeah. Look, I would say we've certainly taken the assumption that these continue throughout the remainder of the fiscal year. I think when we sat down as a management team and had to make a decision on how we wanted to approach guidance based on the new information and body language we're seeing from customers, we could have taken what we've learned and just ran that through our model and adjusted guidance accordingly based on that. Or we could have taken the assumption, which we did, is that we're going to continue to see this. We could continue to see this from more customers as we get further into the fiscal year. And hopefully, we took enough of an assumption there around these types of things continuing. So that was the approach we took here. In terms of what this means from a 2024 standpoint, it's very early for us to give a kind of read on that, Jacob, obviously. But the assumptions we made is that these types of headwinds do continue through the remainder of the fiscal year. And we'll see what things look like from a macro standpoint as we get closer to the second half of 2023. Okay. And then we talked about headwinds, but you're still pointing to pretty robust, you're pointing to really robust ex-COVID growth. So I think maybe two key callouts from the quarter. I think Zydis is performing well. We've heard from some others that OSD demand's pretty good right now. And then also, I think really strong growth at Paragon and gene therapy. So maybe just talk on those two options. Sure. Yeah. No, those are absolutely all been bright spots in the quarter for us and continue to be areas of the business we're extremely excited about. I would say from a Zydis standpoint, this is our proprietary fast-dissolving technology, a leadership position in that market, a great pipeline of development programs, some great, I would say, commercial programs that are already on the market. We're a little bit capacity constrained in this area, so we've built a nice little backlog. So there's certainly no demand challenges there. It's all about execution and saw really good growth. I'd also highlight this is a business that has very strong EBITDA margins here, given the proprietary nature of the technology and the high level of utilization we run at. We only have one Zydis facility across our network, and that's in the U.K. but a great business for us and one that we will continue to see growing and help with the margin expansion story in the future as well. From a gene therapy, this has been an extremely fast grower, I would say, growing even in excess of what that market looks like. so a business where we have 10 manufacturing suites. As we exited fiscal 2022, we're bringing another eight online. I would say this business is really tied to some very large, I would say, customers nearing commercialization. so we're really not seeing any material impact related to some of these customer decision-making because these are programs that are just so close to turning commercial. The gene therapy business for us is one that will continue to be a significant growth driver as we work towards a continued long-term target of 8%-12%. Got it. And then I think the other big piece of ex-COVID growth are some of these tech transfers you've announced. One, any change in expectations there? And two, maybe how should we think about the revenue opportunity from those? Yeah. So we've not quantified that. We did refer to them as tech transfer programs as in plural. These have been, I would say, starting within our facilities that we're bringing them in already. There's some, I would say, startup volumes already in place there. And the ramp-up expectation here is in the second half of the fiscal year. So that hasn't been an area where we've seen any change from the original guide. Continue to be very pleased with the opportunity of being able to bring those into the network. Got it. And then maybe last question just on biologics before I want to dig into the 2023 guide a little bit more. But on biologics, I think no shortage of things people are worried about right now, but there are positive things to point to out there. These weight loss drugs are ramping, Alzheimer's. We'll see if somebody cracks that nut. You have biosimilars coming in a meaningful way in the next couple of years. As we think about those types of end markets in your biologics assets, how much of an opportunity are those for you? Yeah. No, I think they're great opportunities. I think all those therapeutic categories you mentioned, as well as the biosimilar opportunity, is certainly one that we're excited about. I think the industry is excited about. I think if there's any question, which we don't believe there is, over capacity around the CDMO space in terms of large molecule. But if there's any question that there is, I think these will certainly sop a lot of that up. So love these opportunities. We've not talked too specifically what we're tied to around that, but totally, completely agree that these are strong directional indicators in terms of continued growth within biologics overall for the company. Got it. So going back to some of the headwinds you outlined previously, I think you talked about inventory being like 30% of the change in guidance. Can you talk about the consumer impact and then can you just frame out the impact between the two segments of the reduction in guidance? Sure. I think the 30% I was referring to is actually the impact on PCH overall, which is a combination of consumer spending and the inventory or supply chain changes that we're seeing from our customers. But I do view both of those as being really macro-driven. The consumer spending is the dynamic that's really driving products to move off shelves at a slower clip, and then ultimately our customers needing to take a cash conservation approach to how they manage their working capital in that kind of environment. But that's about 30% of the overall guide call down, which was pharma and consumer health related. Okay. Got it. And then can you just talk about how those headwinds or the reduction in the revenue guidance impacts the margins in each segment? Yeah. So we haven't guided to margins overall here at the segment level. I will say I wouldn't expect any impact to what we're seeing there from a pharma and consumer health standpoint to have an adverse effect on the overall pharma and consumer health margin. So I think that margin will remain intact. The biologic side, in terms of the margin profile that we'll see there, look, I think a lot of the cost savings initiatives that I had mentioned in my opening comments here and the efficiencies that we're looking to put in place across the business are more impacting the biologic side of things than they are the pharma and consumer health side of things. And just to put it in perspective, I mean, we've hired thousands of people through the pandemic. We were in a position where we needed to ensure that we can get billions of doses of COVID-related vaccines out, and we were able to do that successfully, but we spared no cost in doing it. We were not operating our facilities, what I would refer to as the Catalent way, focused on operational excellence and Lean Six Sigma and those types of, I would say, key programs that we really have across our network of 55 sites, and we're getting back to being able to put those in place. At our peak, we were operating three COVID-related vaccines, and we're now down to one, so we can take a step back and ensure that we're right-sizing our facilities and, again, operating them in a significantly more efficient way, and those initiatives are really already underway. As we mentioned, we'll be in a position where they'll be fully operationalized by the end of the calendar year, so we'll be able to see the full benefit of those initiatives in the second half of fiscal 2023. Got it. That's helpful. Just going back to the cost takeout efforts, I don't think you've quantified them. I'm not sure you will, but can you kind of help people understand your guidance? You took down revenue, but even the margins were the same. So how do we think about that dynamic? Yeah. Look, I think the cost savings are a big part of that, as we mentioned here. We haven't quantified them, but just as I said, to put it in perspective, we added thousands of heads, of headcount through the COVID pandemic. We've needed to keep parts of our facilities fully staffed where we had dedicated capacity and minimum volume requirements for customers for programs that are no longer part of the portfolio and part of that natural COVID-related wind-down that we expected. So being able to execute those levers and truly getting back to basics. We have a program within the company called the Catalent Way, which speaks to how we run our facilities, Lean Six Sigma, as I mentioned, 5 S, just making sure we're able to get back to those operational rigors. Here is what we're putting in place across several of our facilities that were impacted by significant step-up in volume that we saw through the pandemic. Got it. And just one quick one kind of with these moving pieces. Can you just remind us of seasonality of EBITDA this year? Yeah. So a normal seasonality for us would have been about 40-60. So 40% of our EBITDA in the first half of the year, 60% in the second half. This year, we did talk to, given the wind down of COVID, the seasonality of that wind down, as well as the cost saving initiatives in place that this felt more like a 36%-37% tied to the first half from an EBITDA perspective in comparison to the 40-60. And that 40-60 is, again, really what we've seen historically. So we've always been very back half weighted. It's just natural seasonality we see across this business. And if you look back to the all the way back to the 2024 time period where we went public, you'll see something pretty similar to that all the way through where we are today. Got it. And then the other piece of guidance we haven't touched on is you've reduced your CapEx assumptions for this year. I think maybe some of this is specific to Oxford and Princeton, but I think it's also broader than that. So can you just talk about the reduction split between the two segments? And then I think the bigger picture question is, I think with COVID rolling off, people are worried about capacity in the industry. Is this some view on your part that maybe we could see overcapacity in the near term? No, I wouldn't read it into overcapacity in the near term. I think this was the company taking a more cash conservation approach, just like we're seeing from some of our customers and other players around the space. I think if you look at what we've spent historically, we've been somewhere between 8%-10% in a normal year. And what we've seen over the last three years, as we go back to the pandemic timeframe, something between 14%-17% of sales each year. That's not a sustainable level of capital deployment. This is a capital-intensive business. We operate in a highly regulated space, but we should be able to get back down to a more normalized level of about 10% of sales, and that's what we're looking to do here. I've said in my opener as well, we've built the right portfolio of assets to be able to continue to see the company grow in line with its long-term commitment of 8%-12%. So I think this pullback will help improve from a cash flow story, but doesn't keep us from being, again, in a position to continue to drive that long-term growth that we see across the company. Got it. And then we've been talking a lot about 2023, and understandably so, but you also have, I think, long-term targets, $7.5 billion in revenue, 30% EBITDA margin by FY 2026. Any change to these expectations? Yeah. Look, I would just say on that, those numbers were obviously put out in a very different macroeconomic environment than where we are now. We continue to be extremely confident about the long-term growth outlook of the company. What I would say, if there's an area there that I just want to make sure we pressure test is some of the FX assumptions. We were a company that's significantly impacted by the strengthening of the U.S. dollar. We've seen an over $200 million headwind in fiscal 2023 alone in comparison to fiscal 2022 levels. So that's the area where I would say we need to just understand and sharpen the pencil around and also just see how the macroeconomic environment continues to play out, but continue to have a very strong level of confidence about the long-term growth outlook of the company and, again, being able to deliver that 8%-12% growth that we've targeted. Got it. Just since you mentioned FX, maybe just remind us the margin impact from FX, how close they're. Yeah. So we've seen about, I would say, four to five points of impact from a top-line perspective. Whatever it was from a top line, it's about 0.5 to 1 point larger at the bottom line. There's a couple of reasons for that. I would say, first, we do see some high-margin businesses that we have, Zydis being one of them that we've talked about, that's denominated in GBP based in the U.K., as well as some other businesses we have in Europe that are concentrated to euro currency. Then, obviously, all of the corporate-related headquarters costs that we have here being in U.S. dollars. So that has a little bit of a drag on the bottom line from an FX standpoint. But I would assume about a four percentage point impact on the top line and something closer to five from an EBITDA perspective, given those dynamics we talked through. Got it. Maybe just on kind of a higher-level question, COVID to non-COVID transition, I think at times over the last couple of years, there was a view that it would be pretty seamless when this would take place, but I'm not sure anybody saw, or I don't think many people maybe saw COVID, the vaccine demand slowing as much as it has. Can you just talk about that experience and also talk about assets like Bloomington that would seem to be well-positioned longer term, kind of the near-term versus long-term transition of COVID non-COVID? I think it's a great point, and I think we were certainly surprised here by the sharpness of the COVID-related cliff. I would tell you, although we mentioned that this wasn't a big change to our guidance, there was certainly a possibility in the summer months of an upside case associated with COVID as you thought about the potential uptake of further boosters tied to the Omicron variant specifically, as well as the changeover to smaller dose units, whether that's a single dose or double dose vial or a prefilled syringe, which we've been talking about over the last 12 months as being some direction that we do believe our customers and the industry will eventually move to that we just haven't seen materialize at the rate in which was intended there, so I think we were all a little bit surprised by the significant step down. That being said, right now, we had two lines within our Bloomington facility, as well as some capacity in our Anagni facility in Italy that were really tied to COVID-related programs. Those were vial lines. And I mentioned in my opener, we were able to invest in parallel to bring on some additional capacity. None of that was vial capacity. We're investing in other, I would say, drug product capacity, primarily prefilled syringe, which is where we've seen tech transfers coming in using that technology and where we continue to see a very strong pipeline on that side of the business. So we have to think about the wind down of COVID, not in the sense of having a customer exit a COVID vial line and then having to ramp up tech transfer programs on that same capacity. It's the additional capacity that we've brought online through the pandemic that we'll be ramping up for some of these tech transfer programs. I will say that the cancellation that we have with one of our customers on vial capacity does free that up earlier than what was anticipated. That customer was committed through the end of our fiscal year around that, and we did mention that we've reached a settlement agreement with them there, so that will be capacity that we'll be able to utilize for other programs. Obviously, it's difficult to have vial programs that align to the volumes that were necessary through the COVID pandemic where we were producing billions of doses, but being able to run other programs and some of the backlog programs that we have within the portfolio on those assets into 2023 will certainly be helpful. That kind of spurred a question. You're talking about a line opening up earlier than you thought. And I think there's been questions like, "What do you do with these assets as COVID rolls off and you've announced these tech transfers?" Just when a line like that becomes available, do you go out hunting for tech transfer opportunities? How long does that take, that kind of process? Look, I would say to bring in a tech transfer program take anywhere from six to more months here because there's obviously, especially for a commercially approved product, there's a regulatory component of this, of needing to get the line validated to be able to be in a position to run that program. However, there are, I would say, projects that we've had maybe a bit on hold, I would say, or a backlog of programs where customers were maybe running on lower levels of inventory than they would have liked that we'll be able to essentially that are already validated on certain lines within the network that we'll be able to ramp up and execute on. We know exactly what commercial programs are out there. We know what the volume, the needs are of those customers. Those are absolutely where we target from a business development standpoint. The fact that we were able to bring in several tech transfer programs, I think, was obviously a great outcome here. It's a part of the market, both on the drug product and drug substance side of things, that we continue to target externally with customers. Maybe just one last COVID question. The multi-dose vial, the single dose vial, or prefilled syringe, I think that's something we've all been talking about for a number of years, and it hasn't really played out to this point. Can you just talk about where we stand? Yeah. So that's obviously a decision that Catalent is not in a position to make. That decision is being driven by our customers as well as regulators. I would say we continue to believe that if we end up in a position where COVID vaccines are either combined with flu vaccines or administered similarly to a flu vaccine in a general practitioner office, that that's likely going to be in a prefilled syringe. The days of mass vaccination sites and 10, 14 doses per vial are not necessary in sort of the endemic phase of COVID. In terms of the timing and what that looks like, it's difficult to say here. As I said, we were already wrong on this, thinking that there was the potential for an upside COVID case in fiscal 2023 that certainly won't materialize. Is this something that can turn out to be a fiscal 2024 item? We'll have to see how it plays out. But again, outside of our control and at the discretion of our customers. Got it. Before I move to a couple of balance sheet cash flow statements, I'll just see if anybody in the room has any questions. All right. I'll keep going. Maybe just on the balance sheet. Oh, sorry. Go. I just have one follow-up. You mentioned earlier that there's some large customers are doing projects. I wanted to understand that a little bit more. Is this a one-off delay that just occurred? The one project here and there, or is it overall? Question is on delays from larger customers that are not relying on funding. Yeah. Thanks, Paul. So we've seen it from, I would say, several customers. I wouldn't say it was one. These are large, well-capitalized customers that have a much stronger balance sheet than even Catalent does, so certainly not biotech funding related. And some of these are programs that we've actually already won that are in the Catalent pipeline already. So what we're seeing here is not a cancellation. It's essentially, I would say, a delay in terms of the pace at which they were looking to move around these programs. So the burn rate of winning this business, having it in the pipeline, and that generating revenue for us is where we've seen that delay. I would say the parts of the business for us that have been most impacted by these decisions have been our drug substance business and our cell therapy business. This is not a dynamic we're currently seeing on the drug product side of the business where we're working with mostly large-scale commercial programs, I would say, primarily, nor our gene therapy business where we've seen that kind of body language from any large players that are in late stage that are looking to move at a very continue to move at a rapid pace. So this was enough here for us related to these handful of programs we saw to just raise the flag internally and maybe take a more look through things through a more conservative lens or conservative orientation around the second half of the year and are we going to see more customers just slow, and these are customers that have multiple programs. Some have multiple programs with us. They're not making that decision on every program they have, but they're making it on enough of the programs that cause us to just take a different look at the second half of the year. Maybe just a follow-up would be two for me on that. Just one, in terms of where these delays are, phase one, phase two? I would say certainly phase one, but the phase one ones are not large enough for us to talk about. So we've actually seen more phase two related delays than I think we expected. Phase three, maybe there's one or two, but you're typically not going to see that at phase three program, which obviously has a much higher success rate. But we're certainly seeing it at phase two level programs. Got it. And then just on cell therapy, we all think of MaSTherCell, but you've got a number of other assets there. I get that there's maybe some softness or some delays there right now, but any change in your thinking about the long-term opportunity? No. I mean, cell therapy market is one that we're very extremely bullish on. The MaSTherCell is what we've built through that. We had a facility in Houston as well as one in Gosselies. We've added Princeton, which is U.S.-based, obviously, and commercially capable here, and continue to have a good pipeline on the cell therapy side here, but we need to see some of that pipeline really start to, I would say, materialize and burn into revenue. And that's where we're seeing some of the delays. Got it. And then just kind of wrapping up in the last five minutes, just balance sheet, your CFO, can you talk about where leverage currently stands and how you think about capital deployment? Yeah. Look, I think from a leverage standpoint, we've obviously just done the Metrics acquisition, which gives us high potent capability on the oral side, which is a great technology, one that we've been looking at building organically and got the opportunity to acquire the Metrics business, which is an absolute leader in this space. But with that, we're looking at leverage on a pro forma basis. As of 9/30, it's about three and a half times. Our guidance has us back down to three times by the end of the fiscal year, so that June 30th time period. I think we'll look to continue to move leverage south of that where we could. Look, we've done a lot of M&A to date. We've done a lot of investments organically. We have the right assets in place now, and now it's about generating the returns around those assets. So a lot for us to digest and execute on. Long-term leverage target remains at three times. Capital allocation, we've always talked about CapEx and organic investment being first. I would say we've talked about M&A being number two. I would slide M&A to the lower priority right now, given my earlier comments. And I think when we get in the position where we're generating significant levels of free cash flow, which we do expect to improve, especially with the cool down in CapEx, we have to look at both debt pay down opportunities as well as share buybacks, especially at the levels in which we're at right now. So that's the math we'll do as the free cash flow position improves here. So that's how I would think about capital allocation. So a little bit different than obviously how we've talked about this historically. Okay. Cash flows, improving free cash flows. I think there's a couple of things to talk about there quickly. Inventory has been carrying higher levels of inventories. When do you foresee kind of taking those down? So, inventory was actually, I just did a presentation on this to our senior leadership team yesterday at the company. Our inventory levels in the month of September for the Q1 close were higher than they've ever been before, in excess of $700 million. We absolutely need to improve that. Obviously, a lot of this has been driven by supply chain challenges and disruptions we've seen. I think there's parts of this where we'll be able to pull back and are starting to pull back. But there's also, I would say, additional challenges that continue to pop up every day. So we're not quite out of the woods here. So I would say this is an area that I would expect to improve as we get further into the fiscal year. If we're talking about what the historical level of inventory has been, we're probably about $400 million too high right now. I don't think we'll see $400 million of a reversal here in the fiscal year, but this is an area we should certainly be in a position to continue to pull back from as we get further into 2023. Got it. Just quickly, the other drag on cash flow, contract asset, and liability. Can you just talk about the timeline for that? Yeah. This is another one that we're going after pretty aggressively. I think we need to change the way we contract with customers around contract assets here, be in a position to invoice at different stages of the revenue recognition process versus when batches are released for those development-related programs. We need to shorten the cycle time as well in terms of releasing those batches. So huge focus area for the company, for my team, and cross-functionally with our operations supply chain teams as well. And this is another area where we expect to improve as we get further into the year. Perfect. Well, on that note, we've hit the 45-minute mark. Tom, Paul, thank you so much for being with us here today. Thanks for having us.