Awesome. Morning, everybody. Luke Sergott here at Barclays. I cover life sciences, tools, and diagnostics. With me, I have Paul Surdez, VP Investor Relations, and Thomas Castellano, CFO of Catalent. We're already 45 seconds behind schedule, so I guess we could jump right into the questions here. You made a comment on the last quarter where you were talking about revisiting your rev rec policy, and how that's going to impact the rest of the business. Talk about really the genesis of that comment and how the business has changed and why you would need to reconsider. Yeah, sure. Thanks, thanks, everyone, for having me, Luke, here, and I appreciate the question. The question around revenue recognition was really tied specifically to the relationship that Catalent has with Sarepta and their DMD product. Obviously a product that's very important to Sarepta patients, but to Catalent as well, given what we've locked in with them in terms of a long-term commercial supply agreement. Similar to all of our development programs, we recognize our revenue on a percentage of completion basis, obviously, in accordance with U.S. GAAP. Our commercial revenue is typically recorded again, depending on the contract, but usually on a batch release basis. I think what creates a bit of a unique situation with regards to Sarepta is if this program does become commercially approved, given the very long nature of the manufacturing process associated with this program, it would create more lumpiness from a revenue standpoint. We're active with our auditors as well as external advisors to understand the Sarepta contract in detail and make a call on what the best revenue recognition approach is for this one. You know, the question came on our last earnings call from one of our analysts there. You know, as we said, we're revisiting it. Obviously there's a May 29th date here as to whether or not that product gets commercially approved. Upon that commercialization, the approach that we're going to take to recognize that revenue will be aligned with our auditors and aligned with our internal accounting policy, obviously, both of which would be in accordance with U.S. GAAP. All right. Can we walk through some of the mechanics there? You know, talking specifically about the Sarepta drug, but when you're doing the scale-up manufacturing, because it's taking so long to make the drug, right, before. They want to be able to hit the ground running as soon as it's commercialized. Are there essentially two contract structures like your pre-commercial and your post-commercial? Give us a sense on the mechanics of how the actual, you know, when you guys start making the drug and how the payments start, you know, coming forward. This isn't a question of the revenue recognition doesn't change anything from a cash standpoint. The contract's very clear in terms of us being able to invoice the customer at the point in time in which we have a batch to deliver to them. Regardless of the approach we take to revenue recognition, the cash dynamic related to it remains at batch release, which is what's created this contract asset component to the balance sheet, which should really be viewed as an extension of our accounts receivable. Again, you know, as I said, from a development standpoint, we continue to produce product at large scale, but customers in some cases could make the decision to try to ramp up volumes for a potential commercial launch, especially given a very long manufacturing cycle associated with this product. That's essentially what we're seeing there. Generally speaking, what makes this situation for us so unique is we really haven't had a gene therapy product that we had within our portfolio that was development and then moved to commercialization. We have been tied to a commercially approved product on the gene therapy side in the past, one of those, but that was a tech transfer program that came into us after it was already commercially approved. Never had the dynamic of moving from development stage over to commercial stage, which with the gene therapy program, and given the very long manufacturing cycle here that we're seeing around this program, it really is almost unchartered territory for us in terms of ever having a program that was similar in terms of its size and scale, given the robust patient population that you can see related to this particular program. Also, as I mentioned, that very long manufacturing cycle time. Okay. When you, when you're thinking about how you guide, given these long cycle times and with, you know, the Sarepta approval on May 29th, give us a sense on how your philosophy around guidance has changed. Yeah. There really hasn't been any change to our guidance philosophy as a result of this particular program. What I would say here is, regardless of whether there's a change to revenue recognition or not, the impact related to our current fiscal year, which ends on June 30th, would be very minimal, given that there's only a 30-day time horizon between when that PDUFA date would be reached and when this, when our fiscal year would be wrapping. In terms of that revenue recognition approach, that will potentially impact how we guide for fiscal 2024. Mm-hmm. related to this program. You know, generally speaking, we have a good amount of visibility to our commercial revenue entering into a fiscal year. For us, commercial revenue across the company, we do about $4.8 billion in annual sales. About 50% of our sales are commercial, and I would say about 50% of our sales are development. Here the commercial products have very, I would say, good visibility as we get into a fiscal year and guide given the long, the long nature of those products and the customer demand profile, having a good understanding of that. When you think about the development side of the business, that's where some of the lumpiness that we've seen on a quarter-to-quarter basis can come into play. I would say, you know, as we've seen a shift into newer modalities such as cell therapy, gene therapy, you know, plasmid DNA, and just really drug substance within our biologics business, given how much of that is development, we can see some of that quarter-to-quarter variability. It's very difficult to predict early stage programs and how those are going to progress and mature, and ultimately whether or not they're going to be commercially approved, and if they are, what the timing of that is. That's where I would say, you know, there's the most variability. We tend to really understand each of the key programs we have going into a fiscal year and try to forecast those out throughout the remainder of the year in terms of how they play out. The other thing I would say is, you know, we run the business to a much higher set of financial targets internally than what we commit to externally as well. That's pretty consistent going back to our IPO in 2014, that we've always had a budget cycle internally that we would be driving the business towards, but again, committing externally to both top line and profitability levels that are cushioned, if you will, compared to those internal targets. Right. You talked a little bit about it before with the development side, and we saw the negative impact of the biotech funding where, you know, R&D budgets were getting tightened, things were getting pushed out. Give us the lay of the land right now as you guys are seeing it for the rest of the year. Are you starting to see the environment start to improve? Yeah, no. Good, good question. I think this is, this is one on, you know, top of all of our investor minds as well as our minds internally, obviously. Some of the biotech funding challenges, you know, I would say less attractive capital markets have certainly impacted some of our earlier stage customers' ability to get the necessary capital to continue to advance multiple programs. I would say the areas of our business that have been most impacted on this are, again, our newer modalities. I would say cell therapy is a big area. When we did cut the guidance back in the November time period, we were just seeing slower progression and decision-making from some of our early phase customers. It wasn't only our early phase customers. We actually saw some larger customers, as well, well-funded companies that had multiple development programs really being a little bit picky in terms of how many of those development programs they were going to progress into 2023, just I would say, given the macro backdrop that we see. Some of that slower decision-making and progression as customers take a more cash conservation approach to managing some of their R&D spending is certainly a dynamic that we have seen and continue to see to an extent. Mm-hmm. I would say, you know, we're obviously coming towards the end of our fiscal year here in three- four months. We'll have a little bit more time to understand what that dynamic looks like as we get into fiscal 2024 and obviously factor that into our guidance for next year. on those conversations, are they starting to... I mean, is it getting worse or you're just starting to have more-? I would say it's playing out as we expected, right? Okay. When we cut the guide in November, we not only took into consideration all of the new information and body language we were seeing from existing customers, but assumed that, you know, things were gonna continue down this path and maybe... Mm-hmm get a little bit worse before they get better. Mm-hmm. That was the approach that we took towards trying to assess what the H2 of our fiscal year or first half of calendar 2023 could look like for some of those, for some of those key customers. I would say if there's an area where we've been more negatively surprised and things continue to get worse, maybe even a little bit outside of what we had assumed, it's on the pharma and consumer health business. Mm-hmm. Particularly as it pertains to the consumer health side of that business and the wellness, which is our gummies, soft chew, and lozenge, the business that we essentially acquired as Bettera. Mm-hmm ... Bout a year ago. This is a business that we were expecting to see growth rates that were well in excess of what you would consider to be normal within our PCH business, which is a 6%-10% growth segment. We're seeing growth rates well in excess of 10, almost approaching 20. Went into this year having, you know, what we thought was going to be a robust double-digit growth rate that we had to really pull back to flat. You know, more recently, even in looking at this business, it's likely to be down year-over-year given some of the consumer spending challenges we continue to see on a relatively high price point dosage form as you think about soft chews. Mm-hmm ... and gummies and lozenges. We do believe that this is a transitory issue that will eventually improve. I think the timing of when we see that improvement is the piece of information that we're, you know, still trying to assess, but obviously we'll be several months smarter when we need to give our fiscal 2024 guidance late in the summer period. We'll see. Again, still a part of the business that we're bullish on in the long term, but again, I think has some more near term variability. When we see that recovery is still to be seen. Yeah. I remember when you guys did the deal, you talked about not getting too excited about it 'cause it would be lumpy and it's, you know, consumer-driven fads on the, on the gummy side. On that guide cut, so with the remainder of the year in hand for the last next quarters, so you have it implies 20% growth on the biologics. If you don't have Sarepta, you know, the DMD approval there baked in the guide, like what's the underlying driver of that biologics growth at 20%? What I would say is, my comments around the Sarepta approval are whether or not the outcome of that approval will drive any significant variability to the current fiscal year. The answer to that is no, right? We're 3/2 or four months out from the end of the quarter for us. When that PDUFA date is reached in late May, if there was negative news received at that point in time, it wouldn't really change much for us, given that we're, you know, again, only 30 days at that point out from the end of the quarter. That was more the commentary around the assumptions here. I would say, you know, as we get into the Q4, we're expecting to see a further ramp-up here as a customer builds inventory for a potential launch. That's I would say a big contribution in terms of our Q4 step-up. We also have to just remember that this business, you know, exudes a natural level of seasonality. That seasonality has really been clouded, I would say, over the last two and a half years or so because of the COVID pandemic. If you were to go back to 2019, or even into our 2020 year, you would see a very progressive level of seasonality, where our Q1 would be our lightest quarter by far in the summer months when many of our customers are shutting their facilities, we're shutting our facilities for normal maintenance-related activities. You know, you factor that into the demand profile you see in that Q1. You'd see a step-up in our Q2, a further step-up in Q3, our Q4, which would be the quarter ending on June 30th, would be our highest highest demand quarter from a production standpoint. Because we're running at such high levels of utilization across our network of facilities, you're seeing a very high absolute $ revenue contribution, but also a very high margin profile of that business. Even in our PCH business, if you were to look historically, you'd see a mid-to-high teens% Q1 EBITDA margin that could be as high as low-to-mid 30s% in our Q4. The only difference between that Q1 and Q4 is really the level of utilization that we're running on within our facilities. You need to factor in that normal step-up in seasonality that again, has been clouded over the last couple of years because how much of that's been sort of overcast by the COVID-related business, which had a little bit more of a, I would say, consistent contribution on a quarter-to-quarter basis. The last thing I would say that really contributes to the uptick that we have around the Q4, not only from a top-line standpoint but also from a margin profile, is the COVID-related business. You know, we did give a lot more visibility to what our COVID expectations are for the remainder of the fiscal year, and they're a little bit higher than they were at earlier in the fiscal year, just based on what we're seeing from a demand standpoint. You know, we don't include anything from a COVID perspective in our guidance that's not either contractually committed to us through either a take or pay or a minimum volume commitment from a customer or volume and orders that we have in-hand that are in excess of that. That's certainly what we're seeing here as we get into the Q4. Our Q3 contribution from COVID is going to be very low. Q3 was a peak quarter in the prior fiscal year. We'll see near zero levels of COVID contribution in Q3. There will be something, but it won't be material. Our Q4, we will see a step-up here as one of our key customers looks to potentially build some inventory, thinking about the development also of the fall booster season. To put things in total from a revenue standpoint, we did about $1.3 billion of COVID-related revenue in fiscal 2022, which was our peak COVID year. In our fiscal 2023, we said on our last earnings call that we'll see somewhere closer to about $650 million of COVID-related revenue in the current fiscal year. On that, as we get closer and closer to an endemic environment, how are you guys thinking about that longer term? Well, it's a good question, Luke, and one I would say is, you know, one we look at pretty aggressively internally. I think there's a lot of different ways that COVID can play out. But I would say, you know, looking at things more from a respiratory vaccine perspective and, you know, the agreement that we were able to announce with both the extension and the expansion related to our relationship with Moderna on our last earnings call in, I think early February, shows that we've been able to not only extend but also expand into both the U.S. and Europe with now having available capacity in Anagni, Italy, that can be used for Moderna. Also expand from just COVID-related vaccines to more of their respiratory vaccine portfolio when you think about flu, RSV, COVID and any of those combination products as well. You know, I think going forward as we get into fiscal 2024, it's early, obviously, for me to comment on what any of our guidance will look like at that point in time or what the floor associated with this respiratory vaccine revenue stream could be for us. You know, I would say it's not likely to grow next year. Mm-hmm versus the $650 levels we have this year. I certainly would say that there's a floor that's far larger than, you know, what I think some considered at one time to be potentially zero. Mm-hmm. You know, we went from $1.3- $650 million, Does COVID go to zero next year? I think there will be endemic as well as other respiratory vaccines given the portfolio and the relationship, as well as a likely shift from vial-related, you know, multiple dose per unit to a prefilled syringe, which fits very well into our capability and expertise here as well. I'm not gonna give you a number as to what that floor could be. But I would say, you know, we continue to believe that we should see line of sight to, you know, several $100 million next year in revenue related to respiratory vaccines. Okay. When you're thinking about that in terms of your long-term guide of 8%-12%, kinda just walk us through there, the other drivers that you have coming on? Yeah, sure. Like from 2024 on, that's like another 400- 500 basis point headwind. You know, the underlying business has to keep growing. You've added a ton of capacity. Yep ...outside of this. Talk about the other, Sure the rest of the business. Yeah, I mean, I think we did deploy significant levels of capital through the COVID pandemic, you know, assets that we put in place to be able to meet the needs of our customers through the pandemic, drove accelerated returns. We've redeployed much of that capital into, I would say, very attractive areas of the market. Think about cell therapy investments, further investments in gene therapy, as well as well as plasmid DNA and further investments in the European continent as well as in the U.S. within drug product business and focusing on prefilled syringe, which is, you know, no matter what the modality of choice is out there, whether you're looking at, you know, protein therapeutics and monoclonal antibodies or cell therapy products, gene therapy products, mRNA, all of those large molecules are essentially injected into patients, right? fits very nicely into the large scale sterile fill finish, I would say capabilities that we've brought online across the, you know, across our network. Going back to the drivers of, you know, future revenue growth here, if we were to see a drug product business that was leveling off because we still had a decline on the COVID side, you have to remember we're also bringing in several large tech transfer programs that we've talked about. Mm-hmm ...on the sterile fill finish side, which will continue to grow and ramp up into our capacity there as well. The gene therapy continues to be a business for us that has been growing, almost in, you know, above market levels. Obviously, the news related to Sarepta would be one that could see a further acceleration. Mm-hmm ...that revenue opportunity for us, as well as the maturity and progression of the other, you know, 100+ programs we have in gene therapy development pipeline. You know, we're working with over 70 customers, have well in excess of 100 different development programs in gene therapy that we have in the portfolio. Cell therapy, another area that we've been a little bit slow on the uptake in terms of being able to fill the capacity, but now have very good, I would say both development assets, but also commercial scale ready with the Princeton facility that we acquired several quarters ago. Very well-positioned on the cell therapy side of the business as well. That's a business right now that I would say is, you know, is margin dilutive to us here. As we look to continue to progress the development programs we have as well as onboard new business there, the opportunity to see a real pop from a profitability standpoint as a result of that, I think is pretty meaningful. Those are the, I would say, big drivers that we see on the large molecule side of the business. Going back to our PCH segment, you know, we will eventually see a recovery on the consumer health side of things. Mm-hmm. We've had pockets of, I would say consumer, and macro pressure on that business in the past. We saw it back in 2008, during the financial crisis and saw a significant rebound in that business, in the 2009-2010 timeframe. We saw it at the start of the COVID pandemic with lockdowns and people not traveling and not getting sick, and those types of challenges that that business recovered very nicely in the 2021 and 2022 timeframe. Mm-hmm. Now we're seeing a little bit of a headwind here related to consumer discretionary spend. Again, that will be a business that will rebound, and it's a matter of what the point in time is there. The last thing I'll highlight on the PCH side of the business, you know, we continue to have a good development pipeline there, in our pharma side of things, particularly as it pertains to our Zydis delivery platform. Mm-hmm. That's our freeze-dried lyophilized business that's proprietary in nature. With improvements we've made to drug loading capability there, as well as, you know, some key programs we have in the pipeline, including Biohaven product that we've talked about publicly that's now part of Pfizer. The robust growth opportunity we have in that business is very meaningful as well. Continue to have strong line of sight to that 8%-12% long-term growth rate. Mm-hmm ...with contributions across both our large molecule and small molecule business. Okay. The last one here, I guess as we're thinking about that from the long-term growth, you guys threw out the 28% target by 2024. That's another 150 basis point step-up. Is that mostly gonna be driven through a lot of these, you know, from the mix perspective? Or what, give me some? Look, I would say it's premature now to give any type of guidance around what 2024 looks like. I would say margin improvement continues to be a key growth driver or value creator, I should say, for the company. If you look at our track record historically, going back to the IPO, we've been pretty consistently delivering somewhere between, I would say, a 70 and a 125 basis points of margin improvement each year. The one exception to that is being our fiscal 2023 year, where we've seen some pockets of underutilization across the network, a more robust COVID cliff that materialized faster than expected, as well as some significant inflationary pressures that I would say, you know, many companies are sort of fighting through right now. We'll see what 2024 has to, you know, looks like as we get closer into the year here. You know, as CFO of a company, obviously, you know, we're gonna look to do everything we can to drive further margin improvement and again, find that to be a key value creator for the company into the future. Awesome, man. I tried. All right, Thanks you. Thanks, everyone. Thanks.