AptarGroup's Q3 2025: Contradictions Emerge on Emergency Medicine Growth, Inventory Normalization, Beauty Segment, and Legal Expenses

Date of Call: October 31, 2025

Financials Results

• Revenue: Reported sales increased 6% and core sales grew 1% in Q3 2025 vs prior year period
• EPS: $1.62 adjusted earnings per share for Q3 2025, up 4% year-over-year
• Gross Margin: Consolidated gross margin declined 80 basis points year-over-year
• Operating Margin: Adjusted EBITDA margin 23.2%, up 30 basis points vs 22.9% in the prior year period

Guidance:

• Q4 adjusted EPS expected $1.20 to $1.28 per share
• Q4 effective tax rate expected 19.5% to 21.5%
• Guidance assumes EUR 1.17 = USD FX rate
• Q4 depreciation & amortization expected $75M to $80M (step-up/run rate from BTY intangibles)
• Expect continued Pharma strength in Q4 (notably injectables); emergency medicine to decelerate into Q4 and H1 2026 (~35% lower 2026 revenues for that end market vs 2025)
• Beauty expected positive core sales in Q4; Closures product volumes expected to grow

Business Commentary:

• Pharma Segment Performance:
• Aptar's Pharma segment reported adjusted earnings per share of $1.62 for Q3, driven by growth in proprietary drug delivery systems for central nervous system therapeutics, asthma, and COPD treatments.
• The segment also saw significant growth in injectables, with prescription core sales increasing by 7% and injectables by 6% in the first 9 months of the year.

• The growth was supported by increased demand for elastomeric components for GLP-1 medications and regulatory-driven Annex 1 requirements.

• Consumer Healthcare Challenges:

• Consumer Healthcare core sales decreased by 11%, primarily due to lower sales of nasal decongestant and nasal saline products.
• Despite this, sales for ophthalmic solutions continued to grow, and active material science solutions increased by 8%.

• The decline in cough and cold volumes in Europe has affected the segment, although signs of recovery are expected in Q4.

• Beauty Segment Dynamics:

• The Beauty segment's core sales were flat for the quarter, with declines in product sales offset by increased tooling revenues.
• Geographically, sales grew in Asia, Latin America, and certain end markets in North America, while Europe saw flat sales, particularly in prestige fragrance and facial skin care.

• The segment's adjusted EBITDA margin declined by 120 basis points due to a less favorable sales mix and lower margin tooling sales.

• Emergency Medicine Portfolio Impact:

• Emergency medicine represented approximately 5% of total company sales in Q3 and was expected to contribute about 5% for the full year 2025.
• A significant reduction of 35% is anticipated for the emergency medicine portfolio in 2026 due to near-term headwinds and elevated inventory levels at a large customer.
• This will temporarily impact margins and revenue growth, but the underlying market is expected to stabilize to low to mid-single-digit growth rates after normalization.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted improved adjusted EBITDA margin (23.2%, +30bps) and adjusted EPS growth (+4% YOY) and reiterated long-term pharma pipeline strength, but warned of a near-term emergency-medicine revenue decline (~35% in 2026 for that end market) that will compress margins; company is increasing buybacks and raised the dividend.

Q&A:

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): Just so I can understand your comments specific to '26 for Pharma. So is it right to assume that you're assuming 7% to 10% growth just from the new product pipeline, et cetera? And then emergency medicine is roughly 11% of pharma, and that's going to be down 35%, and that's how we should calibrate as it relates to the growth expectation for next year? And then related to that, where are we on the cough and cold, specific to Europe in terms of the destock? Is it going to drag into 4Q?
  Response: 7%–10% is a long‑term pipeline target, not explicit 2026 guidance; injectables expected to grow high single‑digit to low double‑digit; emergency medicine ~10–11% of pharma expected to decline ~35%; cough & cold destocking has largely run its course with Q4 potentially returning to growth.

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): And then for the initial 3Q guidance, you did include the litigation cost of $0.06 to $0.07. And then you've changed that going forward? And just give us a reason as to why that is.
  Response: Q3 actual atypical litigation costs were ~$4.4M (vs prior estimate $5–6M); because timing and amount are uncertain they exclude these elevated, non‑ordinary course litigation costs from adjusted EBITDA and adjusted EPS to reflect underlying operations.

• Question from Paul Knight (KeyBanc Capital Markets Inc.): Can you talk to the GLP-1 marketplace and Annex 1? What level of contribution to growth do you think those 2 markets represent? Is it 100, 200, 300 basis points of additional organic growth? Or can you quantify it is the first question?
  Response: They won't quantify basis points; GLP‑1 is a primary growth driver (Sept YTD GLP‑1 up >40% YoY) with Annex 1 a close second and biologics also contributing; oral alternatives are not expected to materially displace current demand in the near term.

• Question from George Staphos (BofA Securities): What are the next 2 or 3 steps that are going to drive higher margin in Beauty — when should we expect that inflection? And then should we expect that unit dose has been where you've seen most of the product activity recently in Pharma?
  Response: Beauty margin improvement hinges on volume recovery (particularly North America), ongoing productivity and regional project wins; unit‑dose/Unidose and other high‑value pharma formats have been major recent drivers of product activity in Pharma.

• Question from Matthew Larew (William Blair & Company L.L.C.): As you think about the more medium-term period, what's the level of confidence that 7% to 11% absent moving parts is still the right range? And as you're ramping injectables capacity, when will you need to think about broader capacity?
  Response: 7%–11% is reiterated as the long‑term target range supported by the pipeline; they remain confident in that cadence long term; injectables capacity has headroom (three large 'boxes' were built to add equipment), so no near‑term need for a large new capacity increment.

• Question from Daniel Rizzo (Jefferies LLC): With the NARCAN/emergency medicine, is that a significant margin difference between that product and others? How should we think about pricing versus cost dynamics across pharma?
  Response: Emergency‑medicine products are among the highest‑margin pharma offerings; pharma pricing is value‑driven (quality, regulatory support, services, IP), not tightly correlated with material cost.

• Question from Matthew Roberts (Raymond James & Associates, Inc.): Within emergency medicine, are there other categories still growing and how much is naloxone expected to be down? And broadly, what are you seeing on inventory levels heading into 4Q across Personal Care and related categories?
  Response: They won't break out specific EM indications; other EM products exist (e.g., BAQSIMI); customers expressed optimism but there is inventory to work through; Personal Care shows format rotations rather than broad destocking and no widespread inventory concern heading into Q4.

• Question from Gabe Hajde (Wells Fargo Securities, LLC): Are we implying a $40M–$45M revenue headwind from the emergency response medicines in H1 2026? And does the litigation prevent normal commercial supply of that product?
  Response: The headwind estimate is in that ZIP code but likely slightly larger given the math (11% of pharma down ~35%); to their knowledge Aptar continues to supply the product commercially—litigation hasn't halted supply.

• Question from George Staphos (BofA Securities): On D&A you called out $75M–$80M — should we carry that forward as a run rate? And if the emergency‑medicine step down plays out, are we back to normal low‑mid single‑digit growth thereafter?
  Response: Yes—$75M–$80M is effectively a new run rate (amortization from BTY intangibles); and if assumptions hold (including normal government funding), emergency medicine could revert to low‑mid single‑digit growth over time.

Contradiction Point 1

Emergency Medicine Growth and Market Expectations

It directly impacts expectations regarding the growth trajectory and market conditions for a key product segment, influential in financial forecasting and investor expectations.

Could you clarify your comments on '26 for Pharma, particularly the 7% to 10% growth and emergency medicine's impact? Where is Europe's cough and cold category's destocking status? - Ghansham Panjabi (Robert W. Baird & Co. Incorporated)

2025Q3: Emergency medicine's end market is expected to decline 35% in '26. - Stephan Tanda(CEO)

With the end of the cough and cold destock, will pharma sales return to a normal cadence? - Matt Larew (William Blair & Co. L.L.C.)

2025Q1: Growth in emergency medicines is expected, but it's reasonable to expect a more normal growth trajectory eventually. - Stephan Tanda(CEO)

Contradiction Point 2

Inventory Normalization and Market Recovery

It involves differing perspectives on the timing and nature of inventory normalization and market recovery, which are crucial for understanding the company's operational and financial outlook.

Can you clarify the 7-10% growth and emergency medicine impact for '26 for Pharma, and where Europe's cough/cold category stands in destocking? - Ghansham Panjabi (Robert W. Baird & Co. Incorporated)

2025Q3: Europe's cough and cold destocking is largely complete and expected to return to growth. - Stephan Tanda(CEO)

Can you provide updates on order patterns and inventory levels in pharma and CHC? How is GLP-1 affecting injectables? - George Staphos (Bank of America)

2025Q1: It's challenging to predict the timeline for inventory normalization. - Stephan Tanda(CEO)

Contradiction Point 3

Emergency Medicine Sales and Inventory Levels

It involves changes in expectations for emergency medicine sales and inventory levels, which could impact revenue and profitability in the Pharma segment.

Can you clarify your comments on the 7% to 10% growth and emergency medicine's impact for the 2026 Pharma segment? - Ghansham Panjabi (Robert W. Baird & Co. Incorporated)

2025Q3: Emergency medicine's end market is expected to decline 35% in '26. Europe's cough and cold destocking is largely complete and expected to return to growth. - Stephan Tanda(CEO)

What green shoots are you seeing in China? What momentum and impact could these developments have in 2025? - George Staphos (Bank of America)

2024Q4: We expect market conditions for cough and cold products to improve in 2025, supported by a potential for destocking to stabilize and demand to normalize. - Vanessa Kanu(CFO)

Contradiction Point 4

Beauty Segment Growth and Inventory Levels

It involves changes in expectations for the Beauty segment's growth and inventory levels, which could impact revenue and profitability.

Did you observe any signs of Beauty destocking in the quarter? - George Staphos (BofA Securities, Research Division)

2025Q3: There hasn't been destocking in Beauty, and we've actually seen good order entry into Q1. - Stephan Tanda(CEO)

Given that currency rates remain at current levels and tax rates align with your expectations, do you expect earnings per share to grow in 2025 compared to 2024? - George Staphos (Bank of America)

2024Q4: For Personal Care and Beauty, we've seen ongoing destocking. Inventories are up significantly in the low double digits in our largest markets. - Stephan Tanda(CEO)

Contradiction Point 5

Legal Expenses and Their Impact

It involves changes in the company's approach to legal expenses and their impact on financial results, which are critical for investors to understand.

Why were litigation costs removed from the updated 3Q guidance? - Ghansham Panjabi (Robert W. Baird & Co. Incorporated)

2025Q3: The actual litigation costs came in at $4.4 million, lower than the initial $5-6 million estimate. These costs are not indicative of the underlying business performance and are being excluded from adjusted results. - Vanessa Kanu(CFO)

What about legal expenditures related to intellectual property rights? - George Leon Staphos (Bank of America)

2025Q2: Legal costs associated with intellectual property litigation are expected to remain elevated for the next few quarters. The company anticipates expenses of about $0.06 to $0.07 per share for the third quarter. - Vanessa Kanu(CFO)