Welcome to the West Pharmaceutical Services First Quarter 2008 Earnings Call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Ms. Theresa Kelleher from FD. Ma'am, you may begin.

Good morning, everyone. Welcome to the West Pharmaceutical Services first quarter 2008 results conference call. As you know, we issued our results this morning. The releases have been posted at the company's website located at www.westpharma.com. If you have not received a copy of this announcement, please call FD at 212-850-5600, and a copy will be sent to you immediately. Before we begin, I would like to remind you that certain statements that may be made by management of the company, may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements set forth anticipated results, based on management's plans and assumptions. Such statements give our current expectations or forecast of future events. They do not relate strictly to historical or current facts. In particular, these include statements concerning future actions, future performance or results of current and anticipated product, sales efforts, expenses, the out come of contingencies such as legal proceeding, and financial results. We have tried, wherever possible, to identify such statements by using words such as estimate, expect, intend, believe, plan, anticipate, and other words and terms of similar meaning, in connection with any discussion of future operating or financial performance or condition. We cannot guarantee that any forward-looking statement will be realized. If known or unknown risks and uncertainties materialize, or if underlying assumptions are inaccurate, actual results could differ materially from past results, and those expressed or implied in any forward-looking statements. For a non-exclusive look of these factors, which can cause actual result to defer from expectations, please refer to the factors listed in today's press release. Investors are advised however, to consult any further disclosures the company makes on related subjects in the company's 10-K, 10-Q and 8-K reports. The company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future information, or otherwise. This call is being recorded on behalf of West Pharmaceutical Services and is copyrighted material. It cannot be rerecorded or rebroadcast without the company's express permission. Your participation on this call implies to your consent on our taping. Once management has concluded their remarks, we will open the floor for questions. At this time, I would like to turn the floor over to Dr. Don Morel, Chairman and CEO.

Thanks very much, Theresa, and good morning, everyone. Thank you for joining our call today. As Theresa mentioned, I'm joined by our Chief Financial Officer, Bill Federici; and by Mike Anderson, our Treasurer and primary Investor Relations contact. Earlier this morning, West announced earnings for the first quarter of 2008. To begin our commentary, I would like to touch on a few key elements about Q1 results, update you on several key programs, and then review our guidance for the full year. I will then turn the call over to Bill who will walk you through the particulars of our results for the quarter. From a revenue standpoint, we are very satisfied with our overall performance for the first three months of the year. Consolidated revenues were $277.7 million for the quarter versus $257.6 million for Q1 '07, an increase of 5.1%. As you will recall during our February update, we outlined in some detail the impact of three significant issues that would lower our revenue growth in 2008. The market uncertainties surrounding the Exubera device and the exiting production of the diagnostic components, both items that we no longer expect to sell, and the changing status of ESA drug reimbursement. Collectively, these three issues hit our Q1 revenue line, in line with our expectations or roughly $20.9 million. Management is very pleased with the quarter overall, because the rest of the businesses came through with stronger than anticipated results, leading to earnings of $0.76 per diluted share, $0.72 after removing some items that might complicate comparisons to other periods. Gross margins were solid at 30.8%, although slightly lower than the 31.2% reported for the first quarter of 2007. We had no expectation that it would equal or exceed last year's all-time record first quarter. However, the consolidated results get…

Thank you, Don, and good morning, everyone. As indicated in this morning's press release, West reported first quarter 2008 income from continuing operations of $26.2 million, or $0.76 per diluted share. Our reported earnings this quarter include a net-after-tax benefit of $1.3 million for the combined effects of a $1 million unfavorable restructuring charge incurred in our tech group, a favorable $1.3 million gain from a contract settlement we reached with our customer Nektar, and a $1.1 million discrete tax benefit, principally relating to a retroactive reduction of our Singapore tax rate. Excluding the net positive effect of these three items on current period earnings, first quarter 2008 earnings per share from continuing operations were $0.72 per diluted share, versus last year's first quarter earnings of $0.77 per diluted share. There were no charges or benefits outside our normal or operating results in our first quarter 2007 results. However, the $0.77 2007 first quarter included $0.16 of income related to the lost sales of Nektar Exubera devices, anemia drug components, and disposable medical device components. The company's consolidated sales in the quarter were $270.7 million, a 5.1% increase over first quarter 2007 sales. Excluding exchange effects, consolidated sales declined by 1.2%, versus is the prior-year quarter. At $207.5 million, our [in-systems] first quarter sales were 8.4% above first quarter 2007 first quarter sales, with all but seven-tenth of a percentage point of the increase due to currency effect. The modest growth was as expected, and was due to an $11 million decline in sales of high value components for ESA drugs used to anemia, cancer, and dialysis patients, and also to the company's decision to discontinue manufacturing certain blood collection system components in Europe. These items serve to reduce year-over-year segment sales growth by 5.8% points. Saying it another way,…

Thanks very much, Bill. This concludes our prepared remarks for this morning. We'd now be pleased to take any questions that you might have. Operator?

Thank you. First question comes from Arnie Ursaner from CJS Securities.

Hi. Good morning, Don.

Good morning, Arnie.

Most of my questions relate to gross margin. I know you renegotiate most or many of your contracts at year-end. We've been through unprecedented increases in raw material costs. I'm trying to evaluate your 34% pharma systems margin to get a feel for if you believe you have fully recovered your raw material costs and if you are changing the way you perhaps structure your contracts, given the volatility around some of the raw materials.

We really didn't restructure, the way we do the contracts. We still have the adjusters in for all the agreements that have been completed. And the ones we discussed last year, they are all done and signed, except for one, where we're going on an order basis while we finalize a couple of the terms. So far for this year, our purchase price variance on raw materials has been slightly favorable on the Elastomer side of the business, because our supply agreements with our suppliers. The area where we're running the biggest negative variances is on plastic resins, actually flowing through the tech-side of the business. But because of the pass-through nature of those agreements, we've actually recovered more than 90% of the raw material costs that we've seen. The short answer rather, is we're recovering the majority of those costs under the terms of the agreements that we have with our tech customers for plastic resins. So far so good on the Elastomer side of the business, but it's something we're watching very closely through the year obviously, with oil where it is.

Okay. And again, a lot of your customers shut their plants on Easter, which occurred in Q1 this year, occurred in Q2 last year, and you've also been running a lot of overtime to deal with plant inefficiencies as you ramp up capacity. Can you give us an update on those two items, plus specifics, can you give us an update on the negative hit you may have taken in Grand Rapids and what you think you'll hit for the current year?

Starting from the end and working backwards, we still had a slight negative hit from Grand Rapids in the first quarter. We're working our way through that. The major lines for the customer are coming online. One major line is now up and running smoothly, which will have a dramatic improvement there. We expect the other lines to come in the second and third quarters. We do believe by end of the year, we should be running positively for Grand Rapids.

Each month has been progressively less of a loss than the month before, Arnie.

What was the loss in the quarter?

It was $600,000.

And again, regarding Easter and plant inefficiencies and overtime, how much of a margin impact do you think that had in Q1 for you?

The Easter impact, it is there. You're absolutely right. There are less days to sell, but that was not a dramatic fact in first quarter. The impact of inefficiencies, yes, they do continue, because we are continuing the plant expansions. We don't quantify it exactly; but in the previous quarters, it's been running around $1 million or so per quarter, and that's not an unreasonable estimate for the current quarter.

Okay.

That should come down as we progress through the year. Remember, sequentially the new capacities will come online through the end of the year and the beginning of '09. We expect to see that ramp down.

Don, I was a little confused by your comments (inaudible) Maybe you can clarify that. In your prepared published comments, you speak about potential recovery the back half of the year, and you thought customers might not take more product as the year went on. But I thought you heard in the presentation indicate that you thought they would have less contribution from ESA. Just clarify your view of how ESA will play out for the year.

Yes. There's King of two parts to it. I think you nailed it there. There was another ODAC meeting that King of changed the reimbursement guidelines for certain indications again. We're very comfortable with our prior guidance, as it relates to the materials that we sell directly to the producers of those drugs, and we've taken that into account in our guidance. What we're seeing is a little uncertainty, which we think will continue through the end of the year in the downstream suppliers, that is, where our customers actually ship bulk product to contract fillers, whether it's a vile or a pre-filled syringe, and to some of the producers where these drugs might go into a finished system. That's where we don't have a whole lot of visibility into the pipeline. We're just hedging our bets a little bit for the end of the year. As you know, when we get to the September, October, November timeframe, we see changes in order patterns that are harder to predict.

Two more clarifications if I can. On CZ, you indicated you are going to introduce it in Europe. But introducing means you'll have a product that your customers can test. Just as a are minder, I'm assuming you're not implying or hinting any revenue expectations for the foreseeable future?

There will be a modest amount, simply because of the selling of the samples, but you're exactly right. The first part of the launch process is the sampling for them to do the necessary stability and line trials.

And typically, what will the incremental cost be to a customer who does decide to use this product versus the traditional measure?

I'm not sure we've got a good gauge on that yet, because it depends on the attributes that the customer requests in the system. Some of them are going to take the CZ barrel on its own, assemble the plunger and the plunger rod, along with sterilizing or Westarring it. It's going to depend specifically on the attributes of the product. From a gross margin standpoint to us, in terms of the selling price, it's going to be one of the higher items in our portfolio.

Okay. Very last quick final question, Lexington Rubber Products went into bankruptcy. They at least have a tiny overlap of business with you on the more mundane stoppers. Do you see opportunities there?

We've looked carefully at them in the past. They actually compete with us on only one item, which is an IV component that goes into line systems for intravenous administration. It's probably business we can pick up through bidding, because we supply some of those now, as opposed to an outright purchase of that part of their business.

Thank you very much.

Thanks Arnie.

Our next question comes from Ross Taylor of C.L. King. Ross Taylor - C.L. King & Associates: Hi. Can you all hear me okay? I'm on my --

Yes. You're fine. Ross Taylor - C.L. King & Associates: I think most of my questions were actually answered, but maybe just two or three brief ones. Don, I don't know if you can expand at all in regards to the ESA drug? My expectation would be that you really receive minimal revenues from those in the first half of the year and get some in Q3 and Q4, and is that still the right thing to look at things? Or is the revenues there been pushed out even farther towards the back-end of the year?

I think that's the right way to look at it. If anything, you will probably see a little bit of slippage into the fourth quarter. But right now, everything that we're hearing and seeing indicates that the orders will start to return at that point. The only other clarification I would add is that if you look at the scripts for the ESA drugs, and look at the impact that the reimbursement guidelines have had on those sales, clearly our unit volume was not going to return to the historically high levels of '06 and '07. But we do expect to see some return to a more normalized level. But again, looking at the fourth quarter and beyond. Ross Taylor - C.L. King & Associates: Okay. And another question. With regard to the benefit foreign currencies are having on revenues, does much or any of that actually flow down to the earnings line?

Yes, it does Ross. In the first quarter, we had a $3.8 million dollar positive impact to operating profit. Ross Taylor - C.L. King & Associates: Okay. And last question relates to the CZ product. Are there any particular things you think are driving the higher interest levels in that product than it sounds like you've previously expected?

I think really, it's King of an enhanced sense of urgency on the part of the major producers, because of the silicone issue. Any visible particulate in the drug substance itself is clearly cause for concern, and when silicone oil causes a conglomeration of the proteins, as we talked about during the investor day, you can visibly see that precipitate in the drug solution. To the producers, it means very substantial cost savings, because they can reduce the amount of drugs that they put in. They don't have to account for this drug loss through the contamination. We think it's going to have tremendous potential downstream. Ross Taylor - C.L. King & Associates: Okay. That's great. Thanks very much.

Thanks Ross.

(Operator Instructions). Arnie Ursaner from CJS Securities, your line is open.

Arnie, we can't hear you if you're asking a question. Operator, is his line open?

Yes. Please check your mute button.

Is this better?

Now, we can hear you. You're very faint, Arnie.

You mentioned recovery of bad debt write-offs. Can you quantify that, please?

A small item, about $300,000 in the quarter.

Okay. And the benefits you're getting back from Nektar, I assume we just subtract that out when we look at your segment margin in tech group?

Yes.

Okay. I think that's it for me. Thank you.

Thanks Arnie.

We have no further questions.

Thanks very much, operator. And thanks to everyone for your time this morning. 2008 is off to a good start, and we look forward to speaking with you again in early August to discuss our second quarter results. Thank you again for your time today.