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The following is an excerpt from a 10-K SEC Filing, filed by WEST PHARMACEUTICAL SERVICES INC on 3/26/2003.
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Item 1. Business. West Pharmaceutical Services, Inc. (the "Company") applies value-added technologies to the process of bringing new drug therapies and healthcare products to global markets. The Company's technologies include drug formulation research and development, clinical research and laboratory services, and the design, development, and manufacture of components and systems for dispensing and delivering pharmaceutical, healthcare, and consumer products.

The Company is organized into two reportable segments:

1) the Pharmaceutical Systems segment consists of two regional operating units, the Americas and Europe/Asia, serving global markets. The Pharmaceutical Systems segment designs, manufactures and sells stoppers, closures, medical device components and assemblies made from elastomers, metals and plastics and provides contract laboratory services for testing injectable drug packaging.

2) the Drug Delivery Systems segment identifies and develops drug delivery systems for biopharmaceutical and other drugs to improve their therapeutic performance and/or their method of administration. This segment also includes a clinical services organization which conducts Phase I through Phase IV clinical trials.

As of December 31, 2002, the Company and its subsidiaries had 4,140 employees.

The Company, a Pennsylvania business corporation, was founded in 1923. The executive offices of the Company are located at 101 Gordon Drive, PO Box 645, Lionville, Pennsylvania 19341-0645, approximately 35 miles from Philadelphia. The telephone number at the Company's executive offices is 610-594-2900. As used in this Item, the term "Company" includes West Pharmaceutical Services, Inc. and its consolidated subsidiaries, unless the context otherwise indicates.

The Company makes its periodic and current reports available, free of charge on its website, www.westpharma.com, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission.

Pharmaceutical Systems Segment

Pharmaceutical Stoppers
The Company is one of the world's largest manufacturers of rubber and elastomeric stoppers for sealing injectable drug vials and other pharmaceutical containers, a ranking that is supported by primary market research and the Company's own market resources. The Company offers several hundred proprietary natural rubber and synthetic elastomer formulations, which are molded into a variety of stopper sizes, shapes and colors. The stoppers are used in packaging serums, vaccines, antibiotics, anesthetics, intravenous solutions and other drugs and solutions. They are designed and manufactured to assure the integrity of these solutions throughout the drug product's approved shelf life.

Most stopper formulations are specially designed to be compatible with a given drug formulation so that the drug will remain safe and effective during storage. New elastomeric components must be tested with each drug solution to show that ingredients do not leach into the customer's product or adversely affect the drug's safety and effectiveness. The Company's laboratories conduct tests to determine the compatibility of its rubber stoppers with customers' drugs and, in the United States, file formulation and process information with the Food and Drug Administration ("FDA"), which is used in support of customers' new drug applications.

Rubber stoppers are usually washed, sterilized and subjected to other pre-use processes by the customer or a third party before they are fitted on the filled container. The Company has introduced a value-added line of stoppers that are pharmaceutically pre-washed and packaged and ready to be sterilized, eliminating several steps in customers' incoming processes. The Company is also developing a line of pre-sterilized stoppers that can be introduced directly into customers' sterile drug-filling operations.

Metal Seals
The Company also offers a broad line of aluminum seals in various sizes, shapes, and colors to secure its rubber stopper onto the vial and help its customers differentiate and distinguish its drug solutions. The seals are crimped onto glass or plastic pharmaceutical containers to hold the rubber stoppers securely in place. The top of the aluminum seals often contains tamper-evident tabs or plastic covers, which must be removed before the drug can be withdrawn. During 2002, the Company introduced improvements in its metal seals that help the customer protect against counterfeiting of injectible drug products and maintain better control and integrity of in-process filled vials prior to final labeling.

Some aluminum seals are sold with specially formulated rubber or elastomeric discs pre-fitted inside the seal. These "lined" seals may be placed directly onto the pharmaceutical container, thus eliminating the need for a separate stopper. In recent years, the Company has expanded capacity and upgraded production processes for metal seal manufacturing, clearly bringing them to state-of-the-art capability.

Other Products
Other products for the pharmaceutical industry include:

* Products used in the packaging of non-injectable drugs such as rubber dropper bulbs, plastic contraceptive drug packages, and child-resistant and tamper-evident plastic closures;

* Plastic systems used for lyophilized drug reconstitution and delivery, which are molded and fabricated in a clean room environment;

* Plastic containers, bottles, and closures for the consumer, medical device and diagnostic markets;

* Elastomeric and plastic components for empty and pre-filled disposable syringes such as plungers, tip caps and needle covers;

* Blood-collection system components, including vacuum tube stoppers and needle valves, and a number of specialized elastomeric and plastic components for blood-analyzing systems and other medical devices;

* Closures and fitments used in intravenous drug delivery systems; and

* Disposable infant nursers and individual nurser components.

The Company also makes closures for food and beverage processors, focusing its efforts on multiple-piece closures that require high-speed assembly.

Product Development
The Company maintains its own laboratories for testing raw materials and finished goods to assure conformity to customer specifications and to safeguard product quality. Laboratory facilities are also used for development of new products. Engineering staffs are responsible for product and tooling design testing, and for the design and construction of processing equipment. In addition, a corporate product development department develops new packaging and device concepts. Approximately 95 professional employees were engaged in these activities in 2002. Development and engineering expenditures for the creation and application of new and improved device products and manufacturing processes were approximately $10.6 million in 2002, $10.0 million in 2001 and $9.6 million in 2000.

Drug Delivery Systems Segment

Drug Delivery
Since 1993, the Company has been developing proprietary drug delivery systems for various drug and biological products for which alternative methods and routes of administration might improve therapeutic performance or the cost effectiveness of the therapy. In furtherance of that effort, in 1998 the Company completed the acquisition of DanBioSyst UK Ltd (DBS), a research and development company located in Nottingham, England. DBS was re-named West Pharmaceutical Services Drug Delivery & Clinical Research Center, Ltd. (noted as West Drug Delivery herein) in 1999 and its operations integrated with the Company's Lionville based drug delivery development operation.

West Drug Delivery engages in both independent and client-funded research to develop unique delivery technologies, patenting these where possible, and subject to any rights granted or ceded in connection with client funding, retains the rights to exploit the patented technology. West Drug Delivery has patents or patent applications covering a range of delivery technologies for various routes of administration, including nasal, oral and parenteral. West Drug Delivery then seeks to license the technologies to pharmaceutical companies for use in combination with their drug products. Alternatively, West will develop versions of generic drug products, which incorporate its proprietary delivery technologies, and then seek development and marketing partners or licensees for the resulting products. West Drug Delivery also maintains laboratory capabilities that support client and internal development projects. Research and development expenditures for the drug delivery business unit were $10.9 million in 2002, $7.8 million in 2001 and $7.5 million in 2000.

In 2002, West Drug Delivery Systems completed a Phase I trial for nasal calcitonin and continued the development of proprietary formulations based on the Company's patented chitosan-based nasal delivery system (ChiSysTM). The Company also continued development of the TargitTM delivery system, an orally administered, specially coated, starch capsule designed to bypass normal digestion and deliver the drug to the colon for local and systemic effect. In addition, the Company funded studies related to a near term licensing opportunity for a generic version of a popular nasally delivered allergy product. The Company anticipates that the development work in 2002, together with increased focus on its ChiSysTM technology, will lead to additional licensing opportunities in 2003.

Clinical Services
In April 1999, the Company acquired the Clinical Services division of Collaborative Clinical Research, Inc. Clinical Services operates as a business unit within the Drug Delivery Systems segment. The Clinical Services business unit consists of an 80-bed clinical trials research facility known as the "GFI Research Center" in Evansville, Indiana. In addition to performing clinical trials, limited contract research services such as protocol writing, case report form design and various aspects of early phase project management are at times provided to clients.

The GFI Research Center performs human clinical trials for pharmaceutical, medical device and consumer health products, which are conducted on behalf of applicants seeking marketing approval for their products. In the pharmaceutical arena, the GFI Research Center conducts Phase I through Phase IV clinical research trials covering a broad range of therapeutic applications.

In conducting the trials, the GFI Research Center contracts with licensed physicians who oversee the administration of individual trials. In addition, the Institutional Review Board ("IRB"), an independent committee that includes medical and non-medical personnel charged with protecting the safety of study subjects, provides review of both study protocols and trial administration. The GFI Research Center employs a staff of approximately 100 people, including nurses, medical technicians and other support staff.

The Company may be subject to claims arising from the personal injury or death of persons participating in clinical trials, the professional malpractice of the physicians with whom the Company has contracted or the actions of its own employees in conducting the trials. The Company believes that these risks are mitigated by several factors. First, physicians who perform the studies are required to carry their own malpractice insurance. Second, review by the IRB helps to ensure the protection of subjects enrolled in the trial. Third, all study subjects are required to sign an informed consent prior to their participation in a particular study. Finally, regulations governing the conduct of clinical trials and the protection of human subjects place shared responsibility for proper study conduct and the protection of study subjects onto the principal investigator, the IRB and the trial site. Extensive training programs are conducted at the site involving investigators, staff and IRB members regarding their respective responsibilities in the conduct of clinical research.

To further reduce its exposure to liability, the Company typically obtains indemnification from the trial sponsors. However, the indemnification excludes actions by the Company such as negligence or misconduct, and the terms of each indemnification provision may vary.

Government Regulation
The FDA extensively regulates the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of drugs under the Food, Drug and Cosmetic Act. The Company's businesses are involved in a number of activities regulated by the FDA.

The Company's drug packaging components, including stoppers, seals and syringes, are used to package drug products that are regulated by the FDA. To accommodate the needs of its customers, which manufacture drug products, the Company must maintain detailed written procedures for the receipt, identification, storage, handling, sampling, testing and approval or rejection of its products. Before shipment, samples from each lot of components must be tested for conformance with applicable written requirements. Manufacturing facilities must establish and conform to written procedures for production and process controls and must create and retain records for a specified period of time.

The Company's contract laboratory, which performs certain services for drug manufacturers, is subject to the FDA's current good manufacturing practices ("cGMP") regulations. It must also register as a contract laboratory with the FDA and is subject to periodic inspections by the FDA. The Drug Enforcement Administration has licensed the contract laboratory to handle and store controlled substances.

The FDA regulates the work of the GFI Research Center in certain clinical trials. GFI must comply with the FDA's regulations applicable to activities a sponsor of certain trials delegates to it, such as recruitment of study subjects, documentation of the study and conducting and monitoring the trial. In addition, the FDA regulates the conduct and activities of GFI's IRB.

To be approved for marketing in the United States, drugs must undergo an extensive development and approval process designed to ensure that only those products proven to be safe and effective are made available to the public. As part of that process, applicants seeking approval must conduct, through hospitals and other clinical research facilities, a series of clinical tests of the drug on humans. These clinical trials involve the administration or use of a drug in progressively larger populations of human volunteers, and in some cases, over long periods of time and in higher doses. Human clinical trials are a critical component of the drug development process as the FDA's ultimate approval for marketing of an applicant's drug will depend in large measure on the data and information obtained during the clinical trial work.

Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the investigational new drug exemption.

Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Each trial must be reviewed and approved by the IRB before it can begin. Phase I usually involves the initial introduction of the investigational drug into people to evaluate its safety, dosage tolerance, pharmacodynamics, and, if possible, to gain an early indication of its effectiveness. Phase II usually involves trials in a limited patient population to evaluate the appropriate dosage and dosage tolerance; identify possible adverse effects and safety risks; and preliminarily evaluate the efficacy of the drug for specific indications.

Phase III trials usually further evaluate clinical efficacy and test further for safety by using the drug in its final form in an expanded patient population. The FDA sometimes requires Phase IV studies to be conducted after a drug has been approved for marketing. These studies are used to monitor the long-term risks and benefits of a particular drug, to study the effect of alternative dosage levels, or to evaluate the safety and efficacy of a drug in targeted patient populations.

Recent Developments
On January 29, 2003, an explosion and fire occurred at the Company's Kinston, N.C. plant. Six people lost their lives and many others were injured in the accident, which caused substantial damage to the building, machinery, equipment and inventories. See Note 21 "Subsequent Event" of the Notes to Consolidated Financial Statements of the 2002 Annual Report to Shareholders, incorporated herein by reference.

In December 2002 the Company sold its consumer healthcare research unit for $2.0 million to Concentrics Research, LLC, a company formed by the former employee management team and Bindley Capital Partners, LLC. During 2002 but prior to the sale of the business, the Company recorded a goodwill impairment charge of $0.6 million; as a result, there was no gain or loss recorded on the sale of the business.

In 2001, the Company sold all the operating assets of its contract manufacturing and packaging business unit to DPT Lakewood, Inc. for a sales price of $29.8 million, consisting of $28.0 million in cash and a $1.8 million note due in 2003. The sale resulted in a loss on disposal of $25.2 million, or $1.76 per share.

For additional information see Note 2 "Discontinued Operations" of the Notes to Consolidated Financial Statements of the 2002 Annual Report to Shareholders, incorporated herein by reference.

Order Backlog
At December 31, 2002, the Pharmaceutical Systems segment order backlog was approximately $119 million, all of which is expected to be filled during fiscal year 2003, compared with approximately $105 million at the end of 2001. Order backlog in this segment includes firm orders placed by customers for manufacture over a period of time according to a customer's schedule or upon confirmation by the customer. The Company also has contractual arrangements with a number of its customers, and products covered by these contracts are included in the Company's backlog only as orders are received from those customers.

Drug Delivery Systems segment backlog, which is primarily related to the clinical services business unit, consists of signed contracts yet to be completed. Contracts included in backlog are subject to termination or delay at any time and therefore the backlog is not necessarily a meaningful predictor of future results. Delayed contracts remain in the Company's backlog until cancelled. As of December 31, 2002, the Drug Delivery Systems segment backlog was $1.3 million, of which $1.1 million is expected to be filled during fiscal year 2003; at December 31, 2001 the backlog was $2.0 million.

Raw Materials
The Company uses three basic raw materials in the manufacture of its Pharmeutical Systems products: elastomers, aluminum and plastic. The Company has been receiving adequate supplies of raw materials to meet its production needs, and it foresees no significant availability problems in the near future.

The Company is pursuing a supply chain management strategy, which involves purchasing from integrated suppliers that control their own sources of supply. This strategy has reduced the number of raw material suppliers used by the Company. In some cases, the Company will purchase raw materials from a single source to assure quality and reduce costs. This strategy increases the risks that the Company's supply lines may be interrupted in the event of a supplier production problem. These risks are managed by selecting suppliers with multiple manufacturing sites, rigid quality control systems, surplus inventory levels and other methods of maintaining supply in case of interruption in production.

Patents, Trademarks and Proprietary Rights
The Company's policy is to apply for patent protection for the technology, inventions and improvements deemed important to the success of its business. The Company also relies upon trademarks, trade secrets, know-how, continuing technological innovations and licensing opportunities to maintain and further develop its competitive position.

It is also the Company's policy to require that employees and consultants, outside scientific collaborators, sponsored researchers and other advisors who receive confidential information, execute confidentiality agreements upon the commencement of employment or consulting relationships. The agreements provide that all inventions by an employee shall be the Company's property.

The Company's patents, trademarks and proprietary rights that relate to the Pharmaceutical Systems Segment have been useful in establishing the Company's market share and in the growth of the Company's business, and are expected to continue to be of value in the future, especially in view of the Company's continuing development of its own proprietary products in this segment. Although of importance in the aggregate, the Company does not consider its current Pharmaceutical Systems segment business or its earnings to be materially dependent on any single patent, trademark or proprietary right.

The Company's Drug Delivery Segment has acquired a significant portfolio of patents, pending patent applications and related proprietary rights for inventions relating to drug delivery systems technology developed primarily at its Nottingham, England research facility. While this portfolio has not produced significant tangible income to the Company in the past year, it is expected to be of major value to this segment going forward, particularly in the areas of attracting and developing strategic alliances with ethical drug manufacturers seeking proprietary systems for delivery of their products, and then developing, selling and licensing the Company's proprietary systems for use with the products of these manufacturers.

Major Customers
The Company provides components and/or contract services to major pharmaceutical, biotechnology and hospital supply/medical device companies, many of which have several divisions with separate purchasing responsibilities. The Company also provides clinical research to full service contract research organizations. The Company distributes its products and services primarily through its own sales force but also uses regional distributors in the United States and in the Asia/Pacific region.

Becton Dickinson and Company ("BD") accounted for approximately 13% of the Company's 2002 consolidated net sales. The principal products sold to BD are synthetic rubber, natural rubber, metal and plastic components used in BD's disposable and pre-filled syringes and blood sampling and analysis devices. The Company expects to continue as a major BD supplier.

Excluding BD, the next ten largest customers accounted for approximately 31% of the Company's consolidated net sales in 2002 but no one of these customers accounted for more than 4% of 2002 consolidated net sales.

The Company competes with several companies, some of which are larger than the Company, across its major Pharmaceutical Systems product lines. In addition, many companies worldwide compete with the Company for business related to specific product lines. However, the Company believes that it supplies a major portion of the U.S. market requirements for pharmaceutical elastomer and metal packaging components and also has a significant share of the European market for these components.

Because of the special nature of these products, competition is based primarily on product design and performance, although total cost is becoming increasingly important as pharmaceutical companies continue with aggressive cost control programs across their entire operations. Competitors often compete on the basis of price. The Company differentiates itself from its competition as a "full-service" supplier that is able to provide pre-sale compatibility studies and other services and sophisticated post-sale technical support on a global basis.

The Company competes against numerous competitors in the field of plastic closures for consumer products. Many of these competitors are larger than the Company and command significant market shares. The Company differentiates itself through its expertise in high-speed assembly of multiple-piece closure systems.

The clinical research industry is highly fragmented and comprised of several large full-service Contract Research Organizations (CROs), many small CROs and limited service providers. The major competitors in the industry include the research departments of pharmaceutical companies.

Many companies provide proprietary drug delivery technologies to the pharmaceutical and biotechnology markets. However, unlike West, the majority of these companies are focused on a single route of drug administration, and very few have capabilities necessary to take drug products through all stages of the development process and commercial manufacture. The three largest companies, the market leaders, have multiple-delivery technologies, but their strong franchises are in oral, controlled-release delivery systems. West's drug delivery technologies, none of which is currently in commercial production, are in less competitive segments that do not compete with the market leaders.

Environmental Regulations
The Company is subject to applicable federal, state, local and foreign health, safety and environmental laws, including those governing discharges of pollutants to air and water, the generation, management and disposal of hazardous materials and wastes and the remediation of contaminated sites. Some of the Company's manufacturing facilities have been issued environmental permits/certificates and have implemented controls to prevent or reduce discharges to air and water. These permits/certificates are subject to modification, renewal and revocation by the issuing authorities. The Company believes that its operations are currently in material compliance with all environmental laws, regulations and permits. The Company believes that ongoing environmental operating and capital expenditures will not be material.

Pursuant to applicable state programs, the Company is currently completing environmental remediation activities at one current and two former manufacturing facilities. Collectively, the Company has reserved $0.9 million to address the cost of remediation at these three facilities.

At its former Technical Center facility in Phoenixville, Pennsylvania, the Company has fully characterized contaminated soils and is about to complete groundwater characterization activities. Upon completion of the groundwater characterization in 2003, the Company believes that it will be able to obtain a release of liability from the Commonwealth of Pennsylvania.

The Company has completed remediation activities at its former plastics manufacturing facility in Wayne, New Jersey. Remaining work on the site involves re-grading a small area adjacent to the manufacturing area to comply with state solid waste management regulations. This work is expected to be completed in 2003, following which final approval is expected.

At its current operating plant in St. Petersburg, Florida, the Company has commenced remediation activities for contaminated groundwater. The Company expects that this project will be completed in 2004, subject thereafter to periodic monitoring.

The Company conducts business in most of the major markets in the world. Sales outside of the United States account for approximately 46% of consolidated net sales. Although the general business process is similar to the domestic business, international operations are exposed to additional risks including fluctuating foreign currency exchange rates, multiple tax jurisdictions and, particularly in Latin and South America, political and social issues that could destabilize local markets and affect the demand for the Company's products.

For additional information see Note 13 "Affiliated Companies" and Note 7 "Segment Information" of the Notes to Consolidated Financial Statements of the 2002 Annual Report to Shareholders are incorporated herein by reference.

The Company's financial condition and results are impacted by fluctuations in exchange-rate markets (See Note 1 "Summary of Significant Accounting Policies - Foreign Currency Translation" and Note 5 "Other Income (Expense)" of the Notes to Consolidated Financial Statements of the 2002 Annual Report to Shareholders, incorporated herein by reference). Hedging by the Company of these exposures is discussed in Note 1 "Summary of Significant Accounting Policies - Financial Instruments" and in Note 16 "Financial Instruments" of the Notes to Consolidated Financial Statements of the 2002 Annual Report to Shareholders, incorporated herein by reference.