The following discussion should be read in conjunction with the Management's Discussion and Analysis and consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2008.

COMPANY OVERVIEW

West Pharmaceutical Services, Inc. (which may be referred to as West, the Company, we, us or our) is a manufacturer of components and systems for injectable drug delivery and plastic packaging and delivery system components for the healthcare and consumer products industries. The vast majority of our business is conducted in healthcare markets. Our mission is to develop and apply proprietary technologies that improve the safety and effectiveness of therapeutic and diagnostic healthcare delivery systems. Our business is conducted through two reporting segments - "Pharmaceutical Systems" and "Tech Group." Pharmaceutical Systems focuses on primary packaging and systems for injectable drug delivery, including stoppers and seals for vials, closures and other components used in syringe, intravenous and blood collection systems, prefillable syringe components, and safety and administration systems. The Tech Group offers custom contract-manufacturing solutions using plastic injection molding and manual and automated assembly processes targeted to the healthcare and consumer products industries. Our customer base includes the leading global producers and distributors of pharmaceuticals, biologics, medical devices and personal care products.

As a result of our global manufacturing and distribution presence, more than half of our sales are generated outside of the U.S. in currencies other than the U.S. dollar. For consolidated financial reporting purposes, transactions and balances reported in foreign currencies must be translated into U.S. dollars based upon applicable foreign currency exchange rates. Fluctuations in foreign currency exchange rates, therefore, can have a significant effect on our consolidated financial results. In general, our financial results are affected positively by a weaker U.S. dollar and negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct our business. In terms of net sales and operating profit, the most significant foreign currencies are the Euro, the British Pound, the Danish Krone and the Singapore Dollar, with the Euro-denominated sales representing the majority.

Recent Trends and Developments

As expected during the first quarter 2009, the U.S. dollar continued to strengthen against our most significant foreign currencies and the resulting translation of foreign currency exchange rates had a negative impact on our results versus prior year. We reported first quarter 2009 revenues of $242.4 million, representing a decrease of 10.4% from the same period a year ago, reflecting unfavorable foreign currency translation of 7.5 percentage points. Sales in the U.S. for the first quarter of 2009 were $119.5 million, representing a decrease from the prior year quarter of 6.1%. Domestic sales for the quarter reflected the impact of customer inventory reduction and cost-cutting programs due to the current economic uncertainty, and the impact of regulatory-related delays imposed on certain customers' products. First quarter international revenues were $122.9 million, representing a decrease of 14.3% below the prior year period, the vast majority of which related to unfavorable foreign currency translation effects. Excluding the changes in foreign currency exchange rates, international revenues would have been substantially equal to those in the prior year quarter and consolidated revenues on that basis declined 2.9%. Sales of our advanced pharmaceutical packaging components such as West Spectra™ seals and those that incorporate our enhanced manufacturing processes, including Westar®, West Envision®, and value-added coatings, were substantially equal to those in the first quarter of 2008.

Overall, management expects that the U.S. dollar in 2009 will be stronger than in 2008 relative to our most significant foreign currencies, which is expected to have an adverse effect upon our quarterly and full-year financial results throughout 2009. For example, if we were to translate our full-year 2008 financial results using our 2009 forecasted exchange rates, our consolidated net sales in 2008 would have been approximately $70 million lower than the actual results.

Management also expects that the unfavorable global economic conditions which began in the second half of 2008 will continue further into 2009, having an overall negative impact on current year orders due to lower discretionary spending on pharmaceutical products and medical services. Customers are expected to continue to aggressively manage their inventory levels by keeping safety stock and ordering horizons in check in response to uncertain market conditions. As the year proceeds, however, we expect a return to more normal customer ordering patterns and increased pricing tied to contract anniversary dates, resulting in more favorable quarterly comparisons to the respective 2008 periods.

RESULTS OF OPERATONS

For the purpose of aiding the comparison of our year-to-year results, reference is made in management's discussion and analysis to results excluding the effects of changes in foreign exchange rates. Those re-measured period results are not in conformity with U.S. generally accepted accounting principles ("GAAP") and are considered "non-GAAP financial measures." The non-GAAP financial measures are intended to explain or aid in the use of, not as a substitute for, the related GAAP financial measures.

Percentages in the following tables and throughout this Results of Operations section may reflect rounding adjustments.

NET SALES

The following table presents net sales by reportable segment:

                           Three Months Ended
Net sales:                      March 31,
($ in millions)             2009          2008
Pharmaceutical Systems   $    183.2      $ 207.5
Tech Group                     62.3         66.4
Intersegment sales             (3.1 )       (3.2 )
Total net sales          $    242.4      $ 270.7

Consolidated first quarter 2009 net sales decreased by $28.3 million, or 10.4%, over those achieved in the first quarter of 2008, including $20.3 million, or 7.5 percentage points, resulting from unfavorable foreign currency translation. Excluding foreign currency effects, first quarter 2009 net sales decreased $8.0 million, or 2.9%, as compared to the prior year quarter. Unfavorable sales volumes and mix contributed 4.2 percentage points to the decline, which was partially offset by sales price increases of 1.3 percentage points, as annual price increases went into effect during the first quarter for our non-contract customers.

Pharmaceutical Systems

This segment reported a first quarter 2009 sales decline of $24.3 million compared with the same quarter of 2008, including $18.5 million resulting from unfavorable foreign currency translation. Excluding these currency effects, sales were $5.8 million, or 2.7%, below prior year levels despite selling price increases of 2.5 percentage points. Unfavorable sales volume and mix contributed 5.2 percentage points of the decline, resulting from customer inventory management, regulatory-related interruptions affecting production at certain customer facilities and generally lower demand due to market conditions in the U.S. and Europe.

Sales of pharmaceutical packaging components were $18.7 million lower than the prior year, the vast majority of which related to the unfavorable currency translation effect. Excluding foreign currency impacts, sales of traditional packaging components including stoppers, seals and prefilled injection components contributed to the decline, a portion of which was due to the regulatory-related issues mentioned above. Sales of disposable medical components were $2.7 million lower than the prior year first quarter, most of which related to lower sales of non-filled syringe components. The combined sales of safety and administration systems, and laboratory and other services were $2.9 million lower than the prior year due to the effects of foreign exchange and generally lower demand for laboratory and other services.

Tech Group

First quarter 2009 sales were $4.1 million below 2008 levels, including $1.8 million of unfavorable foreign currency translation. Excluding the effect of foreign currency, sales were $2.3 million, or 3.4%, below prior year levels. Lower sales prices contributed 2.3 percentage points of the sales decline as a result of reduced plastic resin costs, which are contractually passed through to certain customers in the form of adjusted selling prices. The remaining decline in sales was the result of overall reduced sales volumes, primarily from our U.S. operations and due to our decision to discontinue selling the low-margin consumer products manufactured at a facility in Mexico which was sold in the fourth quarter of 2008 as part of our Tech Group restructuring initiative.

Sales results by significant product group were mixed during the first quarter. Healthcare devices sales increased $1.1 million compared with the prior year quarter due to increased demand for components used in self-injection pens and increased volume for certain other medical devices manufactured in Europe. However, the combined sales of consumer products, tooling and other services decreased $5.2 million due to the plastic resin pass-through effect on selling prices, and as a result of our decision to exit the consumer products business in Mexico. Intersegment sales of $3.1 million and $3.2 million in 2009 and 2008, respectively, were eliminated in consolidation.

GROSS PROFIT

The following table presents our gross profit and related gross margins by
reportable segment:

                              Three Months Ended
Gross profit:                      March 31,
($ in millions)               2009           2008
Pharmaceutical Systems
Gross Profit                $    59.8       $  74.9
Gross Margin                     32.7 %        36.1 %

Tech Group
Gross Profit                $     9.5       $   8.6
Gross Margin                     15.2 %        12.9 %

Consolidated Gross Profit   $    69.3       $  83.5
Consolidated Gross Margin        28.6 %        30.8 %

First quarter 2009 consolidated gross profit decreased $14.2 million over the same quarter in 2008, with $4.9 million of the decline due to foreign currency translation. The remaining decline was attributable to the impact of lower sales volumes, unfavorable capacity utilization at our plants and higher production costs, net of increased selling prices.

Pharmaceutical Systems

The first quarter 2009 gross profit and gross margin percentage for Pharmaceutical Systems declined by $15.1 million and 3.4 percentage points, respectively, versus the prior year quarter. The decrease was attributable to unfavorable sales volume and mix, higher production costs including raw materials, and lower capacity utilization at most plants due to reduced volumes. The impact of unfavorable sales volume and mix and higher raw material costs reduced our gross margin by 1.2 percentage points, and 1.0 percentage point, respectively, compared to the first quarter of 2008. A portion of the increased raw materials costs was due to the appreciation in value of the U.S. dollar versus the Euro which resulted in higher costs for dollar-denominated materials purchased in Europe. In addition, several of our key raw material supply contracts include lagging petroleum-based surcharges, which continued to reflect the higher oil prices experienced in the latter part of 2008. As the year proceeds, however, we expect gross margins to improve once we begin to realize the benefits of lower commodity costs in the price of our key raw materials.

Tech Group

First quarter 2009 gross profit and gross margin percentage for the Tech Group improved by $0.9 million and 2.3 percentage points, respectively, in comparison to prior year results. The improved gross margin performance was largely due to favorable sales volume and mix in our European operations, as we recently increased production capacity to meet the demand for certain medical devices. In addition, we experienced a significant reduction in U.S. plant overhead resulting from our restructuring efforts and continued focus on improving production efficiencies. While the pass-through of reduced plastic resin costs resulted in lower selling prices, gross profit was not affected due to the offsetting favorable effect on raw material costs.

RESEARCH AND DEVELOPMENT ("R&D") COSTS

The following table presents R&D costs by reportable segment:

                            Three Months Ended
                                 March 31,
($ in millions)            2009            2008
Pharmaceutical Systems   $     4.0       $     4.9
Tech Group                     0.3             0.5
Total R&D expense        $     4.3       $     5.4

R&D costs during the first quarter of 2009 were $1.1 million lower than those incurred in 2008 as several Pharmaceutical Systems projects have transitioned into early stages of commercial production and, therefore, the focus has shifted from R&D to expanding production capabilities and related activities.

We expect consolidated R&D costs for the full year 2009 to reach approximately $23.0 million, as a major focus of our innovation team will continue to be the development of prefillable syringe systems and various other applications that will use Daikyo Seiko, Ltd. ("Daikyo") Crystal Zenith® resin, a unique, transparent polymer that can be used to produce vials and syringe barrels. Daikyo, our 25% owned affiliate in Japan, is also our partner in a long-standing marketing and technology transfer agreement that enables West and Daikyo to develop products that help customers mitigate drug product development risks and enhance drug performance and patient safety. In addition to the various Crystal Zenith projects, other significant R&D projects include an advanced injection system using auto-injector technology, and a passive needle safety device.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") COSTS

The following table presents SG&A costs by reportable segment including
corporate and unallocated costs:

                                                            Three Months Ended
                                                                 March 31,
($ in millions)                                             2009           2008
Pharmaceutical Systems SG&A costs                         $    28.5       $  26.1
Pharmaceutical Systems SG&A as a % of segment net sales        15.6 %        12.6 %

Tech Group SG&A costs                                     $     4.4       $   4.5
Tech Group SG&A as a % of segment net sales                     7.0 %         6.7 %

Corporate costs:
General corporate costs                                         4.5           5.6
Stock-based compensation expense                                1.4           2.4
U.S. pension and other retirement benefits                      4.1           1.5
Total Selling, General & Administrative costs             $    42.9       $  40.1
Total SG&A as a % of total net sales                           17.7 %        14.8 %

First quarter 2009 consolidated SG&A expenses were $2.8 million above those recorded in 2008, including a $2.3 million favorable effect from foreign currency translation.

In Pharmaceutical Systems, 2009 SG&A expenses increased by $2.4 million over the prior year, despite the impact from foreign currency translation which reduced SG&A by $2.2 million. Compensation costs were $1.5 million above those incurred in the 2008 quarter mostly due to increased staffing of information technology and other necessary technical and manufacturing support functions and to the impact of annual salary increases. Depreciation expense, also associated with our second quarter 2008 information systems implementation, accounted for $0.5 million of the increase. Severance and related benefits costs increased by $0.9 million, most of which resulted from our decision to consolidate laboratory functions into our Lionville, PA facility and to relocate certain development center functions to our St. Petersburg, FL plant. We expect to incur additional costs of approximately $0.5 million during the second quarter of 2009 as we complete this laboratory consolidation and relocation process. Various other costs including utilities, professional services and other corporate facilities costs contributed to the remaining increase in SG&A expense.

General corporate SG&A costs were $1.1 million favorable to 2008 levels, reflecting lower levels of third-party professional services and a reduction in our estimated annual performance-based bonus incentive costs. Stock-based compensation costs for 2009 decreased $1.0 million due primarily to the impact of changes in our stock price on the fair value of our deferred compensation liabilities. The deferred compensation liabilities are indexed to our stock price and valued at its quarterly closing market price with the resulting change in value recorded in earnings. During the first quarter of 2009, our stock price decreased $4.96 per share, closing at $32.81 per share on March 31, 2009, while during the first quarter of 2008 our stock price increased $3.64 per share, closing at $44.23 per share.

U.S. pension plan expense in the three months ended March 31, 2009 was $2.6 million higher than in the comparable 2008 period, primarily resulting from lower than assumed performance on plan assets throughout 2008. We anticipate full-year 2009 U.S. pension and other retirement benefits costs to be $10.4 million higher than the $6.0 million incurred during 2008. The costs of non-U.S. pension and other retirement benefits programs are reflected in the operating profit of the respective segment.

RESTRUCTURING AND OTHER ITEMS

Other income and expense items, consisting of gains, losses or impairments of
segment assets, foreign exchange transaction items and miscellaneous royalties
and sundry transactions are generally recorded within the respective segment.
Certain restructuring and other items considered outside the control of segment
management are not allocated to our reporting segments. The following table
presents our restructuring charges and other income and expense items for the
respective period:

                                              Three Months Ended
                                                   March 31,
($ in millions)                               2009           2008
Pharmaceutical Systems                      $    (0.1 )     $   0.3
Tech Group                                        0.2          (0.1 )
Corporate                                         0.1             -
Unallocated charges (credits):
Contract settlement and related gain, net           -          (1.3 )
Restructuring and related charges                 0.7           1.0
Total unallocated charges (credits)               0.7          (0.3 )
Total restructuring and other items         $     0.9       $  (0.1 )

Other income and expense items for Pharmaceutical Systems, Tech Group and Corporate are attributable to gains and losses on the sale of fixed assets, foreign exchange transaction gains and losses on intercompany and third-party transactions, and other miscellaneous charges. There were no individually significant income and expense items during the first quarters of 2009 and 2008.

Contract settlement and related gain, net - In February of 2008 we entered into an agreement with our customer, Nektar Therapeutics, which provided for the full reimbursement of, among other things, severance-related employee costs, purchased raw materials and components, equipment, leases and other facility costs for maintaining and closing the Exubera device production facility. During the first quarter of 2008, we received payments from Nektar which more than offset related costs incurred, resulting in a net gain of $1.3 million.

Restructuring and related charges - As part of a plan to reduce Tech Group operating costs, we initiated a series of restructuring initiatives at the end of 2007 to align the plant capacity and workforce of our Tech Group with the revised business outlook for the segment and as part of a longer-term strategy of focusing the business on proprietary products. We incurred $0.7 million and $1.0 million during the first quarters of 2009 and 2008, respectively, in restructuring and related charges as part of this plan. The majority of these charges related to severance and post-employment benefits and a smaller portion related to asset write-offs and other related costs. We expect that these restructuring activities will be substantially completed during the second quarter of 2009.

OPERATING PROFIT

Operating profit by reportable segment and corporate and other unallocated items
were as follows:

                                               Three Months Ended
                                                    March 31,
($ in millions)                                2009           2008
Pharmaceutical Systems                       $    27.4       $  43.6
Tech Group                                         4.6           3.7
Corporate and other unallocated items:
General corporate costs                           (4.6 )        (5.6 )
Stock-based compensation costs                    (1.4 )        (2.4 )
U.S. pension and other retirement benefits        (4.1 )        (1.5 )
Other unallocated (charges) income                (0.7 )         0.3
Total operating profit                       $    21.2       $  38.1

Pharmaceutical Systems' operating profit for the quarter was lower than that of the prior year by $16.2 million, including an unfavorable foreign currency translation impact of $2.1 million. The reduction in operating profit was the result of lower sales and gross profit combined with higher spending on SG&A as discussed above.

Tech Group operating profit was $0.9 million above that achieved in the prior year quarter, despite an unfavorable foreign currency translation impact of $0.4 million, largely due to the increased gross profit resulting from favorable European sales and lower production overhead in the U.S. as described above.

General corporate costs and stock-based compensation costs declined by a combined $2.0 million as described in the SG&A Costs section above. U.S. pension and other retirement benefit costs increased $2.6 million over the prior year quarter and are projected to be $10.4 million higher for the full year as discussed above. The change in other unallocated (charges) income is described in more detail in the Restructuring and Other Items section above.

INTEREST EXPENSE, NET

The following table presents our net interest expense by significant component:

                          Three Months Ended
                               March 31,
($ in millions)           2009           2008
Interest expense        $     4.4       $   4.6
Interest income              (0.3 )        (1.0 )
Capitalized interest         (0.5 )        (0.5 )
Interest expense, net   $     3.6       $   3.1

Consolidated first quarter 2009 net interest expense increased by $0.5 million over the amount recognized in the first quarter of 2008. This increase resulted from lower interest income due to less favorable market rates of interest earned as well as lower levels of cash and cash equivalents on hand during the first quarter of 2009.

INCOME TAXES

Our effective tax rate was 14.6% in the first quarter of 2009 and 24.2% in the prior year quarter. The following factors impacted the comparability of the tax rates in 2009 versus 2008:

· In 2009, we recognized a $1.7 million provision benefit principally resulting from the completion of a tax audit and the expiration of open tax periods in certain foreign tax jurisdictions.

· In 2008, an agreement with the Republic of Singapore reduced our income tax rate in that country for a period of 10 years, on a retroactive basis back to July 2007, resulting in a $1.0 million tax benefit.

· Also in 2008, we recognized a $0.1 million net tax provision benefit resulting from the expiration of open tax audit years in certain foreign tax jurisdictions.

The impact of these items reduced our effective tax rate by 10.0 percentage points in 2009 and 3.1 percentage points in 2008. Excluding these discrete items, the annualized effective tax rate was estimated to be 24.6% and 27.4% for 2009 and 2008, respectively. The decrease in the 2009 annualized effective tax rate was primarily due to a change in mix of earnings which resulted in a higher concentration of earnings in jurisdictions where we are subject to lower tax rates, and a fourth quarter 2008 renewal of the U.S. tax credit for certain R&D activities.

EQUITY IN AFFILIATES

The contribution to earnings from our 25% ownership interest in Daikyo in Japan and 49% ownership interest in three companies in Mexico for the first quarter 2009 was $0.4 million favorable compared to the first quarter 2008 results. The first quarter of 2008 reflects our share of Daikyo's demolition and disposal costs associated with their Crystal Zenith capital expansion project.

NET INCOME ATTRIBUTABLE TO WEST

First quarter 2009 net income attributable to West was $15.4 million, or $0.46 per diluted share, which included restructuring and related charges of $0.7 million, and discrete income tax benefits of $1.7 million. Collectively, these items totaled $1.3 million after tax, or $0.04 per diluted share. Same quarter 2008 net income attributable to West was $26.2 million, or $0.76 per diluted share. Our 2008 results included a net gain on contract settlement proceeds of $1.3 million, restructuring and related charges of $1.0 million, and discrete income tax benefits of $1.1 million. Collectively, these items totaled a net benefit of $0.3 million pre-tax ($1.3 million after tax, or $0.04 per diluted share). Excluding the impact of these items, net income attributable to West in 2009 was below the prior year amount due to the reduction in gross profit on lower sales and higher SG&A costs as described in the respective sections above.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following table and explanations provide cash flow data from continuing
operations for the three months ended March 31:

($ in millions)                              2009        2008
Net cash used in operating activities       $  (3.3 )   $  (6.9 )
. . .