CSL market cap hits $83b as it lifts profit outlook again
A “severe” flu season in the northern hemisphere and better than expected sales of plasma products has helped CSL lift its full-year profit guidance for a second time this year, sending its market capitalisation to almost $83 billion.
CSL, which creates vaccines and other products to prevent and treat life-threatening illnesses, said it now expected net profit after tax for fiscal 2018 in the range of about $US1.68 billion to $US1.71 billion, up from $US1.55 billion to $US1.60 billion flagged in February.
Shares in Australia’s largest biotechnology company closed 4.13 per cent higher on Friday at $182.95. The increase in market capitalisation to $82.77 billion moved CSL into fourth spot on the ASX 200, ahead of banking giant ANZ at $81.66 billion.
CSL chief executive Paul Perreault said the improved outlook was underpinned by a “confluence of positive outcomes”.
“Of particular note has been a positive product and geographic sales mix shift, particularly with better than expected sales of Idelvion and Haegarda,” he said.
Idelvion is used to treat bleeding disorders, while Haegarda is used to prevent attacks of hereditary angioedema, which result in severe swelling.
Mr Perreault said its Seqirus business was “also performing well, following a severe northern hemisphere influenza season”.
“The phasing of investments in some of our clinical trials has also yielded a positive financial variance.”
CSL’s Seqirus business, which was formed in 2015 by combining bioCSL and the flu vaccines business of Novartis, is the second-largest flu vaccine company in the world.
CSL produces quadrivalent flu vaccines, which cover four strains of flu and have been in higher demand around the world.
But it is its plasma products which are propelling growth, with analysts pointing to profit from plasma products close to $2 billion and profit from its flu vaccines close to $20 million.
In February, CSL reported its half-year net profit rose 34.9 per cent to $US1.09 billion. Sales for the six months to December increased 12.8 per cent to $US4.1 billion.
“This upgrade reminds us that CSL is a best-in-class plasma business,” said David Stanton, regional head of healthcare research, Asia Pacific at CLSA, which has increased its 12-month-forward target price for CSL by 8.5 per cent to $200.65 (from its previous forecast of $185).
“We continue to believe demand growth is solid for plasma products and is likely to continue,” Mr Stanton said.
“Our investment thesis for CSL’s plasma business is unchanged – CSL continues to enjoy high growth in a number of products and remains the highest margin plasma product provider.”
He said of the 211 plasma collection centres that had been/were due to be opened in the US between 2015 and 2018, CLSA had calculated that CSL accounted for 48 per cent of all new centres.
“As it takes time to bring on new capacity onto the market, we believe that these market share gains are more likely to be maintained,” he said.
Mr Stanton said CSL was benefiting from “an ongoing focus on costs”. “We increasingly believe the level of cost control seen in FY18 can continue over the medium term,” he said.
A Credit Suisse report on May 2 said it expected the company to have double-digit immunoglobulin sales, with continued growth stemming from the March US Food and Drug Administration (FDA) approval Hizentra.
Hizentra is used in the treatment of chronic inflammatory demyelinating polyneuropathy (CIDP) as maintenance therapy to prevent relapse of neuromuscular disability and impairment.
Sales of Hizentra and Privigen were boosted last year when some competitors experienced supply shortages. The company has also received high demand for its Haemophilia B treatment, Idelvion, which has now launched in 13 countries.
“Relative to other plasma players, CSL has added a substantial number of plasma centres in the past three years, enabling it to meet additional demand requirements,” the Credit Suisse report said.
With an additional 15-20 plasma centres to be rolled out in the second half of the year, “CSL remains well-placed to grow immunoglobulin volumes slightly ahead of industry over the short-to-medium term”, the report said.
Mr Perreault has been calling on the government to ensure research and development is supported through tax incentives so that local biotech companies can commercialise their products in Australia rather than move offshore. CSL spends close to $800 million annually on research and development globally, which is about 10 to 11 per cent of total revenue.
It has so far refrained from commenting on the Turnbull government’s proposed R&D tax incentive changes in this month’s federal budget, saying it was still assessing the potential impact on its business.
The most controversial part of the government’s changes is a new “intensity measure”, under which tax experts say companies with turnover of $20 million or more will, in most cases, be adversely affected.