Resilient CSL enters new growth phase

Australia’s homegrown biotech giant CSL has reported a 36 per cent surge in plasma collection volumes to a record high, helping drive a 19 per cent jump in revenue, as its core business shines through as the ongoing growth engine of the $150 billion company.

CSL pointed to increased demand for its core immunoglobulin-based therapies and its wide-ranging portfolio of new or expanded clinical assets that target hard-to-treat conditions. These should hit the market in the next five years.

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Paul Perreault delivered his final result as the CEO of CSL on Tuesday.  Eamon Gallagher

Announcing the half-year earnings on Tuesday, the company said its plasma collection volumes (without which it cannot produce its key therapies) soared 36 per cent to a record level.

This was particularly satisfying for outgoing chief executive Paul Perreault, who has driven a rapid expansion in plasma collection centres throughout the US while in the top job.

He said volumes of the liquid gold (plasma is a distinct yellow colour) were now 10 per cent higher than pre-pandemic levels, and he expected them to keep growing.

“The plan is to keep growing, so I expect that we’ll deliver,” he told The Australian Financial Review.

“The issue here is that you can’t control everything. We’ve had some really severe weather this winter, that causes a decrease in collections… [But] I think we’re in good shape to continue to grow.”

In the six months ending December 31, CSL’s revenue soared 19 per cent to $US7.2 billion, buoyed by strong growth in its immunoglobulin portfolio – its largest product franchise – and another solid result for its vaccines business, Seqirus.

But despite the revenue growth, the company suffered a profit hit because of higher plasma collection costs, expenses associated with its $US11.7 billion acquisition of Vifor and a new product launch. Net profit slipped 7 per cent to $US1.6 billion ($2.3 billion).

However, the earnings margin erosion is expected to be temporary and evidence of the company’s operating leverage was visible.

“Overall the market will be relatively happy with this result, in that it appears that plasma collection costs are starting to decline from recent highs,” Barrenjoey head of healthcare Saul Hadassin said.

“While collections are up 36 per cent for the half, there are other variables like price, product mix and rebuilding safety stock that will affect how much of this translates into revenue growth. We’d be wary of extrapolating this rate of growth into future sales.”

Following the result, CSL declared an interim dividend of $US1.07 per share, unfranked, up 3 per cent on this time last year.

The result was the swansong for Mr Perreault, who will hand over the reins to COO Paul McKenzie in early March.

The company is considered the global leader in plasma-derived therapies to treat a range of conditions including immunodeficiency and autoimmune diseases, hereditary bleeding disorders and critical care medicines.

Despite having only a few more weeks in the CEO seat, Mr Perreault led CSL’s earnings call and answered the majority of questions from analysts. His successor mainly fielded operational questions about the rollout of its new plasma collection system developed by Terumo Blood and Cell Technologies (which has had some setbacks thanks to supply chain issues) and queries related to Vifor.

Mr Perreault said the pandemic-related challenges of reduced plasma collection volumes were now firmly in the rearview mirror for CSL, but it was still working to bring down the cost per litre of plasma, which had climbed significantly.

This was triggered by a large increase in donor fees across the industry to lure people back to collection centres, as well as higher staff costs versus volumes donated and a decision by US Customs and Border Protection to suddenly prevent Mexican donors from crossing the border to donate plasma.

Despite that decision being overturned by the US courts, CSL’s costs were affected in the half because there was a higher percentage of “new” donors, thanks to all the Mexican donors needing to be reassessed and also paid the new donor rate, after having been blocked from donating for six months.

Donor fees

Following the pandemic, CSL increased donor fees from $US600 for the first eight donations to $US1100. The payments were now below $US1000, Mr Perreault said.

“Donor fees themselves are tricky because… if you want to reduce collections, the quickest way you can do that is to drop all the donor fees,” he said.

“We had higher costs for new donors, higher new donor rates at a higher cost per litre (CPL), but we’ve come down 10 per cent or so on CPL, but the reason the margins took a dip was because we’re using the highest cost plasma in our system from nine months ago.

“That will start to reverse… and we’ll see margin return and donor fees moderate… but not back to pre-COVID levels.”

The company’s core business involves the separation of human blood into components that can be converted into therapies.

The business is split into three business units – Behring, Seqirus and Vifor. Behring remains the largest contributor to the group’s bottom line, and generated $US4.6 billion in revenue in the first half.

Immunoglobulin therapies are the largest contributor to CSL Behring’s revenue, which surged 19 per cent from these products.

Flu vaccines business Seqirus posted another strong result, with revenue up 9 per cent, but its performance was hampered by lower vaccination take-up in the aftermath of COVID-19.

“There were two things [behind the reduced vaccination rate in the US], vaccine hesitancy was one thing, but also as they push more and more vaccinations, the staffing in these pharmacies giving COVID [vaccines] now also have to give flu,” Mr Perreault said.

“People go in and say which one will I get, will it be COVID or flu… [And] in the September timeframe, people were really pushing the COVID vaccine significantly.”

R&D pipeline

The company’s share price had climbed 6.5 per cent in the lead-up to Tuesday’s earnings announcement. After the result, CSL shares closed the day almost 1 per cent higher at $307.75.

The result was the first following its completion of the acquisition of renal and iron products business Vifor, which adds a new dimension to the business. There were no surprises in the result from Vifor, and it is trading in line with analysts’ expectations.

The company maintained its full-year earnings guidance on net profit after tax and amortisation of $US2.7 billion to $US2.8 billion at constant currency.

A milestone for the company in the first half was the approval of the world’s first gene therapy for haemophilia b, Hemgenix.

The therapy started in the laboratories of uniQure, but was acquired by CSL, and it had been in development for close to a decade.

Priced at $US3.5 million per dose, it made headlines for being the world’s most expensive drug, but it is expected to be effective for well over a decade and the company is working through reimbursement with insurers.

Hemgenix is one of the near-term growth drivers for the business, although CSL says it will take time to get patients signed up. It does not expect it to replace its existing haemophilia b treatment Idelvion any time soon.

In the next five years, the company hopes to bring to market more than 14 new or expanded therapies, including hereditary angioedema treatment Garadacimab and second heart attack prevention drug CSL 112. Both of these have the potential to become the standard of care, CSL says.

“The R&D portfolio is progressing extremely well. It’s in the best shape it’s ever been, with a cluster of late-stage programs approaching fruition,” Mr Perreault said.




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