Plasma collections are back on track and CSL can leave a messy period behind it. The Vifor acquisition has just completed and will add a significant new angle to the story.
FY22 was beset with unusual circumstances and the result is of limited use. It included a one-off COVID vax event and the acquisition costs for Vifor. It also reflected the FY21 collapse in plasma collection.
For the record, FY22 net profit of US$2.25 billion was 6% below the prior year on a sales increase of 3% on a constant currency basis.
In CSL Behring, the company’s global biotherapeutics business, plasma collections have recovered to exceed pre-pandemic levels. 27 new centres were opened during the year and CSL is now rolling out the new faster Terumo ‘Rika’ plasma collection device which received US FDA approval in March. This device will increase yield by about 8% at ~14% lower cost and require 30% less donor time. The improving collections will support sales growth in the core albumin and Ig products. CSL has not lowered single donor fees but has cut generous new donor incentives.
CSL Seqirus sales increased 13% (CC) in FY22, helped along by a 16% increase in seasonal flu vaccines. A record volume of 135 million flu doses was distributed in FY22 and the US seasonal influenza vaccine sales topped US$1 billion for the first time. The revenue increase was all price driven and EBIT lifted 52% with margin up 950bp to 37.4%. We understand CSL has increased price and mix again for FY23.
The new Melbourne R&D facility is under construction and will accommodate about 80 employees when completed in early 2023. A new R&D campus in Marburg (Germany) will open in September 2022 with about 500 employees and a new R&D facility in Boston (USA) will support CSL’s sa-MRNA technology platform. CSL spent US$1,156 million on R&D in FY22, up 17% on the prior year and this supports the strong pipeline of products in the portfolio.
The acquisition of Vifor was completed on 6 August. CSL will hold an investor briefing on 17 October which will be keenly watched. Vifor is a world leader in iron replacement therapies for the treatment of diseases such as iron deficiency anaemia. Related areas of iron deficiency in heart failure and patient blood management will bring new earnings streams.
Investment view
With plasma collection back on track and heading for improvement, and with Seqirus benefitting strongly from new government contracts, CSL guidance (ex-Vifor) for FY23 looks conservative, in our view. CSL is on a 3-year recovery path to pre-COVID operating metrics.
Risks to investment view
The Vifor Pharma acquisition is now complete and its integration with CSL is underway. Progress on this will reveal any challenges or changes to views of the benefits and costs. Global blood products markets have been impacted (plasma collections) and this may also present challenges if further variants emerge causing disruptions.
Recommendation
We have retained our Buy recommendation.
FIGURE 1: SEGMENT SALES
FIGURE 2: SEGMENT EBIT
