CSL keeps pumping up the profit

Australia’s biggest health company has continued its stellar run, with profit and revenue both rising 8 per cent.

CSL CEO Paul Perreault at the company's Parkville head office. Picture: Stuart McEvoy.

Australia’s biggest health company, CSL, is continuing its stellar run, with profit and revenue both rising 8 per cent — not to mention challenging Commonwealth Bank as the ASX’s biggest stock.

But despite the buzz, chief executive Paul Perreault believes there are others who have a less lofty assessment of the company, which began as the Commonwealth Serum Laboratories in 1916.

“Some people might say we are a bit boring because we haven’t changed our strategy,” Mr Perreault said.

“Our is a focused strategy on execution to meet patients’ needs around the world for these specialised medicines that are usually non-discretionary.”

The medicines he is referring include immunoglobulin therapies, which are used to treat immunodeficiencies and have been the biggest driver of CSL’s growth. The company also produces treatments for blood-related disorders, such as haemophilia, and influenza vaccines. And there is more to come, with CSL spending about $1bn a year on drug trials to build its pipeline of future blockbusters.

It is a formula that has propelled the company’s share price to soar more than 76 per cent to $328.48 in the past year, coming within a whisker of overtaking Commonwealth Bank as the ASX’s biggest stock. (However, CBA widened the gap on Wednesday with a 4 per cent rise).

While Mr Perreault said the attention on challenging CBA, which has a market cap of $156bn, was nice, it had not been the goal of CSL, which has a market cap of $149bn.

“It’s nice, I guess, because it shows people believe in CSL and what we do and our good returns for shareholders,” he said.

“But our goal was never to be the biggest. The goal was to execute on our strategy and take care of patients. That’s turned out to be a pretty good strategy.

“And they should feel good about going into next year. I certainly do.”

On Wednesday Mr Perreault upgraded CSL’s full-year profit guidance, which is now expected to be between $US2.1bn ($3.12bn) and $US2.17bn, representing 10-13 per cent growth on last year.

Mr Perreault said demand for immunoglobulins will continue to grow in the year ahead in a tight market, which CSL foreshadowed last decade by investing in more collection centres for ­plasma — the raw material for the medicines — than its competitors.

CSL opened 30 new plasma collection centres last year, taking the total number to more than 230, and this year it plans to open another 40 to keep up with the strong demand.

Immunoglobulin therapies are the biggest sales driver for the company, recording a 26 per cent increase in revenue to $US1.985bn in the six months to December 31.

Sales of Privigen and Hizentra — CSL’s two main products in its immunoglobulin portfolio — grew 28 per cent 37 per cent, respectively.

Overall sales for the group soared by 8.4 per cent to reach $US4.7bn, while the company’s net profit rose to $US1.248bn — an 8 per cent increase on the same period in 2018, although slightly below consensus of $US1.264bn.

But Ord Minnett analyst Athena Kospetas said the immunoglobulin sales were “drastically above” her estimate of 20 per cent growth.

“IG sales growth, a key focus, was very strong after adjusting for the changed treatment of hyperimmune sales,” Ms Kospetas said in a note to investors.

The changed treatment of hyperimmune sales referred to an expanded approval for both Privigen and Hizentra to now include CIDP or Chronic Inflammatory Demyelinating Polyneuropathy, which is a debilitating neurological disorder.

“Now in the US we have the indications (approval) both for Privigen and subcutaneous Hizentra. We now have access to be able to provide into those areas and really get the word out,” Mr Perreault said.

“These patients are about double the dose of a primary immune deficiency patient — so even though there aren’t as many, the dosage is higher because they need to have more IG in their system to handle the disease.”

But not everything was in positive territory. CSL’s albumin — a protein made in the liver that keeps fluid leaking from blood vessels — grew in all markets except China, which weighed on that portfolio’s revenue, which sank 33 per cent to $278m.

Mr Perreault cited the decrease in albumin sales in China to CSL switching to a new direct distribution model in that ­country.

“This transition has seen overall albumin sales decrease … which is in line with guidance. The China transition is progressing well and will improve our participation in the value chain as well as allowing us to now work directly with clinicians,” he said.

“The availability of albumin to patients has not been impacted and reported sales are expected to return to a more normalised level in FY21.”

Mr Perreault said the company had yet to feel any impact from the coronavirus outbreak, which has shut down China, with most people being urged to work from home, while travel to, from and within the country has been heavily restricted to limit the spread of the virus.

He said this was despite CSL having operations in Wuhan, the epicentre of the outbreak.

“None of our staff have been infected.

“We are monitoring that very carefully. We have been monitoring all our employees there. But from a product perspective we haven’t had any decline in imports of albumin, which is the biggest part of our business (in China), but also on our global supply chain. As we look across the globe we have multiple sources of manufacturing and our robust supply chains ensure that these critical supplies aren’t single sourced, so CSL doesn’t expect any negative impact on our ability to supply or any major impact as a result of the virus in China.”

CSL will pay an interim dividend of US95c a share on April 9.