Blood Money

Despite weaker-than-expected sales growth from CSL’s core plasma business in the first half of FY19, the group retained its clear market lead in 2018 as the largest supplier of plasma-derived therapies.

 

Importantly, the results and commentary from CSL’s leading competitors were also consistent, indicating market conditions remained robust with demand exceeding supply in some markets and plasma collection the key constraint.

 

There is little sign that competitors will be able to match CSL’s accelerating plasma collection growth and with the influenza vaccine business enjoying a rapid rise in profitability, we are comfortable the group will be able to continue to grow ahead of the broader market, supporting double-digit earnings growth.

 

We maintain our Accumulate recommendation on CSL and our target price of $210.00.

 

  • Plasma products – CSL extended its lead over its main rivals in 2018, comfortably retaining its position as the largest supplier of plasma-derived therapies by both volume and revenue in 2018. CSL increased its share relative to its two key competitors by almost 2 percentage points. Grifols retained its lead as the owner of the largest number of centres (almost entirely due to acquisitions), but CSL collects almost as many litres of plasma as its two chief competitors combined. Putting aside M&A activity (likely to decline in future given the small number of independent plasma collection groups), CSL is the clear leader in terms of the number of centres it opens and average collections per centre. We do expect its competitors to continue to lift their investment in plasma centres, especially Takeda, but we see little risk to CSL’s market-leading position.
  • Influenza vaccines – CSL’s Seqirus’ 2018 sales lifted sharply, supported by a product mix that boosted its global market share. Notably, revenue from standard quadrivalent and trivalent vaccines were flat on a year ago, which was below our expectations, but this was offset by very strong growth in sales of the adjuvanted vaccine for older patients. We attribute flat revenue from classic vaccines to some price erosion due to geographic mix, i.e. low-priced tender markets, and to a lesser degree, increased competition in first-world markets (with three suppliers of quadrivalent vaccines).

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