CSL (CSL) – Rough Week

CSL engages in the research, development, manufacture, market, and distribution of biopharmaceutical products, principally plasma-derived treatments and nephrology therapies, and vaccines in Australia, the US, Germany, the UK, Switzerland and China. CSL was founded in 1916 as Commonwealth Serum Laboratories, sold by the federal government in an initial public offering in 1994, and is headquartered in Melbourne, Australia.

CSL posted first-half FY26 net profit short of market expectations, driven by weak revenue growth at its dominant Behring plasma products division that erased the benefits of better-than-expected revenue from its Seqirus vaccine and Vifor nephrology businesses. The soft result capped a horror couple of days for the beleaguered biotech – its shares slumped 4.6% after the result, taking its two-session slide since the bungled announcement of CEO Paul McKenzie’s exit to more than 9%.

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Within Behring, sales of its key immunoglobulin (Ig) and albumin products missed forecasts by 6% and 27%, respectively, on a constant-currency basis, although strength in its new Hemgenix and Andembry offerings provided some offset, while Seqirus and Vifor turned in much-stronger performances, their revenue beating consensus estimates by 9% and 7%, respectively.  Pleasingly, the Behring unit's gross margin met market expectations, even as its immunoglobulin and albumin revenues fell short. That outcome was driven by a tight cost control across the whole group, with R&D expenses a notable 10% below market expectations. CSL also flagged US$1.1 billion ($1.5 billion) in impairments – not related to restructuring costs – for FY26, the bulk of which were taken in the first-half accounts.  

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The company reiterated guidance for FY26 net profit growth of 4–7% on a constant-currency basis, although Ord Minnett notes this implies an earnings bias to the second half of 56%, versus a comparable 34% skew recorded in FY25. Post the result, we have cut our EPS estimates by 3.0%, 2.2% and 3.0% for FY26, FY27 and FY28, respectively, which, combined with currency effects, leading us to cut our target price to $198.00 from $217.00.  Cost performance has improved significantly as CSL’s business restructuring plans are implemented but revenue growth is still proving hard to come by, and the CEO’s exit adds a degree of difficulty to the biotech’s outlook. Despite the apparent upside on offer, Ord Minnett will need more evidence of top-line growth and margin expansion before we can become more constructive on CSL. As a result, we maintain our Hold recommendation.