CSL (CSL) - Vifor challenges

CSL engages in the research, development, manufacture, marketing and distribution of biopharmaceutical products, principally plasma-derived treatments from its Behring division, nephrology therapies from its Vifor business, and vaccines from its Seqirus division. 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.

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Ord Minnett has reviewed its CSL (CSL) model further with a focus on its Vifor nephrology business that is facing challenges which, in our view, are being underestimated by the broader market. Our estimates for Vifor revenue and operating profit in FY27 are below consensus estimates by 15% and 32%, respectively, while our forecasts for operating profit across the FY27–FY29 horizon are more than 10% below market expectations.

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Vifor will be hurt by losing exclusivity rights for Injectefer, used to treat iron deficiency anaemia in adult and paediatric patients, as generic variants enter the US market from July. Meanwhile, its Velphoro therapy, used to control phosphorus levels in the blood of patients with chronic kidney disease on dialysis, will be taken off the US federal government’s transitional drug add-on payment adjustment (TDAPA) program from January 2027. Both these issues will drive material falls in prices and we assume a fall in revenue and profit for Vifor of US$355 million ($505 million) in FY27.

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The problems facing Vifor and a middling outlook for the Seqirus vaccine division, offset somewhat by a modestly brighter outlook for the key Behring plasma products business, lead Ord Minnett to cut its CSL group EPS estimates by 1.2% and 0.9% in FY27 and FY28, respectively. Our FY26 forecast is unchanged. We note our group EPS forecasts are now below those of the broader market by circa low-to-mid single-digits over the medium term.

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Our target price on CSL is unchanged at $117.00 post this latest review. Despite the apparent significant upside on offer, Ord Minnett maintains its Hold recommendation on the stock given the significant uncertainty around the earnings outlook and broader issues as management attempts to reset the business.

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