CSL Ltd posted a first-half FY17 net profit of $805 million, in line with Ord Minnett’s expectations, although the composition was more weighted to a smaller loss from the Seqirus flu vaccine business than we had forecast.
Seqirus almost broke even in the seasonally stronger first half, demonstrating progress is being made despite having an uncompetitive product range this year. As foreshadowed, a strong lift in immunoglobulin and specialty sales supported wider margins at its Behring division.
CSL should deliver FY17 net profit ahead of the 20% growth implied by its guidance if, as we expect, the company is able to hold onto a material portion of the market share gains it made in its core plasma business.
CSL’s aggressive investment in plasma collection centres gives it a clear advantage over the rest of the industry. We expect this to become increasingly apparent over the next couple of years especially if demand growth hits the top end of the historic 5–7% range.
News flow from competitor drug trials remains the key risk to the outlook. Shire expects to report results from its prophylactic hereditary angioedema therapy SHP643 by mid-year. This will be followed by news from Roche’s ACE910 phase III in haemophilia A patients with inhibitors in July and then from another phase III trial of the same therapy in patients without inhibitors during the December quarter. Both these therapies have the potential to materially affect CSL’s medium-term earnings.