CSL Primed For Additional Market Share

Australia | Mar 16 2017

Supply issues with competitors are expected to support vaccine and blood product supplier CSL's volume and market expansion.

-Undersupply now apparent in raw plasma market and likely to persist for a time
-Substantial rise in capital expenditure to establish recombinant manufacturing facility
-Favourable trading terms expected to continue for the longer term


By Eva Brocklehurst

A problem with supply for small-medium fractionators is expected to support vaccine and blood product supplier CSL's ((CSL)) expansion. For its part, the company has raised the tempo of its operations, brokers observe, accelerating the opening of plasma collection centres to double its fractionation capacity by 2024.

On UBS estimates, 2016 raw plasma collections grew around 5-6% and there is no new incremental allocation to low-priced and emerging markets. Hence, the under-supply that is now apparent. The last under-supply cycle occurred in 2006-09, which the broker notes was ended only by a significant increase in US unemployment, which accelerated collection growth and pushed many collection centres to capacity.

On UBS estimates, net output of IVIG (intravenous immunoglobulin) was above demand from 2010 and thereafter the market sought to restrict collections, a factor which may have reduced the visibility around the needs of future collection centres.

Exacerbating the current short supply, the opening of new US collection centres, while accelerating, will take over two years before they make a meaningful contribution to the collection pool. The bottlenecks will, therefore, persist for over two years, the broker asserts, in part reflecting competitor inability to plan and allocate capital ahead of rising regulatory requirements. UBS believes global demand can sustain 5% volume growth for around seven years in both IVIG and albumin.

The company's site visits hosted in Germany and Switzerland highlighted regulatory restrictions and capacity constraints are now easing. At the 2013 visit to Switzerland, Credit Suisse noted management's intention to open 10 plasma centres that year and 30-40 centres per year over 10 years if the business continues to grow at a compound 6-8%.

The broker believes growth for the IG product has run ahead of expectations, while competitors have expanded plasma collection at a slower pace. Credit Suisse's feedback also suggests the market for raw plasma is tight and fractionators are selling IG as quickly as it can be produced.

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