Australia | Sep 30 2022
This story features CSL LIMITED. For more info SHARE ANALYSIS: CSL
Brokers remain generally upbeat on CSL and focus upon the earnings contribution from the Vifor Pharma acquisition.
-CSL’s potential earnings from the Vifor Pharma acquisition
-Mexican border relief for CSL collection centres
-Potential upside from treatment of hereditary angioedema
-The latest on plasma collections
By Mark Woodruff
Shares of CSL ((CSL)) began the decade at around $280 and are now at a similar level, having traded between $340 and $240 over the journey.
Such range-bound movement is in stark contrast to the period 2017 to 2020, when shares nearly tripled in value.
Now may be a good time to review prospects for the company, given several brokers within the FNArena database have provided new insights during September.
In anticipation of an investor briefing on recently acquired Vifor Pharma, scheduled for October 17, Ord Minnett and Credit Suisse have both reviewed the expected contribution to CSL earnings.
Credit Suisse forecasts Vifor will contribute around 15% towards sales and 4% to profit for CSL in FY23, with this increasing to 8% of profit by FY25.
Vifor has leading global positions in iron deficiency and nephrology, which, according to the broker, are two non-cyclical and structurally growing niche pharmaceutical markets.
Vifor specialises in intravenous iron deficiency treatments with its Ferinject/Injectafer products and legacy drug Venofer.
However, Credit Suisse concerns itself with the nephrology business, following a recent update from Fresenius Medical Care. A higher-than-normal excess mortality in its dialysis patient base during covid has recently weighed upon the demand for renal pharmaceuticals.
Vifor has exposure to nephrology, along with Fresenius Medical Care, via the Vifor Fresenius Medical Care Renal Pharma joint venture.
The joint venture commercialises products such as Micera and Velphoro and gives Vifor access to Fresenius’ dialysis patient base.
While Neutral-rated Credit Suisse slightly lowers its CSL EPS forecasts following the nephrology update, the $305 target price remains. Investors are reminded of the potential opportunity for CSL to expand indications and increase the life cycle of Vifor products.
The broker sees a core medium-term opportunity in gaining access to the chronic kidney disease (CKD) population and expects a greater focus on cardio-renal in the long term, as patients with CKD present with elevated cardiovascular risk.
Ord Minnett also reduces its forecast earnings contribution from Vifor to reflect the drop in dialysis patients, though feels the issue will be short lived, and retains its Accumulate rating and $330 target price.
In any case, the analyst points out CSL’s Behring division provides an offset, via a boost to revenue and margin from the return of Mexican border donors.
Mexican border relief
Ord Minnett anticipates less payments will be now required by CSL to entice plasma donors. This comes as the US District court issued an injunction to prevent officials from enforcing the ban on paid plasma donations from Mexicans that enter the US with non-immigrant visas.
Overweight-rated Morgan Stanley estimates there are sixteen CSL collection centres near the US/Mexico border that account for around 10% of the company’s total plasma collections.
Upside from the potential approval of Garadacimab
CSL announced in mid-August that Garadacimab, an antibody used in preventative treatment in patients with Hereditary Angioedema (HAE), had met primary and secondary endpoints as part of its Phase 3 trial.
HAE is a disorder characterised by recurrent episodes of angioedema (swelling) in various parts of the body.
Recent analysis by Outperform-rated Macquarie concluded there was strong upside from the potential approval of Garadacimab and noted potential advantages of Garadacimab relative to existing prophylaxis treatments.
The broker now awaits full results from the Phase 3 VANGUARD study early in 2023.
Macquarie noted CSL’s attractive earnings growth profile out to FY24, with benefits from the Rika platform and earnings contributions from Vifor.
Additional features of the new Rika system, a next-generation automated technology, will potentially enable the collection of more plasma, in shorter periods of time.
The broker’s forecasts are supported by an assumed recovery in plasma collections.
On that front, plasma collection centre data from Morgan Stanley last week revealed the US and EU rollout of collection centres by CSL remains strong and showed a 6.9% year-on-year rise compared to August.
The analyst felt the company's valuation was becoming attractive with plasma collection volumes accelerating and a margin recovery underway.
The FNArena database has six broker ratings for CSL with four Buy (or equivalent), one Accumulate and one Neutral rating. The average target price is $324.80, which suggests 13.2% upside to the current share price.
Outside of the database, Wilsons and Jarden have Overweight ratings and Goldman Sachs is Neutral rated, while the average target price of all three brokers is $322.
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