Healthcare Giant CSL Faces Tough Times
A group of healthcare analysts has confirmed that CSL, a major player in plasma and vaccine therapies, is facing a long period of challenges. The company’s recent performance has led to significant concerns among investors, with shares dropping sharply following earnings reports.
In the early stages of its US rollout, EBR has shown promising signs of growth. Meanwhile, Bioxyne and Biome have announced supply deals as budget considerations come into play. Analysts have found CSL guilty of causing harm to both the wellbeing and financial interests of its investors. The recent drop in share price by 20% is still in effect, with further losses of up to 6% observed in the latest trading session. An acquittal seems unlikely at this point.
CSL admitted that its current year revenue is expected to decline by 2% on a constant currency basis, which is significantly lower than the 2.5% growth it had previously guided. Analysts had anticipated an average decline of 0.5%, making the sell-off even more severe. Underlying earnings are now expected to decrease by 4%, compared to the company’s initial guidance of 5.5% growth. On average, analysts expected a 1.7% increase, highlighting the gap between management’s projections and analyst expectations.
Analysts’ Criticisms and Concerns
Macquarie Equities issued a note titled “a bloody mess,” maintaining a neutral call but downgrading its valuation of CSL from $176 to $111 per share. This new valuation reflects a 20% discount due to “earnings uncertainty.” Despite CSL’s comprehensive downgrade of its core Behring plasma business, the firm remains cautious about the extent and duration of issues in the immunoglobulin (IG) and albumin markets.
RBC Capital Markets also reduced its target price for CSL, from $176 to $113, following the “worse than expected downgrade.” The firm noted that while CSL is regaining market share in immunoglobulin, new products from competitors have challenged its leading position. Sustainable profitable growth within Behring is dependent on momentum beyond IG.
Bell Potter downgraded its call for CSL to $100, citing concerns over the further degradation in Behring’s gross margin and the difficulty in returning to pre-Covid levels of around 57%. The US immunoglobulin plasma market has faced oversupply, leading to price competition and further market share loss for CSL.
Optimistic Outlook
Despite the challenges, Morgans remains one of the most optimistic observers of CSL, retaining a buy call but cutting its valuation from $241.34 to $147.59. The firm believes that CSL frames the issues as “primarily executional rather than structural,” implying they can be resolved. Encouragingly, Seqirus is performing better than expected, IG demand remains mid-to-high single digits, and there are early signs of plasma share stabilisation.
With a new CEO yet to be announced, management will focus on addressing its issues in a more disciplined manner. EBR Systems, the maker of the world’s only wireless cardiac pacing device for heart failure, has reported an increase in US usage during its limited release phase. In its March quarter statement, EBR said heart surgeons implanted 41 of its WISE devices, taking the total to 71. This translated to revenue of US$2.4 million ($3.4m). The company also signed 16 new purchase agreements and trained 22 more physicians, bringing the total number of WISEd-up doctors to 55.
Record Sales for Little Green Pharma
Little Green Pharma, a medical cannabis purveyor, has posted record March quarter revenue ahead of its proposed merger with Cannatrek. European sales exceeded Australian revenue for the first time, with the Continent and UK contributing $6.4 million, up 70% from the previous quarter. Aussie sales fell 10% to $6.1m, reflecting broader market trends as regulatory reforms impact prescribing practices.
Bioxyne has bolstered its plans to penetrate the German market with a $50 million supply deal. Under the two-year exclusive compact, Bioxyne will supply its partner Adrex with Australian product made under certified manufacturing standards. Germany is one of Europe’s largest and most developed medicinal cannabis markets.
Meanwhile, Biome Australia has extended its agreement with a key supplier, Probiotical SpA, until 2028. This extension provides certainty for both businesses as Biome scales internationally. Biome is focused on boosting manufacturing in Australia and will update investors later this year.
At we tell it as it is. While EBR Systems is an advertiser, the company did not sponsor this article.
