Flu vaccine record for CSL as profits rise 13 per cent

Despite suffering its fair share of setbacks such as the withdrawal of a COVID-19 vaccine with UQ and the breakdown of an international alliance for plasma therapy in coronavirus patients, Melbourne-based global biotech CSL (ASX: CSL) came out on top with profit growth in FY21.

Net profit after tax (NPAT) was up 13 per cent at US$2.38 billion (AUD$3.27 billion), with the sharpest rise in earnings coming from its vaccine-focused Seqirus business which saw a 41 per cent jump in seasonal influenza sales to reach a record 130 million doses.

"This was achieved by significant growth in seasonal influenza vaccines driven by record demand and the ongoing shift to Seqirus' differentiated and high value product portfolio," chief executive officer Paul Perreault said.

"During the year, we announced plans to construct a new world-class biotech manufacturing facility in Australia as a further sign of our promise to provide safe and effective influenza vaccines around the world.

"The state-of-the-art facility will use cell-based technology to produce influenza vaccines for use in both seasonal influenza vaccination and pandemic programs."

While Messenger RNA (mRNA) has been a game-changer for vaccine development in the fight against COVID-19, and CSL is utilising the technology in its domain of mitigating the spread of the flu.

"Furthermore, we have accelerated our research in mRNA technology in the next generation self-amplifying mRNA for influenza," Perreault said.

"Pre-clinical results appear promising with human clinical trials expected to commence next year."

In a letter to shareholders, CSL chair Dr Brian McNamee AO also highlighted the work done by the group to support vaccine manufacturing in Australia with AstraZeneca.

"We were very pleased to have been able to partner with AstraZeneca and the Australian Government so that AstraZeneca's COVID-19 vaccine could be produced for our home country," McNamee said.

"Our contribution builds on our 100-year history as a proven pandemic partner to Australia and demonstrates the deep skills and expertise in biotech manufacturing."

This was not the only arena in which CSL sought to contribute to tackling the pandemic, with McNamee highlighting the partnership with the University of Queensland in early 2020 for its vaccine candidate.

"While Phase 1 clinical trials showed promising results, at the time the candidate was deemed unsuitable to progress to Phase 2/3 clinical trials; a large-scale study that would have been led by Seqirus," McNamee said.

"Although this was a disappointing decision, the progress made through this collaboration in just 10 months of work was an impressive achievement."

He explained how CSL Behring had also co-founded the CoVIg-19 Plasma Alliance, an unprecedented industry group of 11 companies across more than 13 countries and five continents, to develop a potential plasma-derived hyperimmune therapy for treating COVID-19.

"The collaboration concluded in April 2021 as the research program did not meet primary endpoints, but we felt the learnings from the collaboration were worth every effort made."

With its scale as one of Australia's largest ASX-listed companies, CSL's has been built on research and in FY21 its R&D expenses rose by 5 per cent to US$1 billion (AUD$1.38 billion). The group's bottom line was also affected by a AUD$136 increase in its deferred tax expense.

That research is ongoing across numerous fronts including in the areas of immunology, haematology, respiratory, cardiovascular and metabolic, transplants and vaccines.

While vaccines are a more topical issue at the moment, the bulk of CSL's revenue and profit comes from its blood therapy division CSL Behring. Its earnings growth before interest and tax was 8 per cent compared to the 82 per cent spike for Seqirus, although that growth came off a much larger base to reach AUD$3.64 billion versus AUD$666 million for the vaccine company.

"The importance of diversification across our business units is clear in this result. The essential nature of our plasma-derived and recombinant products demonstrates that the global demand remains strong," Perreault said in the letter to shareholders.

"However, plasma supply has been depressed by government lockdowns and stimulus packages, particularly in the United States. 

"As society moves past the worst of the pandemic we have implemented a variety of measures in order to attract donors back to our centres, including offering higher donor compensation, leveraging technology to make the donor experience more efficient, and initiated a collaboration to deliver a new plasma collection platform."

He noted a recovery in plasma volumes, although lower volume and associated cost pressures will likely impact margins throughout the current financial year, with a lower NPAT guidance in FY22 of $2.15-2.25 billion.

"Plasma collections are expected to continue improving following multiple initiatives we have implemented," the CEO said.

"Together with the global rollout of COVID-19 vaccines I'm optimistic of a global recovery with greater social mobility and more normalised conditions.

"Plasma therapies have a 9 to 12 month manufacturing cycle. Increasing collections today underpin our expectation of an increase in supply of therapies to patients."