Record flu vaccine demand gives 44 per cent shot in the arm to CSL earnings

Record flu vaccine demand gives 44 per cent shot in the arm to CSL earnings

Mitigation measures against COVID-19 led to a drastic reduction in influenza rates last year as the flu was given fewer pathways to spread, but the public was not about to become complacent. Following the advice of many health agencies around the world, people got vaccinated against the seasonal flu in record numbers in 2020.

Melbourne-based CSL (ASX: CSL) has therefore reaped the rewards of its status as one of the world's largest flu vaccine companies, after today reporting a 44 per cent lift in net profit after tax to US$1.8 billion (AUD$2.3 billion) in constant currency terms for the December half.

Seaonal flu sales actually rose by exactly the same percentage for CSL's subsidiary Seqirus, although earnings growth was much higher and the broader group also saw a strong performance from its blood plasma (immunoglobin) therapies business.

"Our influenza business Seqirus, delivered an exceptionally strong performance, more than doubling earnings before interest and tax to $693 million," says CSL chief executive officer and managing director Paul Perreault.

"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."

CSL received a blow late last year when a vaccine it was working on with the University of Queensland (UQ) was abandoned; while trials of that vaccine showed promising signs of effectiveness, some recipients received false positive results for HIV.

However, the company is critical to the Australian Government's plans to produce the AstraZeneca vaccine locally, and in the December half CSL announced it would construct a new world-class biotech manufacturing facility.

"The state-of-the-art facility will use cell-based technology to produce influenza vaccines for use in both influenza pandemics and seasonal vaccination programs and will be the only cell-based influenza vaccines facility in the Southern Hemisphere," Perreault says.

As a founder of the CoVIg-19 Plasma Alliance, CSL has made good progress with its partners on developing a plasma-derived hyperimmune for treating among the most severe complications resulting from COVID-19. A global Phase 3 clinical trial has nearly been completed and CSL is producing trial lots at itsSwiss facility.

If successful, this will become another viable option for hospitalised COVID-19 patients

In the plasma business, sales were up 19 per cent for CSL's market-leading sub subcutaneous product HIZENTRA, given a continued strong uptake for its use treating the debilitating neurological disorder CIDP (Chronic Inflammatory Demyelinating Polyneuropathy).

CSL's sales of Albumin, the most abundant protein found in plasma, rose 93 per cent due to the successful transition to a new distribution model in China.

"Albumin sales in China now reflect a more normalised level with the new distribution model expected to help improve our participation in the value chain and strengthen sales, marketing and our distribution network," Perreault says.

"Sales of our transformational therapy for patients with Hereditary Angioedema (HAE), HAEGARDA, increased 16 per cent with new patients continuing to take up the innovative therapy."

Perreault highlights CSL's 27,000 dedicated employees have remained focused on delivering on the company's promise to patients and public health.

"Our people and business model both demonstrated tremendous agility and resiliency in this most challenging of environments."

For the full financial year CSL expects profits to reach US$2.17-2.265 billion (AUD$2.8-2.92 billion), with Perreault forecasting continued robust demand for the group's core plasma and influenza vaccine products.

"Seqirus is performing well as strong demand for influenza vaccines together with our differentiated products portfolio will see it deliver another strong profitable year," he says.

"Consistent with the seasonal nature of the business we anticipate, however, a loss in the second half of the year.

He explains COVID-19 will continue to have an impact on CSL, noting blood donations have been adversely affected during the pandemic; an issue he raised early on last year.

"To combat this, we have  implemented a number of initiatives to increase plasma collections and introduced a customer fulfilment process to ensure the equitable distribution of medicines to patients.

"We remain the industry leader in opening new plasma collection centres and investing in future innovation - positioning CSL to emerge strongly when the COVID-19 crisis recedes."

While securing an integral role in Australia's COVID-19 vaccine strategy would appear to be a boon for a group like CSL, Perreault says the additional work has resulted in "significant opportunity costs" to CSL's standard business and manufacturing operations as well as the re-prioritisation of some R&D projects.

"Subsequently, there will be an increase in operations and R&D spend in the second half as we restart projects and build them back to scale," he says.

"Our people continue to work exceptionally hard to undertake the COVID-19 vaccine work without compromising the production of our core life-saving therapies influenza vaccines and plasma and recombinant protein therapies.

"We're proud that we've been able to meet our existing global commitments while leveraging our unique position and capabilities in Australia, resulting in what will be a significant contribution to the COVID-19 vaccine effort.

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