CSL has more upside..., page-368

Fox - my take on the situation is quite a bit more positive, for the following reasons.

1. In every country with a functioning health care system, a national blood transfusion service, and its associated supply chain, is an absolutely critical part of that system. In Australia, for example, a person receives a life saving blood transfusion every 30 seconds, so if the supply chain were to break down, the results would be catastrophic, and far worse than even the worse-case Covid-19 scenario. I cannot conceive of any circumstance in which governments would stand by while this happened. The WHO has detailed rules, guidelines, and protocols to ensure a continued safe and adequate supply of blood during viral pandemics, and all members are signed up and committed to these.

2. CSL's plasma collection centres, and its unique drug manufacturing capabilities, represent a key and vital part of the blood supply chain in every country in which it operates. Governments will do everything possible to assist in ensuring uninterrupted supply of whole blood and its derivatives, and that will be a strong positive for CSL.

3. There is no evidence whatsoever that any known coronavirus can be transmitted via blood transfusion, so, even in the absence of a cheap, quick, and reliable test for the presence of Covid-19 in the blood of potential donors, I don't see much risk to plasma collection and processing. If donations fall off in the USA, then CSL can always increase the payments made to donors; that should work.

4. In the event of a severe Covid-19 pandemic, we would be looking at mass hospitalisation of affected patients. Patients with the secondary bacterial infections such as pneumonia, etc. which follow Covid-19 infection, will in nearly every case be treated with intravenous immunoglobulin (Ig) infusion. Supply of Ig is very tight, and prices were heading strongly north even before Covid-19. CSL is the leading player in the Ig field, and is also best placed to ramp up supply of a product that represents >40% of its revenue.

5. There's not much data around the Wuhan laboratory, but at some point in the not too distant future CSL will presumably reopen it, and the surviving staff will go back to work. The Chinese government will be just as keen a everyone else to get these labs functioning again as soon as possible, and may well offer assistance to affected companies to encourage them to accelerate the reopening process. In any event, this seems to be pretty much a non-issue in the scheme of things.

6. As others have noted, the $A may still have a long way to fall, so in that we have another positive for CSL.

So, all up, I'm not too concerned, although we definitely have some interesting times ahead of us.