No, the plasma and flu businesses are high quality because there are only 3 large global companies in each industry, so there’s little risk of them falling apart… the post above highlights the changes in the last 10 years…
But you can also add to the above list the scientific innovation in rare disease drugs such as synthetic recombinants and synthetic IG that somewhat undermine the investment return future of plasma therapies… diseases include hemophilia, HAE, CIDP, myasthenia gravis, all of which plasma drugs had a monopoly over before innovation by leading edge biotech companies. This is why CSL’s specialty drugs portfolio has delivered very little growth over the last few years, which is important as they’re 90%+ gross margin.
The double digit growth forecast depends on cost savings and efficiencies whereas it was historically achieved through market share gains, high margin products and new products.
The greatest risk to the forecast is the currently unforeseen reduction in plasma product prices across the industry as all 3 large companies adopt the same cost saving measures, particularly plasma throughput yield improvements. If all players reduce production costs by say 10%, will they hold current prices, or will margin improvement be competed away?
CSL Price at posting:
$295.42 Sentiment: None Disclosure: Not Held
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