Will the CSL share price return to its all-time high?

Aaron Teboneras | August 31, 2020 2:41pm | More on: CSL

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The largest company on the ASX by market capitalisation, CSL Limited (ASX: CSL) has seen some tailwinds over recent years. The global biotech giant’s share price has soared 20% in the past 12 months, however it is still down 18.9% on its all-time high of $342.75 achieved in February.

At the time of writing, the CSL share price is trading at $288.25.

While COVID-19 continues to wreak havoc on the world economy, investors may be wondering if this former market darling will regain its shine and break new highs again in the near future.

COVID-19 negotiations

In the coming weeks, the Australian Government is expected to sign a multi-million-dollar deal with British pharmaceutical giant AstraZeneca to purchase and produce up to 30 million doses of its potential COVID-19 vaccine.

The supply-pact will allow CSL to produce the vaccine under a strict licensing agreement, which in turn could see an easing of Australia’s lockdown laws.

In addition, CSL has partnered with the University of Queensland and the Coalition for Epidemic Preparedness Innovations to advance its own development of a COVID-19 vaccine candidate. The deal is being hailed as a major step forward in the race for developing a reliable vaccine.

Interestingly, the last global pandemic was the swine flu back in 2009. CSL used all its efforts to develop a vaccine and carry out human trials, receiving new drug approval later that year. This lead to its immunisation program for Australians and partner countries. CSL was the first company in the world for both clinical trial and mass production of an inoculation for the swine flu.

Many of the steps from 2009 are being applied to today’s approach for finding a coronavirus vaccine, with CSL safely fast-tracking its progress. It is anticipated that the company is around 12–18 months away from producing a vaccine for COVID-19. This compares to the average of 8 years to find a vaccine for such a disease. Should the company succeed in vaccine development and mass commercialisation, the potential revenue could be enormous.

Plasma collections

Another catalyst for the weakness in the CSL share price was the knock-on effect the coronavirus had on plasma collections. Investors were concerned that due to the restrictions around foot traffic movement from city-wide shutdowns, the company would see a substantial drop of blood donations. This would ultimately disrupt production of medical therapies, while putting some clinical trials on hold.

However, CSL has turned to social media influencers in the US to encourage people attend its facilities and donate the life-saving resource. The company is hoping to see the 5% drop in plasma collections reported in its FY20 results come back to normal levels.

These marketing initiatives are projected to support the company’s key revenue driver, CSL Behring, which posted US$7.8 billion from earnings in 2020.

The company has also rolled out new plasma collection centres, coupled with an increased cash incentive for donating blood in the US. In the midst of the current economic climate, this should have a positive effect on stocking up supply for future months.

Foolish takeaway

I think that the CSL share price is a great buy-and-hold option for any long-term investor. The blue-chip company is still growing at an impressive rate, despite the challenging conditions COVID-19 has caused.

CSL is actively developing a coronavirus vaccine and addressing its plasma collection disruptions. Thus, it is only a matter of time before the CSL share price reaches new highs, in my view.