Is CSL’s Plasma Recovery Now Priced In?

This story features CSL LIMITED. For more info SHARE ANALYSIS: CSL

Trends in plasma collections are improving for CSL but is the recovery being priced in?

-Reduced coronavirus cases, vaccine roll-out underpins US plasma collections
-Will the US Customs restrictions on Mexican donors impact collections?
-CSL valuation appears full to Macquarie and Citi
 

By Eva Brocklehurst

Is it time to re-assess CSL ((CSL))? The stock has been riding improving trends for plasma donations in the US, outperforming the ASX200 over the June quarter.

Reduced coronavirus cases, ongoing administration of vaccines in the US, a slowdown in the third round of government stimulus payments and higher donor fees have all contributed to improvement in plasma collections.

A new plasmapheresis platform, which is a means of removing, treating and then transfusing blood components, also has the potential to increase collection efficiency and support earnings growth further.

Foot traffic for around 100 US collection centres Macquarie has monitored increased over recent weeks and these trends are expected to support improved revenue for CSL heading into FY23.

Geographically, foot traffic appears largely unchanged in Texas, Florida, Michigan, Ohio and Illinois while improvement was noted in Georgia. Yet, US authorities appear to be stepping up regulations around plasma donations by Mexican citizens in the US.

The US Customs and Border Protection advises it will no longer allow plasma compensation to certain non-immigrant visa holders, and crossing the border for that purpose (to gain payments for plasma donations) will not be permitted.

A large proportion of plasma donations in centres near the US/Mexican border could be coming from non-US citizens. Citi estimates there are around 300 CSL plasma collection centres, or 4%, located in areas that could be affected.

Yet the broker does not believe there will be any material impact on earnings and expects a continued recovery in donations. The broker believes the plasma collection market will normalise in FY23, while risk to the upside continues if the CSL 12 phase III trial result, due at the end of 2021, is positive.

Morgan Stanley is not so sure, suspecting the Mexican restrictions may slow the recovery and noting these collection centres along the border are large and obtain more plasma than the average.

CSL has indicated it is working to have the decision reversed and Morgan Stanley still expects the cpompany will grow collections around 25% in the year to March 2022.

Valuation

From a pure valuation perspective, Citi downgrades to Neutral from Buy as the stock has outperformed since March. The stock has outperformed the ASX200 by 12% since March and is now within 5% of Citi's $310 price target.

Macquarie has also assessed the outperformance, noting the share price is being driven by an expansion of CSL's multiples. The current 12/24-month forward PE multiples of 45.8x/38.1x implies premiums to the ASX200 of 145%/113%, ahead of both two and five-year averages.

Macquarie downgrades to Neutral from Outperform as a result. In addition prior analysis has highlighted competitive risks for key specialty products.

Haemophilia B

In another development, CSL partner uniQure has positive data from a phase III HOPE-B gene therapy trial of etranacogene dezaparvovec. This trial has demonstrated sustained and durable increases in Factor IX activity and a single dose reduced the annualised rate of bleeding by 80% while usage of replacement therapy declined -96%.

CSL has global rights to develop and commercialise the product and Morgan Stanley estimates it may pay uniQure more than US$2bn, which would include upfront cash, milestone payments and royalties.

The broker assesses the global haemophilia B market is worth US$1.4bn with CSL's Idelvion constituting $US500m. UniQure is responsible for completing the study and the manufacturing of the therapy.

FNArena's database has three Buy ratings and four Hold for CSL. The consensus target is $300.19, suggesting 0.9% upside to the last share price.

See also, Treasure Chest: CSL Plasma At Turning Point? On May 5, 2021.

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