Rudi’s View: CSL & NextDC

This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor

Five years of gradual erosion in the share price have significantly reduced investor enthusiasm for CSL ((CSL)). Certainly, FNArena received multiple messages in recent months from disappointed hangers-on who’ve decided to throw in the towel and look for greener pastures elsewhere.

It has been a remarkable reversal from the period prior to the global covid pandemic that has weighed upon CSL and the broader healthcare sector internationally. Prior to 2020 there was virtually nothing CSL could do wrong, with strong multi-year rewards for loyal shareholders cementing its status as Australia’s highest quality performer.

But that was then and today the share price is lingering around $240 versus the all-time high of $342.75 reached on 20 February 2020.

We can but guess the remaining army of retail shareholders in Australia has equally responded to the southward-bound share price with above-average displeasure. The company itself, still the third largest listed on the ASX, has responded through organising shareholder briefings in between financial result releases.

The first such briefing took place on Monday in Sydney. On Friday the event moves to Brisbane.

On Monday, Chief Financial Officer Joy Linton addressed a room that was far from fully occupied –see: non-performing share price– but casual observations afterwards suggest the overall appreciation from shareholders present was positive with many lauding her eloquence and in-depth knowledge of the company’s international operations and highly specialised medical products.

As expected, one of the features in Linton’s presentation slides was how badly healthcare and biotechnology shares have performed globally. Indeed, the notable reversal in CSL’s underlying share price trend is not totally out-of-sync with the global headwinds that have descended upon the industry at large.

The latest obstacles can be traced back to the new administration under president Trump in the US and his personal affection for import tariffs. CSL, of course, has no idea what goes on inside Trump’s head, but Linton’s presentation emphasised two key messages for the room:

-CSL has a significant presence in the USA, where circa 60% of its workforce is located and 90% of its all-important plasma collection centres, implying some protection against tariffs

-CSL has a significant network outside of the USA and is flexible and agile enough to prepare and adjust for the new environment in which trade tariffs might feature prominently.

As one example of the latter, the CFO disclosed CSL is a major exporter of albumin, the most abundant protein in human blood plasma, into China but most of it is exported from facilities in Switzerland and Germany, with only a smaller part coming from the US where the bulk of plasma is being collected.

This still makes the company vulnerable to any tit-for-tat responses between Washington and Beijing, but approval is pending to start exporting from its Tullamarine location near the Melbourne airport. Once such approval is in place, there will be nil exports of albumin coming directly from the US into China.

US administration risks and disappointing share price performance aside, another of Linton’s key messages was that CSL still sees itself as an innovation company. The next major product launch involves Andembry, a monoclonal antibody treatment developed by CSL for the prevention of recurrent hereditary angioedema (HAE) attacks.

Andembry was discovered and developed in Australia by CSL scientists and is the company’s first monoclonal antibody therapy. It is often referred to as Garadacimab, the name used during clinical trials and stages of development.

CSL is convinced it has developed the global standard of care for what is a rare genetic disorder that causes repeated episodes of severe swelling in different parts of the body. ‘HAE’ can be life-threatening for those who suffer.

In January, Andembry was approved for Australia, with markets including the UK, the EU, Japan, and Switzerland equally opening up, but the big opportunity in the US is still awaiting FDA approval.

The company is now working towards reimboursement payment approvals for those countries where Andembry is now available. According to Linton, early indications are “highly promising”.

CSL is “quietly confident” FDA approval might arrive before the end of FY25 (June 30).

It is no secret Robert F. Kennedy Jr, the United States Secretary of Health and Human Services and chair of the ‘Make America Healthy Again’ Commission, is no big fan of the healthcare industry and vaccines in particular.

Linton explained Kennedy’s public scepticism is targeted at the mRNA technology, which to date has not lived up to very high expectations communicated during the early covid pandemic.

CSL’s Seqirus is a top three global vaccine manufacturer, but has never genuinely moved down the mRNA pathway. Its vaccine technology has migrated away from eggs and today is 100% cell-based.

With the USA currently experiencing an above-average severe flu season, one might expect this should flow through a more promising outlook for Seqirus, but things in the USA are far from ‘normal’ these days.

Anti-vaccine sentiment has firmly gripped Trump’s MAGA base with general vaccination levels in 2025 some -50m people below the level back in 2019/20. This still leaves more than 100m vaccinations in that country and CSL’s observation is the annual rate of decline is noticeably slowing.

Equally important; while general scepticism and apprehension towards vaccines has spiked around the globe since the covid pandemic, the fall in vaccination numbers remains primarily an American phenomenon.

News about the US administration allocating US$500m for the development of a government funded universal vaccine does not worry CSL with Linton pointing out such universal vaccine has long been the Holy Grail inside the industry (so nothing new) and US$500m, in this context, doesn’t seem like a whole lot (considering the time required including challenges).

Linton’s presentation also mentioned Seqirus having developed an adjuvant that significantly improves the potency and breadth of vaccines, especially for influenza, as it helps the body with generating immunity not just to the vaccine strain but also to related strains, and so offers broader protection.

Regarding Vifor, the largest acquisition in the company’s history that arguably hasn’t lived up to expectations to date, Linton assured the picture will look a lot better in ten year’s time, which is the typical timeframe used by CSL management and board.

Vifor’s iron deficiency treatment is starting to perform in growth markets, Linton assured the audience, and it has recently been launched into China. Vifor operates from Switzerland, so no tariff threats should be overshadowing its future in China.

Just like every other company on the planet, especially those considering themselves to be innovators, CSL has started implementing AI across a small part of its plasma collection operation. While early indications are of efficiency improvements being achieved, one should not expect any big announcements at this early stage.

One day after Linton’s address to shareholders in Sydney, news came through that Vinay Prasad has been appointed as head of the US Food & Drug Authority’s (FDA) Centre for Biologic Evaluation & Research (CBER).

As also highlighted by Ord Minnett two days later, Prasad, a haematologistoncologist, has been accused of spreading misinformation about the covid-19 vaccine and was a vocal critic of the Health Department’s response to the pandemic.

News of his appointment triggered sharp share price falls for biotechs around the globe and CSL’s share price has not been immune. Ord Minnett stated its analysis suggests Prasad is not necessarily against broad-based immunisation for influenza per se, but he is sceptical of much of the clinical data.

And Now For Something Different… NextDC

Of a complete different nature was the appearance of NextDC ((NXT)) CEO Craig Scroggie at the annual investor conference organised by the Australian Shareholders’ Association on Wednesday this week.

In contrast with Linton’s measured though educational endeavour, Scroggie commanded central stage like a whirlwind of joy and happiness.

Attendees on Wednesday approached him afterwards with gratitude for successfully explaining the complicated matters of AI, data centres and energy requirements to a layman’s audience.

A few confessed to being a shareholder too.

NextDC had just announced its biggest contract ever, causing the share price to rally on the day.

As a builder of key infrastructure in support of tomorrow’s AI revolution in Australia, NextDC is suddenly super hot among investors these days. Scroggie’s presentation at the Macquarie Conference earlier that day had elicited no less than 135 questions from the audience.

At the ASA Conference, Scroggie’s on stage appearance was brief but no less popular, as the NextDC CEO explained the giant leaps occurring through technology, also affecting the country’s energy demand.

The past decade has seen the single largest transformation in computing power taking place –ever!– and NextDC operates the key supporting infrastructure.

Ranging from internet connections at home and in offices, to satellite services through Starlink and internet access while sitting on a plane high above Australian skies, ultimately all roads lead to NextDC’s data centres in and around major cities across the country, with mining companies equally on the customer list.

As far as the day’s announcement goes, the market had been waiting to see whether/when the next contract might be announced and what exactly would be in the finer details.

On Wednesday, just about everything turned into a positive surprise, negating the general scepticism that had previously weighed down on the share price.

NextDC announced its first-ever AI deployment contract, alongside a fresh record six-monthly 52MW agreement that also featured a significant step-up in activation and billings.

Those analysts who’ve been quick enough to respond are universally in agreement: it proves industry dynamics, carried by AI, remain robust, tangible and real.

NextDC’s future is being de-risked, despite ongoing requirement for significant capex spending, and more contracts will only further strengthen the investment case.

****

Both CSL and NextDC are owned by the FNArena-Vested Equities All-Weather Model Portfolio.

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

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