Australia | 1:46 PM
CSL surprised even the most cautious commentators with (yet again) a hefty downgrade for future earnings. Analysts are questioning where to now?
- Weakness in immunoglobulin and albumin drives another major earnings reset
- Analysts question whether CSL’s Behring challenges are cyclical or structural
- Competition, pricing pressure and NHS contract loss weigh on outlook
- CSL’s valuation premium has evaporated amid ongoing downgrades
By Danielle Ecuyer
Harsh words from analysts: not happy!
Australia's largest biotech CSL ((CSL)) has endured one of the more dramatic de-ratings among Australia’s once revered blue chip companies, with the decline reflecting not just weaker earnings but a broader erosion of investor confidence in what was once viewed as one of the ASX’s most dependable long term compounders.
The latest downgrade saw the share price tumble -16% in a single session after management cut revenue expectations by around -4% at the lower end of prior guidance, while net profit after tax guisance was reduced by around -7%.
More troubling for investors was the weakness came primarily from immunoglobulin (Ig) and albumin sales, the core earnings engines of CSL Behring.
Jarden commented CSL’s FY26 ambitions for both products had proven overly optimistic and ultimately unrealistic.
The downgrade also re-inforced concerns around management execution following multiple downgrades since the August 2025 result.
Investors historically paid a premium valuation for CSL because of its reputation for reliable earnings growth and defensive qualities, however, that trust has weakened as earnings expectations have continued to deteriorate.
The current interim CFO’s 90 day review triggered the latest reset, which Canaccord Genuity described as a “clear eyed dose of operational frankness”.
This broker was particularly critical of what it viewed as costly misdirected innovation and investment decisions, arguing these have weighed heavily on both company performance and shareholder returns.
UBS points to an additional -US$5bn in impairments on top of the -US$1.6bn recorded in 1H26, reflecting earnings erosion since the Vifor acquisition across intangible assets and lower utilisation assumptions for property, plant and equipment.
Investors are now increasingly questioning whether CSL’s challenges are cyclical or more structural, including slowing growth in immunoglobulin, rising competition from newer therapies, ongoing weakness in China's albumin sales, and whether the Vifor acquisition has delivered the expected strategic benefits.
CSL Behring's pain just keeps on coming
Taking a deeper dive into the latest downgrade, Bell Potter details how ADMA Biologics flagged a week earlier there had been an oversupply of Ig in the US market.
Arguably, the factors include rising supply from competitors Grifols, Takeda and others, the analyst states.
Interim CEO Gordon Naylor referred to the market as increasingly competitive, where CSL has lost market share to Grifols and Takeda through 2025 and into 2026.
Other analysts highlight management’s comments around a “destocking” event in the market, which has resulted in a revenue downgrade of -US$300m.
Consideration by analysts has also been given to what is referred to as 340B. As articulated by Ord Minnett, 340B relates to the participation of pharmaceutical manufacturers in Medicaid to sell outpatient drugs at discounted prices to healthcare operators which care for uninsured and low income patients.
As demand has subsided, so too has the problem of excess supply emerged. In CSL’s case, the issue may have been exacerbated by the loss of the UK’s NHS' primary immunoglobulin supply contract in January 2025.
Bell Potter finds the ongoing “degradation” in Behring’s gross margin very concerning and queries whether margins can improve back to the pre-covid level of circa 57%, as CSL has lost market share amid oversupply challenges.
Management infers to excess inventory as transitory in nature, citing demand for Ig continues to grow.
Morgans explained management repeatedly stated underlying plasma demand remains healthy, with Ig volumes continuing to grow in the mid-to-high single digits globally. Equally, the overall market is viewed as “rational and oligopolistic”.
Analysts are not so convinced. Bell Potter sees further competitive pressures coming from the approval by EU regulators of Grifols’ Egyptian based plasma supply chain, which is expected to boost global supply.
Equally, the broker envisages it will be challenging for Behring to re-establish market share without conceding too much on price, resulting in downgraded Ig sales estimates for FY27-FY28.
Citi warns the Ig market is not on “firm footing” and makes additional downgrades to Behring gross margins, resulting in more aggressive net profit after tax downgrades compared to peers.
Macquarie also cautions around the potential extent and longevity of weakness in the Ig business, despite management guiding to high single digit revenue growth for FY27.
Jarden believes CSL has considerable displaced Ig volume, including the effect of the NHS contract loss, which could result in further pricing pressure.
Ord Minnett is equally pondering where growth will come from in FY27, lowering assumptions around Ig revenue growth.
Morgan Stanley is less fazed and adjusts Ig revenue growth forecasts in line with expected market growth of circa 7% for FY27. UBS details how the deeply discounted Medicare program, the 340B channel, has been a structural headwind for CSL pricing.
A reduction in inventory should assist with better control, albeit the bar for FY27 growth is now lower.
Specialty product Hizentra was noted by Jarden as a large contributor to the Ig downgrade, as it commands a higher margin than Privigen, contributing in part to the reduction in FY26 gross margin guidance by -100bps.
Morgan Stanley points out the Behring gross margin is now implied post update at around 47.9% in 2H26, down around -200bps year-on-year and circa -330bps on the prior half.
Hizentra is also facing new competitors which, according to Jarden, are expected to challenge both volumes and pricing.
Chinese albumin market also under pressure
The Chinese albumin market value has been downgraded by around -US$200m. As highlighted by Macquarie, CSL’s China plans have proved “too ambitious”.
Management pointed out the overall volume of albumin in China, the world’s largest albumin market, has not fallen. Price competition is instead pushing down the total value of the market and CSL’s franchise is anticipated to decline by more than -15% in FY26.
Competitor Grifols also reported a decline in albumin sales of -6% in the March quarter, UBS notes, which was attributed to new regulation limiting hospital usage in the country combined with oversupply.
Ord Minnett believes the expenditure required to grow albumin market share will challenge the achievement of satisfactory returns on investment over the medium term.
RBC also flags an uptick in albumin market share against further price deterioration, remaining cautious on the prospect for a recovery.
CSL Behring, Ig and albumin contributed around 72% of FY25 revenue.
Seqirus and Vifor served up mixed outlooks
Turning to CSL Seqirus, management's update was broadly positive, with FY26 performance noted as “moderately stronger”, Macquarie observes.
Citi singles out an uplift in FY26 flu vaccine growth to 10% because of late season orders.
Vifor remains subject to increasingly price competitive markets with the introduction of several generics in Europe and soon in the US market.
As explained by Bell Potter, the end of some Velphoro re-imbursement benefits from December 31, 2025, combined with increased competition, resulted in the additional non cash impairment of -US$5bn across FY26-FY27.
Jarden views Vifor as achieving better than expected results over the last three halves, but the outlook has been tempered by an increased rate of decline in its iron franchise.
Robust price competition against Vifor's flagship US iron drug and Venofer represent the initial signs of generic competition.
Middle East impacts came in at -US$150m, creating another earnings shortfall, Canaccord Genuity notes.
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