CSL tipped for ‘modest’ vaccine earnings as overseas peers soar

CSL tipped for ‘modest’ vaccine earnings as overseas peers soar

JP Morgan healthcare analyst David Low said CSL’s share price has not rallied like other US biotechs because the revenue implications of its involvement in vaccine production is small by comparison.

“CSL’s exposure to vaccines is quite small especially after the University of Queensland vaccine program was terminated. It’s about the relative financial contribution – the potential earnings from COVID vaccines is modest compared with the group’s other business lines,” he said.

Of CSL’s $US8.8 billion ($11.4 billion) in sales revenue in 2020, only $US1.3 billion was from vaccine making. The core of the ASX-listed giant’s business is in its speciality plasma products group, which has been disrupted over the past year due to reduced foot traffic at its US collection centres.

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“Given rising COVID case numbers and the early stage of the vaccine rollout, I expect [plasma] collections will remain under pressure for some months yet. So unfortunately, come February [when the company gives interim results], the outlook will still be quite unsure,” Mr Low said.

CSL has said it does not expect vaccine making to have a material impact on revenues, despite signing agreements including for the production of 51 million doses of AstraZeneca’s vaccine.

“CSL is proud of our ongoing contribution to Australia’s COVID response, including our hyperimmune program, our support for the University of Queensland vaccine program and re-tooling for the AstraZeneca vaccine,” a spokeswoman said earlier this month.

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Morningstar healthcare analysts are expecting Pfizer/BioNTech and Moderna to lead sales as the COVID-19 vaccine and treatments market grows to be worth tens of billions of dollars annually.

“We expect $US13.7 billion in global sales for Pfizer/BioNTech’s [vaccine] in 2021 and significant profits through 2022,” Morningstar analyst Karen Andersen wrote in a note to clients this month.

“We expect Moderna to see $US8 billion in 2021 revenue related to its COVID-19 vaccine.”

Morningstar forecasts a $US39 billion COVID-19 vaccines market in 2021 but says the need for companies to appear ethical in their distribution will put downward pressure on pricing.

It says most vaccine stocks are either “fairly or overvalued”.

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Few Australian institutional investors have direct exposure to offshore vaccine makers, with Platinum Asset Management’s healthcare fund one of the only significant investors.

Portfolio manager Bianca Ogden, an early backer of Moderna and BioNTech, said she has been adding to and selling down her stakes in companies depending on the overall level of enthusiasm for vaccine stocks, and when she thinks there is value.

“It’s a long-term holding that will fluctuate based on the retail market. We have sold some of these at different stages,” she said.

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