Mounting COVID-19 cases on a daily basis has triggered an economic crisis, strongly reflected by plunging stocks with Dow Jones industrial average plummeting into a bear market. The concerns over the economic impact of the coronavirus outbreak further intensified after the World Health Organization (WHO) officially declared the disease, COVID-19 a pandemic on Wednesday, 11 March 2020. With Dow Jones plunging nearly 1465 points, the Australian Securities Market S&P/ASX 200 Index (INDEX ASX: XJO) also sank steeply by approximately 7.9% to settle at 5304.6. The impact of rising coronavirus outbreak COVID-19 is also visible on the healthcare sector which at the close of the trade session on 12 March 2020, S&P/ASX 200 Health Care sector (XHJ), settled at 39,461.9, down by 3012 basis points or 7.63%.
CSL beats CBA and BHP as the most valuable company
CSL is a leading biotech giant with a focus on the development, manufacturing, commercialization & delivery of biotherapies and influenza vaccines, with its two-core businesses - CSL Behring and Seqirus.
In times like these when the global share markets are crashing, one of the health care service providers, the vaccine maker CSL Limited (ASX: CSL) has been ranked as the most valuable company on Australian Securities exchange recently, overtaking the dual-listed miner, BHP Group Limited (ASX: BHP) to become the most valuable company on the ASX, also beating Common Wealth Bank of Australia (ASX: CBA), in a watershed moment for the industry, as described by the local biotech leaders, with the market capitalization of CSL now standing at $127.36 billion, compared to $77.56 billion and $111.72 billion valuation of BHP and CBA respectively.
Like other stocks, the share price of CSL has also deteriorated over the past month, falling from $328.250 per share on 12 February 2020 to settling at $280.51 on 12 March 2020. However, when compared with the sliding price of CBA and BHP, which have tumbled around 19% and 26% respectively, this seems trivial.
CSL’s Stock Information
On the stock front, CSL’s stock was trading on 13 March 2020 at $269.50 (AEDT 11.36 AM), down by 3.925%. The 52-week high and low of the stock was noted at $ 342.750 and $189.14. In the last six months, CSL delivered a positive return of 31.27%, with the average volume of 947,894, P/E ratio of 47.93x and an EPS valued at $6.33. CSL generated an annual dividend yield of 0.94%.
CSL Ranked Amongst World’s Top Three Most Valuable Biotech
Earlier in January, CSL has been listed as one of the top three most valuable biotech firms in the world when the share price of this Melbourne-headquartered blood products company broke the $300 share price milestone.
Key to CSL’s Success
The success of CSL is reflected by the fact that in the last five years, CSL's share price has soared 228%. Over the last 20 years, the company has gone from strength to strength, accomplishing the noteworthy achievement of building up from a small federal government department back in the 1990s to now sitting at the top on the ASX.
Today, CSL is a worldwide market leader in blood plasma research & disease treatment, with its footprints in more than sixty countries and engaging more than 25,000 people across the globe.
Key to CSL’s exorbitant progress lies in is its high investment in research and development to develop a continual pipeline of novel and innovative products and further expanding its global R&D capabilities. CSL invested approximately US$3 billion in R&D in the last half-decade and US$832 million in the past year. This provided additional revenue streams and established a much bigger moat to protect against market competition.
Another fact supporting CSL’s success relates to its earnings growth of approximately 16.5% annually (over the last three years). CSL’s earnings base is effectively protected from any business cycle decline.
The company's recent success is attributable to escalating demand for immunoglobulin resulting from a dearth of supply, as reported by the US FDA in August 2019. With the demand for the product having soared amid greater usage and more knowledge of the therapies by doctors, CSL has profited from this immunoglobulin shortage in Western markets, especially in the United States.
Worth noting that Immunoglobulin therapies are used for treating ailments, including chronic inflammatory demyelinating polyneuropathy, Guillain-Barre syndrome, lupus, Kawasaki disease, and immune deficiencies.
Moreover, CSL opened plasma collection centres quicker than Grifols and Takeda (CSL's main competitors), letting the company garner market share.
Strong Financial Progress Reported in 1H FY2020
For the first half of the financial year 2020, CSL reported a strong half-year with both revenue and net profit after tax (NPAT) up 11%. The robust 1H performance mirrored-
- Robust progress in immunoglobulin portfolio
- Well advancing transition to its own distribution model in China.
- Sustained progression of the haemophilia portfolio
- Solid performance from Seqirus
The company also upgraded FY2020 NPAT guidance anticipating 10-13% rise in growth amounting to US$2,110- US$2,170 million on a CC (constant currency) basis.
CSL’S Segmented Financial Highlights
In the next five years, CSL is poised well to continue to deliver strong earnings growth, propelled by a continued rapidly burgeoning plasma collection network, and soaring immunoglobulin products demand at a global scale.
Outlook for the financial year 2020
- Anticipating nearly US$2,110 million to US$2,170 million NPAT at constant currencies, representing a rise of 10-13% as compared to FY2019.
- Anticipates growth of nearly 6 % in revenues, up by nearly 10% accustomed for GSP.
- A continuous strong demand for plasma and recombinant products is also expected.
- Expecting a one-off effect on albumin sales resulting from the transition to a new distributor model in China.
- CSL’s product differentiation and process improvement to benefit its Seqirus portfolio. The portfolio to result in accordance with prior guidance.
CSL’s Take on COVID-19
On coronavirus pandemic, CSL specified that despite being influenza virus the core focus area of CSL, not the novel Coronavirus, the company has joined the bandwagon to fight the deadly disease by collaborating with Queensland University’s vaccine development program for COVID-19, thereby contributing to the global effort in combating the illness. Further, it was reported that it would deliver its technical expertise and a donation of its patented adjuvant technology- Seqirus' MF59®, to the Brisbane-based university’s pre-clinical development plan
The company assured a donation to the China Red Cross valued nearly RMB 1 million, underpinning its efforts to prevent the coronavirus outbreak, in an acknowledgment of the effect on the communities within which CSL functions.
To meet the mounting worldwide demand and to address the life-saving medicines' unmet need, global capacity is required. CSL is well-positioned to meet the needs of patients as well as health care providers globally with its strategic manufacturing and distribution capacity. CSL's strategy includes a firm focus on improving its efficiency across the company’s business, including scaling up its operations to address the growing global market.