Biotech giant stumbles

CSL faces some big challenges, but the long-term prognosis is more encouraging

- GRAHAM WITCOMB

CSL is a century-old company and a darling among healthcare stocks, having delivered a 15% annual return over the past 10 years.

Currently, investors are spooked by three risks that are getting lots of attention.

Risk 1: Weight-loss drugs

Ozempic improves glycaemic control and can be used 'off label' to assist weight loss.

While the drug has been around for years, it's making headlines because researchers are finding new applications for it and easier ways to administer it.

The risk that Ozempic-like drugs, known as GLP-1 agonists, pose to CSL can be split into broad and narrow effects.

On the broad side, Ozempic helps people lose weight by reducing appetite. Ozempic is currently very expensive, but we can imagine a future where the government subsidises the drug as a way to improve the population's overall health and take pressure off stressed healthcare budgets.

The relevance to CSL is that its sprawling network of plasma collection centres tends to focus on lower-income neighbourhoods.

However, individuals with lower incomes also face a higher risk of being overweight, so this demographic may benefit from Ozempic disproportionately.

If people on Ozempic spend less on food, and their discretionary incomes subsequently rise, the pool of willing plasma donors may decline, or CSL may need to increase donor fees to compensate.

We consider this scenario unlikely, but Ozempic could disrupt some of CSL's products directly, including in its Vifor division - chiefly iron and other therapies used by patients with chronic kidney disease (CKD) and its nephrology and cholesterol drugs.