CSL Posts 23 Percent Revenue Growth, Boosted Largely By H1N1 Sales

PERTH, Australia - Melbourne-headquartered CSL attributed its 23 percent revenue growth for the first half of 2010 to it's A/H1N1 vaccine Panvax out of its Biotherapies business unit. Business strategy for the company will focus on geographic expansion in emerging markets and specialty products.

CEO Brian McNamee told analysts and reporters during a Feb. 17 earnings call that CSL Biotherapies sales increased 31 percent to AU$528 million The H1N1 vaccine contributed AU$160 million in sales. CSL reported an after-tax profit of AU$617 million for the six months ended Dec. 31, 2009. The financial year in Australia begins July 1.

"CSL's ability to conduct very important trials and have them published and generate vaccine and benefit economically in the first half was a very significant part of our result," the CEO said, adding that the U.S. government's cancellation of vaccine orders had no impact in the first half of the year.

In defense, he noted that when orders were placed most governments believed that two doses of the vaccine would be necessary, and "it's quite unusual for a pandemic vaccine to be highly efficacious with one dose" (Also see "CSL Announces Robust Immune Response From Single Dose Of Swine Flu Vaccine; TGA Approval Expected Soon" - Scrip, 14 Sep, 2009.).

He also noted that CSL structured its contracts internationally to ensure that antigen was the key driver, not the number of doses.

Offsetting the H1N1 success, however, was a disappointing result for HPV vaccine Gardasil royalties, McNamee said, primarily because uptake in the U.S. and Europe was slower than anticipated.

"The Australian government has done a fantastic job immunizing young women against HPV and, yes, we benefited greatly for a number of years from that and now the sales in Australia really are dropping significantly," McNamee said.

Australia offered both Gardasil and Panvax free of charge to its population; the government purchased 21 million doses of the Panvax vaccine, which was enough to treat the entire population.

CSL also signed a six-year marketing deal with Merck for its seasonal flu vaccine Afluria in the U.S. Afluria is currently marketed in 27 countries (Also see "Merck Re-enters Flu Vaccine Business: Seals Six-year Afluria Marketing Deal With Australia's CSL" - Scrip, 1 Oct, 2009.).

McNamee said geographic expansion in emerging markets coupled with growth in specialty products will continue to be a strong focal point for CSL strategy going forward.

The company saw positive growth in China with a strong demand for albumin, for which the price remained flat, but volume increased.

The company also saw volume growth in specialty products such as Berinert , which won U.S. FDA approval for hereditary angioedema in October (Also see "CSL Wins HAE Race For U.S. FDA Approval; Will Orphan Drug Rules Lock The Gate Behind?" - Scrip, 13 Oct, 2009.). Berinert is also approved in Australia, Spain, Japan, Argentina, Switzerland, the Czech Republic, Germany and Hungary.

CSL Behring, CSL's North American business unit, saw total sales grow by 10 percent to $1.8 billion. Its immunoglobulin product sales grew at 9 percent, with sales of Vivaglobin and Privigen both solid.

Reimbursement was challenging in the U.S. environment the first half of the year, the CEO said, "with growth in unemployment and the economic situation meant reimbursement got very challenging for some patients that caused disruption of therapy."

He said that while CSL has the best portfolio of products in the U.S., the market there will continue to be challenging, while growth is stronger in Europe and the rest of the world.

After caving in to opposition from the U.S. Federal Trade Commission, CSL scuttled its $3.1 billion deal to acquire Talecris Biotherapeutics last June (Also see "Spilled Blood: CSL & Talecris Terminate Their Merger Deal In Face of FTC Lawsuit" - Scrip, 9 Jun, 2009.), and McNamee told analysts that while CSL would continue to look for another acquisition, it would most likely seek complementary products where CSL already has a field force in therapy areas such as coagulation, neurology, oncology and immunology.

When asked what the anticipated impact might be from the class-action lawsuit filed against CSL and Baxter for price fixing in the U.S., McNamee was defensive, saying the case was baseless, adding, "it's rent a crowd currently ... welcome to America."

CSL's projected revenue outlook for 2010 is between $970 million and $1.07 billion net profit after tax, with expectations toward the upper end, the CEO said. Half-year earnings exceeded analyst expectations and CSL's share price on the S&P ASX went up 6 percent following the announcement to AU$33.90.

- Tamra Sami ([email protected])