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Thursday December 16, 2:39 PM

UPDATE: Australia CSL Set For Pft Gain From Ops Transfer


By Richard Noonan



MELBOURNE (Dow Jones)--Australian plasma company CSL Ltd. (CSL.AU) said Thursday it has started transferring the manufacture of immunoglobulin products from the U.S. to its more efficient plant in Switzerland after recently getting regulator approval for the move.


In a development that some analysts say will bolster profit margins, CSL said it has started to process a blood-derived product, known as intermediate paste, from Kankakee at its ZLB manufacturing plant in Bern.


Speaking at its annual research and development briefing, Chief Scientific Officer Andrew Cuthbertson said the Food and Drug Administration approval completes a major integration project linked to the company's purchase of the Aventis Behring plasma business in April.


"A major goal of our integration process was to be able to increase the efficiencies of our production of immunoglobulin products by transferring fractions from the manufacturing process to our very high efficiency facility in Bern," he told reporters.


"That has been achieved, which is a great result and important to us in terms of our operational efficiency," Cuthbertson said.


Melbourne-based CSL bought Aventis Behring from drug company Aventis SA (AVE) for US$675 million and is nearing the end of a process to combine those assets with it own ZLB business.


As part of an ongoing cost-cutting program to help boost returns, CSL has closed a third of its U.S. plasma collection centers, shut plants and slashed global manufacturing output by a quarter.


Citigroup Smith Barney analyst Andrew Goodsall described the production transfer as "one of the most significant milestones" for CSL in the current fiscal year ending June 30, 2005.


While it will take up to six months for the Bern-produced products to reach the market, Goodsall estimated the transfer will improve yields by 25% and possibly lead to profit upgrades for the company.


"This is earnings upside," he said.


Shares in CSL closed up 3.2% at A$28.99, extending gains so far this year to 62%. The stock touched A$29.07 in intraday trading, its highest level in six weeks.


Cancer Vaccine Moves Closer


CSL detailed the change as part of an update to the market on a range of research projects underway.


Cuthbertson said development of an anticancer vaccine it has licensed to U.S.-based drug company Merck & Co. (MRK) is tracking to plan after successful results from the latest clinical trials.


He noted that Merck has indicated it is on schedule to file for FDA approval of the newly named Gardasil vaccine in the second half of 2005. The vaccine aims to stop infection of the human papillomavirus, the sexually transmitted virus that causes most cases of cervical cancer.


FDA approval and subsequent sales of the vaccine will trigger milestone payments and royalties to CSL, which licensed the product to Merck after completing initial discovery work in the early 1990s.


"It's at a very exciting stage now," Cuthbertson said.


"It's very important to CSL commercially."


He declined to comment on the payments it may receive, noting its relationship with Merck is confidential.


However, he said typical license fees for a product of this type usually attract royalty payments of between 5% and 9% of sales. He also said the vaccine compares with other "high-tech products," which typically sell for more than US$100 a dose.


Gardasil, which is initially targeting an audience of up to 70 million adolescent women across the U.S. and Europe, may be ready for sale within 12 months of the filing, he added.


Citigroup's CSL valuation attributes almost A$3.00 a share to the vaccine.


U.K.-based GlaxoSmithKline PLC (GSK) is developing a similar vaccine, although its development is estimated to be at least six months behind that of Merck.


Cuthbertson also said CSL has signed a new research agreement with Aventis to develop a vaccine to prevent chlamydia.


Research on the vaccine is still in the preclinical phase, with clinical trials for any vaccine about two years away.





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Friday December 17, 2:43 PM

UPDATE: Analysts Eye Vaccine Payday For Australia's CSL


By Richard Noonan



MELBOURNE (Dow Jones)--Analysts that follow Australian plasma group CSL Ltd. (CSL.AU) are increasingly confident the company will reap windfall profits from a cancer vaccine in development by U.S. partner Merck & Co. (MRK)



After market updates by both companies this week, several analysts Friday upgraded valuations for CSL and began including potential licensing payments into their forecasts on rising expectations the vaccine will succeed.


Merck is competing with rival drugmaker GlaxoSmithKline PLC (GSK) to be first to market with a vaccine to stop infection of genital warts and human papillomavirus, the sexually transmitted virus that can cause cervical cancer.


While both vaccines have proved successful in clinical tests, Glaxo's development is estimated to be at least six months behind that of Merck, whose vaccine guards against four types of the virus compared with Glaxo's two.


The vaccine has been dubbed by senior executives of U.K.-based Glaxo as "the biggest vaccine ever," with potential annual sales of several billion dollars.


Merck, which is under pressure to come up with another blockbuster product after the recent withdrawal of painkiller Vioxx, this week named its vaccine Gardasil.


The U.S. drug giant is currently conducting Phase 3 clinical trials of Gardasil and is planning to file for U.S. Food and Drug Administration approval in the second half of 2005, possibly earlier. It plans to follow with an international filing soon after U.S. approval.


Merck also said this week it doesn't expect any patent or intellectual property issues to delay the vaccine's launch.


FDA approval and subsequent sales of the vaccine will trigger milestone payments and royalties to CSL, which licensed the product to Merck after completing initial discovery work on the technology in the early 1990s.


"It is becoming increasingly evident that the HPV vaccine will be on the U.S. market in 2006," Merrill Lynch analyst Michael Carmody said in a note to clients.


"While development risks remain, our level of confidence regarding the vaccine continues to increase as important milestones are achieved," said Carmody, who has a Buy on CSL.


He estimates the present value of the vaccine to CSL as between A$3.00 and A$4.50 per share.


Four other analysts surveyed have valuations on the vaccine between A$2.90 and A$3.45 per share.


Shares in CSL rose 1.8% to A$29.50, extending gains so far this year to almost 64%.


Blockbuster On The Way?


CSL has declined to comment on the value of the vaccine or the payments it may receive because its relationship with Merck is confidential. It has also declined to provide guidance on pricing.


However, typical license fees for a product of this type usually attract royalty payments of between 5% and 9% of sales. The vaccine may compare with other products which typically sell for more than US$100 a dose.


If the product is launched, Citigroup Smith Barney estimates CSL may receive payments totaling A$86.5 million in fiscal 2007, rising to A$146 million in fiscal 2009.


Gardasil, which is initially targeting an audience of 86 million women aged between nine and 24 across the U.S. and Europe, may be ready for sale within 12 months of the filing.


UBS analyst Sophie Johnson estimates Merck may rake in sales of A$100 million in 2006 from the vaccine, rising to A$1 billion in 2008.


"The HPV vaccine could have peak year sales in the multibillion dollar range," said Johnson, who upgraded her CSL valuation for the vaccine to A$2.98 from A$2.10 per share.


However, like other analysts, she noted the political and ethical debate over using public funds for vaccination of young women for a sexually transmitted infection is likely to meet some opposition.


A question mark over whether governments will make the vaccine mandatory also remains.


Even so, analysts noted Merck is looking to broaden the vaccine to include older women and men, a move that may increase the potential market to almost 400 million in the U.S. and Europe alone.


Goldman Sachs JBWere analyst Jack Mordes factored in vaccine contributions into estimates in anticipation of a successful FDA approval. He upgraded earnings forecasts for CSL by 17%-to-20% in the year ending June 30, 2007.


"The comments provided this week by CSL and Merck on HPV were positive and as its filing launch date nears, further positive newsflow and a focus on HPV's contribution to earnings are likely to provide support for the share price," Mordes said in a research note.


The gap between Merck's launch of Gardasil and that of Glaxo will be crucial for potential sales, analysts said.





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Rising plasma prices a shot in the arm for CSL


Date: December 24 2004


By Rebecca Urban


CSL can look forward to improved earnings from its plasma product division, after evidence emerged from the US this week that prices were finally rising.


Analysts believe a decision by the US Centre for Medicare and Medicaid to reimburse a higher-than-expected $US40 ($A52.40) per gram for intravenous immunoglobulin (IVIG) during the first quarter of 2005 is a sign that prices, which have been forced down recently by excess supplies, are firming.


David Stanton, an analyst with ABN Amro, said contracts with doctors and hospitals would expire in the middle of next year and the new reimbursement rates meant new deals would likely be struck close to $US40.


Mr Stanton said due to increased demand for IVIG, distributors had been forced to dip into stockpiles. "Supply is predicted to decrease dramatically by mid 2005. This will mean manufacturers will be able to charge higher prices for IVIG."


The news should reinforce confidence in CSL's ability to achieve the $250-$270 million profit after tax previously forecast for the financial year.


CSL also announced yesterday that it had signed an agreement with the National Blood Authority to continue to provide plasma therapeutic products in Australia. The new agreement runs for four years and starts on January 1.


CSL shares closed 8ÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’Æâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ lower at $29.22.








Commonwealth deal with CSL under microscope


Date: December 24 2004


By Michael Evans


Analysts have questioned whether taxpayers have received value for money under a new federally-funded blood deal finalised with CSL.


Blood products maker CSL on Thursday signed a five-year agreement to supply plasma products to the Australian National Blood Authority in a deal estimated to be worth $100 million to $150 million.


Merrill Lynch analyst Michael Carmody said it appeared the Government was paying the same amount for less product.


"Discussions with management confirm that while the new contract covers an altered portfolio of products and services, the fiscal returns for CSL are broadly in line with the existing arrangements," Mr Carmody wrote in a briefing note.


"It appears CSL has negotiated an outcome where the Commonwealth is paying less for manufactured products but more for a range of ancillary services provided by the company to the haemophiliac community."


He said those services included inventory management, distribution, technical services and patient support programs, noting that CSL already conducted most of the services.


"We see the National Fractionation Agreement contract outcome as a positive for CSL as it removes a potential negative for the stock," he said.


Citigroup Smith Barney analyst Andrew Goodsall agreed there had been a change in pricing structures and service provision.


"Within the agreement we understand that there may have been some reallocation of pricing, giving the Government cheaper headline pricing but this is offset by additional services to be provided by CSL for which the Government has agreed to pay."


General manager of the NBA, Dr Alison Turner, said "the negotiation of the contract has been a major challenge to the NBA as a new organisation".


"We have had to stay up-to-date with a rapidly changing global industry and understand the needs of health services to ensure security of supply and to obtain good value on behalf of all governments," Dr Turner said.


CSL shares closed 7c weaker on Thursday at $29.23.





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Plasma demand bolsters CSL



January 08, 2005


SHARES in CSL, the world's second-largest maker of blood products, have had their biggest gain in four months after Citigroup said prices for its plasma products in the US had risen up to 10 per cent.


Shares climbed $1.24, or 4 per cent, to $31.64, after a 3.1 per cent rise on Thursday. Melbourne-based CSL was the second-best performer on the 15-member S&P/ASX 200 health index last year.


Prices for intravenous immunoglobulin (IVIG) have recovered after a supply glut caused makers such as CSL to close blood collection centres.


The cost of CSL's Carimune NF and GammarP products had risen by about 1000 per cent over the previous year, Citigroup said in a recent note.


"We've seen the first round of pricing increases for 2005 in the US IVIG market come through," said Angus Gluskie, who holds CSL shares among the $380 million in equities he manages at White Funds Management in Sydney.


Global human plasma sales make up as much as 85 per cent of CSL's revenue, according to its latest annual report.


"CSL's earnings are heavily levered to this IVIG pricing," Mr Gluskie said.


"The fact that price rises are going through across the industry and the price rises are sticking -- that's obviously of benefit to CSL."





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Prudent to place stop-loss strategy on CSL


Geoffrey Hill



WHEN the market is running hard as it is now, common sense is quickly discounted.


It is an evident fact that growth stocks (stocks paying low dividends and ploughing back most of their profits into the business) rise fastest in the current market.


CSL is the largest blood plasma fractionalising company in the world. The company's four main divisions are animal health, bio-plasma, biosciences and pharmaceutical.


Currently forecasts for the 2005 full year to June are for a net profit of $270 million, up from $145 million for full year 2004.


This places CSL on a projected P/E of 21 and dividend yield of 1.3 per cent.


Looking at the graph, Point 1 shows the current uptrend in force. At $33 (Point 2) there is a resistance/support region and then another at $37.50 (Point 3).


It looks as though a similar trading pattern may emerge where the price consolidates between the Point 2 and 3 lines. The boxed region at Point 4 shows the type of trading pattern that may be repeated.


During this time, the market will be critically observing the company's performance and sales to see whether profits could jump in the 2006 financial year.


There are two ways to look at this. Either make a positive assumption that at $37.50 next year's profit will be 21 times earnings again (implying a net profit of $350 million). Or make the negative assumption that profit will be steady ($270 million), this gives a P/E of considerably more.


CSL's shares seem priced for perfection with the risk of either profit disappointment or a less buoyant All Ords ready to weigh on the price.


CSL shareholders would be wise to implement a stop-loss strategy to lock in gains in case the trend reverses.






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Turnaround: from trouble to triumph


February 24, 2005


CSL's Brian McNamee and Brambles' David Turner have pulled off remarkable achievements in achieving success after both companies faced big problems two years ago.


McNamee has created Australia's first global pharmaceutical company since the Aspro producer Nicholas. Over the next five years, CSL is headed for skyrocketing profits and growth rarely seen in Australia from non-resource companies.


Turner's achievement (with help from his predecessor C. K. Chow) is no less significant. He has taken the shambles of Brambles' global business and has continued to untangle its problem-ravaged Chep pallet business.


Australian superannuation savers desperately need chief executives and boards who can succeed on the global stage because just under 40 per cent of our main share market index is concentrated in banks and wealth management companies that have been unable to escape Australian borders.


Brambles and CSL have joined the global resource wealth creation powerhouses BHP, Woodside, Rio Tinto and WMC.







McNamee has pulled off two coups. The first was to extend the licence for a vaccine against the human papilloma virus (HPV) with Merck and also gain royalties from a rival product being developed by Glaxo.


McNamee conservatively values the HPV business at $8 a CSL share. It is likely to be a lot more, although CSL earnings will not benefit until 2006-07, so it is out of the range of the Australian institutional radar.


Nevertheless, CSL's global pharmaceutical business is therefore valued at about $24 or 18 times expected earnings per share for the current year. Given what is ahead that is not a high multiple.


In the first half of 2004-05 the big driver of CSL profits was the low-priced stock it bought as part of the Aventis Behring takeover. That discounted surplus stock will continue to drive profits for all of the 2005 calendar year.


In the current half year the company will also begin to benefit from the substantial reduction in its operating costs and the improvements it is seeing in the price of its IVIG (intravenous immunoglobulin) products. In the 2005-06 year it will begin to benefit from the discoveries it has in the pipeline.


Unlike any other Australian bio-researcher, CSL now does not need to share the spoils of its research with the big drug companies -- it can market the products itself. Later it will buy products from small research companies around the world that can fit into its marketing and development chain -- the reverse of what currently happens in the Australian pharmaceutical industry.


CSL is in a transitional stage. The latest boost to profits is merely a signal of what is ahead.






also, sb increase target to $41.74:



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