Healthcare

CSL nudges higher following completion of Vifor Pharma acquisition

By Market Index
Tue 02 Aug 22, 2:40pm (AEDT)
Blood plasma balls or round discs which could be construed as blood cells
Source: Unsplash

Key Points

  • CSL expects to hold more than 97% of Vifor shares on completion and advised investors that planning for the integration of Vifor is well under way
  • Synergies are expected to be phased in a 3-year period post acquisition close
  • Citi expected the acquisition to be around 9% accretive to NPATA per share

CSL (ASX: CSL) managed to defy the -0.50% dip experienced by the S&P/ASX 200 (XJO) index at noon, with the biotech giant up around 0.58% following revelations it has received all necessary regulatory clearances for the $17bn acquisition of Swiss giant Vifor Pharma, effective from 2pm AEST today.

Given that all conditions for CSL’s US$179.25 per share offer for Vifor – initiated last December - have now been met, completion is expected proceed by 9 August 2022.

CSL expects to hold more than 97% of Vifor shares on completion and advised investors that planning for the integration of Vifor is well under way.

CSL will proceed to cancel the remaining 3% in accordance with Swiss takeover rules and will apply for the delisting of these shares on the Swiss Exchange (SIX).

Upon completion of the acquisition, Hervé Gisserot the current chief commercial officer for Vifor Pharma, will lead the Vifor business as general manager, and report to CSL’s chief operating officer, Paul McKenzie.

Synergies

Synergies are expected to be phased in a 3-year period post acquisition close.

Commenting back in January, Citi expected the acquisition to be around 9% accretive to NPATA per share, and including amortisation is expected to be “modestly accretive” to earnings per share (EPS).

What does Vifor Pharma do?

Vifor Pharma Group, a specialty pharmaceutical company with leadership in renal disease and iron deficiency, is expected complements CSL’s existing diverse and robust pipeline across the therapeutic areas of Haematology, Thrombosis, Cardiovascular, and Transplant.

Commenting on today’s announcement, CSL's CEO Paul Perreault noted:

"Joining CSL, the Vifor business adds near-term value along with a clear path to long-term sustainable growth. It also adds an outstanding management team, along with a high-value and complementary portfolio of products and market leading position in the nephrology and iron deficiency spaces."

Overall, the Vifor acquisition is expected to expand CSL’s blood products franchise and provide exposure to a growing renal disease market, where the prevalence of Chronic Kidney Disease (CKD) is expected to grow at 8%-plus annually. 

What happens at the half year?

In line with expectations, CSL reported net profit after tax (NPAT) of $1.76bn for the 6 months ended 31 December 2021, down -3%, or -5% on a constant currency basis.

A highlight at the half year was HPV royalties which were up 134% due to a sales rebound following strong demand and increased supply.

The company paid an interim dividend of US$1.04 per share.

CSL will announce its full year result 17 August and FY22 NPAT is anticipated to be in the range of approximately $2.15bn to $2.25bn at constant currency, including around $90m to $110m in transaction costs related to the agreement to acquire Vifor.

CSL plans to hold a dedicated Vifor market briefing 17 October when management will discuss Vifor’s growth strategy and insights into its product portfolio and financials.

image
The CSL share price has been treading water for some time.

 

What brokers think

CSL shares have not fared well since the Vifor acquisition was announced back in December and have gone virtually nowhere year-to-date.

Consensus on CSL is Strong Buy.

Based on Morningstar’s fair value of $269.74 the stock appears to be overvalued.

Based on the six brokers that cover CSL (as reported on by FN Arena) the stock is currently trading with 8.7% upside to the target price of $321.

Macquarie notes foot traffic trends for CSL’s US-based collection centres showed sequential improvement in July and retains Outperform rating and $312 target. (01/08/22).

The broker is forecasting a full year FY22 dividend of 251.00 cents and EPS of 676.05 cents.

Yesterday, Citi reported that recent figures from Grifols and Takeda show the plasma industry continues to improve, courtesy of strong demand and rising prices.

The broker retains a Buy rating, a target price of $345 and is forecasting a full year FY22 dividend of 324.50 cents and EPS of 703.79 cents.

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