CSL tumbles as key heart attack drug fails trial, why the market is so disappointed

CSL has received top-line results from the Phase 3 AEGIS-II trial which was aiming to evaluate the efficacy and safety of CSL112 for prevention of major adverse cardiovascular events (MACE) in patients with myocardial infarction. It was hoped CSL112 would assist in reducing cardiovascular death in patients who had experienced non-fatal heart attacks.

The study showed CSL112 did not meet the primary efficacy endpoint of MACE reduction at 90 days. As a result, CSL has reported there are “no plans for a near-term regulatory filing”. The study, which CSL notes is “the most ambitious study in our company’s history”, involved over 18,000 patients from over 850 sites in 49 countries.

CSL said that further analysis of AEGIS-II is “ongoing”, and primary results will be presented at the American College of Cardiology Scientific Sessions to be held on 6 April 2024. “Substantial work remains to fully analyse and understand the complete data and then to determine any development path ahead for this asset,” the company said.

No material impact, but stock price tumbles

Despite CSL reminding investors it had excluded any financial contribution from CSL112 in its forward-looking estimates, and that it didn’t expect any material impact following the AEGIS-II trial conclusion, its stock price has fallen sharply today.

Just because CSL hadn’t factored in any financial benefits from CS112, it doesn’t mean the market hadn’t. For example, Goldman Sachs recently noted the treatment represents “the most material opportunity, and remains the primary focus amongst the investor base”. Still the broker was running with a probability of success of just 15% heading into today’s results.

Analysts at RBC noted today there was a “reasonable expectation” in the market that CSL112 would be commercialised, noting that CSL has spent “close to $1 billion on developing and testing it”. Both brokers noted the company had already taken early steps towards production, with the commercial launch of CSL112 originally slated for late 2025.

RBC suggests the impact of reallocating any resources which had been pointed at CSL112 would be minimal to CSL as “those assets and production lines could be largely re-purposed”. Despite this, when assessing today’s announcement in its entirety, the broker points out that “some investor disappointment” is expected.

This is because the market had penciled in a positive impact on CSL’s margins because CS112 would have been produced largely as a by-product of the company’s existing treatments and resources. RBC notes now “that gross margin tailwind is now no longer available”.

But wait, there’s more…tomorrow!

Broker commentary suggests the market wasn’t completely surprised by the failure of CSL112’s Phase 3 trial, but that this news does require at least some adjustment in probability-weighted price targets, and therefore in CSL’s stock price. Today’s adjustment will likely be quick and localised to a couple of trading sessions as US investors digest the news this evening.

Investors won’t have any chance to wait for the dust to settle, though, as CSL is due to release its half year results tomorrow, Tuesday 13 February.

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