ASX healthcare giant CSL (ASX: CSL) reported an 11% increase in sales and a 15% increase in net profit on a currency adjusted basis for 2024.

This was largely thanks to the strong performance of CSL's Behring division, which benefitted from healthy demand for immunoglobulin and an improved global supply situation.

Despite those fairly strong top-line numbers, CSL shares weakened after the results were released. Morningstar’s CSL analyst Shane Ponraj thinks that this was mostly down to the company’s guidance for 2025.

CSL said that it expects profits of between USD 3.2 billion and USD 3.3 billion next year, implying 10-13% constant-currency growth. This was roughly 3% lower than what Ponraj was expecting.

Our recent preview of CSL earnings revealed three things that Ponraj would be keeping an extra close eye on. These were:

  • Margin recovery at CSL Behring
  • News on the rollout of haemophilia treatment Hemgenix
  • Revenues at CSL Vifor

Let’s take a look at each one.

CSL Behring margins

CSL’s Behring segment sells products, such as immunoglobulin, that are derived from blood plasma. This business was responsible for over 70% of CSL’s overall sales in 2024.

Behring’s gross profit margins have suffered in recent years from plasma shortages and increased blood collection costs during the Covid-19 pandemic. A recovery to pre-pandemic margins of around 57% is seen as a key profit driver for CSL over the medium term.

For 2024, CSL had guided to a 100 basis point improvement in Behring’s gross margins on a constant currency basis (100 basis points is 1 percentage point). In the end they achieved 120 basis points of improvement, largely driven by reduced collection costs, efficiencies, and price increases.

Once FX was taken into account, however, margins only rose from 49.1% to 49.7%. Management have previously said that it will take three to five years for Behring’s profitability to return to pre-Covid levels. While the impact of FX in 2024 was unfortunate, Behring’s gross margins appear to be moving in the right direction.

Hemgenix rollout

CSL licensed Hemgenix, a gene therapy for haemophilia B, from uniQure in fiscal 2020. As gene therapies pose a long-term potential threat to demand for plasma-derived treatments, success with their own gene therapies could soothe concerns of disruption to CSL’s business.

Hemgenix and other gene therapies are very expensive. As a result, adoption of newly approved treatments can take some time. This appears to have been the case for Hemgenix, which gained plenty of referrals in 2024 but was only administered to 12 patients. Ponraj says this was slower than management were expecting.

Vifor sales

In Shane’s opinion, this was the most disappointing aspect of CSL’s results.

As we highlighted in our earnings preview, kidney treatment firm Vifor – which CSL acquired in 2017 – has faced headwinds in its vital US market. Ponraj was hoping to see some improvement here, but the segment's sales fell by around 7% on an annualised basis and gross profits fell by 10%.

The main issue appears to be continued step-edit pressure, where patients are required to try cheaper options before using Vifor’s leading Ferinject treatment.

CSL’s outlook and Fair Value estimate

All things considered, Ponraj held his Fair Value estimate for CSL at $310 per share after the company’s full year results.

While disappointing sales in the Vifor segment led Ponraj to decrease his profit forecast slightly, he noted that CSL guided to another year of lower capital investments as they focus on improving yields in their existing plasma collection operations.

A key assumption in Ponraj's valuation is that gross margins in the key Behring segment will recover to their pre-pandemic levels of 57% by fiscal 2028.

At a recent share price of around $299, CSL shares traded modestly below Ponraj’s Fair Value estimate and commanded a 3-star Morningstar rating.

 

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