Is It Time to Buy CSL Shares?

When I think of biotech companies, I usually think of a couple of scientist inside a little laboratory. But in reality the industry is mostly powered by billion dollar companies. That’s because if you want to manufacture or produce anything the research and development for your product is usually enormous.

That’s why small biotech firms usually get eaten up for their intellectual property — they need the capital to turn their research into an actual product.

Therefore its commonplace to see majority of returns from a select few companies. Australia’s biggest biotech firm is CSL Ltd [ASX:CSL]. CSL don’t have much competition, because they can buy out smaller local competitors. But recently CSL has been focused on launching products in the US.

What exactly does CSL do?

CSL’s key business involves plasma products, which are then turned into vaccines & pharmaceuticals. CSL splits human blood into its separate components to harness blood proteins. Each blood protein is then used to treat various medical conditions. CSL treats multiple medical conditions, from burn victims to helping patients with immune diseases.

Shares could sustain $100

CSL shares have been doing nothing but going up since the 7th of this month. In short, CSL is finishing off the year strong. Shares have touched the prestigious $100 mark this year.

And guess what? They seem to be climbing up to this point again. Shares are up 11% in 3 months, and could climb even higher before the year ends.

CSL Share Price December 2015

Source: Google finance

CSL is likely to reap rewards from a new Australian fund

The Turnbull government is determined to keep biotech research in Australia. Recently Malcom launched a four year $1.1 billion ‘National Innovation and Science Agenda’. The agenda will be aimed at increasing funding for research and commercialisation.  What would this mean for CSL?

It’s great news for CSL and the Australian biotech industry as a whole. Andrew Cuthbertson, CSL’s chief science officer and R&D director commented last week stating:

We think the fund will help keep the intellectual property and early development in Australia … and it will increase the pool of sound projects suitable for translational and later-stage development.’

CSL does translational research in Australia right now. There are more ideas than we can cope with and of course we’d like to do more,’ Mr Cuthbertson said but also added CSL is eager to ‘understand how we can participate [with the fund]’.

With CSL’s involvement in the new Australian biotech fund, things are looking pretty good for shareholders. But that’s not the only good news…

Last Thursday CSL held their investor R&D briefing in Sydney. Throughout the session CSL touched on new study schedules along with advancements on two haemophilia products. CSL plans to launch their new treatment for haemophilia in the next 12 months.

We are feeling really good and really excited. These are the first biotech products we’ve developed from the beginning all the way through. We aren’t there yet but we are poised to achieve registration and launch,’ Mr Cuthberston said.

What does this mean for CSL shares?

CSL are looking ahead to 2016, and they should be. CSL’s performance has been great recently and if product launches go according to plan then you can bet more investors will be looking to buy CSL.

CSL’s high price might put some investors off, but a high share price isn’t always a negative thing. It can means you purchase less ownership within the company, but enjoy the same percentage returns if things go well.

Härje Ronngard,
Junior Analyst, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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