Why is the CSL share price running higher?

Posted: 13 May 2022 1:06 pm
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Shares in biotech giant CSL have lost more than 7% of their value so far in 2022, so why is it running up today?

Shares in biotech giant CSL (ASX: CSL) are among the top traded stocks on the ASX on Friday, rebounding from the broader declines from the previous day.

At the time of writing, the stock was up 2.4% to $277.54.

Why is the CSL stock price rebounding?

Some of the gains today can be attributed to the investor shift into defensive sectors like pharmaceuticals, amid rising volatility in the global markets over fears of higher interest rates.

Investors have used the dips as an opportunity for bargain hunting for blue chip stocks in sectors like pharmaceuticals. For example, other ASX-listed pharma giants such as ResMed (ASX:RMD) and Cochlear (ASX: COH) are also trading 2% and 1% higher respectively.

But the gains in CSL in particular are in focus as they come just a day after the company announced a likely delay in its mammoth $16.4 billion takeover of Switzerland-based Vifor Pharma (SWX: VIFN).

The Australian company had previously said it expected to close the acquisition of Vifor by June 2022, but says this may now be delayed by a few months as it waits for regulatory approvals to be completed.

That would mean CSL's first guidance for fiscal year 2023 is now likely to be without any contribution from Vifor. CSL has said previously the merger is expected to be immediately earnings per share accretive.

Catalyst deal

Despite that overhang, the market and analysts don't seem too perturbed by the delay in the deal, with 14 of 15 analysts covering the stock rating it as a "Buy" or higher, with a median price target of $327.50, according to Refinitiv data.

Morningstar analyst Shane Ponraj on Thursday said he expects CSL, the world's largest maker of blood plasma treatments, to post double-digit revenue growth in the next 5 years largely underpinned by the immunoglobulin portfolio.

Morningstar is now factoring in a 9-month earnings contribution from Vifor in fiscal 2023 rather than a full year, forecasting FY net profit of US$2.6 billion although some of the shortfall is offset by the stronger USD relative to the AUD.

Meanwhile, brokerage Morgan Stanley, which has an "Overweight" rating and $310 price target on the stock, says confidence "remains high" for the Vifor deal completion despite the latest delay. It has called that the closure of the deal could serve as a catalyst for CSL.

Vifor is a global leader in iron deficiency therapies and also focuses on nephrology, cardiology and rare diseases, which would help diversify the product portfolio of CSL.

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