Trump administration Health Secretary Robert F. Kennedy Jr’s more stringent requirements for vaccines have contributed to a $1.5 billion writedown at one of Australia’s largest companies, biotechnology firm CSL, which then suffered a $10 billion hit to its value.
CSL shares plunged on Wednesday morning after the biotech disclosed the writedowns, posted an 81 per cent drop in first-half profit and sought to explain its abrupt CEO change on Tuesday amid further weakness in the US vaccine market following the appointment of the vaccine sceptic health secretary.
The biotech’s share price has now halved in 18 months, shredding more than $70 billion of shareholder wealth after the latest writedowns and operational struggles.
The company, which began life as a Commonwealth-owned laboratory and became one of the Australian stock exchange’s great success stories over the past 30 years as it became a big player in blood plasma products and vaccines, has also been hurt by regulatory changes in China.
Net profit after tax fell to $US401 million ($566 million) for the December half year, hit by restructuring costs from its transformation announced last year and $US1.1 billion worth of asset writedowns on different parts of its global business, including its vaccine division.
Shares dropped as much as 12 per cent to a low of $150.23, having dropped 5 per cent on Tuesday evening after it botched the announcement that chief executive Dr Paul McKenzie was retiring with immediate effect that day.
The stock had not stopped trading on the ASX and dropped quickly amid chaotic trading.
“The results we’re presenting today represent a step in a broader transformation of CSL with the objective of delivering enhanced growth, profitability and shareholder returns,” CSL’s interim chief executive, Gordon Naylor, said on Wednesday.
He emphasised that his appointment will not be a passive one, and he will continue to drive the changes announced last year.
Chairman Dr Brian McNamee told investors in a late call on Tuesday the company had a sense of “urgency” as it looked to improve its performance and indicated McKenzie was not driving the change quickly enough.
“When the board sat down recently and looked at our business and thought about where we need to go in the future, we recognised he didn’t have the skills that we wanted for the future,” McNamee told analysts.
He also emphasised that the board was “not happy with the performance” of the group.
CSL shares dropped significantly last year, as investors were underwhelmed with its general performance, spooked by anti-vaxxer sentiment in its large US market, and US President Donald Trump’s threats to put tariffs of up to 250 per cent on pharmaceuticals.
In October last year, a further plunge in US vaccination rates since the appointment of Kennedy delivered another hit to vaccine profits and sparked a share price collapse.
McNamee said the double-digit decline in US vaccination rates was a shock to the group, given the declines already experienced over the previous two years, and it was yet to see a bottom to this vaccine decline.
CSL said in its results announcement that the writedown of its vaccines division was caused by a hit to the value of its coronavirus vaccine technology “driven by declining COVID disease burden and more onerous US regulatory requirements”.
On Wednesday, CSL indicated this business was expected to decline further this year.
China has also hurt CSL because it has changed its rules to allow a plant-based version of a blood plasma product called albumin to be mixed with the traditional human blood-based equivalent produced by CSL, leading to a 27 per cent drop in its exports to the country.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.
