CSL Ltd

ASX:CSL

Earnings Call Analysis

Earnings Call Transcript 2023-Q2

[Mark Dehring, Head, Investor Relations]

Ladies and gentlemen, good morning and welcome to CSLs First Half Results call for Fiscal 2023. It's Mark Dehring speaking and joining me online is Paul Perreault, CSL's, Chief Executive Officer; Paul McKenzie, CSL's, incoming Chief Executive Officer and Joy Linton, CSL's, Chief Financial Officer.

Paul Perreault and Joy will shortly provide an overview of the results and then we'll move to Q&A and as with past practice, could you please limit your questions to two and of course if you have further questions, you can rejoin the queue. Please note this briefing is being webcast and lastly, before we start, I draw your attention to the forward statement disclaimer contained in the slide deck.

I'll now pass you over to Paul Perreault. Paul?

[Paul Perreault, Chief Executive Officer]

Thank you, Mark and good morning, everyone and thank you for joining the call today. Before I get into the results, I would like to take an opportunity to just say a few words about our upcoming leadership change at CSL. As you know, back in December, I advised the board of my intention to retire after 10 years as CEO and more than 25 years with CSL. It really has been a privilege to lead this great organization and I'm immensely proud of what we've achieved at CSL over the last decade, the sustainable growth and innovation with a patient-focused culture.

I want to congratulate Paul McKenzie who's here with us today on being appointed CSL's next CEO. Paul is an experienced biotech leader with an excellent track record of delivering outstanding results. I am confident that Paul will continue to innovate and lead CSL to its next level of sustainable and profitable growth for our shareholders and the patients that we serve around the world. I thank you all for your support over the years. I look forward to watching CSL continue to be a global leader, deliver shareholder value, and most importantly, keep our promise to patients and provide them with our lifesaving medicines.

So now turning to the result, as per usual, I will provide an overview of our first half results and I'll hand over to Joy who will go into more detail on the financials and I'll conclude with our outlook and of course we'll be happy to take your questions at the end of the presentations.

Also with the addition of CSL-V4, you will notice that we've adopted a new format and pushed some of the detail by product to the appendix. This allows me to really focus on the drivers of each business, but also provides investors with more detail as well as leave more time for questions. I trust you find this an improved approach, but as always, we welcome any feedback. You all have Mark's number.

So on to performance; CSL has delivered a solid result for the first half of fiscal year '23, and I think this demonstrates the strong fundamentals of the company and the disciplined execution of our patient-focused strategy. As we emerge from the COVID pandemic, the continued investment that we have made is now starting to deliver positive momentum and it highlights the resilience and the potential of our broaden portfolio.

So first the headline numbers; revenue is up 25%. This includes approximately five months of contribution from CSL Vifor. Net profit after tax was $1.62 billion, which was steady on the previous half. However, this does include the one-off cost associated with the acquisition of CSL Vifor. Adjusting for this on an underlying or NPATA basis, which is the measure of what we're now focusing on, this was $1.82 billion for the half up 10%.

In terms of the major highlights for the first half, in the CSL Behring business, our Ig franchise grew very strongly and plasma collections are now at record levels. The impacts of COVID are largely behind us at this point.

CSL Securus has continued to deliver strong sales growth driven by its high value differentiated products. CSL Securus also announced a license agreement with Arcturus Therapeutics for access to their late stage self-amplifying mRNA vaccine technology.

For CSL Vifor, we successfully closed the acquisition on the 9th of August and had approximately five months contribution in this half. The integration is well advanced and delivery of our cost synergy objectives are on track.

In R&D, we were very excited to receive FDA approval for HEMGENIX in the US. This is the very first gene therapy product approved for patients with hemophilia B, an important new therapy that will change people's lives and potentially be a cure for many patients.

Turning to the next slide and focusing on CSL Behring and its sales by therapeutic area. Overall, CSL Behring's revenue is up 11% at constant currency. As I mentioned, our IG franchise grew strongly with sales up 19%. This was driven by a significant increase in plasma supply with strong growth recorded in both our leading IG brands, Prevagen and KCENTRA across all geographies, especially in Europe and the emerging markets.

The increase in plasma supply also saw our albumin portfolio grow by 11% with strong growth in both the US and Europe, whereas albumin growth in China was constrained by the COVID environment. Haemophilia was up 12%, where once again the standout performer was Idelvion, which was up 22%. This has driven -- was driven by higher patient demand, with increased in-person doctor visits and increased utilization in Japan.

Specialty products were up in encouraging 5% with strong growth in Kcentra, which increased by 8% as hospital demand returns to pre-pandemic levels. The other category for CSL Behring was down 31% and this was due to the fact that the revenue we received from the manufacturer of AstraZeneca's COVID vaccine was minimal in the current half as we had completed the contract of 50 million doses for Australia and other nations.

Moving on to the next slide, which is our operating highlights for CSL BERINERT. As I mentioned at the beginning, plasma collections are now at record levels. The strong improvement in collections we achieved last financial year has continued and in fact is accelerating. For the six months to December, 2022, our plasma collections were up 36% and compared to the same period before the pandemic, our collection levels are now 10% higher. This is a remarkable achievement and is a testament to the focus and dedication of all of our employees at CSL Plasma and the commitment of our wonderful donors.

We've seen a continued increase in the use of the CSL plasma donor app, which has undergone additional enhancements and the downloads for the app are now exceeding 2.5 million and the continued adoption of the online self-administered health history questionnaire is saving donors time from waiting at the in-center kiosks.

In September, 2022, we welcome back the Mexican donors to our plasma centers after the US District Court in Washington granted a preliminary injunction reversing the ban on Mexican donors entering the US to donate plasma. The centers on the border are recovering strongly. We continue to invest in opening new plasma collection centers with seven opened in the US as well as one new center in Germany and others will close -- are close to opening.

During the half, we commence the rollout of the new Plasmapheresis devices in a number of our centers. So far the results have been in line with our expectations of faster collection times, meaning less time on the bed for the donors. The rollout has gone slower than we would've liked due to supply chain issues with soft goods, the tight employment environment and some teething issues that we're working to overcome.

We are committed to the rollout of our program and want to ensure we get it right in light of the increased pace of collections. On the manufacturing side for CSL Behring, we officially opened the new plasma fractionation facility at Broad Meadows. This facility gives us the capacity to process up to 9.2 million plasma equivalent leaders a year and prepares us for the initial launch of CSL112. We also added new base fractionation capacity of Marburg. Both of these expansions will help us meet the increasing demand for our plasma-based therapies.

We have also continued to invest in yield initiatives. As you know, yield has always been a key and important focus for us and we have multiple programs underway in both collections and manufacturing. We'll update you when we have some more meaningful things to share with you in this particular area.

Moving on to the next slide, and CSL Seqirus are vaccines business, Seqirus delivered another strong result with total revenues of $1.738 billion, up 9% at constant currency. Seasonal influenza vaccines which make up 90% of Seqirus' revenue was up 9% achieved against a backdrop of reduced rates of vaccination.

While there are low levels of influenza -- were low levels of influenza circulating during the pandemic, this has reversed and we're seeing the highest and earliest prevalence of influenza-like illness in nearly a decade. Population immunity against influenza is also low, increasing the importance of vaccination. Despite the decline in immunization rate, Seqirus maintained a record volume of doses and continue to grow revenue through its differentiated product portfolio.

Continuing with CSL Seqirus and some of the operational highlights, this northern hemisphere season was the first time we began selling into the pediatric segment of the market since FLUCELVAX was approved in the US for six months age indication. This resulted in an increase in demand for FLUCELVAX and we expect this growth to continue overcoming years with approvals also received in Argentina, Canada and Taiwan with Australia and New Zealand currently under evaluation.

For FLUAD, the CDC adopted the advisory committee on immunization practices or ACIP's recommendation for it to be one of the preferentially recommended seasonal vaccines for adults aged over 65 in the United States. This preferential recommendation provides us with the opportunity to better educate healthcare professionals, pharmacy partners and patients on the benefit of adjuvanted influenza vaccines, which are really designed to protect the immune systems of the elderly.

On the pandemic side of the business, CSL Seqirus was awarded a barter task order for the manufacturer of H5N1 clinical trial material. We also supplied AFLUNOV pre-pandemic pre-pandemic stockpile, which H5N1 to Singapore. CSL Seqirus completed the contract for the manufacturer of the 50 million doses of AstraZeneca's COVID-19 vaccine in Australia, which I mentioned before and was a tremendous achievement.

And finally on manufacturing the additional fill and finish that we've been working on at Holly Springs and Liverpool were completed and building works are well advanced for the new cell culture influenza facility in Melbourne at Tullamarine where I visited earlier last week.

Turning to the next slide in CSL Vifor, as I mentioned at the beginning, our acquisition of Vifor Pharma successfully closed on August 9th last year. So we had approximately five months of financial contribution from the new member of the CSL family or CSL Vifor. CSL Vifor sales for the period were $889 million. We don't have a prior period to report against as we didn't own the business in the previous half, but based on unaudited management accounts, CSL Vifor performed well with the revenue growth of approximately 15%.

The main contributors to this growth were Mircera in the dialysis segment and the continued progress of the launch of Korsuva in the US. The introduction of step edit measures in the iron market in the US had a positive impact on Venofer, CSL Vifor, low-dose iron product, but put pressure on the high dose iron product Injectafer. We continue to work with healthcare providers to ensure the optimal outcome for patients.

The integration of CSL Vifor is well advanced in the cost synergies that we identified at the announcement of the acquisition are well on track. There were some other highlights in the period and they included for the iron business, the heart failure label variation for the US has been submitted with the response expected very shortly. In dialysis, the agreement with a large kidney care provider in the US for the ISA [ph] portfolio is now effective from December, 2022 and Korsuva, Kapruvia was approved in Australia, Canada, Singapore and Switzerland with a long-term licensing agreement also signed for Korsuva in China.

In the non-dialysis part of the nephrology business, Tavneos, a treatment for patients with severe active ANCA-associated vasculitis was approved in Great Britain, Switzerland and the UAE and just last week, it was approved here in Australia.

Moving on to the next slide and the R&D portfolio, the slide shows the forward-looking R&D portfolio events for fiscal year '23 as presented at the R&D investor briefing in November, 2022. So let me talk about some of the highlights in the R&D portfolio, which are shown in the green words on the slide.

In immunology, we will present -- we will be presenting the Garadacimab HAE Phase III study data for the first time at the 2023 American Academy of Allergy Asthma and Immunology Annual Meeting in San Antonio, Texas. These data are consistent with the positive top line results announced in August last year and we plan to begin regulatory submission to global health authorities later this calendar year.

Bernard subcu [ph] for HAE received PMDA approval and was launched in Japan. This approval of the at-home subcutaneous therapy for patient suffering from hereditary angioedema advances treatment options for patients in Japan.

In hematology, I mentioned HEMGENIX, the first and only one-time gene therapy for appropriate adults with Hemophilia B was approved by the FDA in November and will be launched very soon. In addition, results from the HOPE-B study demonstrated that after two years of follow up, adults with severe or moderately severe Hemophilia B treated with a one-time infusion of HEMGENIX generated elevated and sustained mean Factor IX activity levels and durable hemostatic protection.

In the cardiovascular metabolic space, enrolment in the CSL112 AEGIS-II trial was completed in November, 2022. There is a 12-month follow up after which the data will be unblinded and analyzed prior to the release of the final results in early 2024.

We initiated a combined Phase IIb3 study possible six in October to evaluate Clazakizumab for prevention of major adverse cardiovascular events in MACE in hemodialysis patients.

In vaccines our Adjuvanted Cell Culture Vaccine or aQIVc program is on track to go into the Phase III trial. For CSL Vifor, the Phase III study for SNF472, which is being developed for Calciphylaxis in patients on hemodialysis, was completed in late 2022 with top line data expected in quarter two calendar year 2023.

Also in the CSL Vifor portfolio, EMA accepted for review, the conditional marketing approval application for Sparsentan for the treatment of IGA nephropathy. The EMA will review the application under the centralized marketing authorization procedure and a review decision on a potential approval is expected in the second half of calendar year 2023.

We also received approval for FERINJECT to treat patients in China with iron deficiency and approvals for Korsuva and Kapruvia in multiple countries, as I mentioned, including Switzerland, Canada, Singapore and Australia.

So before I finish up and hand over to Joy to go into the financials in a little bit more detail, I wanted to share this slide with you, which shows the significant launch dates that are being targeted with our advanced R&D pipeline over the next few years. In this financial year, we are all set to launch HEMGENIX in the US. We'll also be launching HAEGARDA or is it's known to be known Bernard SC in Japan. And as I mentioned, we are expecting to receive response to the heart failure label in the US any day now.

In terms of the other launches expected over the following year, I won't go through all of them, as many of them will be familiar to you such as Garadacimab, CSL112, Clazakizumab or our aQIVc program for CSL Seqirus. Plus, we've added some new projects to the impending pipeline for CSL Vifor, including SNF472 for the treatment of vascular calcification and sparsentan for the treatment of scar tissue developing in the kidney for CKD patients.

Furthermore, CSL Seqirus has signed a licensing agreement with Arcturus for their self-amplifying vaccine technology. So we have a multitude of late stage programs that are well advanced and coming to fruition over the next few years, which will be a super exciting time for CSL. In all of my time at CSL, I have never seen the pipeline in such a strong position and it really sets the company up for sustainable and profitable growth into the future.

I'll now hand over to Joy.

[Joy Linton, Chief Financial Officer]

Thank you, Paul, and good morning to everyone. Before I make a start, I do want to publicly recognize Paul's tenure at CSL. He's overseeing transformation, business excellence and incredible growth. It's been a huge privilege for me to work alongside Paul for the past two years and to observe and learn from his leadership in action. Paul's focus on people, whether it be our patients or our employees, is legendary inside CSL and I'm sure many of you on the call can relate to this when I say that Paul is a people person.

As we've announced at the CSLV4 market briefing in October, guidance is now provided at statutory net profit after tax attributable to CSL shareholders before impairment and amortization of acquired intellectual property or NPACA in abbreviated form. It also excludes the one-off costs relating to business acquisition and integration costs and inventory fair value uplift adjustments.

On a reported basis, first half NPACA was $1.818 billion, up 2%. On a constant currency basis, NPACA was $1.957 billion, up 10% after adjusting for a currency headwind of $138 million and I'll talk to FX in more detail shortly. As you have heard me say before, we believe NPACA better reflects the underlying performance of the company. Net statutory profit after tax measure is of course provided as usual.

I do want to highlight that unless otherwise called out references to NPACA are attributable to CSL equity holders only. As you know, part of the CSLV4 business includes the majority owned joint venture company, Vifor Fresenius Medical Care Renal Pharma.

At CSL Vifor controls this joint company, a 100% of the joint company result is consolidated into the financials. So a 100% of the revenue from the joint company is included in the CSL Group revenue. The earnings are then attributed according to the ownership structure of the joint company's earnings, 55% in favor of CSL Vifor and 45% in favor of the non-controlling interest. And also, just as a reminder, the financials in this presentation are inclusive of approximately five months contribution from CSL Vifor, which of course affects every line item of the financials.

On this slide, we do provide a reconciliation between NPATA and NPAT at constant currency. And so starting with NPATA of $1.957 billion, the following just adjustments are included. It's $96 million attributable to the amortization of acquired intellectual property.

Other one-off acquisition costs of $190 million and this is made up of the unwinding of the inventory fair value uplift recognized on acquisition. This is a non-cash item with the remaining balance of $85 million relating to the acquisition transaction and integration costs. After adjusting for non-controlling interests and tax NPATA attributable to CSL shareholders for the first half is $1.753 billion.

So turning to the group financial highlights on Slide 14 and looking in these in a bit more detail, on a constant currency NPATA basis, total revenue for the group was up 25% to $7.575 billion with a corresponding gross profit of $4.275 billion up 24% and I'll talk to margins shortly.

Sales and marketing costs increased by 65%, which was driven by the marketing and commercial activities for the HEMGENIX launch as well as the incorporation of CSL Vifor. The group operating result was up 18% or $3.563 billion. Research and development costs were up 25% as we advanced assets such as Garadacimab, CSL112, and HEMGENIX along with the inclusion of the CSL Vifor R&D activities.

We do expect that for the FY '23 full year, total spend for R&D will be in line with the 10% to 11% guidance envelope of total revenue as we continue to invest in innovation and have a number of exciting programs to come to fruition that Paul has already outlined.

General and administration costs, excluding CSL Vifor acquisition related costs, adjustments of $85 million was up 26% and this was largely driven by the CSL Vifor five month contribution. Net finance costs increased as a result of the debt associated with the CSL Vifor acquisition and rising interest rates.

On debt, our average -- weighted average cost of debt at December 21 was 2.43%, and at December 22, it was 3.85%. As previously mentioned, NPATA attributable to shareholders of CSL was up 10% at constant currency.

The reported effective tax rate for the half year '23 declined to 16%, mainly due to the geographic profit mix and CSL Vifor's lower statutory tax rate. We do expect the effective tax rate to be within the range of 18% to 20% at constant currency for fiscal year '23. Cash flow from operations was $981 million, a decrease of 31%. This was largely reflecting the strong growth in plasma collections.

Another contributing factor is the higher finance costs paid primarily due to the debt financing arrangements entered into fund the acquisition for CSL Vifor and on a reported basis, NPATA EPS was down 3%. However, at constant currency it was up 4%.

Finally, we have increased our interim dividend to US 1.07 per share, representing a 3% growth against the $1.04 per share paid in the prior corresponding period. And for Australian shareholders, this translates to approximately a $1.55 Australian up 9%.

So turning to the segment results on slide 15, as we detailed at the CSLV4 market briefing in October, the new segment reporting shows gross profit less sales and marketing expenses as managed by the business units. Our new segment reporting reflects the way that the chief executive officer, who is the chief operating decision maker, monitors and assesses performance of the business in accordance to make decisions about resource allocation and this is in accordance with the accounting standards.

Furthermore, R&D and G&A expenses are no longer allocated to individual segments as the centralization of the management and reporting of R&D is reflective of the portfolio approach we are now taking to our R&D investments. General and admin costs, this follows the work that we've done over the last few years to bring together our enabling functions into a single global structure.

Excluding the five month CSLV4 contribution, total revenue was up 10% at constant currency and the strong IG sales in CSL Behring and the ongoing shift to differentiated products in CSL Seqirus were both significant contributors to this top line. With the addition of CSLV4 where Masera performed exceptionally well, total group revenue was up 25% at constant currency.

As you know, COVID has impacted the cost of collecting plasma right across the industry and of course, this has impacted CSL Behring's gross margin, and I'll talk to this in more detail in the next slide.

Fundamentally, however, today's margins reflect the cost of plasma nine months to 12 months ago as the cost of plasma works its way through inventory until it is sold a year or so later when it is reflected in the cost of goods.

CSL Seqirus margin expanded with the continued success in the product differentiation strategy and improved manufacturing efficiencies. And lastly, the addition of CSL Vifor four has had a modest but positive impact on the group's margin.

Looking now at the segment operating result, excluding CSL Vifor, it was up 4%. However, when you adjust for the first half fiscal '22 contribution received for the manufacturing of the AstraZeneca COVID-19 vaccine, the segment operating result is up 8% on a comparable basis.

So turning to the next slide, CSL Behring gross margin graphic. The red line is the total cost per liter or CPL for the US and the gray line being the gross margin percentage. The largest components within the CPL are donor compensation and direct labor. And these two combine equate to approximately 65% of the total CPL. The remaining is a mix of leasing costs, consumables, and other costs associated with the -- including fixed costs.

The initial decline in margin that you can see on the chart arises from the sharp drop in plasma collected a year earlier when the pandemic first started to take hold in the US. Early in the pandemic, the industry hadn't yet raised donor fees or wages, but you can see clearly the effect of this, of the higher fixed cost allocation because of the reduced volume of plasma working its way through the manufacturing process.

The peak in CPL occurred midway through the second half of fiscal '22 with the heightened red line reflecting such. The main driver being the increase in donor compensation, as the industry worked hard to attract donors in a difficult COVID environment along with inflationary pressures, particularly labor and supply chain costs.

With the nine month to 12 month inventory cycle time, these costs are now filtering through the financial statements and are contributing to the downward pressure on the CSL Behring gross margin. Now that that has happened, what we are currently seeing is a gradual reduction in CPL. To put that into context from the peak in fiscal year '22, CPL at the end of December has reduced by approximately 10% and we can expect to see this benefit in gross margin in the next financial year as the cost of inventory phases through the P&L.

While we do expect further softening of the CPL, managing it downwards is not an easy task, especially when you overlay the many macroeconomic factors in play. The CSL plasma team have been extremely diligent in evaluating and executing initiatives to continue to grow plasma volumes, and we are now starting to reap the benefits of that hard work and focus.

Now on to the next slide, which talks through currency. As I'm sure you can all appreciate, there's been significant volatility in world currency markets since CSL being a global company, we are not immune to this. In the first half of this fiscal year, we include -- we incurred NPATA currency headwinds of about $138 million US dollars, and it was largely driven by a stronger US dollar. This is a function of both realized and unrealized losses.

Two significant realized losses amounting to approximately $50 million were a function of firstly realized losses accrued, which related to the US dollar, against the Chinese won, and that relates to albumin and in addition the movement of the pound sterling against the US dollar as a result of production of flu add in Liverpool in Sterling, which was subsequently sold into the US. The balance of the losses relate to the movement of the US dollar against the Euro, the Chinese yuan, as well as a basket of emerging market currencies, primarily from the CSL Behring sales in these currencies and this headwind was partially offset by a significant cost base in Swiss francs.

Our currency exposure has improved since the last update in October '22 and if currencies were to remain stable from now until the end of fiscal '23, the total FX impact is anticipated to be a headwind of approximately $175 million at NPATA noting that we have reflected $138 million of that in the first half.

And with that, I will hand back to Paul, who will finish up with some comments on the outlook.

[Paul Perreault, Chief Executive Officer]

Well, thank you Joy, and thank you for your kind comments. I've learned a lot from you over the last two years as well, and I'm sure that I'm quite positive that your leadership style will become legendary as well, so in a good way -- in a good way.

So on to the outlook, looking specifically at CSL Behring, the strong growth we've seen in plasma collection in our immunoglobulin franchise is expected to continue and notably in the second half we'll be launching our gene therapy product HEMGENIX initially in the United States. For CSL Seqirus, we expect to deliver another strong profitable year. However, consistent with the seasonal nature of the business, we anticipate a loss in the second half of the year on CSL Seqirus.

For CSL Vifor, I'd like to make a comment that the R&D portfolio is progressing extremely well. It's in the best shape it's ever been with a cluster of late stage programs approaching fruition. In terms of our guidance for fiscal year '23, I'm pleased to reaffirm our guidance provided in October of last year. We expect revenue growth to be approximately 28% to 30% over fiscal year '22 at constant currency.

With our guidance provided in October of last year, we expect revenue growth to be approximately 28% to 30% over fiscal year '22 at constant currency with NPATA expected to be in the range of approximately $2.7 billion to $2.8 billion at constant currency, a growth of between 13% and 18%. This includes approximately 11 months of contribution from CSLV4 and excludes the one-off cost associated with the acquisition.

And with that Mark, I think we're now happy to take questions.

[Mark Dehring, Head, Investor Relations]

Good, thank you Paul. Operator we'll now move to Q&A. I think everybody on the call is familiar with the process. [Operator instructions] And our first question comes from David Stanton at Jefferies. Go ahead David.

[David Stanton, Jefferies]

Thank you very much everyone. And Paul, can I start by congratulating you on your tenure as well? The two questions for me; first your -- some of your global competitors have talked to a donor fee decline as they see it going forward in the order of about 30% from the highs CSLs talk to total plasma costs decline of about 10%. Can you explain some of the differences where they may be compared to your competitors in terms of that decline?

[Paul Perreault, Chief Executive Officer]

Thanks David and I appreciate the comments. Look, I would say that it's never apples to apples and you have to look at the number of new donors coming into your system as well as the number of returned donors and new donors are at a higher rate in terms of compensation. But we also have all the fixed cost overhead in the center. So, when we talk about CPL, we look at it holistically. Everybody wants to talk about donor fees, which is an easy lever to pull, but as I mentioned, we're above pre-pandemic levels by over 10% and we're growing and we need to continue that growth to supply product to patients.

So, you have to be very careful because the faster you lower the fees, the faster you're going to reduce your collections and so it's a real balance that we play. Our job is to try to be more efficient in driving the overhead recoveries, the lower hours per donation making sure that our staffing models are appropriate to make sure that we're doing all the levers within the CPL to bring that down.

So donor fees is one part, it's a large part of it, I get that. But I'd say we're doing it in the right way to make sure that we continue to grow collections while we bring down the cost. And I can tell you that as we continue to move forward, we're acutely aware of this. I think we're already at or below donor fees for most of our competitors. So I don't think we had as much to go either as my view.

[David Stanton, Jefferies]

Understood. And my, my second question is, Garrett that, you'll be presenting that what looks to on preliminary data be quite or excellent data, where do you see that product on a two-year view compared to both the comparables and your own HAE franchise, please. And finally, is it higher margin? Sorry, that's the 2B part of the question. Thank you.

[Paul Perreault, Chief Executive Officer]

Well, I'm not going to give you a two year forecast, but what I would say is that we expect a very strong uptake of garadacimab. The data is fantastic, and when we take a look at what's going to be presented in just a week or two, it's, I think everybody will be very pleased. It is right in line or slightly, what I would say is a very great profile for patients, and we expect that we will see people move there and yes, and from a margin perspective, it's going to assist.

So from that perspective, we're super excited about garadacimab because, we've been innovating in the HAE space for a number of years. We continue to see improvements, just like HEMGENIX we don't mind disrupting ourselves a bit in order to bring a better product to patients.

[Mark Dehring, Head, Investor Relations]

Good. Thank you, David. Next question comes from David Lowe at JPMorgan. Go ahead, David.

[David Stanton, Jefferies]

Dave Stanton, congratulations. Can you hear me?

[Mark Dehring, Head, Investor Relations]

Can you hear us? David?

[David Stanton, Jefferies]

Seem to have lost David Low. So David, we'll come back to you. Next question comes from Andrew Goodsall at MST Marquee.

[Andrew Goodsall, MST Marquee]

And just to reiterate that congratulations and also welcome Paul Mackenzie. Perhaps if I can just start with Dehring just with, with recently, I guess we've seen that that's stalled your, your role. So maybe just any more commentary on sort of when that gets started again and just on the outlook for Tamo where they can go, I guess, and perhaps potential date for a new mammogram and hemophilia for that one.

[Paul McKenzie, Chief Operating Officer]

Thank you, Andrews. This is Paul Mackenzie. So I'd also like to pass on my thanks and congratulations to Paul on his retirement. He has been as Joy said, legendary for shareholders, but our people within CSL as well as our patients who he is truly a chief patient officer for the company and make sure everyone else in the company feels the same.

On Terumo as you know, we've had to extend our rollout of Terumo. We're still very bullish on what we've seen in terms of the results on the donor experience from both a safety viewpoint and a time on the bed viewpoint. We have run into with Terumo and we're partnering with them actively some supply chain challenges on soft goods, which are really, we're very dependent on them and have to make sure we balance the speed of rollout with the risk that the presence of soft goods would present if we didn't have them in the fleet.

So we've been working very hard on that and we're continuing to evaluate that supply chain availability versus our rollout. We're currently in three centers and we look to continue to do more centers as the supply chain issues resolve themselves correctly. In terms of the nomogram, I'm pleased to report that we have received FDA approval for the IDE, which is the investigational study, and we will begin that clinical trial in this quarter.

[Andrew Goodsall, MST Marquee]

Okay. And how long would you expect that would take?

[Paul McKenzie, Chief Operating Officer]

That's a relatively small amount of patients, roughly 124 patients. So should be on a short order.

[Andrew Goodsall, MST Marquee]

Okay. And my second question, just while we're on the subject of yield, just the last result that there was some sort of mention of potential yield within the fractionation process. Just wondering if you've got any further commentary on that and the materiality of that.

[Paul McKenzie, Chief Operating Officer]

Look, it's progressing well and I would say that we'll be continuing to roll out more data when we have it available, Andrew. It's one thing to get it in lab scale and then start to move it into manufacturing, but we still got a ways to go to make sure that we get it all the way through the manufacturing process. And then of course, when we do our separation technology at the various sites, we also have to make sure that we can get it across all the sites.

So, it sounds easy to say, well, all the plasma will go through a new yield process or an additional yield process, but there's a lot of complexity to it and that's why I'm not trying to be coy, but I just say that, there's some milestones that'll come hopefully later this year and into next year that we'll be able to update you on as we continue to go, because we want to make sure that as we roll it out, you're well-informed.

But look, I don't any yield is great. The slightest yield, this is gold in our business, is to get better yields because the more IG yield you get, the less plasma you have to collect. And that's the hardest thing we do in the business is collect plasma. So I'm looking for decent uplift.

[Andrew Goodsall, MST Marquee]

Terrific. Thank you. And congratulations again Paul.

[Paul McKenzie, Chief Operating Officer]

Thanks Andrew. I see we have David Low from JPMorgan back online. So David, please go ahead with your questions.

[David Low, JPMorgan]

Thanks very much. Can you hear me this time?

[Paul McKenzie, Chief Operating Officer]

Great. Congratulations, Paul. Same as everyone else you said. It's been it's been a privilege to listen to you over the last 10 years or so.

[David Low, JPMorgan]

Thank you.

[Paul McKenzie, Chief Operating Officer]

My wife doesn't say that.

[David Low, JPMorgan]

My first question, Paul, is just anti CRM as a threat to immunoglobulin given it seems to be in making some progress in the autoimmune space, obviously with fairly small indications today, but with CIDP trial results expected fairly soon. Just wondering how you and CSL characterize this threat now as it seems to be getting closer.

[Paul McKenzie, Chief Operating Officer]

Yeah, look, David, thanks for the question. I characterize it as another competitor in a particular indication and potentially. They're going to have to show better efficacy at a lower cost, and that's going to be difficult, right? In my view, with everything they've been spending out in all the promise they've been talking about in this space, because there's more than one anti-CRN that wants to take over the world.

But all I would say is that as we take a look at the need for IG across the globe, there's still a growing need for IG for multiple, multiple indications. There's still an underdiagnosis of primary immune deficiency.

We still have patients waiting and we haven't even penetrated areas like China and other areas, which of course has some limitations, but the need for IG is going to be there for years to come. We've been saying for many years that IG, that was the big risk. IG is going to go away. There's going to be new competitors.

Look, innovation will happen and as I've said before, my view in CSL's view and the scientific view is that a polyclonal antibody in the immune system is a really good asset. And it will be around for a while because we're still trying to figure out where IG works in some of these patients because it covers so many receptor sites.

So the coverage of the receptors for autoimmune or immune mediated diseases is beneficial as opposed to trying to find a single antibody that's going to cover a wide range of disease states. So I think we're still quite bullish. I can tell you that as I look out into the future, I'd say IG is still going to be a very strong contributor to growth for CSL. Won't tell you what's in our forecast, but I can tell you that you still see me collecting plasma and more plasma. So that should give you some indication of our view.

[David Low, JPMorgan]

Perfect. Thank you for that. My other question relates to V4. I noticed the gross margins were significantly weaker than the FY '22 period. I'm also aware that the, the sales mix change, but can you to talk a little bit to that, and I didn't quite follow your commentary there on V4 and the change in demand for higher concentration of lower concentration iron products, if I, perhaps that's all related.

[Paul McKenzie, Chief Operating Officer]

Yeah, I'll let Joy talk to the margin, but in terms of the INJECTAFER versus Venofer, Venofer is an oral low dose product and with step edits. They're trying to get the least costly and accessible product first before they move to the injection. And so that's because it's higher cost and more complex and costly to deliver than oral. So that was the comment. Joy?

[Joy Linton, Chief Financial Officer]

David, I'm not sure we particularly recognized your comment that says the margins on Venofer are lower. Look, we haven't provided any -- we haven't provided any historical margin data. So if you look at -- if you perhaps if I just look at perhaps the unaudited numbers that we have, perhaps we just allocate some costs slightly differently. But certainly in terms of the fundamentals of the business, we wouldn't recognize declining margins in Venofer.

[David Low, JPMorgan]

Okay. So it's accounting treatment. So I'm looking at -- and I understand that's unaudited and not CSLs numbers, but you had put the difference there down to different treatments rather than any change in the business.

[Joy Linton, Chief Financial Officer]

No fundamental change in the business. That's correct. Yeah.

[David Low, JPMorgan]

All right. Thanks very much everyone

[Paul McKenzie, Chief Operating Officer]

Leanne Harrison at Bank of America. Go ahead, Leanne.

[Lyanne Harrison, Bank of America]

Good morning all. Thank you for taking my questions. Can I start with IG demand? So obviously we've getting good plasma collections come through and with the IG growth, where are you seeing that? Are you seeing, increase in new patients diagnosed? Are you, getting a sense that there's an increase in utilization or grams per head being used? Can you shed more color on that?

[Paul McKenzie, Chief Operating Officer]

Sure Leanne. Thank you for the question. I think what we've seen is certainly in the EU, which was starved for IG during COVID we've seen a big uptake again back there as supplies come -- starting to come back with the plasma collection. Also some of the emerging markets again there was allocation that had to be done across the globe in order to try to get to as many patients as possible.

We've seen an uptick in PID diagnosis post-COVID because patients are now coming out of their homes. When you have a compromised immune system and you have something like a pandemic going on, you try not to be around people too much because people are contagious. And now there's more face-to-face visits in the doctor's office coming back.

And you cannot diagnose rare diseases with a team's call or a video call or a Skype call. I can tell you. These are patients that need to be well understood. You need good histories and physicals, you need testing, you need -- that's how you diagnose these rare diseases and especially something as complex as primary immune deficiency, which presents itself mainly as infections.

And so they might be getting antibiotics during COVID to treat an infection, but nobody's looking at the underlying disease. So I think that's where we've seen a better uptake in terms of new patients being diagnosed. These patients never went away. It's just they haven't been diagnosed and even when we go back to a decade and a half or two decades ago when there was supposedly the demand had come down and there was a glut of IG, the glut was only because people didn't believe the shortage was over and they were waiting to put patients on.

Physicians want to treat patients, and if they don't have product to treat, they stop looking because they want to be able to help and they want to be able to treat. So that face-to-face back on board new patients being diagnosed the emerging markets again is a driver of that as well as Europe that was had less IG available during the pandemic.

[Lyanne Harrison, Bank of America]

Okay. And just a follow up with IG and inventory levels so, I've seen in your balance sheet you've got posted $5 billion in inventory now. Are you happy with your current stocks of IG or you're still looking to build more?

[Paul McKenzie, Chief Operating Officer]

Well, I'd love to say we're building more, but if you look at our finished goods inventory versus whip and plasma collections, there's not much finished goods inventory ready to go. That's part of the issue is that, it's hard to build inventory when, you're still processing and producing and trying to get the inventory into the finished vial.

So I would say we're not where we want to be yet in terms of safety stock, if you will, or additional inventory. So we're still pushing it out fairly quickly as it comes through the plants.

[Lyanne Harrison, Bank of America]

Thank you very much.

[Paul McKenzie, Chief Operating Officer]

Thank you, Lyanne. Next question comes from Chris Cooper at Goldman Sachs. Go ahead Chris.

[Chris Cooper, Goldman Sachs]

Thanks, Mark. I also wanted to say thanks and congrats to you, Paul, but I do actually have two questions for Joy today, please. So Joy, just on Slide 16, your commentary of the Behring margin will improve over the medium term. Can I just confirm the ultimate expectation is still to return to pre-COVID profitability in that division?

[Joy Linton, Chief Financial Officer]

Yeah, I think that's right. I don't think we see any reason why that wouldn't be the case. I'm not going to -- we're not going to sort of say exactly at what point in the future that will be, but certainly over that medium term period that remains the aim.

[Chris Cooper, Goldman Sachs]

Presumably you don't need your, your CPL to return to that December 20 level in that chart for that to occur. You've had pricing probably missed some mixed changes from your way in the interim period, is that correct?

[Joy Linton, Chief Financial Officer]

Yeah, I think that's right, Chris, that the world has changed since COVID, right? So the way in which we get back there will look a bit different to what it was like pre-COVID. So I'm not sure we ever think donor fees will go back to where they were pre-COVID. But as you say, we've taken some pricing along the way. We've done a lot around productivity. We continue to do a lot around productivity.

Paul's sort of alluded to some yield the work that's quite a bit of investment going in that into that. And so there's a lot of things going on to get ourselves back there. We've got the benefit of scale again as we've built additional capacity in the manufacturing facilities, and we'll start to see the volume benefit of that.

So there's a lot rumour. We've talked about benefits through the plasma collection process. So there'll be continued innovation. There'll be continued productivity improvements and they will all contribute to how we get back there albeit with probably a higher donor fee over the long run.

[Chris Cooper, Goldman Sachs]

Got it. Thank you. And just a second on the [indiscernible] if you don't mind. So, I would expect a bit of first half waiting in those numbers, but it does look like you're tracking just a bit ahead of the implied run rate you guided to for the full year. So I guess what I just want to confirm is whether the reiteration in guidance amounts to a reiteration of the NPA target that you sort of outlined in October?

[Joy Linton, Chief Financial Officer]

I'm not sure I can particularly understand the question. I think what we're doing is reaffirming the NPAT guidance of between $2.7 billion and $2.8 billion. Pleased to be able to do that today, but I don't think, I'm not sure as particularly understand your question, Chris.

[Chris Cooper, Goldman Sachs]

It just looked to me that the, the amortization of the acquired IP was just running at a level which was above where I would've expected it to be. So I just wanted to make sure that was just a bit of front end loading of the fully guidance.

[Joy Linton, Chief Financial Officer]

Okay. Yeah. So I think a couple of things to note. Yeah, five months in the first half, six months in the second that slide of slide, was it 13? Just make sure you are taking out the NCI or the amount that's not attributable to CSL shareholders. I think what the guidance we provided in October, we haven't moved away from that in terms of acquired intellectual -- the amortization of acquired intellectual property.

I think we've still got that same range. We have -- we haven't finalized the PPA work, so what's in the balance sheet at December is interim preliminary number. We have 12 months post the acquisition to finalize that, and we will be looking to bring a more final number in June. But I see no reason why that amortization won't be in that range of 140 to one 170 attributable to CSL shareholders.

[Chris Cooper, Goldman Sachs]

Got it. So we're still looking for end part of round 2.5 to 2.6 for the full year.

[Joy Linton, Chief Financial Officer]

Yeah, I see what you say. I see where you're going.

[Paul Perreault, Chief Executive Officer]

Thanks. Chris, next question comes from Steve Wheen at Jarden. Go ahead, Steve.

[Steve Wheen, Jarden]

Yeah, thanks Mark. Paul, I just wanted to ask about the IG growth. Obviously growing the raw materials at 36%, does that include sort of the beds all back into full capacity Mexico? Is that -- where are we in the trajectory of getting back to that sort of run around? I'm just trying to understand how much more collections can improve just on sort of the structure of your clinics and I'll do my second question after that.

[Paul Perreault, Chief Executive Officer]

Yep, sure. No problem, Steve. Look we have more capacity in our centers. We're above pre pandemic levels and growing, as I said, we're above, we're 10% above our high pre pandemic. And so that's, that's really a, a great number to be at. But we still have capacity. The centers on the border, were at about 70% of the capacity that we had going into the pandemic. So we still have room to grow there at the, at those centers. And I think there's more to come on top of that you know, as we continue to move.

So I'd say that there's more capacity, there's more opportunity. We are running still higher than our, our competitors in terms of the average donations per center. And so, you know, we're still opening some new centers as well. So I think the fleet has more capacity to grow and, you know, it's all based on our IG growth forecast.

So when we take a look at our forecast, as you know we're looking 24 to 36 months out in order to make sure that we have the fleet optimized to deliver that much plasma, you know, that far in advance. So that's why we're collecting and still see the capacity there.

[Steve Wheen, Jarden]

Great. Thanks Paul. And, and then once for Joy with regards to that gross margin chart and the cost per liter of collection you seem to be talking to the 10% decline from the peak is sort of not going to keep going at that sort of level immediately. I'm just curious about the extra cost of the contingency arrangement you have now with hes to extend that for two years. What, what's, what sort of cost does that sort of inject back into this collection profile?

[Joy Linton, Chief Financial Officer]

Yeah, thanks Steve for the question. There's two parts to that. Let me just go back to the first part, which is, we do see there will be continued softening of the cpl, right? So you know, the 10% was to December. We do think there will be some further softening particularly of the donor fee. Now, as I said earlier, we don't think it'll ever get back to where it was pre pandemic, but, you know, we are, we're still at higher levels than where we think we will land.

So that would be the first comment I would make. The, the impact for Humanetics is actually not particularly material. We, have good relationship with humanetics. The extension there is really, you know, effective risk management just to make sure that we have, con continue to get soft goods and you know, continue to collect plasma, right?

So it's not a particular material increase in costs per se. The, the upward pressures on costs are much more, you know, more global supply chain costs, inflationary pressures, wage pressures, those types of things are, are probably are bigger headwind than, than anything to do with hes or, or, or turmo.

[Paul Perreault, Chief Executive Officer]

Good. Thanks, Steve. Next question comes from Sean Laaman at Morgan Stanley. Go ahead. Sean. Sean, can you hear us?

[Sean Laaman, Morgan Stanley]

I was just saying, congratulations, Paul, on your retirement and all the best for the next chapter. Maybe some of the, the elements of this question have already been answered, but just to ask it to clarify my own understanding, and my question relates to patient access to IG over the mid to longer term.

And we know CSL has been the most prolific company in the industry in terms of growing center numbers over the years, but I just wonder if the cadence of rollout continues or whether you see plasma volumes growing more from leaders per center rising over the mid to longer term.

And does the challenge that we've observed of access to plasma volumes over the last few years drive a renewed or increase focused on IG yields? Can we expect a material improvement in IG yields and what might that magnitude be?

There are some unlisted companies that suggest or anywhere between a 10% to a 100% improvement in IG yields. We know CSAW has a pattern out there, probably one of many, which suggests a double digit increase in yield. So can you give us some context on that and will any improvement in yield that CSL might be able to achieve over the mid to longer term be potentially matched by competitors, or will this be a competitive advantage to the company? Thanks, Paul.

[Paul Perreault, Chief Executive Officer]

Sure. Look, I would say that the access to new centers continues and we are opening new centers, as I mentioned earlier, not at the same pace as we were, pre-COVID where we were opening 40 a year. We've now gotten to a point -- we're the second only to Griffel in terms of the number of centers that we have in the US and combined fleet.

So I think that's one thing that puts us in good stead, because again, each of our centers collects more on average per center than our competitors. So there's still room to grow there. We're still opening new centers. We hope to be able to process even more donors with the improved do times of donors on the beds through the new systems we're implementing.

We are looking to obviously not collect plasma if we don't have to. The demand requires that we do the patient starts, the new patients available, the new geographies, you know, we're selling into over 102 countries today at CSL. We don't have every product in 102 countries, right? We don't have the whole portfolio in every country.

So we're still moving plasma products, including, you know, K centra, including HAEGARDA, including IG, including albumin. So there, those are all plasma products and we need the plasma if we're going to continue to expand into these, these new countries. So the countries that we're already in today, in fact. So, so that's, that's the global nature of our business. We're the largest global player in the industry. And so that's our job. There's a lot of people at lab scale that talk about IG yield.

Nobody's done it at scale. You know, there's a lot of people that claim they can get. I mean, a hundred percent g u would mean you're getting more IG than as available cuz we're already recovering, you know, more than that.

So that'd be a pretty big ask. But I, I would say that we certainly are well aware of everything that's going on in this space. And we think that the programs we have are fantastic. Now, will they all work? There are different areas of yield that will continue to explore different steps in the process, different areas.

I think we will have a competitive advantage for quite a number of, you know, years because this doesn't happen overnight. So unless my competitors are doing things, I don't know which could be the case cuz I'm not, I don't know everything. I would say I, I like where we sit at the moment and the magnitude is significant.

For us where I could stop opening centers, that that gives you some idea. If you figure out how many leaders we collect per center on average. But when we see the, the demand continuing to grow in the high single digits, which we are so that, you know, somewhere between that six to 9%, and yet we as the leaders want to grow faster than that. So I still want the business to try to grow in double digits in IG because we're the leaders there.

So that's our job. So look, it, it's not one thing that's gonna make a difference. And as I said earlier, implementing yield across every manufacturing facility is going to take some time because there's some processes that aren't exactly the same at each stage of the fractionation process. So it's a complex business as usual, which is one of the beauties of the business because not everybody can do what we do. So I think we're, we're in good stead and I'm really excited about the future innovations that'll come outta C S L.

[Sean Laaman, Morgan Stanley]

Sure. Thanks Paul. And, and one more follow up, if I may, and I guess the other, other griller in the, the us dialysis space and that contract win. Give us some context about how potentially material that contract may win, may be, if you can.

[Paul Perreault, Chief Executive Officer]

Well, the new contract with Messier allows us access to a whole other dialysis player. So obviously if you look at the overall population of patients on dialysis, it opens up a significant opportunity for us as a company. I don't want to go in the forecast and where we'll be. Right.

[Sean Laaman, Morgan Stanley]

Awesome. Thanks so much, Paul.

[Mark Dehring, Head, Investor Relations]

Terrific. Thanks Sean. Next question comes from Saul Hadassin at Barrenjoey.

[Saul Hadassin, Barrenjoey]

Thanks Mark. And good afternoon everyone. First question from me, just looking at the rates of growth between IG and [indiscernible] just wanted to check, is albumin growth of 11%, is that a good proxy for your liters collected six to nine months ago? And is the difference to IG then at 19%, is that effectively all price and a bit of mix?

[Paul Perreault, Chief Executive Officer]

Yeah, thanks, Saul. Look, it's about on average, as you know, it's not the same, production of albumin as IG in terms of apples to apples. So there's always going to be a difference between IG and albumin availability.

In terms of where we take a look yeah, there is some, some price and there's mix and there's volume. So, it's really a mix across all of those areas. I mean, when you look at the different regions you've got about, I would say from this result, what we're looking at is about 75% volume and about 25% price.

[Saul Hadassin, Barrenjoey]

Thanks Paul. And just another one from me on, on plasma centers. So the comment around collections being up sort of greater than 10% pre-COVID, I think your collection centers are probably up around 30% versus where they were pre-COVID, at least in aggregate. Can you just talk to those centers that have been opened, whether they are sort of similar size and in essence, do you need to get back to 30% growth in leaders, total leaders collective versus pre covid to see those centers really running at a, at a very efficient level? Thanks.

[Paul Perreault, Chief Executive Officer]

Well, look, so the newer centers are less of a proportion than they used to be. And so there is capacity there for the new centers to, to get there. They are the same size by the way. We, we have a, you know, a footprint and a process of centers in terms of scale, size, number of beds, et cetera, because we don't want them to be suboptimal and we're running at what we think is the optimal size and and capacity. So yeah, there's more room to grow in individual centers. Doesn't mean that every center has 30% to grow. So overall it all contributes to that growth that you've seen.

[Mark Dehring, Head, Investor Relations]

Next question comes from Gretel Janu at Credit Suisse. Go ahead Gretel.

[Gretel Janu, Credit Suisse]

Thanks Mark and good morning. And congrats, Paul. Just firstly on Vifor, so just back to the early comments on my spare, just trying to understand what happened in this half that contributed to the very strong growth there. Was there any early adoptions from in the period and then just going forward as well just with the approval of Duc that there do you see, how do you see the growth platform for my in the medium term? Thanks.

[Paul Perreault, Chief Executive Officer]

Yeah, if I can just comment on Messa. So obviously when we started up the new contract, you have to provide inventory. So part of what you've seen is the inventory growth across that new partner with us. In terms of the HS that you mentioned. Obviously the HF labels have come out. We're continuing to evaluate that, but we think most of that penetration will happen for those that aren't tolerant on the ESAs. And so we -- there'll be an impact over time, but we don't think it will be significant out of the gate.

[Gretel Janu, Credit Suisse]

Understood. And just to be clear about second half performance might, you wouldn't expect such a huge step up because you already saw some of that inventory come through in that first half, just to be clear.

[Paul Perreault, Chief Executive Officer]

Correct, yes.

[Gretel Janu, Credit Suisse]

Great. And then secondly, just on HEMGENIX just wanting to understand a little bit more about your rollout strategy and in particular, how much additional sales and marketing expense should we expect in the second half?

[Paul Perreault, Chief Executive Officer]

Thanks. Look, I would say that in the first half you know, we had quite a bit of sales and marketing expense because we had to prepare, as I said, this is, this is something we have to do in a pristine manner. All eyes are on us in this space. You know, there's five competitors with a gene therapy for HEMGENIX that are waiting out there to look at us and see what we're doing.

They want to, they want to make sure that, they learn from us. So all eyes are on us. This is a, a, a costly product. We have to get all of the payers on board, which our access team has spent a lot of time and effort on education and working through the models. And I think we, we've done a great job of, of explaining the benefit to the patients over the long term.

And, the actual benefit as a cost is, is tremendous and, and well documented. So I think, you know, we're getting there. The, the treaters have patients that they'd like to put on, but there are you know, some hurdles to getting these patients in and, and setting up the appointments and the administration, which is, you know, one, one shot-ish, but it's still, takes time to, to understand how to infuse a gene therapy with a vector.

So it's I wouldn't expect you to see, a hundred patients sign up anytime soon right. It's going to take a while to get that. So the sales and marketing will continue because there's a lot of work to do. We've budgeted for most of that, and so, you know, it's within our results guidance that we're giving you.

So I wouldn't look for anything additional to what's in there cuz we already knew what was coming. So I think that's fine. We also have a clinical trial, post-marketing trial to run. And that is going to take a while to do because you have to have high antibodies to the vector that need to be identified for those patients.

It's not a large study, it's only about I think sorry, 30, 31 patients in the trial. So that'll take another, probably at least, you know, year or more to, to go because it's hard to find patients with this high antibody tighter to the, to the vectors. But I would say it's going to be as more and more patients get enrolled and get experience with it, then we'll start to see the uptake into next year.

But overall I'd say, you know, it's going really well thus far. There's a lot of interest, a lot of patients that are, are ready to find their doctor and say, hey, let's go ahead and give this a try. But we'll see. I mean, like I say, all eyes were on us and we, we gotta make sure

[Mark Dehring, Head, Investor Relations]

Gretel is done in the right way. Thanks, Gretel. Next question comes from Craig Wong-Pan at RBC. Go ahead Craig.

[Craig Wong-Pan, RBC]

Great, thank you. Just on IG sales, I noticed that privilege and experience stronger growth than Henri in the period. So could you talk about the dynamics there and if this means that mix might not be much of a benefit in future periods?

[Paul Perreault, Chief Executive Officer]

No, look, I think mix will be fine, but as I said, a lot of the areas that grew were Europe and emerging markets. And a lot of those are more tender based on IV and hospital use. So I'd say you, you saw a lot of that from a PN volume perspective. As I said, it was about, you know, three quarters volume and some price. The price would've also probably been a little bit more weighted towards Prevagen. So from that perspective, you probably saw a little bit of a difference there between Prevagen and KCENTRA.

[Craig Wong-Pan, RBC]

Okay, thanks. Understood. And then just my second question on the Seqirus margins Joey mentioned there was some benefit there from product differentiation and then the manufacturing side as well. Just wondering if you could provide a split between those factors and also whether the current margin which you achieved, is that kind of a new sort of normal sustainable margin for that business?

[Joy Linton, Chief Financial Officer]

I think the margin really -- it really reflects the, the product mix, right? So what I think we've done a very good job of is to move the market away from an undifferentiated relatively low egg-based product to both FLUCELVAX, which is the cell product and [indiscernible], which is the adjuvanted today.

And I think if you go to the appendix B, I suspect, yep, appendix B, it does give you a split of those products and you can see the growth and we're not going back to egg-based products anytime soon. Right. So this is a fundamental shift or at all. It is a fundamental shift that in the Securus business we've been on for a few years now and have, it's underpinned the success of CSL Securus and continue to do so.

[Craig Wong-Pan, RBC]

Okay. I think I thought you mentioned there might have been some manufacturing efficiencies, which you got through so that it's mainly on the product mix?

[Joy Linton, Chief Financial Officer]

Yeah, clearly you put more through the facilities, you tend to get a bit of favorable manufacturing and volume was up particularly in Europe, and so we probably have had some -- we will -- there is some favorable manufacturing in that just from efficiencies. But the main component is the product mix shift from the undifferentiated product through to FLUCELVAX.

[Paul Perreault, Chief Executive Officer]

We also had better yields on the number of the strains this year, and so that also helps us on the margin side. So yield is important, not just in plasma by the way, it's important in flu as well.

[Mark Dehring, Head, Investor Relations]

Thanks, Craig. Next question comes from David Bailey at Macquarie. Go ahead, David.

[David Bailey, Macquarie]

Yeah, thanks Mark, and congratulations, Paul. Joy, just slide 16 the one with the c p on the gross margin. Looks like there's a, you know, pretty strong negative or inverse correlation between those two variables up to the September quarter. Just wondering what the basis for that dip was. And if we can sort of confirm that this, this half is your expectations for being a trough for gross margin for bearing.

[Paul Perreault, Chief Executive Officer]

Thanks David. I've been waiting for this question until I'm surprised it took all the way to you to ask it, but there you go. I think a few things we would say, firstly CPL is not the only component that impacts gross margin, as you know, but it's clearly been a really material one over the last over the last few years.

And so -- or it's certainly post the pandemic. So what we've tried to show on the slide is that trend in the CPL. And obviously what's been going on sort of by a quarter on, on margins. Well, I mean, the margins do bounce around a little bit, right? Month by month, quarter by quarter, you do get a little bit of a, a bit of movement because there's a range of other factors, right?

Whether that be supply chain costs or you know, if there's a write off in a, in a manufacturing facility or mix of products and things. So you do, you do get some movement. But I, I think we could, you know, we, based on what we know now, I think we would reasonably expect that we are on or around the low point.

But, famous last words on future inflationary press pressures and global supply chain costs. But based on what we know today I think we were saying that we reasonably think that we are on or around below point.

[David Bailey, Macquarie]

Okay, that's helpful. And then just around back to just wondering if that contract was captured within the guidance provided in October 300, 3 30 at the impact level, just wondering if that contract with DaVita was captured within that guidance? Yes.

[Mark Dehring, Head, Investor Relations]

You. Thanks, David. Next question comes from Andrew Payne [ph] at CLSA. Go ahead, Andrew.

[UnidentifiedAnalyst]

Yeah, hi thanks for taking my question. Just on the album, you, you called out China with lower in the half on COVID we we're just seeing increased engagement in China's health system since the start of the year. So just wanting to know how material that is you know, the China sales in for aluminum and, if you're expecting that to increase in the second half as the as the economy reopens over the

[Paul Perreault, Chief Executive Officer]

Look, I'd say it was timing was part of that for sure. And, and we would expect to see some in China, but I can tell you that we have a lot of demand for albumin in other countries as well, including all through Europe where we've seen increased demand since covid is subsided. So, you know, there's plenty of demand across the globe for albumin and China will continue to, to come forward in looking for more albumin.

[UnidentifiedAnalyst]

Sure, thanks. And, and just one other on Vifor. So look, I know it's early and but now you've taken control of the four. Are you able to update your view on the EPS secretion of the deal? I know you said load of mid, mid-teens and pad per share previously in the, in the first year, just wanting to see how that's looking from your view.

[Paul Perreault, Chief Executive Officer]

Yeah I'll take that one. Thanks. so I think when we are looking to re well, we've reaffirmed our guidance on the last page of the presentation that is pretty all inclusive, so reaffirming our guidance around e p s accretion as well.

[Mark Dehring, Head, Investor Relations]

Good. Thank you, Andrew. Our last question comes from Matthew Shaer from Citi [ph]. Go ahead, Matthew.

[UnidentifiedAnalyst]

Yeah, good morning, good afternoon. Thanks very much for taking the time. To answer my question my first one was on in injector and I was wondering whether you could give us a sense of the size of the opportunity in the heart failure in the US.

[Paul Perreault, Chief Executive Officer]

Well, again, we're waiting for the label to come out, hopefully any day now. Again, I won't go into forecast. I think there's a significant benefit for patient outcomes and we do think, we'll, we'll be con contributor, but it's already in our forecast for this year. So I don't expect an upside on this forecast because we factored in that success for this year.

[UnidentifiedAnalyst]

Understood. And then my second question is on flu vaccines. I could see from slide 11 that you have your COVID candidate listed. I was wondering why your potential flu vaccine mRNA and it is not listed?

[Paul Perreault, Chief Executive Officer]

Look, I think its early days and flu. You know, you've got four antigens going in, you've got to really make sure that self-amplifying is the right platform for flu. We've got our program, which, is really what we think is the next generation flu vaccine. The mRNAs have not been, I would say, convincing on their flu vaccine trial so far.

They've got somewhat similar immunogenicity, but a lot more side effects and you really want something more. And I think is going to show a very strong result is what I expect in the phase three trial that we're going to start in the August timeframe. So I think there's still more to come on flu. Everybody thinks it's easy because it says mRNA and it's, it's tough.

Flu is difficult, you've got shift and drift of, of viruses and you have four antigens going in. Everybody thinks they want to make a universal flu. The mRNAs delivery system in the first generation still has issues. We need to solve for dose, we need to solve for stability we need to solve for durability.

And so all of that still needs to go where our current vaccine platform already delivers that. So, that's what we're looking at in terms of science takes time. You, have to have some patience. Everybody when they have one success thinks it's easy just to push it to the next one. Life tells me that's not typically the case.

[Mark Dehring, Head, Investor Relations]

Yep. Good. Thank you, Matthew. Ladies and gentlemen, we have no further questions in the queue. So I'll draw the briefing to a close. So I wish you a good afternoon and thank you for your interest in CSL. Bye-Bye.