The share price of blood plasma and vaccine supplier CSL Limited (ASX: CSL) is coming under pressure today. A competitor, Baxter International (NYSE: BAX), has been given the green light in the United States for its subcutaneous (sub-Q) immunoglobulin (Ig) product called HyQvia. CSL has enjoyed a virtual monopoly position in the market since 2006 with its own product named Hizentra.
Why is the market surprised?
While the market largely expected the new product approval, the product label appears broad and non-restrictive and does not call for the need to monitor patients for certain antibody levels. This may prove vital in uptake and patients switching away from CSL's product, according to broker Morgans.
Quantifying the risk to CSL:
According to the broking arm of Citigroup, CSL's Hizentra garners approximately $500 million in revenue per annum and is currently growing at around 19%. It represents about 20% of Ig sales and approximately 10% of group sales. If growth were to slow to zero it would have a $100 million impact, which is not large in the context of group sales. However, this would potentially concern investors as CSL's product mix is skewed to immunoglobulins and they are the incremental driver of expansion.
Summary of market concerns:
1. Baxter's product requires less frequent dosing and this benefit is very significant for patients.
2. Why wouldn't existing CSL patients trial HyQvia, as they may always switch back to Hizentra?
3. CSL is being over optimistic in suggesting that the battle is for new patients. The fear is that many may switch from CSL's products.
