The CSL Limited (ASX: CSL) share price could be in the spotlight as the Australian Government backs the biotech giant to produce COVID-19 vaccines. With new cases of the virus still growing in Australia, the need to access a vaccine has never been higher.
Here's how CSL could save Australia from the COVID-19 pandemic as well as a look at whether you should invest.
Producing vaccines for the whole country
According to an article in yesterday's Sydney Morning Herald, the federal government has backed biotech giant CSL to make enough vaccines for the entire Australian population. If a locally produced vaccine is not first to market, the government will have to broker licencing deals with international developers. CSL would then manufacture the vaccine at its Broadmeadows facility.
Last month, CSL noted that the company had established a partnership with the Coalition for Epidemic Preparedness Innovations (CEPI) and the University of Queensland to fast-track the development of a COVID-19 vaccine.
In addition to manufacturing a potential vaccine, CSL has also been working on additional potential therapies by collecting plasma from recovered patients. In conjunction with other global biotech companies, CSL has launched a campaign in the United States encouraging recovered COVID-19 patients to donate plasma. In partnership with the Australian Red Cross Lifeblood Service, CSL is also collecting plasma in Australia from recovered COVID patients.
How has CSL performed?
In a trading update released in early April, CSL acknowledged that plasma collection volumes are expected to be impacted by the COVID-19 pandemic. In order to mitigate these challenges, the company's plasma collection centres have been designated as 'essential and critical' services.
As a result of reduced volumes, there are fears that supply issues could result in increased production costs. Despite these fears, the company recently acquired global licence rights from uniQure to commercialise a gene therapy program for the treatment of haemophilia B.
Should you invest?
In my opinion, CSL is one of the highest quality companies listed on the ASX. The company has assured shareholders that it's in a strong capital position with more than $1 billion in available liquidity. CSL has also reaffirmed its profit guidance for FY20.
Despite the optimism of possibly manufacturing a vaccine, the CSL share price has remained relatively flat for 2020. This muted price action could reflect portfolio rotation and concerns about a decline in plasma collection volumes.
Personally, I think that the CSL share price won't be suppressed for much longer, particularly if there continues to be positive news about a potential vaccine. I think a prudent strategy would be to wait until August when CSL reports its full-year results to get a better picture of where the company stands.
