CSL Reviews Non-Plasma Unit as Perreault Mulls Options

CSL Ltd., the world’s second-biggest maker of blood-derived therapies, is taking a hard look at its non-plasma businesses as incoming head Paul Perreault tries to assess their growth prospects.

CSL created a new unit, named bioCSL, in January to encompass its vaccine, pharmaceutical and diagnostics businesses. Their separation from the Melbourne-based company’s CSL Behring plasma division will help identify their profitability, Perreault said in an interview yesterday. The assessment will probably take 18 months to two years, he said.

“We also want to make it clear to shareholders, is there value here?” said Perreault, 56, an executive director who will take over from Brian McNamee as managing director and chief executive officer on July 1. “If there is, fine. If there’s not as much value as we’d like, then what can we do to improve the business, or are there better options?”

It’s “too early to draw any conclusions” about whether the businesses, which include the Southern Hemisphere’s only maker of influenza vaccine, will be sold or spun off, Perreault said. The company, formed by the Australian government as the Commonwealth Serum Laboratories during World War I, is the country’s main supplier of snake-bite antidotes and vaccines for Q-fever, a livestock disease.

National Significance

Any decision about the future of the businesses will need to be weighed against their national significance, said Perreault, an American who plans to maintain a home base in Philadelphia and spend at least a third of his time in Melbourne.

CSL fell 0.2 percent to close at A$58.75 on the Australian stock exchange. The shares have risen 9 percent this year, compared with an advance of 6.7 percent in the S&P/ASX 200 Index.

The company has yet to report earnings from bioCSL. Pharmaceuticals and vaccines contributed 10 percent of CSL’s $2.5 billion of revenue in the six months ended Dec. 31. Sales of influenza vaccine, including to the U.S., were $97 million, dwarfed by the $1.96 billion contribution from CSL Behring, according to a company presentation.

A trend toward flu shots that protect against four seasonal strains, instead of three, and potentially different vaccine regimens for the elderly are among new challenges manufacturers face, Perreault said.

“We have infrastructure, we have a flu plant,” he said. “It’s not like we can just walk away. Let’s take a close look, let’s do our due diligence and let’s understand where we are with the business.”

Right Timing

The company hasn’t yet hired any outside consultant to help with the review process, Perreault said.

“There is inherent volatility with the seasonal flu business,” said Andrew Goodsall, a health-care analyst at UBS AG in Sydney who has a neutral rating on CSL shares. “If you arrive late in the season in the U.S., you risk not selling.”

CSL sells the Gardasil human papilloma virus shot, which protects against cervical cancer, in Australia and earned about $72 million in first-half royalties on Merck & Co.’s sales of the vaccine outside Australia.

“Diversification does give them some alternative income streams,” Goodsall said, adding CSL’s vaccine against pandemic swine flu made a “materially high contribution to profit” in the year ended June 2010.

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