CSL Limited (CSL) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to CSL's 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 2. 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?

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 is 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 to deliver shareholder value and most importantly, keep our promise to patients and provide them with our life-saving medicines. So now turning to the results. 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 Vifor, 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 broadened portfolio. So first, the headline numbers. Revenue was up 25%. This includes approximately 5 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 costs 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 Seqirus has continued to deliver strong sales growth, driven by its high-value differentiated products. CSL Seqirus 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 5 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 U.S. 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 was 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, PRIVIGEN and HIZENTRA 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 U.S. and Europe, whereas albumin growth in China was constrained by the COVID environment. Hemophilia 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 an 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 receive 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 Behring. 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 6 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 welcomed back the Mexican donors to our plasma centers after the U.S. District Court in Washington granted a preliminary injunction reversing the ban on Mexican donors entering the U.S. to donate plasma. The centers on the border are recovering strongly. We continue to invest in opening new plasma collection centers with 7 opened in the U.S. as well as 1 new center in Germany and others will -- are close to opening. During the half, we commenced the rollout of the new RIKA 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 have 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 Broadmeadows. This facility gives us the capacity to process up to 9.2 million plasma equivalent liters a year and prepares us for the initial launch of CSL112. We also added new base fractionation capacity at 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, our 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 the backdrop of reduced rates of vaccination. Whilst 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 rates, 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 U.S. for 6 months age indication. This resulted in an increase in demand for FLUCELVAX and we expect this growth to continue over coming 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 health care 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 BARDA task order for the manufacture of H5N8 clinical trial material. We also supplied AFLUNOV prepandemic stockpile, which is 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 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 and CSL Vifor. As I mentioned at the beginning, our acquisition of Vifor Pharma successfully closed on August 9 last year. So we had approximately 5 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 a 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 U.S. The introduction of step edit measures in the iron market in the U.S. had a positive impact on Venofer, CSL Vifor's low-dose iron product, but put pressure on the high-dose iron product Injectafer. We continue to work with health care providers to ensure the optimal outcome for patients. The integration of CSL Vifor is well advanced and 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 U.S. has been submitted with the response expected very shortly. In dialysis, the agreement with a large kidney care provider in the U.S. for the ESA 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 nondialysis part of the nephrology business, TAVNIOs, the 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. BERINERT subcu for received HAE received PMDA approval and was launched in Japan. This approval of the at-home subcutaneous therapy for patients suffering from hereditary angioedema advances treatment options for patients in Japan. In Hematology, I mentioned HEMGENIX, the first and only onetime 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 2 years of followup, adults with severe or moderately severe hemophilia B, treated with a onetime infusion of HEMGENIX generated elevated and sustained mean Factor IX activity levels and durable hemostatic protection. In the Cardiovascular & Metabolic space, enrollment in the CSL112 AEGIS-2 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 IIb/III study, possible 6 in October to evaluate clazakizumab for prevention of major adverse cardiovascular events, 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 2 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 want 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 U.S. We'll also be launching HAEGARDA that's known to be known BERINERT SC in Japan. And as I mentioned, we are expecting to receive response to the heart failure label in the U.S. 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 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.

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 overseen transformation, business excellence and incredible growth. It's been a huge privilege for me to work alongside Paul for the past 2 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 our people person. As we've announced at the CSL Vifor 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 NPATA 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 NPATA was $1.818 billion, up 2%. On a constant currency basis, NPATA 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 NPATA 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 NPATA are attributable to CSL equity holders only. As you know, part of the CSL Vifor business includes the majority-owned joint venture company Vifor Fresenius Medical Care Renal Pharma. As CSL Vifor controls this joint company, 100% of the joint company result is consolidated into the financials. So 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 noncontrolling interest. And also, just as a reminder, the financials in this presentation are inclusive of approximately 5 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 adjustments are included. $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 noncash item with the remaining balance of $85 million relating to the acquisition, transaction and integration costs. After adjusting for noncontrolling interests and tax NPAT 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 5-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 is largely reflecting the strong growth in plasma collections. Another contributing factor was the higher finance costs paid primarily due to the debt financing arrangements entered in to 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 USD 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 AUD 1.55, up 9%. So turning to the segment results on Slide 15. As we detailed at the CSL Vifor 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 as 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 5-month CSL Vifor 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 CSL Vifor where Mircera 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 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 9 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 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 U.S. and the gray line being the gross margin percentage. The largest components within the CPL are donor compensation and direct labor. And these 2 combined 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 U.S. 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 9- 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 many the 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 has been significant volatility in world currency markets and 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 USD 138 million, and it was largely driven by a stronger U.S. dollar. This is a function of both realized and unrealized losses. 2 significant realized losses amounting to approximately $50 million were a function of, firstly, realized losses accrued, which related to the U.S. dollar against the Chinese Yuan and that relates to albumin. And in addition, the movement of the pound sterling against the U.S. dollar as a result of production of FLUAD in Liverpool in sterling, which was subsequently sold into the U.S. The balance of the losses related to the movement of the U.S. 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.

Well, thank you, Joy, and thank you for your kind comments. I've learned a lot from you over the last 2 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. So on to the outlook. Looking specifically at CSL Behring, the strong growth we've seen in plasma collection and our immunoglobulin franchise is expected to continue. And notably, in the second half, we'll be launching our gene therapy product team 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 CSL Vifor and excludes the one-off costs associated with the acquisition. And with that, Mark, I think we're now happy to take questions.

Good. Thank you, Paul. Operator, we'll now move to Q&A. I think everybody on the call is familiar with the process. If you have a question, please press star 1. And our first question comes from David Stanton at Jefferies.

Paul, can I start by congratulating you on your tenure as well. The 2 questions for me. First one, your -- some of your global competitors talked to a donor fee decline as they see it going forward in the order of about 30% from the highs. CSL talked to total plasma cost decline of about 10%. Can you explain some of the differences where they may be compared to your competitors in terms of that decline?

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 return 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 CPO, 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 is my view.

Understood. My second question is Garadacimab, you'll be presenting that -- what looks to on preliminary data be quite more excellent data. Where do you see that product on a 2-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.

Well, I'm not going to give you a 2-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 2, 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, 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 IDELVION, the HEMGENIX, I mean we don't mind disrupting ourselves a bit in order to bring a better product to patients.

Next question comes from David Low at JPMorgan.

Congratulations. Can you hear me?

Yes. Can you hear us, David.

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

And just to reiterate that congratulations and also welcome Paul McKenzie. Perhaps if I can just start with Terumo. Just with recently, I guess we've seen that, that stalled your rollout. So maybe just any more commentary on sort of when that gets started again. And just on the outlook for Terumo where that can go, I guess, and a potential date for a new nomogram and [ hematocrit ] for that one.

Thank you, Andrew. This is Paul McKenzie. So I'd also like to pass on my thanks and congratulations to Paul on his retirement. He's been, as Joy said, legendary for shareholders, but our people within CSL as well as our patients. 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 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 3 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.

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

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

Okay. And my second question, just while we're on the subject of yield. Just the last result, 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.

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 1 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 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 am not trying to be coy, but I'd just say that there's some milestones that will 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, I mean, 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.

I see we have David Low from JPMorgan back online.

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

My wife doesn't say that.

My first question, Paul, was just anti-FcRn as a threat to immunoglobulin given, it seems to be making some progress in the autoimmune space, obviously, with fairly small indication 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.

Yes. 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? I mean, in my view, with everything they've been spending out and all the promise they've been talking about in this space because there's more than 1 anti-FcRN 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. They're 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 and 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 mean 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. I 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.

Perfect. My other question is related to Vifor. I noticed the gross margins were significantly weaker than the FY '22 period. I'm also aware that the sales mix change. But could I get you to talk a little bit to that? And I didn't quite follow your commentary there on Vifor and the change in demand for higher concentration and lower concentration high-end products, if perhaps that's all related.

Yes. 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?

David, I'm not sure we particularly recognize your comment that says the margins on Vifor 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 perhaps the unaudited numbers that I -- 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 Vifor.

Okay. So it's accounting treatment. So I'm looking at [indiscernible] and I understand that's unaudited and not CSL's numbers, but you would put the difference there down to a different treatment rather than any change in the business.

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

Next question comes from Lyanne Harrison at Bank of America.

Can I start with IG demand? So obviously, we're 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 of there's an increase in utilization or gram per head being used? Can you shed more color on that.

Sure, Lyanne. 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 supply has 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 is 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 1.5 decades or 2 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've -- they want to be able to help and they want to be able to treat. So that face-to-face back onboard 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.

And just a follow-up with IG and inventory levels. So as seen in your balance sheet, you've got close to 5 billion of inventory now. Are you happy with your current stocks of IG? Or are you still looking to build more?

Well, I'd love to say we're building more. But if you look at our finished goods inventory versus WIP 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 more additional inventory. So we're still pushing it out fairly quickly as it comes through the plants.

Next question comes from Chris Cooper at Goldman Sachs.

I also wanted to say thanks and congrats to you, Paul, but I do actually have 2 questions to Joy today, please. So Joy, just on Slide 16, your commentary that 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?

Yes, 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.

Presumably, you don't need your CPL to return to that December '20 level and that charge for that to occur. I mean you had pricing probably some mix changes going away in the interim period. Is that correct?

Yes. 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 donates 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 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 -- Terumo, 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 how we get back there, albeit with probably a higher donor fee over the long run.

Got it. And just a second on the NPATA adjustment, if you don't mind. So I would expect to be a first half weighting in those numbers, but it's also 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 NPATA guidance amounts to a reiteration of the NPAT target that you have outlined in October.

I'm not sure I can particularly understand the question. I think what we're doing is reaffirming the NPATA 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 I particularly understand your question, Chris.

It just looked to me that the amortization of the acquired IP was just running at a level which was above where we would have expected it to be. So I just wanted to make sure that was just a bit of front end loading of the full year guidance [indiscernible] period.

Okay. Right. Okay. Yes. So I think a couple of things to note. Yes, 5 months in the first half, 6 months in the second, that slide of slide was at 13. Just to make sure you are taking out the NCI or the amount that's not attributable to CSL shareholders. I think we -- 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 an 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 million to $170 million attributable to CSL shareholders.

Got it. So we're still looking for NPATA of around $2.5 billion to $2.6 billion for the full year.

Yes. Yes. Yes, I see what you said. I see where you're going.

Thanks, Chris. Next question comes from Steve Wheen at Jarden.