CSL Limited (CSL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the CSL Limited Full Year Financial Results 2026 Conference Call. [Operator Instructions] I would now like to hand the conference call over to Michelle Rees, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining CSL's 2026 Full Year Results Presentation. I'm Michelle Rees, Head of Investor Relations. Before we begin, I would like to draw your attention to the important disclaimer on the screen. A copy of this, along with our ASX materials has been published on the CSL and ASX websites. With me today are Gordon Naylor, CSL's Interim Chief Executive Officer and Managing Director; Ken Lim, our Chief Financial Officer; and Diego Sacristan, our Chief Commercial Officer. Please note, this briefing is being webcast. I will now hand over to Gordon.

Thanks, Michelle, and good morning, everyone. Today's call is primarily about our FY '26 full year results and the outlook for FY '27. I'll also give you a broader update on our progress toward a return to profitable sustainable growth. In early May, after 90 days in a row, I shared with you that our financial performance had fallen short of expectations and the rapid diagnosis work undertaken to assess the drivers of that outcome. I'm pleased to report that in the end of ending weeks, we've been able to maintain momentum to stabilize the company's performance, restore the cadence and focus of the leadership team and start to deliver results. Considerable work remains but we are making progress. FY '26 has been a reset year for CSL. The actions that put us back on the path to sustainable growth started well before my appointment and have been delivered with intention and urgency. My observation on this is twofold: the industry structures in which we compete remain robust. And as I traveled around the global business and engage with staff, it is evident that the CSL culture of capability, commitment and openness remains deeply held. There is absolute clarity in the global workforce about the task at hand. The leadership team has been key to ensuring that communication with the broader organization has been consistent open and transparent. The full support of the Board has helped us to move rapidly. The FY '27 planning process included the allocation of accountability to a high level of detail all supporting CSL's return to profitable growth. We assessed initiatives in play, focusing on the ones that are core to our success and stopping the ones that weren't. Since I'm not a candidate for the permanent CEO role, I've been able to work with the Board on the process. I'm pleased to say on behalf of the Board, that the search is progressing to plan, and the Board is impressed with the caliber of talent on our short list. In the interim, my role is to continue to drive the business forward and to give the incoming CEO, the strongest possible foundation from which to build. I then expect to return to the Board as a Nonexecutive Director after a suitable transition period. With that, let's turn to the FY '26 results. I'll take you through the high points and then hand over to Ken to explore the financial details. As a reminder, the numbers I talked to are on a reported basis and the percentage movements mentioned are on a constant U.S. dollar currency basis, unless otherwise stated. Revenue was $15.8 billion, down 1%. Underlying NPATA was $3.1 billion, down 2% and while underlying NPAT was $2.8 billion, down 3%. As you know, we're returning to NPAT as our core financial profitability measure. Reported NPAT includes the significant one-off restructuring and impairment charges that Ken will discuss in detail. Within the businesses, bearing revenue declined by 1% at constant currency. Seqirus declined by 8% and Vifor grew by 3%. Underlying demand for minoglobinin remains robust, ANDEMBRY has performed ahead of our initial expectations and HEMGENIX genic continues to grow. Within influenza vaccines, Seqirus was the only global participant to grow seasonal influenza revenue year-on-year. despite significant sectoral headwinds. Our transformation program delivered $176 million of savings in FY '26 ahead of the target we set for the year. We selectively reinvest a portion of those savings in commercial and development initiatives, where we expect the returns to justify the investment. Cash flow from operations remained strong at $3.5 billion. This supported the completion of the share buyback of around AUD 1 billion, and Ken will talk about a further buyback ahead. In addition, I'm pleased to announce that we are maintaining the dividend in U.S. dollars. These capital returns are evidence of the underlying robustness of the business. Turning now to CSL Behring, our largest business. Total revenue was $11.4 billion, which was down 1% against the prior comparable period. Immunoglobulin revenue was broadly flat for the year. The reported outcome was affected by the normalization of U.S. channel inventory that we spoke about in our May update. We now see channel inventory at more appropriate levels. You may recall during the year, we were also cycling the Medicare Part D changes and the loss of the U.K. tender during the first half of FY '25. These created an additional headwind to the year-on-year comparison and contributed to the flat full year RG result. The more relevant indicator of current demand is the second half performance. Ig revenue increased 7% on the prior comparable period and 4% on the immediate preceding half. We regard this as an early indicator that the commercial investments we've made in the U.S. are yielding benefits. We're now maintaining patient share in KCENTRA, which is important as it demonstrates the durability of the franchise. Albumin revenue declined by 17%, principally reflecting cost containment measures and the resulting reduction in market value in China. We're encouraged to see a slowing in the rate of decline in the Chinese albumin market. You can see this reflected in our second half results, which was down 5% compared to the prior comparable period. We have expanded our geographic footprint in China and our partnership with Baheal, who bring great strengths in the retail channel. We continue to see progress from the commercial investment initiatives in both Ig and albumin. It remains early, and we recognized the need to demonstrate sustained execution, but the direction of travel is improving. Elsewhere in the portfolio, our newer products performed well. ANDEMBRY has had a strong launch and is now available in 19 markets around the world, and hem genic grew by 25%. In perioperative bleeding, competition in the U.S. continues to impact KCENTRA pricing, although we are seeing the rate of decline beginning to moderate. On portfolio execution, underlying Ig demand remains robust. As I mentioned, our U.S. and China field force investments are beginning to show progress. albumin volume growth in China has stabilized although market value remains under pressure. And Denby has exceeded our initial launch expectations and the Phase III trial for the VarmX candidate has commenced with the first patient expected in the very near future. We also licensed clazakizumab to Eli Lilly for indications other than for cardiovascular events in people with end-stage kidney disease. That transaction allows the program to benefit from Lilly's development capabilities while enabling CSL to focus its resources on those opportunities where we are best placed to create value. We are aware of a trial evaluating a similar antibody that recently filed its primary end point. Given the population differences, we do not view the [ ZEUS ] results to be necessarily predictive of the outcome of our study, which continues. Now moving to the operational side of the business. CSL is the global leader in plasma collection. We have a large and highly productive network, deep operational knowledge and a long history of collecting safe, high-quality plasma. This has always been foundational to Behring's success, supporting both margin structure and competitiveness. On my first day as CEO, I appointed Steve Marlow, who heads CSL Plasma to the global leadership team. This was to ensure that this part of the group receives the appropriate focus. Underperforming centers have been closed with plasma collections shifting to more efficient ones. We are also pursuing the next wave of plasma innovation by reducing unnecessary sources of process variants, reducing unit supply costs and optimizing labor productivity through sophisticated donor scheduling and in both workflows. Better digital engagement with donors is expected to yield more personalized donor communication and improve the donor experience. Given the information intensive nature of this business, there is fertile ground for our AI applications, an area which we are pursuing rigorously. We have been a leader in driving innovation across the industry. Continuing with that intent, we are transitioning a portion of our U.S. plasma centers to the latest-generation hemonetics plasmapheresis platform. On the manufacturing side, our yield initiatives are progressing. Planning for the Horizon 2 clinical studies continues and construction of the Kankakee Ig facility has commenced. Turning to CSL Vifor. Revenue was $2.4 billion, an increase of 3%. However, that headline result does not reflect the more recent underlying trajectory of the portfolio. Dialysis revenue grew by 18%, large as a result of the temporary benefit from Velphoro's inclusion in the U.S. TDAPA reimbursement arrangement. Although this arrangement will cease on December 31 this year, we have and will continue to experience an early decline in revenue and margin ahead of that date. Within nondialysis nephrology, FILSPARI achieved strong patient uptake in its launch markets, while VELTESSA grew through a new market entry. The iron portfolio declined by 16% as generic competition intensified in both Europe and the United States. These portfolio dynamics are central to the outlook for Vifor and the impairments recognized in the result. So I want to take a moment to go into these in more detail. There are significant headwinds facing Vifor. These are structural and will materially affect the earnings profile of the business over FY '27. Injectafer is now competing against generic entrants in the United States. The European iron portfolio has been in this position for over a year now. and continues to experience substantial price erosion. As I mentioned, Velphoro will lose the benefit of TDAPA at the end of calendar 2026, and we believe sales will decline substantially from their recent highs. This is factored into our forward guidance. In addition, the European Commission has adopted the decision to revoke the marketing authorization for Tavneos in Europe. While we are disappointed in this decision, we respect the outcome of the regulatory process. Patient care remains our highest priority, and we are working closely with health authorities to provide clear information to patient communities and health care providers on next steps. Taken together, these factors create a considerable portfolio headwind. We are taking mitigating actions. The commercial and medical organizations of fear bearing have been integrated. This has enabled us to combine management structures, remove duplicated regional and country-level activities and deploy resources across the combined portfolio more effectively. We are pursuing growth in FILSPARI and VELTASSA, and we are examining the portfolio with a disciplined approach to return on investment. None of these actions eliminate the headwinds but they do mean that the business is actively adapting its cost structure, commercial model and portfolio priorities. Turning to CSL Seqirus. Seqirus continues to perform well as a sectoral leader with the innovative product portfolio driving continuing market share gains. Revenue was $2 billion, down 8%, reflecting the nonrecurrence of pre-pandemic sales associated with the avian influenza threat in FY '25. Seasonal influenza revenue increased by 4%. The adjuvanted portfolio grew by 5%, and cell-culture revenue also grew by 5%. As highlighted earlier, Seqirus was the only global vaccine company to grow seasonal influenza revenue year-on-year. Since the business was established, it has grown seasonal influenza share in each year through product differentiation, manufacturing capability and focused commercial execution. We're proud of this performance, which reflects a long-term strategy of differentiating the portfolio through cell-based and adjuvanted vaccines supported by real-world evidence and targeted geographic expansion. The business gained traction in the U.S. integrated delivery network and pediatric segments despite a challenging overall U.S. market. The final season of standard egg-based AFLURIA represents another step in the evolution of the profile towards enhanced vaccines. The differentiation strategy continues to drive outperformance and market share gains in the United States and Europe. Germany completed a successful first season, and we entered France with enhanced recommendations for Fluid. We have also secured a Pao agreement that provides a platform for market and volume expansion in South America. Our adjuvanted cell-based vaccine Algemflu, has been approved in the U.K. and received a positive recommendation from the European Medicine Agencies CHMP. The operation of separation of Seqirus is now complete, which was achieved on a cost-neutral basis. The business has appropriate operating autonomy while continuing to benefit from selected CSL group capabilities and governance. We're now comfortable with where Seqirus sits in relation to the group's corporate structure with no plans to undertake a demerger in the near term, although we are preserving optionality for a demerger if it would create incremental shareholder value. The Talamarine facility is now open and will support the move to what a fully differentiated portfolio part of which is the expansion of our cell-based pandemic offering that has already yielded new agreements in Canada, New Zealand and Australia. CSL is increasingly -- sorry, Seqirus is increasingly positioned around differentiated products, targeted customer segments and selected markets where it's technology and real-world evidence can support sustainable value. I'll now hand over to Ken to take you through the financial results in more detail.

Thank you, Gordon, and good morning, everyone. Starting with the financial highlights for FY '26, I'll walk through the P&L, focusing on reported numbers and changes expressed in constant currency. Total revenue for the group was $15.8 billion, down 1%. Gross profit was $8.5 billion, down 2% and the group operating result was $6 billion, down 3%. In research and development, we made strong progress on our restructuring initiatives with R&D expenses down 13% to $1.2 billion, while still investing in attractive development programs such as the VarmX Phase III trial. General and admin costs were also down by 13%, benefiting from our cost management initiatives and organizational simplification. Net interest was relatively flat with our gearing finishing the year at 1.8x within our target range after executing a share buyback of AUD 1 billion. NPATA before restructuring and impairments was $3.1 billion, down 2%. I'll go into more detail on the restructuring and impairments shortly. Group underlying NPAT, which is the bottom line earnings metric we will be focusing on going forward was $2.8 billion, down 3% before restructuring and impairment charges. Our underlying effective tax rate was 19.1%. NPAT on a statutory basis after restructuring and impairments was a loss of $2.6 billion. Cash flow from operations was strong at $3.5 billion, and we maintained our final dividend in U.S. dollars at $1.62 per share. taking the full year dividend to $2.92 per share. Turning to the next slide. The table provides a bridge from NPATA to underlying NPAT and then to statutory NPAT attributable to CSL shareholders. As I noted earlier, our FY '26 NPATA was $3.1 billion. From NPATA, we deduct the post-tax amortization of acquired intellectual property, which was $322 million in FY '26. We then adjust for the share of amortization that is attributable to noncontrolling interests. That takes us to underlying NPAT attributable to CSL shareholders of $2.8 billion. This reflects the operating performance of the business after IP amortization, but before the restructuring and impairments recognized during FY '26. To get from underlying NPAT to statutory NPAT, we deduct post-tax restructuring and impairment expenses of $6 billion and then add back the portion of those impairment expenses attributable to noncontrolling interests. This result in statutory NPAT attributable to CSL shareholders of a loss of $2.6 billion. Turning to the segment results. Behring revenue was $11.4 billion, down 1% at constant currency. Gross profit declined by 2% and gross margin declined by 70 basis points. The gross margin result reflects product and geographic mix, the U.S. Ig channel inventory normalization and continued pressure in albumin. These impacts were partly offset by further improvement in plasma collection costs and manufacturing efficiency. Sales and marketing expense in bearing increased by 8% and reflecting the deliberate commercial investments Gordon discussed, including field force expansion in the U.S. and China and support for ANDEMBRY. For for revenue increased by 3%, with gross profit also increasing by 3%. Vifor's operating result increased by 11% as we continue to take out operating costs. I previously foreshadowed that from FY '27 onwards, we'll be updating our segment disclosures, including the separation of Seqirus down to segment EBIT. Although Behring and Vifor have been integrated across commercial and medical affairs, our intention is to continue to report them separately down to gross profit in order to maintain visibility over the distinct revenue and profit drivers of the 2 businesses. Behring and Vifor will be treated as a single segment for reporting sales and marketing R&D and general and admin costs. Turning to Seqirus. Revenue was down 8%, with gross profit down 9% and the operating result down by 12%. While Seqirus' seasonal influenza vaccines revenue was up 4%, its overall result for the year was lower due to the nonrecurring revenue from Avian flu sales that were recognized in FY '25. Sales and marketing costs increased by 8%, reflecting the launches into new markets such as Germany and France. We made strong progress on our transformation program. In FY '26, we reported total restructuring costs of $799 million of which $339 million was cash. We delivered $176 million of savings, ahead of the $100 million target we set for the year. The majority of the savings were generated across R&D, commercial and medical and operations. in FY '27, we expect incremental savings of approximately $220 million, taking the annualized savings to approximately $400 million and then growing to up to $550 million in FY '28. We're taking a disciplined approach to reinvesting a portion of these savings into high priority growth opportunities. In FY '26, $30 million was reinvested in commercial initiatives, principally to support execution in Behring. We also invested $50 million in R&D to support the VarmX candidate. In FY '27, we expect to reinvest around half of the incremental savings into commercial initiatives and progressing our clinical development program. As foreshadowed in May, we are reporting pretax noncash impairments of $5.5 billion in the second half of FY '26, which together with the impairments recorded in the first half equates to total pretax impairments of $7.1 billion for the full year. The largest component of the second half impairment relates to Vifor, where we have impaired products and goodwill by $4.1 billion. This reflects changing market dynamics, which Gordon has discussed, including increased generic competition the conclusion of the TDAPA period for Velphoro and the revocation of the marketing authorization for Tavneos. The balance of the second half impairment relates to property, plant and equipment, in particular, our facility in Lengnau, Switzerland. This impairment relates to a portion of the site that had been set up to support third-party contract manufacturing activities. Further detail on the impairment is set out in Appendix C of the investor materials. Turning to the next slide. We're taking a disciplined approach to how we invest CapEx across our network. In FY '26, our CapEx was $766 million. As can be seen from the chart, our CapEx has come down in recent years, following a period of significant investment as we expanded capacity across the network to meet increasing demand for our products. Moving forward, we expect our CapEx over the medium term to increase driven by the horizon 2 investment we're making at our site in Kankakee. For FY '27, we anticipate CapEx to be around $1 billion, plus or minus $100 million. Moving now to our balance sheet. Our operating cash flow continues to support a strong and flexible balance sheet with capacity to support investment in growth opportunities while also providing cash returns to shareholders. During FY '26, we completed a buyback of AUD 1 billion. And in FY '27 and we intend to undertake a further buyback of approximately AUD 1.1 billion. At year-end, net debt-to-EBITDA was 1.8x. We've also maintained the full year dividend in U.S. dollars. Our capital allocation priorities remain clear. will support the business through investment in growth opportunities that meet our strict return criteria. We'll continue to maintain a strong balance sheet targeting net debt to EBITDA in a range of 1.5 to 2x. And finally, we'll continue to return excess capital to shareholders where that represents the most attractive use of our cash flow. I'll now hand back to Gordon to cover the outlook.

Thanks, Ken. FY '26 was a difficult year. And the result includes substantial accounting consequences from past decisions and investments. We've not sought to minimize those issues, but to address them. Considerable work remains, but the company is now simpler and focused on execution. Commercial initiatives in Behring are beginning to show progress. and Seqirus continues to gain share in seasonal influenza vaccines. At the same time, Vifor face significant and unavoidable portfolio headwinds. A and these will continue to affect group growth. For FY '27, we expect Behring to deliver mid-single-digit revenue growth. Ig is expected to grow in line with the market at mid- to high single-digit rate. The commercial initiatives implemented during FY '26 are expected to support improved execution. We expect continued strong uptake of ANDEMBRY and consistent uptake of HEMGENIX. We also anticipate a modest improvement in Behring's gross margin, driven by plasma cost efficiency, manufacturing initiatives and portfolio mix. Vifor will face significant headwinds with revenue declining by around 25%. These headwinds include continued generic competition in iron and the conclusion of the Velphoro TDAPA period with the EU decision to revoke the marketing authorization for Tavneos. We have no sales for Tavneos in FY '27 guidance. The Vifor cost base is being adjusted accordingly. But the scale of the revenue decline means the business will remain a material headwind to group performance. For Seqirus, we expect low single-digit revenue growth. The business should benefit from momentum in newer markets and targeted customer segments. Ex U.S. influenza immunization rates have stabilized and the rate of decline in the U.S. is slowing. At the group level, the transformation program will deliver further cost savings in FY '27. We will reinvest a portion of those savings in opportunities that meet our strict return criteria principally within the core Behring franchise. For FY '27, we expect group revenue to be broadly in line with FY '26 on a constant currency basis. We expect NPAT growth, excluding the restructuring impairment items, of approximately 5% at constant currency. At current exchange rates, we estimate and FY '27 foreign exchange headwind of approximately $50 million, should those rates remain unchanged for the balance of the financial year. The Board has authorized a new share buyback of AUD 1.1 billion. The actions taken during FY '26 have reestablished the foundation. Our focus in FY '27 is to maintain momentum and demonstrate measurable progress. I'll now hand back to Michelle to take your questions.

Thank you, Gordon and Ken. The line is now open for questions to Gordon, Ken and Diego. To allow as many participants as possible to ask a question, please limit your questions to 2. If you have a further question, you are welcome to rejoin the queue. I'll now hand over to the operator.

[Operator Instructions] Our first question today comes from David Low from UBS.

If we just start with the Behring gross margin expectations, can I talk through a little bit what the drivers are there? I mean, one of the observations that make us that the one-off contribution was quite a significant benefit in FY '26. And if I could throw into the same question, some commentary about last liter economics given what's happened with albumin, please.

Sure. Thanks, David. It's Ken. So in FY '26, as I mentioned before, the Behring gross margin contracted by about 70 basis points Underlying that outcome was benefits that we continue to generate with efficiency gains in plasma collection and manufacturing, and that continues into FY '27. Given the top line result that we reported in Behring in FY '26, that's where we had some headwinds, which led to the margin contraction. Looking forward into '27, we'll see the same efficiency benefits continue to play through with the portfolio now supporting some margin growth into '27. Our objective is to gain back roughly the 70 basis points that we lost in FY '26. In relation to your question about balance leaders, the first comment I'd make is that we are seeing volumes in China albumin starting to stabilize. So that's encouraging. And then ultimately, it's a question of how we are able to balance the mix between IAG and albumin in order to grow margins. And we've taken into account all of those dynamics in the guidance, which we've given today including the modest gross margin expansion in Behring.

Okay. With my other question, just the switch to Haemonetics new equipment, sort of could you get us a bit of an insight as to what the switch is being made and what this means for relationship or the current use of the device, please?

Dave, it's Gordon. So I guess the context here is the focus upon productivity and efficiency in plasma. And so we have quite a number of initiatives that Steve and I are looking at to drive that. And it's strategically quite important to us. So one of those is the machine. So we're we have agreed to with Haemonetics to transition a portion of the fleet over to explore that platform. As we look for new frontiers to further improve the productivity of that operation.

Our next question comes from Andrew Goodsall from MST Marquee.

Just switching over to Seqirus. Just a bit forward-looking. Obviously, you've got 2 products in the market now, [indiscernible]. Just trying to understand how you see the landscape just with those 2 products think you've taken a bit of price increase, certainly can see that in the U.S. And just with Moderna's recent approvals, just so if you can sort of pull that together for your outlook?

We had a bit of trouble understanding. What were the product you mentioned? The line is not great.

Do you want me to repeat, a bit slower?

Yes. We'll try a lot Andrew, just to repeat the question again, we just had a poor line, that's all. Okay. So Seqirus. Just forward-looking, you've shrunk down to 2 products, and leasebacks. And we can see you've taken a bit of price increase in [indiscernible] the U.S. So just trying to understand sort of how you're thinking about that into '27 and just throwing in Moderna into that landscape?

Just your outlook there. So Gordon mentioned our expectation that the business will grow at low single digit. There is a few key parts within that guidance. So first of all, in the U.S. vaccination rates are still declining, but we do see the rate of decline moderating. So as we look ahead into the current '26, '27 season, our expectation is that vaccination rates will decline by low single digit, which is considerably slower than where they were a year or 2 ago. As a result of that, the U.S. business, we expect to be broadly flat with the growth being driven by the ex U.S. markets, driven by the initiatives that we've discussed, including the increased penetration into new markets, new enhanced recommendations for Fluad and the first season of [ organ flu ] in the U.K.

And just a quick one on the -- you obviously had a one-off in this period. We noticed there was a sale. I think it was Novartis to buying Mirex which you've gotten a stake in. So that presumably will create a one-off benefit in FY '27. Just trying to understand the materiality of that?

I don't think we are calling out any one-off benefits in FY '27, Andrew. We had a one-off benefit in FY '26 as a result of the Elo Lilly transaction, but the underlying growth that Gordon mentioned is driven by the core recurring business.

Our next question comes from David Bailey from Morgan Stanley.

I'm just looking at the guidance commentary again and obviously, a fairly significant revenue decline coming through for Vifor. Essentially, I'm trying to understand the contribution of that in terms of a drag to group impact growth for '27. So maybe some commentary around how you're thinking about gross margin for that particular division? Or any sort of sense as to what you think the drag of Vifor is on group and underlying impact growth for fiscal '27?

Well, thanks for the question. So Gordon mentioned an expectation that the Vifor top line will decline by around 25% and the market dynamics, which drive that are principally price. So we do expect the vast majority of that price decline to also impact the Vifor gross margin. So that needs to be set alongside the growth that we're expecting in Behring and Seqirus. So we've already mentioned the Behring revenue guidance, gross margin expansion for Seqirus, there will be top line growth with broadly flat gross margins. And so at a group level, when we consolidate all of 4, you get some offsetting impacts, which is what contributes to the flat overall top line guidance for the group. The dynamic that I'll highlight as you move down through the P&L is to remind you that a considerable portion of the sales for executed through our joint venture, where we have a 55% share. So there's a 45% minority interest in which means that when we work through those adjustments to NPAT, a significant portion of the Vifor sales and margin decline actually accrue to the minority interest.

Yes, that's clear. And maybe just thinking about R&D. You touched on the VarmX candidate, which is interesting in the context of [ Andexa ] no longer be in the market. But can you maybe talk to [ VMXCA01 ]? And then also if there's any potential candidates sort of popped up as part of your revised R&D strategy?

Thank you. So we're really pleased with the progress we're making on reshaping the R&D capability. And we are taking cost out of the business while also reinvesting where we see attractive returns. So in FY '26, we did make investments in the VarmX candidate which is going to shortly start enrolling in FY '27, we expect R&D for the group to be up a small amount. As we continue to make those investments. So there's a number of promising Phase III candidates that will be progressing. We spoke about VarmX and I think in Gordon's remarks, he also talked about CSL 300 or candidate in end-stage kidney disease that's also in an ongoing Phase III study.

Our next question comes from David Stanton from Jefferies.

Perhaps if I could ask, firstly, in terms of like first half, second half. And specifically, the trajectory of expected albumin and Ig revenues in '27. Should we be thinking, given what you've called out and what happened in '26 that first half will look lower compared to second half for both Ig revenue -- Ig growth and albumin growth?

This is Diego. Thank you for the question. So when we think about the prognosis for fiscal year '27, what you see is a continuous performance based on our current momentum. You've seen half-over-half growth in the second half of fiscal year '26. And when it comes to albumin, we call that we see the market going back to stable levels of volume growth. So -- and with a still declining price also, although at slower rate. So when you think about the half over half, I would say a pretty stable first versus second half for Ig, and potentially a small decline in albumin driven by the China market conditions.

And perhaps one for Ken. Can you give us any kind of guide on FY '27 for acquired IP post tax, you had that $322 million in FY '26. Can you talk to what you're thinking for FY '27, please?

For which line item?

Acquired IP post tax.

Okay. So we actually provided some detail in Appendix E around amortization. And I won't go through all the details now but you in that supporting slide that amortization for the group, we expect to be lower by around $90 million in FY '27 versus what we reported in FY '26.

Our next question comes from Lyanne Harrison from Bank of America.

Yes. Can I come back to Ig again? And obviously, as it was mentioned, strong growth in the second half of '26. And I just wanted to understand what's really driven that? Has there been any sort of contract wins that you could call out? And so what was the differentiating factor do you think, in terms of CSL winning those contracts?

This is Diego. So when it comes to Ig, we see a pretty consistent situation to the one that we described in May. So what you see is the result of our ongoing investments. Just as a reminder, we did increase our field footprint in the U.S. We did invest in direct to patient, looking for our request of brand and also as market leaders in the ski category, we're investing in increasing diagnosis. So what you see is the momentum that is created by those investments that we've been doing for some time. And we see -- and again, I want to reiterate that the prognosis for fiscal year '27 is based on the current momentum, it's not is not expecting any acceleration from today. When it comes to contracts, look, we have a complex portfolio, very diverse. We win and sometimes we lose contracts, but it's part of our renewed tender strategy that includes some hedge levers as well. So this is all part of the plan and what we are projecting for fiscal year '27.

Okay. And my second question, can I talk about guidance? I hear what you say about revenue being relatively flat on a constant currency basis. I hear what you're saying about gross margins. So it sounds like that NPAT growth is going to come from operating costs. Can you talk about where you expect some of that cost out to come from? Obviously, you're expecting quite a significant transformation initiative gains in that time frame?

I would say -- thanks, Lyanne, it's Ken. The principal drivers of the earnings growth are actually the growth that we're seeing in Behring and Seqirus. So that is incorporated into the group guidance with some offsets that I mentioned before in relation to Vifor and including the minority interest dynamic that I mentioned before. In addition to that, we are taking further costs out of the business. I mentioned in my presentation that versus fiscal we'll see around another $220 million of costs coming out. The contributors to that R&D, plasma collections manufacturing and commercial, so across a number of different areas of the business. We will be reinvesting about half of that back into growth opportunities. So that will be principally in R&D and commercial, so around $100 million plus being released to the P&L. And that will principally manifest itself in the gross margin line.

Our next question comes from Saul Hadassin from Barrenjoey.

If I can just turn to Ig growth, the mid- to high single digits. I'm wondering if you can talk to your expectations around volume versus price versus mix. And I'm particularly interested in understanding what was your call plasma collections growth over the 7, 9 months to be able to work out what volume growth should look like for Ig in FY '27.

It's Ken. I'll talk about collections and then hand over to Diego to make any additional comments on the commercial side. So in plasma collections, we are both increasing our plasma collections while reducing cost per liter. So this is fundamental to the efficiency strategies that we've had in place for quite some time. and that continues to deliver. We've closed the underperforming centers without seeing a reduction in overall collection volumes. So that's been really pleasing. We will now focus a lot on other initiatives to drive increased efficiencies. So Gordon touched on a little of this on the call, but we think there's a lot of opportunity in how we engage with donors using to be more sophisticated with how we target donors, moving donors more efficiently through the centers -- so all directed towards driving down cost per liter. So that's, I think, on the collection side, I hand over to Diego for any other comments on the top line.

Yes. Thank you, Ken. So in terms of the Ig franchise growth, as we mentioned, what we are projecting is growing with the market. So that's a pretty stable dynamic that we see. You asked about the price. We see the market being very robust. The players kind of recognizing the value of plasma economics and how this value chain works. And we see the price to be pretty stable. When it comes to -- you also asked about the mix is -- depends on the geography, but if you think about the SCIG versus IVIg, SCIG, we are market leaders. We are clearly kind of following that market growth trend. And in the IVIg space, particularly in some markets is growing slightly faster than SCIG, so we might see a slightly higher rate on IVIg. But in balance, both of them growing in the market.

Maybe I'm going to follow up because I don't think I've really got an answer to the question, and that is, what did your collections grow by over the last 9 months that feed into the FY '27 Ig growth assumption. Are you saying that revenue growth effectively matches volume growth for Ig in FY '27. The reason I ask is that there's obviously been some questions around oversupply. And I wanted to get a sense of if you've just been collecting at the same rate at which you think your Ig will grow at into FY '27, i.e., mid- to high single digits. There's a bit of a difference between 5% and 10%.

We're collecting the plasma that we need to support the end market demand that Diego mentioned before.

Our next question comes from Steve Wheen from Jarden.

I just was wanting to just touch on Ig as well. Was there something that you saw in April that announced -- that forced you to announce the downgrade of $300 million that didn't quite pan out the way you expected? It just seems to be -- ultimately, where you ended up is a much stronger end to the second half that probably wasn't expected at the time of that downgrade. Just trying to understand what changed there.