Rarely has an Australian company booked a writedown of the magnitude of biotechnology giant CSL’s $10 billion. It is almost as extraordinary to see the share price of a company the size of CSL – $74.2 billion – leap by more than 16 per cent in an hour. Both happened on Tuesday.
History tells that only BHP and Rio have had bigger writedowns than CSL – the former thanks to a disastrous foray into US shale assets, the latter thanks to its ill-conceived takeover of Canadian aluminium producer Alcan.
In all three cases, the companies succumbed to the folly of hubris and wildly overpaid for a business, only to feel the time-delayed sting of buyer’s remorse and shareholder anger.
The achilles heel for CSL has been the 2022 acquisition of specialty pharmaceutical firm Vifor, which is responsible for the lion’s share of the writedown it reported in its 2026 financial year.
Vifor’s sales grew in 2026, but are forecast to fall by 25 per cent in the current financial year due in part to competition from generic products, while the performance of CSL’s vaccination business Seqirus has felt the headwind of lower vaccination rates, particularly in the US.
But even more significantly, CSL’s underlying sales and profit were both down slightly in 2026, having been hit by a mix of changes in its operating environment and own goals.
CSL has also felt the pain of blood plasma division Behring’s struggle with an oversupply of plasma stock in the US, an issue that it is now attempting to address.
So why did CSL’s share price race ahead after Tuesday’s disclosure of its mistakes and mishaps?
It’s because after the recent history of earnings disappointments, management upheaval and the negative shifts in the competitive landscape, CSL offered an unexpected peek into the beginnings of a change of fortunes.
Everyone loves a comeback story.
Make no mistake, the home-grown biotechnology company that for decades had allowed Australia serious boasting rights is still a long way from redemption.
The rush of positive feedback from Tuesday’s earnings announcement said more about the expectation that it would be worse. Analysts were clearly caught off-guard by the better-than-expected second half profit performance and the promise of a return to profit growth.
The 2026 result came in well ahead of all expectations and sufficiently so to prompt a decent upgrade to their financial models.
For decades, CSL shareholders had faith in banking double-digit gains in annual profit, and can now look forward to underlying profit growth of around 5 per cent for the 2027 financial year.
The improvement will be driven by Behring, its largest business, which is expecting mid-single digit revenue growth.
The overall performance in 2027 will also feel an easing of the headwind of immunisation rates that are now stabilising in all markets but the US, where the rate of decline is slowing.
Coupled with this is the axe CSL has taken to its cost line.
The company called it a reset and a clear growth signal, but could more aptly be described as the first step in a tough fightback.
Its share price responded very positively to the spectre of earnings green shoots and was up more than 16 per cent to around $156.80 by lunchtime.
Remember: this was a company trading above $311 only two years ago, and would have resided in most people’s superannuation funds. Those shareholders will still be disappointed.
But those who picked up the stock at its June low of $90 are already in the winner’s circle.
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