CSL

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http://www.csl.com.au/

http://www.csl.com.au/investors

http://www.fool.com.au/2014/10/15/should...l-limited/

Should you buy the ASX’s best business – CSL Limited?
By Mike King - October 15, 2014 | More on: CSL

In the past eight years, blood plasma group CSL Limited (ASX: CSL) has launched six annual share buybacks. Today, the company announced its seventh, and the share price has climbed around 1%.

CSL will buy back up to $950 million worth of shares, after buying back close to $900 million of shares since October 2013. At today’s price of around $73.05, that represents around 3%, or roughly 13 million shares.

CSL chairman John Shine told shareholders at the annual general meeting that “buybacks remain an effective way to manage our capital that delivers improved investment returns for shareholders.”

He added that since the buyback began, CSL has repurchased around 23% of the company’s shares on issue. Mr Shine says the previous six buybacks totalled around $3.3 billion and have boosted earnings per share by more than 15%.

Earnings per share growth will again exceed profit growth, as shareholders benefit from the effects of past and current share buybacks. In fact, since 2012, CSL has no common stock on its balance sheet, and has been forced to create a special reserve to account for the buybacks.

CSL’s total shares outstanding peaked at close to 600 million in 2009. Today, that figure stands at around 474 million.

The company is truly a marvel at generating returns to shareholders. Since listing in 1994, CSL has managed to deliver compound annual growth in net profit of 24.4%. To give you an idea of how good that is, had you bought $10,000 worth of shares in CSL in 1994, they would now be worth a cool $1.1 million.

Sonic Healthcare Limited (ASX: SHL), Ramsay Health Care Limited (ASX: RHC) and Primary Health Care Limited (ASX: PRY) are all regarded as high quality Australian health care companies, but only Ramsay can hold a candle to CSL’s performance. Ramsay has delivered an average return to shareholders of 26% over the past decade, while Sonic and Primary shareholders have seen returns of 9.5% and 2.3%.

Currently trading on a trailing P/E ratio of 24.1x, CSL shares appear cheap given the quality of the company, and Foolish investors may want to add the company to their watchlists.

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I own this stock, and think you should too.

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CSL answers Bill Gates appeal on Ebola treatment
DOW JONES OCTOBER 17, 2014 9:15AM

US nurses train to use protective equipment against the spread of Ebola. Source: AP
CSL, the Australian maker of blood-plasma therapeutics, has been asked by Bill Gates to explore whether it can develop a plasma product to treat Ebola.

Chief Executive Paul Perreault said he formed a small team to assess the feasibility at the request of the Bill and Melinda Gates Foundation a few weeks ago.

He called it a “highly unusual” request, but said CSL responded right away. CSL wasn’t previously exploring an Ebola treatment.

CSL (CSL) also said earlier this week it was in talks with the World Health Organisation over a treatment for Ebola.

The idea would be to collect antibody-rich plasma from people who have recovered from Ebola, purify it and develop it into a “hyper-immune” product that can be transfused into patients.

“Technically, we can do it, “ Mr Perreault said. The hope is that antibodies from the recovered patient would help others fight the virus.

A Gates Foundation spokesman said the foundation “has been in discussions” with CSL “about convalescent serum production for Ebola.” He said “no final decisions have yet been made.”

The logistics of producing a plasma product could be difficult, Mr Perreault said.

CSL would require facilities in West Africa to handle collecting large amounts of plasma donations.

“The logistics of setting up a place to collect plasma and trying to get donors to come in, it’s quite difficult,” he said.

What’s more, CSL would likely have to transport any donated plasma to a facility in Bern, Switzerland, where it would produce the final product. That could trigger concerns among West Africans — already sensitive to disparities in treatment between infected Africans and Westerners -about whether the finished product would be brought back, Mr Perreault said.

CSL would supply the finished product to West Africans if it ultimately makes such a product. “If people were collecting plasma in Africa and sending it to us, we’d send it back to Africa,” he said.

Mr Perreault said CSL responded right away to the Gates Foundation request, but said it’s “early days” and the company still hasn’t decided on a plan. If CSL does decide to try to develop a product, the company would look to recover its costs, but not to make money, he said.

“We’re prepared to step in and do what we can,” he said. “We can’t do anything unless we get the plasma. That’s the biggest logistic issue.”

Dow Jones

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CSL to buy Novartis vaccine business
BUSINESS SPECTATOR OCTOBER 27, 2014 9:15AM

Mitchell Neems

Business Spectator Reporter
Melbourne
CSL is set to acquire Novartis’ global influenza vaccine business for $US275 million ($A312.24m), with a view to combining the company with CSL’s subsidiary bioCSL.

CSL (CSL) said combining bioCSL’s existing influenza vaccine operations with the Novartis business will create the second-largest global player in the $US4 billion global influenza vaccine industry.

The merged entity will have manufacturing plants in the US, UK, Germany and Australia, a diversified product portfolio and strong pre-pandemic and pandemic franchises in its major centres of operation, CSL said.

“The combined business will have a strong growth profile and is expected to achieve sales approaching $US1bn per annum over the next 3 to 5 years,” CSL said.

CSL chief executive officer Paul Perreault said the Novartis influenza vaccine business provides bioCSL with a global leadership position in an attractive sector that the company has an intimate familiarity with.

“It will transform bioCSL by giving it first class facilities and global scale as well as product and geographic diversity,” he said.

“CSL has demonstrated its ability to make the most of specialist pharmaceutical acquisitions in areas we know well and this transaction has the potential to create a global platform for bioCSL that is comparable in many aspects to our global protein science business.”


Final settlement of the transaction is expected to occur in the second half of calendar 2015, subject to regulatory approval.

Acquisition synergies are estimated at $US75 million a year by fiscal 2020, with integration costs an estimated $US100 million.

The acquisition is expected to be funded through surplus cash.

Business Spectator

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‘Lucky’ company CSL grabs another deal
THE AUSTRALIAN OCTOBER 28, 2014 12:00AM

Robert Gottliebsen

Business Spectator Columnist
Melbourne
CSL is arguably Australia’s “lucky company”. Of course, when luck favoured CSL its chief executives had to be smart enough to take advantage.

By acquiring the Novartis influenza vaccine production business, which has plants in the US, Britain and Germany, CSL moves from being an Australian to a global player. CSL was lucky to be able to pick up the Novartis flu operation for just $US275 million ($312m) because Novartis is involved in a massive asset swap exercise with GlaxoSmithKline. The GlaxoSmithKline group will take the Novartis vaccine business, excluding flu, and Novartis will take Glaxo’s cancer business.

Although Novartis flu vaccines was on the sideline it just happened to be one of the largest flu vaccine companies in the world. GlaxoSmithKline was unable to buy the Novartis flu operation with the other Novartis vaccine operations because GKS was ­already a major player in global flu vaccines.

Accordingly, the Novartis flu operation was in no man’s land and clearly the most logical buyer was CSL, which ranked behind the majors.

Strangely, a similar situation arose ten years earlier when the Aventis plasma operation came on the market when the Aventis group was merging with Sanofi.

In 2004 no one apart from CSL saw much value in the depressed Aventis plasma business and CSL was able to pick up Aventis plasma for a song. It almost recovered its costs with the rise in the value of plasma products. But in the process CSL was able to merge its Australian, Swiss and US operations to become one of two major global players in the high-growth global plasma business. CSL became global in plasma for a song.

In flu, CSL has a substantial Australian vaccine business but was finding it difficult to export the vaccine against the two ­majors — GlaxoSmithKline and Sanofi.

Like Aventis plasma ten years ago, the Novartis flu business was losing money. Novartis was in the process of upgrading its plants, which was necessary to meet standards of modern technology and to produce a flu vaccine that could cope with four different flu strains.

Now, with the relatively inexpensive acquisition of Novartis flu vaccine company, CSL is a global player in flu as it is in plasma.

Governments are very conscious of the dangers of flu pandemics and want to deal with the vaccine producers that have the capacity to produce a large amount of vaccine quickly if a pandemic arises. CSL was in that position in Australia but not in that position globally. Now it is, and is able to compete on an international basis.

At the same time it opens that door to widening the vaccine business to compete with Sanofi on a broader playing field. But to be able to achieve a global business twice by buying assets at depressed prices is a unique experience for any Australian company. That is why we might call it the “lucky company” — although CSL’s former CEO Brian McNamee and now new boss Paul Perreault might argue that they simply made their own luck.

Robert Gottliebsen is a columnist with Business Spectator. Visit businessspectator.com.au

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CSL buys Novartis’s global influenza vaccine business
THE AUSTRALIAN OCTOBER 28, 2014 12:00AM

Damon Kitney

Victorian Business Editor
Melbourne
Vaccine expansion.
Vaccine expansion. Source: TheAustralian
CSL is set to become the No 2 player in the $US4 billion ($4.54bn) global influenza vaccine industry following its acquisition of Novartis’s influenza vaccine business, which has a number of new products close to commercialisation.

CSL said yesterday it expected the Novartis global influenza vaccine business to be profitable “within two to three years” after agreeing to pay $US275 million ($312.2m) for the asset with a view to combining it with its subsidiary bioCSL.

It said the combined business would have a strong growth profile and was expected to achieve sales approaching $US1bn a year over the next three to five years. Acquisition synergies are estimated at $US75m a year by fiscal 2020, with integration costs an estimated $US100m.

CSL chief executive Paul Perreault said the synergy costs would come from removing duplication of systems and processes rather than headcount ­reductions.

“This opportunity today is one that doesn’t come along very often,’’ he said, and described the purchase price as “reasonable”.

He said the deal would give CSL access to “quite a bit of production that can be spread across the geographies’’ and that the company would benefit from the global scale delivered by the ­Novartis facilities. The business lost $US138m at the EBITDA line in the 12 months to December 2013 from net sales of $US527m, which was largely a result of the company’s significant investment in research and development over recent years.

“We expect that over the next few years we should be able to turn this business into a successful, leading business within the flu sector,’’ CSL chief financial officer Gordon Naylor said yesterday.

JPMorgan said the transaction looked favourable “given the Novartis pipeline was close to commercialisation and the maj­ority of research and development dollars had been spent”.

“There is a lot of upside if CSL can get this right but clearly that comes with a lot of integration risk. CSL ultimately is buying a loss-making business that is reliant on a very full R&D pipeline plus some $US75m synergies,’’ the broker said.

Macquarie Equities said yesterday the Novartis flu business would represent a 5.7 per cent headwind to its CSL EBITDA estimates if the losses continued.

But the market appeared prepared to back CSL’s ability to make acquisitions work, pushing its shares 1 per cent higher.

Mr Perreault said last year, when he took over the role, that he would not be stopping the ­aggressive growth that was a hallmark of the tenure of his predecessor, Brian McNamee.

The deal comes as Novartis is in the midst of divesting its non-flu vaccine business to GSK and its Animal Health business to Eli Lilly.

The acquisition is expected to be funded through surplus cash without affecting CSL’s buyback, which was announced at its latest annual results.

The merged entity will have manufacturing plants in the US, Britain, Germany and Australia, a diversified product portfolio and strong pre-pandemic and pandemic franchises in its major centres of operation.

Final settlement of the transaction is expected to occur in the second half of next year.

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CSL soars on news of blood-clotting advance
THE AUSTRALIAN DECEMBER 04, 2014 12:00AM

CSL AGM
CSL plans to launch a mew haemophilia drug in 2016. Source: News Corp Australia
INVESTORS pushed CSL shares higher yesterday after the blood products and vaccine maker revealed it was planning to launch a new drug to treat the genetic blood-clotting disorder haemophilia B in early 2016.

At an annual research and development briefing, chief scientific officer Andrew Cuthbertson said CSL would lodge the required documents with drug regulators in the US and Europe to approve the company’s recombinant coagulation factor IX.

Dr Cuthbertson said that instead of being infused two or three times a week, patients would only require treatment once a week or fortnightly to prevent bleeding into joints or the brain.

“We have done all the clinical trials and we’ve got large dossiers to file with the regulatory agencies,” he said. “This is a very important announcement for patients and for CSL.”

The estimated size of the market for CSL, he said, was $500 million, although it could be as large as $1 billion. The product had an “excellent” safety profile, with no adverse events reported during trials. It was also effective in seven-day, 10-day and 14-day treatments, and boasted a 5.3-fold longer half-life than existing products.

CSL spends almost $500m a year on research and development, employing a network of about 1000 scientists around the world.

Leading healthcare analyst Andrew Goodsall of UBS said it had been some time since CSL had announced a breakthrough product like its haemophilia B treatment.

“The highlight of the R&D briefing was that CSL is only a stone’s throw away from launching into the long-acting haemophilia market,” Mr Goodsall said. “It wasn’t lost on the share price.”

Against a firmer overall market, up 0.8 per cent, shares in CSL jumped $1.73, or 2 per cent, to $86.35 — a level not seen since before the global financial crisis.

The company also revealed progress in its CSL 112 drug to prevent secondary heart attacks and strokes in people who have already experienced cardiac arrest. The drug is made from plasma that CSL currently discards.

A phase 2b trial involving 1200 patients around the world, including Australia, is expected to start next year and take more than two years to complete. If the drug is successful, the potential market is in the billions of dollars.

“There’s a very big unmet need,” said Dr Cuthbertson, who has been a strong supporter of the Abbott government’s proposed medical research future fund.

Overall, he said the R&D portfolio was in good shape compared with a few years ago.

“Back then, there were a lot of things in the early stage of research,” he said. “Now we have new medicines at a late stage that are poised for registration.”

CSL stock has been supported over the years by a continuing buyback program. Last August, with a $950m buyback unveiled in October 2013 almost complete, CSL said the board would consider a further buyback of a similar magnitude.

The new buyback is in its infancy, with the $41bn company having approval to buy a further $903.2m of CSL shares.

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FTA a shot in the arm for CSL

Jessica Gardner
605 words
5 Dec 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

CSL chairman John Shine says an improving economic relationship with China, boosted by the recently inked free-trade deal, has given Chinese ­entrepreneurs and executives ­confidence to push ahead with ­Australian joint ventures.

Professor Shine said in the past six months, on the back of efforts from Trade Minister Andrew Robb and the Australian ambassador Frances Adamson, conversations with potential Chinese partners had ramped up.

"It is really opening up, encouraging a more frank dialogue between ourselves and some of the Chinese companies that we might be interested in working with," Professor Shine said.

The signing of the agreement also sent a strong message from the Chinese government to its companies, which has put Australia "on the map", he said.

"It's on their agenda, it's upfront," he said. "It's been supported by their government and so they're keen to explore various avenues using that."Long history

CSL has been in China for over a decade. It has about 120 staff in the country and has a burgeoning business supplying the blood protein albumin to hospitals for use treating burns victims and replacing fluid lost during surgery.

The company had revenue of about $US300 million from China in 2013-14, which surged 29 per cent on the prior year. Although the free-trade agreement will not have a "practical" impact on this business, Professor Shine said it would facilitate better relationships.

The company, which reached a market capitalisation of $40 billion this week, faces the obstacle of building a network of collection centres, not to mention regulatory change, if it were to supply other blood and plasma ­products in China.

The limitations faced by CSL in this regard was a key topic of discussion between the chairman and a delegation of uber-rich Chinese business people who visited the company's Melbourne manufacturing plant on Thursday.

The influential China Entrepreneur Club, which counts Alibaba founder Jack Ma in its invitation-only membership, has a delegation in Australia this week. The group wants to consider potential collaborations in China and opportunities in Australia.

"They're a group of very successful, outward-looking entrepreneurial spirited individuals," he said.

At the plant tour were executives like the chairman of Hong Kong listed shipping company SITC International and the chair of health, tourism and property conglomerate Sutrans Holding.Care needed

Professor Shine said there was an acknowledgement that China will need help to care for its rapidly growing, increasingly wealthy population. "They are very conscious about the increasing demand for quality healthcare and the opportunity and challenges that provides in China," he said.

Australian medical device maker Cochlear has a growing business in China, while private hospital operator Ramsay Health Care signed a provisional agreement with an operator in the city of Chengdu last month.

The free-trade deal will open the door to more Australian healthcare companies. It will permit Australian medical service suppliers to establish Australian-owned hospitals and profit-making aged care institutions in China.

Australian pharmaceutical companies, including manufacturers of vitamins and health products, will benefit from the elimination of Chinese tariffs of 3 to 10 per cent that will be phased out within four years. Professor Shine said opportunities in China were clear, but companies needed to strike a balance between "enthusiasm and vigilance".

"You don't have to be an economic genius to recognise that a lot of Australia's economic future is going to be quite closely linked to China," he said. "[However] if you get it wrong, you can be damaged for quite some time."


Fairfax Media Management Pty Limited

Document AFNR000020141204eac50001m

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Aug 8 2015 at 12:15 AM Updated Aug 8 2015 at 12:15 AM

CSL executive Gordon Naylor on how to create advanced manufacturing success

Outgoing CSL chief financial officer Gordon Naylor will run the company's new influenza vaccine division Seqirus. Simon Schluter

by Jessica Gardner

In 1994 Gordon Naylor, like hundreds of other CSL employees, received a $1,000 parcel of shares in the privatisation of Commonwealth Serum Laboratories. The $300 million float had been sold at $2.30 a piece. After the share price slumped to a low of 78c in its first year, CSL looked like a terrible investment.

Naylor sold his initial parcel when CSL hit 7 bucks in April 1997, feeling pretty happy that he had more than tripled his investment.

If the story of his investment ended there it could have caused some regret, given the biotechnology giant is now worth $47 billion and this week its share price pierced through the $100 mark.

Those initial employee share parcels would now be worth $122,700, or $180,580 if you include dividends too, according to Bloomberg.

CSL has dazzled investors and not just for its amazing ascent up the sharemarket charts.
CSL has dazzled investors and not just for its amazing ascent up the sharemarket charts. Jesse Marlow
But luckily for Naylor he has grown with the company, from senior project engineer helping to automate the Broadmeadows factory to now chief financial officer. Like the 760 or so local employees who participate in the stock option plan, he has done very well out of what is on some measures Australia's most successful company.

"We have had the benefit of having a very good run on the shares over a long period of time," he tells AFR Weekend.

Naylor's summary is, in the measured approach of an engineer, a bit of an understatement.

A fantastic investment

UBS Wealth Management chief investment officer David Sokulsky says CSL shares have had the highest return on equity among the top 50 stocks on the ASX over the past 20 years, giving shareholders 8581 per cent on their initial investment. The company is also the best over 10 years (766 per cent) and is the fifth best over five years (200 per cent). If that's not enough, this week's climb to $100 was not even CSL's first time at the high mark. The shares hit the century in 2007 before a stock split gave investors three for one and pulled the price back down to about $34.

"It's a company where you have got a genuine global leader with strong earnings growth and you're in a sector with strong demographic tailwinds behind it," Sokulsky says. "That's pretty rare."

CSL has dazzled investors and not just for its amazing ascent up the sharemarket charts.

In a market dominated by banks and miners it challenges preconceived notions of the top performer being, one, a healthcare stock, and two, a manufacturer. If the stockmarket can be seen as a window into the future, the received wisdom of the earnings potential of listed Australian companies, what does the future hold when our eighth largest company is a rarity in its export and manufacture of homegrown medical research?

Investors, naturally, are wondering whether their good fortune can continue, while policymakers want to know how to create more similarly successful companies. Naylor has some answers for both.

The 52-year-old has been the public face of a push to get government to take notice of how CSL believes Australia can be a global player in advanced manufacturing. As the commodity boom subsides, listening to and learning from a company that has been able to make Australia's high cost, isolated environment work is more important than ever.

Part of CSL's success is due to the discipline it applies to its investments. Just like a project manager might try to squeeze the most out of contractors tendering for a slice of work, CSL applies the same toughness to its operations that span across 27 countries, four of which have factories: the US, Germany, Switzerland and Australia.

Swiss tax regime makes factory stack up

In 2014 CSL had to choose where to establish a new $US500 million site, which would generate 500 ongoing jobs, to make synthetic blood clotting agents to treat sufferers of haemophilia. The technology was developed in Australia, but CSL opted for Switzerland. Both countries were marked down for a relatively high currency (at the time) and high costs, but Switzerland's lower tax rates helped it to triumph.

This is how CSL does business and is a real example of the warnings the company has been taking to government.

Naylor, who joined CSL in 1987 from Ford where he had set up the car maker's Geelong plant, was unapologetic in explaining the decision to AFR Weekend at the time. "These countries, such as Switzerland, they get it that they're competing. [In Australia] there's actually not a national imperative to compete."

The company has strong ideas about the medical research future fund and has put up the idea of a 10 per cent tax rate - 20 per cent lower than the standard corporate rate - for advanced manufacturers that make products from locally developed intellectual property. "It's certainly not to be seen as a tax grab by corporates, this is about the country and the nation being more competitive," Naylor says.

"What we're really trying to do here is communicate the learnings we have had from those internal processes [and how they] pertain to a national strategy."

Lower tax rates would no doubt help CSL to sustain earnings growth, but Naylor argues they would also create local jobs and build up supply chains around advanced manufacturers.

If government wants a hand in creating more innovative companies, it may do well to understand how CSL got there in the first place.

When it was established by the government 99 years ago, to shore up our health needs at the time of the first World War, one of its first challenges was to produce three million doses of a mixed bacterial vaccine to ward off the Spanish flu epidemic in 1919.

Over the years CSL has developed a range of life saving treatments from anti-venoms to other vaccines, including the cervical cancer vaccine Gardasil that it created in collaboration with Merck and the University of Queensland.

Blood plasma push pays off

But its global significance is really on the back of its prominence as a producer of blood plasma products. Its acquisition of Swiss group ZLB Bioplasma in 2001 and then Aventis Behring in 2004 gave CSL worldwide scale and allowed it to become the lowest cost producer, ahead of rivals like Baxter and Grifols.

This mantle comes from what Naylor describes as understanding the "microeconomics" of blood and underpins the genius in CSL's business model.

The basic premise of CSL's business is that first it collects blood, either from voluntary donors in countries like Australia or paid donors through a network of collection centres in the United States. The blood is then separated into its component parts through a process called fractionation.

Individual components have wide-ranging uses in medical settings. For example, the protein albumin is used to treat burns victims, immunoglobulins treat sufferers of immune diseases and clotting factors can be used to treat sufferers of haemophilia. CLSA analyst David Stanton says CSL derives the highest revenue per litre of blood. This allowed the plasma business to reach sales of $US4.5 billion last year.

The latest target of CSL's research and development budget - it spends almost $US500 million each year - is the drug candidate CSL112. It is made from a protein that is currently discarded in the fractionation process, but it is hoped that a 1200-person clinical trial will in fact show it can increase survival rates among heart attack sufferers.

CSL tried to add another big rival to its blood plasma business by bidding for Talecris in 2009. But the takeover was knocked back by competition regulators and marked a period of share price underperformance due to uncertainty about what CSL would do next.

Naylor says the irony is that CSL is now bigger than it would have been with the addition of Talecris. "We don't see acquisitions as being a strategy they're really just a mechanism," he says.

But the company's most recent takeover to boost its smaller flu vaccine business was really crucial, especially to investors who are wondering if CSL's good fortune can continue.

In February 2013 CSL announced a review of bioCSL, the vaccine arm which operates out of Melbourne and employs 800 of CSL's 1900 local employees. The prognosis was not good. Naylor concedes it "pretty much has been unprofitable".

Enter CSL's $275 million acquisition of Novartis' flu vaccine business, which later this year will combine with bioCSL and begin operating under the name Seqirus - stemming from the phrase "securing health for all of us". It will be Naylor's job to lead the new unit, and although it will be costly to integrate and will drag on earnings at first, the idea is for it to become another pillar of CSL's business, hitting revenue of $1 billion within five years.

Without it, bioCSL could been trampled in the race to dominate the $US4 billion flu vaccine market.

Naylor says a "shake-up" in the flu sector is allowing large players to get ahead, while smaller ones are left behind. The market is highly competitive, but it is difficult to be differentiated. In many cases the main customers are governments, which have huge buying power through national immunisation programs. And advances in science, such as the move towards quadrivalent vaccines that contain four strains of the virus, up from three previously, require big investments that in many cases small players can't afford, leading them to get pushed out of the industry.

Naylor says without the Novartis business, which will make CSL the second biggest flu player behind France's Sanofi, it may have been a case of "there but for the grace of God went bioCSL."

Global synergies

CSL will be able to tap into Novartis' plant in Liverpool, England, and a brand new site in Holly Springs, North Carolina, which is the only large-scale facility approved in the world to manufacture influenza vaccine by growing the virus in cell culture as opposed to eggs.

For years the accepted practice has been to grow the virus in eggs. At bioCSL's home in the Melbourne suburb of Parkville, scientists process 350,000 hens eggs, five days a week. The eggs are injected with the flu virus, so it can grow in large volumes. The virus is then extracted, inactivated and purified for use as a vaccine in humans.

CSL will benefit from the progress Novartis has made down the new path for vaccine manufacture, but the Novartis business is likely to benefit from CSL's efficiency. Naylor admits the complexity will be high. The flu business has been carved out, leaving behind very little organisational infrastructure. IT systems will have to be built from scratch.

"We don't even have a head office yet," he says. "That sounds as though it's a bit of a headache, which it is, but it's also a great opportunity to really build that infrastructure for efficiency."

But investors are not worried. ATI Asset Management head of research David Liu says CSL chief executive Paul Perrault has picked up where his well regarded predecessor Brian McNamee has left off by being disciplined. "They've have made a large acquisition in Novartis," he says. "But it's been explained why it makes sense to the business and what the longer benefits will be."

Investors have started listening. CSL and Naylor are now waiting to see if the government will too.