CSL Limited

Ladies and gentlemen, good morning and welcome to CSL's first half results call for fiscal 2024. It's Mark Dearing speaking and I'm pleased to be joined by several of CSL's leadership team. With me here are Dr Paul McKenzie, CSL's Chief Executive Officer, Joy Linton, CSL's Chief Financial Officer. Dr. Bill Mezzanotti, Executive VP and Head of Research and Development. Andy Schmelz, Executive VP, CSL Bearing. Stephen Marlow, Senior VP and General Manager, CSL Securus. Hervé Gissereau, Senior VP and General Manager, CSL V4. Today, we're going to vary a little bit from past practice. Paul will, of course, provide an overview of the results and operation. Then we'll have Bill Mezzanotti providing some updates on the R&D portfolio, including the CSL 112 top-line data announced yesterday. Joy will then provide some additional detail on the financials, and Paul will finish up with some comments on Outlook, after which we'll move to Q&A. And as usual, with a view to giving everybody an opportunity to ask a question, could you please limit your questions to two? If you do have a further question, you are of course welcome to 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. And with that, I'll pass over to Paul McKenzie. Paul.

Thank you, Mark, and good morning, everyone. Great to be back in Melbourne. Thank you for joining today's CSL half-year result call for 2024. As Mark mentioned, we released top-line data for CSL 112 yesterday, and Dr. Bill Mezzanotti will talk to this shortly. While not the clinical outcome we were looking for, the study was well designed and well executed. I would like to second Bill's thanks and gratitude to the entire CSL 112 team, the clinical investigators and their teams, and the patients who participated in the trial. Before I deep dive into the results, I wanted to take the opportunity to reflect on my soon-to-be first 12 months as CEO. I continue to be energized by the passion that my colleagues bring to their work every day. All 32,000 of us at CSL and our partners are proud of the difference we make to patients, donors, and public health. Our portfolio of life-changing medicines and vaccines provide significant benefit to patients around the globe managing diseases of significant unmet need. CSL Bearing is a unique and resilient business with a strong growth outlook. My first 12 months as CEO has only reinforced that view. I continue to be bullish on the outlook for CSL Bearing and look forward to sharing with you the great progress we are making in our plasma, manufacturing, and commercial activities. In our CSL Securus business, the value of our differentiated vaccine portfolio continues to deliver value to public health systems now and well into the future. Reflecting on CSLV4, our commercial portfolio addresses significant unmet need in patient journeys in iron deficiency and nephrology. While the strategic potential of the business and the adjacencies with CSL bearing portfolios remain strong, we are working to address a number of challenges. Some of our existing portfolio is facing commercial and regulatory headwinds. For example, step-edit pressure with Farinject or reimbursement bundling of Kursuva in the U.S. Further, some of the late-stage pipeline assets did not meet their desired clinical outcomes, a risk inherent in research and development pursuits. These collective dynamics have dampened our near-term financial growth expectations for CSLV4. On a positive note, CSL V4 continues to generate strong revenues and margins, together with strong cash flows, and we are extracting synergies over and above our initial expectations. Additionally, CSL V4 has brought a number of enterprise-wide opportunities. leveraging the capability and strengths of three businesses in a new and unified way. An excellent example of this is patient blood management. However, this initiative will take time to deliver returns. Most importantly, as a group, CSL remains in a strong position to deliver annual double-digit earnings growth for the medium term. Speaking of the group results, let's move on now to slide four. I'm pleased to report that CSL has delivered an excellent result for the first half of 2024, driven by strong performance by the CSL Bearing business. First, the headline numbers. Revenue was $8.1 billion, up 11% at constant currency. NPAT-A was $2 billion, up 13% at constant currency. Net profit after tax was $1.9 billion, up 20%. In terms of the major highlights for the year, the CSL Bearing business delivered strong growth across the portfolio, especially the IG franchise, which grew very strongly, up 23%. Specialty products, Kcentra and Hagarta, continue to deliver and be the standout contributors to that portfolio. Gross margin recovery is underway, and Joy will take you through the detail of that shortly. There are a number of positive plasma initiatives gaining momentum, including the new RECA rollout. Regulatory filing for Garadacimab, our next-generation HAE therapy, has now been accepted for review by the FDA and EMA, and we anticipate bringing this product to market later this calendar year. It's also worth noting that Japan's submission is on target for approval this fiscal year. Moving over to CSL Securus, which delivered solid sales growth, outperforming the market in a very challenging season. This was primarily driven by our adjuvanted Fluad product, which grew 14%. In partnership with Meiji, regulatory approval was achieved for the world's first self-amplifying mRNA vaccine for the prevention of COVID-19 in adults. And not only did we commence the Phase 3 clinical trial for AQIVC in the Northern Hemisphere, we enrolled our last patient well ahead of schedule in January 2024. CSL Securus continues to expand its differentiated portfolio, and we are passionate about bringing these innovations to the market over the next few years. Switching over to CSLV4, the business is well positioned for the loss of exclusivity in iron in Europe, with limited impact of this seen to date. Tavanose, a treatment for patients with severe active anky-associated vasculitis, has exceeded expectations. mainly in Germany and the UK, with this momentum projected to continue as we expand into additional EU markets. And finally, patient conversion to Mercera, our long-acting ESA, has been strong. Moving to slide five, focusing now on CSL Bearing, our revenue was up 14% at constant currency. As I mentioned, growth in our IG franchise was exceptional. Sales were up 23% with strong growth recorded across all geographies as global supply recovered significantly. Our intravenous IG products, Privagen and Intergam, were up 27% in total, and our subcutaneous product, Hyzentra, up 18%. As we outlined at Capital Markets Day in October, underlying demand for IG continues to be robust, and patient diagnosis rates continue to grow in core indications. We have also launched a 50 mL pre-filled syringe for Hisentra in the US and the EU. We now have a wide range of pre-filled syringe sizes to help meet the individual needs of patients living with both PID and CIDP. Our albumin portfolio grew by 8% with strong growth in Turkey and Mexico and solid growth in both Europe and the US. In China, competition remains strong, and our team continues to advance our positioning. Haemophilia was up 8%, where once again the standout performer was Adelvian, which was up 7%. We maintain leadership positions with Adelvian in the US, several key markets in the EU, and Japan. Our new transformational gene therapy, Hemgenix, has had an accelerating rate of patient referrals. We are confident administration to patients will follow as we navigate through the complexities of the fragmented U.S. healthcare system as a first mover with gene therapy in hemophilia. Hemogenics is recognized as the new paradigm for patient and was recently awarded the Pre-Gallion Award for Best Product for Rare Orphan Diseases. Specialty products were up 6%, led primarily by K-Centra, which grew 12%. Higarda was up 9%, driven by strong growth in the EU, and despite increased competition, has been able to add new patients and preserve our existing patient base. You will note the category other was down 16%, which included COVID vaccine sales in the prior period. Moving to plasma highlights for CSL Bearing, let me start off by reiterating that the underlying fundamentals of plasma collection remain strong, and that there has been continued momentum for plasma donation growth. Digital transformation and continuous improvement initiatives have supported the increases in new donors, reactivated donors, and returning donors. We recently expanded our geographic footprint for plasma collections, opening our first center in Puerto Rico. This builds on the network diversification we already have in Germany, Hungary, and China. One of our initiatives to drive efficiencies through the network is the introduction of the Ricca Plasma Pheresis Platform. Our partner, Terumo, has submitted their iNomogram trial data to the FDA, and we have aligned with them on our rollout plan over the next 18 months. If iNomogram is approved, this initiative will provide a 10% lift in yield across the fleet. One of the pillars from our strategic focus areas is to expand the CSL bearing gross margin. We are making good progress, with cost per liter reducing 10% over the period compared to the prior period. There is still much more to do, however, and we will be working hard to continue this momentum, but gross margin recovery is underway. Joy will talk more to this shortly. Moving on to the next slide and CSL Securus, our vaccines business. First of all, a few comments on the current season dynamics. The industry has seen reduced rates of influenza immunization due to vaccine fatigue and the introduction of RSV and shingles vaccines. Given the reduced rates of immunization, there has been ample supply, giving rise to pricing pressure as manufacturers look to clear stock. Across the industry, we have seen an overburdened health system with staff shortages and reallocated government funding. Against this backdrop, CSL Securus has outperformed the market, delivering solid revenue growth of 2% at constant currency. Our adjuvanted vaccine, Fluad, reported strong growth of 14%, driven by early supply performance and a preferential recommendation from the ACIP in the U.S. Considering the broader environment, CSL Securus' growth is outpacing the competitors, and we expect continued growth over the long term from commercialization of our asset pipeline, which I will talk to on the next slide. Some operational highlights for Securus. flu cell vax six month plus age extension was approved in the UK, Australia and New Zealand. And for flu add 50 year plus age extension was approved in the EU. For flu add we also received a preferential recommendation in Canada for the 65 plus population. On the pandemic side of the business, The advanced purchase agreement with the UK was awarded solely to CSL Securus. We are selected by BARDA to deliver H5N8 antigen to the US government for preparedness against potential avian flu outbreak in humans. In relation to our product innovation journey, we commenced the phase three trial in the northern hemisphere for AQIVC. This brings the best of our technologies together, cell culture and our proprietary adjuvant. Our next-generation self-amplifying mRNA COVID vaccine received regulatory approval in Japan. It is the first self-amplifying mRNA vaccine approved anywhere in the world, and just last week you may have noticed some very positive immune response duration data published in The Lancet. And finally, we commenced a phase one trial for our self-amplifying mRNA for seasonal and pandemic influenza. Turning to CSL V4 on slide 9, revenue was just over $1 billion. We have not provided growth numbers similar to the other business units, as the prior comparable period only included five months following the acquisition of V4 in August 2022. Starting with iron, Ferenjectin China was included in the National Reimbursement Drug List. As you may know, the iron market is transitioning. With the introduction of step-edit measures introduced by U.S. payers, this has had a positive impact on Venefer, CSLV4's low-dose iron product, but puts pressure on the high-dose iron product, Injectifer. We are also meeting the challenge of loss of exclusivity in Europe, and we are well prepared for this. We remain confident in the growth strategies we outlined at the Capital Markets Day. Our patient blood management initiative, which includes iron, is making good progress, but this will take some time. Moving on to nephrology, continued strong ESA performance in the U.S. was the result of following patient conversion to Mesera. Capruvia was approved in a number of emerging markets and launched in the Netherlands and Iceland, and we've seen great, strong performance in Germany, France, and Austria. Valforo's performance in the U.S. was impacted by reduced inventory levels, as requested by our customer. More recently, Valforo in China was approved and included in the National Reimbursement Drug List. Kavanos saw strong sales growth with patient penetration across all launch markets, with regulatory approval also being obtained for South Korea. We also received the pediatric indication for Veltassa in both the U.S. and in Europe. So with that, I will now hand over to Bill Mezzanotti for his update on CSL112 and other R&D products.

Thank you, Paul. I appreciate the chance to discuss AGES II. Just some opening remarks. AGES II was one of the largest and certainly most complex clinical trials we've conducted at CSL. It was supported by years of non-clinical and clinical mechanistic work and a large Phase II safety study. We initiated Aegis II in 2017 and our trial team research partners and patients hung in there through the disruptions of a global pandemic, multiple wars, and widespread political crisis. We conducted the study in 49 countries, had over 900 investigative sites, and enrolled over 18,000 patients. who we needed to follow for at least one year from the time of enrollment. Despite the challenges the extended enrollment time required, we were still able to follow to completion of one year all but two patients. That's a remarkable achievement. And so on behalf of CSL, I'd like to thank all the patients, families, caregivers, and investigators for their support and participation in the AGES program. And as a result of conducting this megatrial, CSL has enhanced capabilities that already are and will in the future serve our patients and portfolio very well. Here on this slide is the design of the study, and details of this have been published previously, but let me touch on a few salient points. This was a randomized, double-blind, placebo-controlled study to investigate whether CSL112 added to the standard of care. could help reduce recurrent major adverse cardiovascular events, in particular stroke, myocardial infarction, and cardiovascular death in patients experiencing an acute myocardial infarction. Patients could be treated in accordance with appropriate country guidelines, including interventional approaches. They had to be randomized and receive their first dose of study medication within five days of presenting with their acute MI. Patients were randomized one-to-one to CSL112 or matching placebo via infusion. The dose of 6 grams was chosen based upon clinical, pharmacokinetic, and pharmacodynamic assessments from earlier studies, non-clinical measurements of cholesterol efflux, and rigorous assessment of safety and toxicology studies. After the first infusion, patients were to receive three more weekly infusions within the first month, with investigator follow-up through to the primary time of interest, 90 days, and then assessed onwards at 180 and 365 days post-MI. In the first 90 days after an MI, patients are most vulnerable to a recurrent event, and the risk slowly declines over the first year. The primary event was the time to first occurrence of any component of the composite endpoint of CV death, MI, or stroke from time of randomization through 90 days. The study was designed in collaboration with an internationally prominent and geographically diverse executive steering committee who strongly endorsed conducting the trial, the dose regimen selected, and the endpoints chosen. The study included two interim assessments for futility. The quality of the study conduct was excellent, as was the data capture. The results were clear. On the next slide, I will share the results. The study did not meet its primary endpoint, which was a statistically significant reduction in major adverse cardiac events at 90 days. There were no major safety or tolerability concerns with CSL112. As a result of these results, we do not plan on making any filings for approval to any major health authority. However, we do plan to discuss the results with major health authorities and to conduct numerous additional analyses to better understand the data and then determine any next steps in development. Importantly, study results will be presented at the American College of Cardiology scientific sessions on the 6th of April this year and published in a peer-reviewed journal. Until then, by ACC rules of disclosure, we are not permitted to share externally any further details about the trial results. Obviously, we as an organization are disappointed in the results, but not in the effort of our people. Given the unmet need in these patients during this vulnerable time period, the ongoing scientific and medical interest in high-density lipoprotein therapy, and the potential value to CSL, I firmly believe we did the right thing. My goal when I started at CSL was to build an organization capable of delivering CSL 112 and an organization that could be successful with or without positive 112 results. I believe we have achieved both. To complete HS2, we had to significantly enhance our capabilities to run the trial. All these capabilities will be utilized as we relentlessly and methodically grow and diversify our pipeline into the future. While today is not meant to be R&D day, we'll have that again in October, I did want to touch base on the next slide on a few recent pipeline highlights that reflect our ability to build and diversify our pipeline. Here are four quick updates, some of which as Paul has touched upon already, to reflect my enthusiasm for the portfolio. First, building on our enhanced capabilities to run cardiac outcome trials, we saw positive phase two results for the use of clazikizumab, our anti-IL-6 antibody in patients with end-stage kidney disease. These patients historically have very high levels of inflammation and very high mortality rates, primarily due to cardiac disease. Reducing such inflammation with therapies like clazikizumab has been associated with reduced cardiovascular risk. We will be shortly initiating a phase three trial to test this hypothesis. The study will be much smaller than AGES II, but fully powered to demonstrate the benefit we believe exists. We will be employing dialysis sites like Fresenius to help us conduct this international trial. Garidacimab, as Paul mentioned, our factor 12A antagonist for the treatment of hereditary angioedema with a great clinical safety and tolerability profile is now under regulatory review in the U.S., EU, and in other countries like Japan. We fully expect this potentially best-in-class therapy to receive first approval at the end of this calendar year. Building on our critical Hyzentra franchise, we finished enrollment in our phase three study to evaluate the safety and efficacy of Hyzentra in dermatomyositis, a rare disease with high morbidity and mortality. We should see phase three data around the time of R&D day in the second half of the year. Hyzentra has received orphan drug designation for this indication. Finally, as Paul mentioned, our adjuvanted high antigen cell-based flu vaccine, AQIVC, for patients 50 years and older, just completed enrollment for the Phase III immunogenicity trial, which will allow regulatory filing in the U.S. AQIVC has the potential to demonstrate best-in-class efficacy along with a very good tolerability profile and the reassuring safety profile we have seen over the years with both our cell-based antigen and our MF59 adjuvant. Data will also be available towards the end of calendar year 2024, and if positive, we will file soon thereafter. So stay tuned. I look forward to sharing more on these programs and many more things at our R&D Day in October. Now on to Joy.