1、 Global Pharmaceuticals Insights on US Plasma Donations&Updates on Plasma Derived Therapies for COVID-19 Major Pharmaceuticals|Connections Series In this connection series note,we provide insights on the current state of plasma collection in the US,and an update on the latest development for plasma
2、derived therapies against COVID-19 as it relates to the three largest players in plasma derived therapeutics:Grifols(EU pharma team),CSL(Gretel Janu,Australian equities)and Takeda(Sakai-san,Japanese Pharma).We also highlight coverage of CBPO(FY 19 results comment)where our team noted a 1 month plasm
3、a collection suspension in China and slow recovery.Limited disruption to US Plasma collection observed so far,but may follow in near term as COVID-19 outbreak continues to grow in US.(Most 1Q impact felt by Grifols likely to be in Germany,given the need for an onsite doctor).Most investor focus has
4、been on the Mexico border,although this is still open to plasma donors who are deemed essential.For Grifols CS est.c.5%of sites c.8%of global capacity.A move of COVID-19 hot spots to the next 5 states as predicted by the Whitehouse Task Force could impact donations more.Exposure to centres here rang
5、es from 37%TAK,48%GRLS,&56%CSL.US rising unemployment rates may increase mid term donation volumes and Grifols&CSL have the highest centre exposure to states with most jobless claims thus far(c 40%)vs Takeda(c 20%).We reflect this with higher mid term growth in our models.CSL is seeing“lumpy”plasma
6、supply,but demand remains strong:In March,CSL saw its US plasma collections soften but remain above the prior years level.However,in the last few weeks,CSL did see volumes dip further,with collections falling below the levels achieved in prior periods(CSL research note).We forecast CSLs FY20 plasma
7、collections down 8%vs pre-COVID-19 estimates,and forecast 13%IG revenue growth(previously 17%).Weve reduced our FY21 EPS estimates a total of 8%as a result of COVID-19 disruption to CSLs plasma supply.In a companion note we have cut our Grifols FY20 EPS by 2%,FY21 by 6%and raised FY22 by 6%.This ref
8、lects 2%lower plasma collection volume in 1Q20,-15%in 2Q,and-3%in 3Q with a rebound of+6%in 4Q20.The EPS hit comes with a 6-9month lag to from collection to sales.Our change in collection growth broadly matches our CSL assumptions on donation volumes,but are less marked overall,reflecting the limite
9、d expectation of new openings for Grifols vs expectations for both CSL and Takeda.Hyperimmune immunoglobulin(H-IG)to be available for testing in COVID-19 patients as early as July.Grifols may be first to patients with its H-IG,in collaboration with FDA/BARDA(where it can utilise a dedicated fraction
10、ation plant).CSL and Takeda have simultaneously formed an alliance with additional companies to accelerate development of an unbranded H-IG therapy,however,timelines have not been disclosed.We estimate c75 donors plasma will produce therapy to treat 3-4 patients.Convalescent plasma already being uti
11、lized in small patient numbers following the FDA authorizing its emergency use.Collection of plasma from recovered COVID-19 patients has begun primarily in the hospital setting.9 April 2020 Equity Research Europe|United Kingdom DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLO
12、SURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the ob
13、jectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Research Analysts European Pharma Team 44 207 888 0304 creditsuisse.pharmateamcredit- Gretel Janu 61 2 8205 4028 gretel.janucredit- Fumiyoshi Sakai 81 3 4550 9737 fumiyoshi.saka
14、icredit- Jason Liu 852 2101 6465 jason.j.liucredit- 9 April 2020 Global Pharmaceuticals 2 Executive Summary There are 4 key plasma manufacturers under Credit Suisse coverage,CSL,Grifols,Takeda(who acquired Shire)and China Biological Products.Collectively we estimate sales of plasma derived products/
15、therapies of c USD$15 billion in 2019,and expect this to grow to c$21 billion by 2023(see Figure 1).Of these total sales estimates,c60%of revenues come from immunoglobulin products,c15%from albumin and the remaining 25%comes from other proteins.In this report,we present insights on the initial impac
16、t felt from COVID-19 on plasma collection,and provide sensitivity analysis for three key players and give an update on the latest development on plasma derived COVID-19 therapies.CSL CSL updated the market on 9th April on how it has been impacted by COVID-19(CSL research note)Plasma collections:In M
17、arch,CSL did see collections soften but remain above the prior years level.In the last few weeks,CSL did see collections dip further,with collections falling below the levels achieved in the pcp.Collections in the various centres are mixed and lumpy.Some centres are achieving collections above budge
18、t,other centres have seen a material slowdown.Centres along the US/Mexico border have been impacted by the border closure.Mexicans are still allowed to donate,but the greater restrictions in crossing the border have created some slowdown.CSL has 4%exposure to US/Mexico border.CSL is still expecting
19、to open 40 new collection centres in FY20(currently have opened 32 centres).New donors are expected to arise following the economic downturn,but CSL will likely have to increase advertising to get access to new donors.Strong demand for products remains as they are life-saving&life-extending and usua
20、lly non-discretionary.In particular,CSL has seen increased demand for IVIG from hospitals.Despite CSL remaining positive that it will be able to open the remaining 8 collection centres in FY20,we prefer to remain conservative.We forecast no further plasma centre openings in FY20(a total of 32 centre
21、s in FY20).We assume total plasma collected in FY20 is 17mn litres(down 8%from prior estimate of 18.3mn L).This implies that the plasma collected between April-June is 16%below the monthly average seen in 1H20 and January&February 2020.We continue to believe that as soon as the US economy begins to
22、open following peak infections we will see a sharp increase in plasma collections due to the rising unemployment rate.We assume IG revenue growth of 13%in FY21,following 21%IG revenue growth in FY20.We forecast 50bp gross margin contraction in CSL Behring in FY21 due to added collection costs associ
23、ated with COVID-19.Grifols Primary research insights from 6 Grifols collection centres shows some initial signs of disruption from COVID-19,with centres working under reduced capacity,due to social distancing requirements and staffing shortages.We see Grifols as having the highest exposure to the te
24、mporary closure of the US-Mexico border,where it has c5%of its sites(which we estimate contribute c8%of its plasma volumes).We understand donors can still cross the border,as are deemed essential,but in our view we estimate there may still be negative impact in the near term.Grifols sits between pee
25、rs in terms of%of sites exposed to US states with the highest rates of confirm COVID-19 infections.We see this as a potential risk to near term donation volumes.However we see Grifols as well positioned in US states with the highest rates of 9 April 2020 Global Pharmaceuticals 3 new unemployment fil
26、ings thus far,where it could see an uplift in new donors in months to come.In a companion note we have updated our Grifols model assuming 15%lower plasma collection in 2Q,and 3%in 3Q with a rebound of+6%in 4Q,driven by new donors likely to be attracted by the donor fee with higher levels of unemploy
27、ment.With a 6-9 month lag to sales,and a 70%contribution margin this would suggest a-2%impact on 2020 EPS and 6%on FY2021 EPS but an increase of 6%in 2022 EPS with higher long term donations.Grifols has seen a strong increase in number of collection centres up from 190 at the end of 2017 to 295 at t
28、he end of 2019 and we assume only c 7 new openings in 2020.Grifols is also able to access more plasma from acquired sites which are winding their third party sales,making more available to Grifols.This potentially puts Grifols in a better position than peers who need to both drive up donations per s
29、ite and open new sites which may be challenging.This analysis does not take into account any ability to supply more albumin to China in 2H2020 if local players who have also had temporary collection issues find themselves short of inventory in 2H2020/early 2021.We understand that Grifols current inv
30、entories are at least 6 months giving them some likely flexibility to take advantage of any market shortages.Neither does it reflect higher prices likely during market shortages or potentially lower donor fees possible if economic pressures increase the number of donors The company is actively worki
31、ng with the FDA/BARDA on the development of both a hyper-immune immunoglobulin(H-IG)product to treat COVID-19 as well as convalescent plasma,where it has the possibility to be first to patients with the former.Grifols is aiming to have its H-IG available by July,and convalescent plasma ready for use
32、 in 2-3 weeks time.Takeda Takeda acquired Shire within which lies the old Baxalta plasma unit.Under the direction of Julie Kim who joined with Shire,Takeda is looking to expand its plasma collection centers but has noted that low site numbers relative to sales correctly suggests high efficiency and
33、larger average sites today.A sensitivity discussed later in the report that matches the Grifols assumptions would result in a-2%for EPS for Fiscal FY21 and+2%in Fiscal 22.This assumes a 70%contribution margin on lost/gained sales and a 15%tax rate.This sensitivity ignores any pricing impact from sho
34、rtages,or material additional demand from COVID related hyper immune or convalescent plasma sales.For our analysis Takeda has the lowest exposure of the majors to sites near the Mexican border,and the lowest exposure the next 5 states hightailed as likely to be next hot spots in the US by the White
35、House task force.CBPO COVID-19 brings uncertainty to 2020E.Plasma collection was suspended for more than one month and just resumed starting in early March,but the recovery speed is low.CBPO postponed giving 2020 guidance.We expect 2020 top line/bottom line to grow at 10%.CBPO has several months of
36、plasma inventory to maintain production.On a China wide industry-level,blood products,especially IVIG usage,during COVID-19 increased,and our team assumes that at some point imported human albumin supply might be reduced by the COVID-19 outbreak in EU/US.As a result,our team expects both human album
37、in and IVIG supply to be constrained and prices to increase in 2020.9 April 2020 Global Pharmaceuticals 4 Figure 1:CS Plasma sales forecasts for 4 key players,2019-2023e Source:Company data,Credit Suisse estimates 05,00010,00015,00020,00025,00020192020202120222023CS Plasma Sales estimates(US$)CSLGri
38、folsTakedaCBPO9 April 2020 Global Pharmaceuticals 5 Current status of US Plasma Collection The US is the largest market for plasma collection,with 700 plasma donation centres spread across the country,making up the majority of worldwide plasma collections in volume.Of those centres,246 belong to CSL
39、,250 are Grifols and 126 are owned by Takeda(Biolife).For Grifols,we estimate 70%of its supply is sourced in the US,and understand that 85-90%of which is collected directly by Grifols(the remaining is bought in from third parties).CSL sources the vast majority of plasma(95%)from its US collection ce
40、ntres.The US plasma market is also unusual in that it compensates its donors,paying them somewhere between c$45-70/donor(depending on volume given/weight of donor and company paying).We estimate a typical US donor fee of$50/donation(based on our CSL discussions,but note that Grifols has suggested a
41、slightly lower effective figure in the range of$45-50/litre.We estimate average donation volume is 0.8L.Given the US is swiftly becoming the epicenter of the coronavirus outbreak(c400,000 cases of global c1.4m cases),we conducted primary research through talking to donation centres and looked at the
42、 relative exposure to the three companies under our coverage by regions most heavily affected by the virus.We have also conducted a sensitivity analysis for Grifols,Takeda and previously published one for CSL(link)on the potential impact of COVID-19 to supply and costs.Donors may use plasma donation
43、 as an additional source of monthly income,so we see this as a potentially attractive earning opportunity to some in the US,given the rising rates of individuals filing for unemployment benefits.Latest data from the US Department of Labor has reported c6.4million seasonally adjusted initial claims f
44、or unemployment made as of 2nd April 2020,up from the previous weeks level of c3.3million Primary research from US collection centres shows initial signs of disruption due to COVID-19 We recently contacted 21 US donation centres and spoke with 18 of them,6 from each company(CSL,Grifols,Takeda),acros
45、s the following states Texas,Arizona,Washington,California,New Jersey and Colorado.Reduced capacity due to CDC guidelines/social distancing.Most centres appear to remain open at this time.Both Grifols and Takeda centres explicitly indicated they are operating under reduced capacity,due to social dis
46、tancing measures and recently updated CDC guidelines for blood/plasma collection(link),which advises centres to have at least 6 feet between donor chairs.They did not quantify the level of restriction.Restricted hours due to capacity.Some centres noted they are open for restricted hours(e.g.only ope
47、n until 2pm vs usually open until 8pm)due to staff shortages(partially due to self-quarantining).Less appointment availability in hotspots.Centres closer to COVID-19 hotspots,such as Washington state or New Jersey appeared to have less availability for appointments for new donors and are operating u
48、nder restricted hours.Minimal centre closures to date.Some centers we tried to reach were closed.We understand Grifols may be temporarily closing some centres if there are issues and may at some point to have to shut down a handful of centres due to COVID-19,however we view these as only temporary c
49、losures.We understand CSL had to temporarily close a centre in Florida after one of the staff members contracted COVID-19.Yet CSL was able to re-open the centre in just a few days.We understand that Grifols and CSL have both started to see a reduction in capacity(due to social distancing measures/re
50、duced hours)but that this can be partially offset through better management of its network,booking donors appointments in advance and increasing operation hours(i.e.more donors coming early mornings/later in the evenings).9 April 2020 Global Pharmaceuticals 6 US state by state analysis shows CSL wit
