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    Brokers say CSL under pressure
    By Jan Eakin
    December 5 2002

    The roller-coaster ride continued for CSL investors yesterday as three stockbrokers warned of further pressure on plasma prices and of dampening enthusiasm about the success of a cancer vaccine.

    After a bullish piece of research from Credit Suisse First Boston triggered a 7 per cent rise in the stock on Monday, much more bearish notes from JB Were, Salomon Smith Barney and ABN Amro sent the stock tumbling 16 per cent in the past two days.

    While CSFB argued that recent comments from CSL rival Baxter suggested that IVIG (intravenous immunoglobulin) prices had stabilised, JB Were said anecdotal evidence pointed to prices that had continued to slide since the last CSL annual meeting. Then, CSL management suggested IVIG was worth $US37 a gram, against $US41 a gram in March. JB Were believes that figure is now below $US35 ($62).

    After paying for a phone interview with an independent plasma industry expert, ABN Amro said it too believed there was the possibility of further price weakness in IVIG prices.

    "Although pricing is anticipated to stabilise and increase in the medium to long term, this is likely to reflect increasing costs rather than margin expansion," ABN Amro said.

    The broker is reviewing its "hold" recommendation and $20 a share valuation.

    The analyst team at Salomon Smith Barney advised investors to be cautious following a 40 per cent share price rise by CSL in the past six weeks on the back of a successful study of its cervical cancer vaccine. The vaccine is still several years away from commercialisation, assuming that it clears all research and development trials.

    "R&D is unlikely to provide any further upside over the short term. IVIG will be the key focus," Salomon said.

    Putting further pressure on the blood processing company was ongoing concern over the US-Swiss exchange rate.

    "This suggests that the outlook for first half earnings will be difficult and accordingly a strong second half rebound is required to meet our estimates," JB Were said. "Whilst there are factors that will contribute to a strong second half, we believe our current forecasts are too aggressive."

    The broker has downgraded net profit estimates for fiscal 2003 by 10 per cent to $105.8 million and fiscal 2004 by 6.5 per cent to $147.2 million.

    Investors, including institutions such as Deutsche and National Australia Bank, decided to take profits following the recent strong share price revival. NAB revealed yesterday it had ceased to be a substantial shareholder in the healthcare company. The stock closed down $1.61 at $19.40 yesterday - 63 per cent below its $52 peak in February.


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