Why CSL shares are this fundie’s top ASX 200 healthcare pick

Two happy scientists analysing test results in a labTwo happy scientists analysing test results in a lab

The CSL Limited (ASX: CSL) share price has closed above the $300 threshold all week, and today it’s currently trading at $302.17, up 1.2% for the day so far.

Meantime the S&P/ASX 200 Index (ASX: XJO) is down 0.65%.

In an interview with Livewire this week, Wilson Asset Management equity analyst Anna Milne said CSL was her top ASX healthcare share pick for 2023.

Why this expert backs CSL ahead of other ASX 200 options

Milne joins a bunch of other brokers who are also tipping CSL shares for growth next year.

When asked about her top healthcare stock pick for 2023, Milne said:

I know it probably feels like a consensus call but it’s got to be CSL.

Earnings are set to grow almost 30% next year, 15% the year after that and 10% in FY 2025 and beyond.

Seqirus is also set up for a strong year from flu season, and Vifor is a compelling medium-term growth lever. It’s a stock that’s hard to fault.

Who else is tipping growth for the CSL share price in 2023?

Wilsons is tipping a 12-month share price target of $327 for CSL shares and has an overweight rating.

As my colleague James reports, Citi has reaffirmed its buy rating with a share price target of $340. Macquarie retains its outperform rating but recently upped its price target by 4.1% to $343.

Tribeca portfolio manager Jun Bei Liu says CSL shares are among the best ASX shares to buy and hold for several years. Liu says: “Even if we have a US recession or a global recession, it’s not going to slow down. It will grow double digits for the next three years.”

Blake Henricks, portfolio manager at Firetrail Investments, said CSL is a defensive share that can ride out any future market volatility. He says: “It’s large, it’s liquid, it’s healthcare. So to me, it ticks all the defensive boxes. It’s in a defensive growth category.”

What’s been happening with CSL lately?

The big news of late has been the approval of CSL’s unique haemophilia B treatment, called Hemgenix, by the United States Food and Drug Administration.

This drug is a big deal because it’s the first and only one-time gene therapy to become available for adults with haemophilia B. A commercial launch is expected in FY24.

According to the Australian Financial Review (AFR), Hemgenix will be priced at US$3.5 million per dose.

Um, what?

Yes, indeed. It will be the world’s most expensive drug, according to the article.

Of course, this isn’t the price that US patients will pay. It’s what health insurers and government programs like Medicare will pay in exchange for the greater cost savings the treatment will deliver to them.

CSL head of research and development Bill Mezzanotte told the AFR the cost to CSL of bringing Hemgenix to market after more than 10 years in development was more than $US1 billion.

He also argues the enormous value to the healthcare system given the patient population size and the long-term efficacy of a single dose, which will replace multiple doses of other drugs per patient, per week.

Dr Mezzanotte said:

You can’t even measure the difference in a person’s life taking one treatment and not need to think about it for at least 10 to 20 years [versus multiple times a week].

It’s not just their convenience, it’s their sense of mental security, and of course, it saves the healthcare system a lot of money in both the cost of therapy, rescue therapies, the cost of treating a bleed and also the lost productivity of these patients.

According to the article, a 2021 study published in the Journal of Medical Economics found it cost the healthcare system more than US$20 million to treat a moderate to severe haemophilia B patient over their lifetime.

CSL share price snapshot

CSL shares crossed the $300 mark for only the third time in 2022 last week.

Immediately before COVID-19 hit the Australian share market, the CSL share price was about $340.

The post Why CSL shares are this fundie’s top ASX 200 healthcare pick appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Csl. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Csl. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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