CSL’s potential new treatment for heart disease could boost profits further

CSL (ASX: CSL) has long been one of my favourite companies, because I believe it is has a huge amount of leverage over its government customers. CSL provides blood plasma products and is a manufacturer of vaccines. It is an essential participant in the blood plasma supply chain, as it is responsible for separating blood into its component parts, in a number of jurisdictions. What government is going to try to squeeze them?

One recent development for the company, as reported by Bloomberg, is that they are trying to extract the beneficial cholesterol known as HDL, from the blood components that are left over, from the manufacture of their haemophilia and immune system products. The plan is to infuse HDL into patients to quell inflamed arteries and reduce the chances of clogged arteries in the weeks immediately after a heart attack.

Andrew Cuthbertson, CSL’s chief scientist, has said that such a treatment could save a lot of lives and “be very good for the company commercially.” However, competitors such as Merck & Co (NYSE: MRK) and Eli Lilly (NYSE: LLY) are also developing compounds with a similar function. In any event, it will be at least a few years before there is any cholesterol lowering product on the market, that can help heart-patients avoid repeat heart attacks in the weeks following the initial attack.

Demand for CSL’s products is driven by poor preventative health, wars, ageing populations and natural disasters. I see all of these factors driving growth in demand (although morally, I hope I’m wrong). Share price aside, the underlying business of CSL is second to none. However, the company is currently buying back its shares, which are not cheap at the current price of over $68.

Foolish Takeaway

CSL is one of the few biopharmaceutical companies that have the revenue to fund continuous research and development of new products. Better yet, their core products – blood components – are unlikely to be made redundant by technological innovations (although synthetic blood is a possibility, one day). Their services are extremely sticky, and demand is unlikely to falter. Nobody knows what the future is for humanity, but CSL will almost certainly be part of it.

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Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article.

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