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Could this be CSL’s next billion-dollar acquisition?

Could global biotech company CSL Limited (ASX: CSL) be interested in acquiring a new billion-dollar antivenom business?

According to Bloomberg, US pharmaceutical company Boston Scientific is considering the sale of antivenom business CroFab, which has been estimated to be worth up to US$1 billion. Boston Scientific acquired CroFab along with a jumble of other healthcare products when it acquired British company BTG in 2019. In my view, it could be a perfect addition to CSL’s antivenom portfolio.

CroFab’s antivenom works to treat snake bites. Specifically, North American pit viper snakes, which include rattlesnakes, copperheads, water moccasins. According to CroFab, 98% of venomous snakebites in the United States come from North American pit vipers.

Now, look, I don’t know a lot about snake bites. The only animal I’ve been bitten by was a wombat at Australia Zoo (yes, really). But the way antivenom is produced is tightly aligned with CSL’s expertise. You can watch a fascinating video of how CSL produces its antivenom on YouTube here.

In essence the process involves putting small amounts of the venom’s toxin into horses or sheep which make antibodies without falling ill. The protective molecules are then extracted from their blood and processed to make antivenom.

Why would CSL buy CroFab?

There would be a lot of synergy between CSL and CroFab. CSL has a deep niche in antivenom products which form part of the company’s Seqirus group. CSL even developed the first aid techniques used for dealing with venoms that are now standard in Australia.

CSL also has a history of growing through acquisitions. In fact, I see acquisitions as a key part of the company’s flywheel of success. As well as reinvesting profits into research and development, CSL invests in businesses with market leading positions which match its strong core competencies. Until recently, CroFab was the only antivenom approved by the US Food and Drug Administration for use in North America.

Foolish takeaway

The estimated price tag of US$1 billion for CroFab would be easily digestible for CSL. At the time of writing CSL commands a market capitalisation of more than $128 billion. CSL also has plenty of cash to put towards a possible acquisition. At 31 December 2019 the company held US$669 million cash. Although I’m only speculating that CSL would be interested in buying CroFab, it feels like it would be a great fit for the CSL portfolio.

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Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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