Why is the CSL (ASX:CSL) share price trading around its COVID lows?

The CSL share price is currently trading close to its March lows. Let's take a look at what's been impacting the biotech giant's shares.

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In recent weeks, the CSL Limited (ASX: CSL) share price has been struggling to gain momentum and put its COVID-19 lows firmly behind it. Shares in the biotech giant have again been dropping today and are currently trading 0.45% lower in morning trade. This takes the CSL share price down to $275.37 – its lowest level since early August and a mere 1.6% higher than its March lows.

What's gone wrong for the CSL share price?

The CSL share price has been suffering as string of negative news has plagued the company since the release of its annual report in September. Compounding this, the lack of any particularly positive updates is also arguably playing a part in the stagnation of CSL shares.

In early December the biotech giant announced that its University of Queensland COVID-19 vaccine was to be scrapped. This came after Phase 1 trial data delivered what could be construed as misleading results regarding HIV diagnoses.

While there were no serious adverse effects or safety concerns surrounding the vaccine, it was discovered it had the potential to produce false-positive HIV test results. This was due to the molecular clamp component of the vaccine. Thus, in spite of showing potential for successfully fighting COVID-19, CSL made the decision together with the Australian Government not to continue with the vaccine's development. 

Investors were clearly unsettled by the news, as was evidenced by the 9% fall in the CSL share price following the announcement.

Pandemic hits plasma collections

In addition to terminating its COVID-19 vaccine trial, CSL has also been impacted by a decline in its plasma collections during 2020, as reported by The Wall Street Journal (WSJ). Plasma is an essential ingredient in some of CSL's immunoglobulin products and pandemic-related lockdowns have made the collection process more complicated. Almost half of CSL's sales come from these immunoglobulin products. 

CSL Chief Executive Paul Perreault said of immunoglobulin (quoted by WSJ):

Across the globe, there's going to be a lot of tightness in the market and there will be some shortages in various countries.

Whether the U.S. sees all of that or not, it really depends on how quickly plasma collections come back.

Despite the rollout of a COVID-19 vaccine having already commenced in the US, as also reported by The Wall Street Journal, the country is continuing to see record numbers of new cases, deaths and hospitalisations. 

Foolish takeaway

Despite its lacklustre returns of late, the performance of the CSL share price over the past year is not far behind that of the overall market. For perspective, the S&P/ASX 200 Index (ASX: XJO) has fallen 1.2% over the last twelve months whilst CSL shares have declined 3.67%.

In its 2020 annual report released on 4 September, CSL advised it expected strong demand from its recombinant therapies to continue, highlighting its differentiated products and strong demand for its influenza vaccines.

In the same report, the company estimated net profit after tax of approximately US$2.170 billion to US$2.265 billion for FY21.

Daniel Ewing has no position in any of the stocks mentioned. 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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