The Federal Budget has hit the headlines, and one ASX 200 biotech company might be affected by a number of measures within it.
Shares in CSL Limited (ASX: CSL), Australia’s only manufacturer of COVID-19 vaccines, may be in for an interesting year due to 2 key government initiatives.
This year’s Budget has granted an additional $1.9 billion of funding to vaccinate Australians. Though, most of the announced changes regard the Pfister-BioNTech and Modena vaccines instead of the AstraZeneca plc (LSE: AZN) vaccine which CSL produces.
Further, the government has incorporated a patent box into this year’s Budget.
Let’s take a look at what the 2021/22 Federal Budget might mean for CSL shares.
CSL could rejoice from Australia’s patent box
The Australian Government is the latest to introduce a patent box to encourage investment in the country’s biotech companies.
The patent box will see biotech and medical company incomes from products made with Australian patents taxed at a rate of 17%. That’s a decrease from the current tax rate of 25% to 30%.
The Government believes the patent box will encourage companies to conduct their research and development in Australia, as well as keeping their patents here afterwards.
CSL chief scientific officer Dr Andrew Nash had this to say this morning in the Sydney Morning Herald:
[The patent box is] an important reform and will help to ensure that the Australia of the future can more easily turn good science into products, professions, and local, advanced medical manufacturing capacity. It is an especially significant boost to the policy environment as the country navigates its way out of the pandemic.
Boosting vaccine rollout
The Federal Budget also includes another $1.9 billion of funding for the vaccine rollout.
The $1.9 billion includes $777.8 million to be spent over the next 2 years for the administration of COVID-19 vaccinations. Another $510.8 million will go towards the National Partnership on the COVID-19 Response, which will see states and territories also administering vaccines.
The remaining funding will go towards implementing, monitoring, and reporting the vaccine rollout; vaccine distribution, logistics, and storage; and a campaign to advertise the vaccination program.
In challenging news for CSL shares, the Government appears to be more focused on using mRNA vaccines like Pfister-BioNTech and Moderna. Prime Minister Scott Morrison said the Government was “better utilising the available stock of AstraZeneca doses” while announcing it had entered agreements to purchase 30 million doses of the Pfizer BioNTech vaccine.
While this sounds like the Government might be starting to step away from AstraZeneca, the company is likely not to be banking heavily on AstraZeneca, no matter which vaccine the majority of Australians receive.
As The Motley Fool Australia has previously reported, CSL’s exposure to vaccines isn’t substantial, and its potential earnings from the AstraZeneca vaccine are small compared to its other business initiatives.
The Federal Budget also includes funding for the Department of Industry, Science, Energy and Resources, which will work with the Department of Health to set Australia up to manufacture mRNA vaccines.
It didn’t state how much funding will go towards mRNA manufacturing due to commercial sensitivities.