Are CSL shares the latest victim of Ozempic success?

The market is worried weight-loss wonder drugs could soon be knocking down the door of CSL.

| More on:
Scientists in white coats look disappointed as the Starpharma share price falls today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The CSL Ltd (ASX: CSL) share price is experiencing a slump on Thursday amid another possible application for weight-loss drugs.

At the time of writing, shares in the biotechnology behemoth are skating 3.9% lower to $244.33. The drop is a stark departure from the 0.23% gain across the broader S&P/ASX 200 Index (ASX: XJO), which would be higher if not for the dead weight of the Aussie market's healthcare sector today.

Slogged with another potential headwind, CSL shares are now within a whisker of their 52-week low once again.

Fears of an $18 billion mistake

While Australian investors were fast asleep, new details emerged of the seemingly miracle drug weight-loss drug known as Ozempic.

The drug's creator, Novo Nordisk, provided a media release shedding new light on injectable semaglutide last night. What was initially intended to treat diabetes, then morphed into a weight-loss treatment, might soon add chronic kidney disease to its umbrella of uses.

According to the release, Novo Nordisk will stop its once-a-week injection of semaglutide in its kidney outcomes trial. The trial compared injectable semaglutide to a placebo in assessing its effectiveness in preventing the progression of renal impairment in people with type 2 diabetes and chronic kidney disease.

The decision to stop the trial stemmed from a recommendation made by an independent committee as "the results from an interim analysis met certain pre-specified criteria for stopping the trial early for efficacy".

Denmark-based Novo Nordisk enjoyed a 4.9% rally in its stock price amid the announcement. Meanwhile, US-based kidney dialysis provider Davita Inc (NYSE: DVA) cascaded 16.9% as investors mulled the implications of a future with reduced kidney issues.

The pain is undoubtedly extending to CSL shares today due to the company's involvement in the kidney industry after acquiring Vifor in 2022 for approximately A$18 billion.

Vifor, which is now integrated into CSL, houses an array of medications spanning iron deficiency, dialysis, nephrology (the study of kidneys), and rare diseases. In other words, this acquisition is heavily skewed towards the treatment of kidney disease and related illnesses.

Source: CSL Vifor market briefing

In its Vifor investor materials, CSL touted the large renal market and its high rate of estimated growth, as shown above.

Today, the market might be rethinking what future growth might look like if Ozempic can deliver better outcomes for people with kidney disease.

The share price whack also follows yesterday's annual general meeting, where investors voiced their displeasure with the company's recent performance.

Could CSL shares be cheap?

Using the price-to-earnings (P/E) ratio is a crude method for establishing a baseline on relative value compared to its historical multiple.

Nonetheless, we can see that despite the recent fall in CSL shares, the earnings multiple is not dissimilar to the past six years. Aside from a blip in 2021, investors have to go back to before 2017 to see an earnings multiple drastically below current levels, as shown below.

Source: Data by Trading View

However, several analysts prior to the Ozempic news had CSL shares in the buy bucket. This includes Morgans, Macquarie, and Morgan Stanley, all setting a price target above $320.

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

More on Healthcare Shares

Happy, tablet or doctor in a laboratory with research results or positive feedback after medical data analysis. Smile, vaccine or healthcare worker reading or working on futuristic science innovation.
Healthcare Shares

Telix share price hits record high on strong quarter and guidance upgrade

This market darling has continued to deliver stunning top line growth.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

Up 66% in FY24, will Telix Pharmaceuticals shares continue?

After such an impressive run, has the trend exhausted?

Read more »

Man sleeping with a sleep apnoea mask on.
Healthcare Shares

Buy Resmed shares at 'attractive entry level' says top broker

Could this be the right entry point to own Resmed?

Read more »

A woman reclines in a comfortable chair while she donates blood holding a pumping toy in one hand and giving the thumbs up in the other as she is attached to a medical machine to collect her blood donation.
Healthcare Shares

CSL shares hit new 52-week high! What's next?

These ASX experts reckon CSL investors are still in for a treat.

Read more »

ASX share price movement represented by doctor pressing digitised screen with array of icons including one entitled health insurance,
Healthcare Shares

NIB shares rise as top broker calls the stock a buy

Is this stock a healthy opportunity?

Read more »

Man pointing at a blue rising share price graph.
Healthcare Shares

Why is the Nanosonics share price rocketing 10% today?

Investors are pleased with a big improvement in this company's performance.

Read more »

Man with a sleep apnoea mask on whilst sleeping.
Healthcare Shares

Why the ResMed share price tanked in FY 2024 and what to expect in FY 2025

Down 11% in FY 2024, is the ResMed share price poised for a big turnaround in FY 2025?

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Healthcare Shares

Why is this ASX healthcare stock rocketing 25% on Friday?

What is getting investors excited? Let's find out.

Read more »