It has been a difficult time for the CSL Ltd (ASX: CSL) share price, which has declined 18% in the past year as investors digest the developing healthcare situation under the Trump administration in the US.
As Australia's largest ASX healthcare share, the business is an important piece of the S&P/ASX 200 Index (ASX: XJO); its decline has affected many Aussie investors.
But is the decline justified, or is there a rebound opportunity? Let's examine what some experts think of the business.
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Largely optimistic on the CSL share price
According to Commsec's collation of analyst ratings, the ASX healthcare share has (at least) 13 buy ratings and one hold rating. Overall, that's a very positive view.
UBS is one of the brokers with a buy rating on CSL shares, with a price target of $310. A price target is the broker's estimate of the share price in 12 months from the time of the investment call.
Therefore, UBS is suggesting the CSL share price could climb by 28% within the next year.
What's going on with the healthcare industry?
UBS notes that President Trump plans to introduce a 'most favoured nation' policy for pharmaceuticals in the US, which could reduce pharmaceutical prices by between 30% to 80%. The idea is that it links drug prices to the lowest prices in wealthy countries, such as Canada, the UK, and Germany
President Trump tried to implement this in 2020 in his first term, but legal action by the pharmaceutical industry blocked the policy, and it was also seen as being difficult to implement, with a risk of reducing drug access in the US. The Biden administration dropped the MFN rule in 2021.
How is CSL exposed?
UBS notes that the US makes up around 43% of CSL's revenue, with Behring accounting for 28%, Seqirus 7%, and Vifor 7%. The broker doesn't see "any material impact on US plasma products which were previously exempt from lower pricing under IRA, and likely have competitive pricing relative to other wealthy countries given manufacturing cost advantages in the US."
Other CSL US sales exposure relates to vaccines (around 8% of sales) and Vifor (being 7% of sales). Pricing comparisons suggest a gross profit margin premium for those products of around 15% to 25% in the US compared to Europe, partly due to weaker central purchasing programs.
Could the healthcare giant cushion any US pay?
UBS commented on what could help the CSL share price:
The direct remit of MFN policy is probably Medicare and Medicaid, ~36% of health insurance coverage in the US, but could impact private coverage over time. All other things being equal, pipeline valuation impact is less for companies with more products still be to launched, who can make better initial pricing decisions.
We also believe CSL has options available to reduce the potential MFN impact, especially for Seqirus. In particular, CSL has the ability over time to produce US specific vaccines. These vaccines could be priced differently to those available outside the US.
We believe a regional product differentiation strategy would be more difficult for Vifor given its more concentrated portfolio. This potential flexibility, initial Medicare/Medicaid impact, and greater likelihood of policy delays probably makes MFN a less bad US regulatory change for CSL relative to [a] tariff [rate] of 15-20%.
With that in mind, UBS left its earnings estimates and valuation unchanged. The broker is forecasting that CSL could generate US$3.07 billion of net profit in FY25 and US$3.5 billion in FY26. Profit growth could be key for revitalising the CSL share price.
