The CSL Ltd (ASX: CSL) share price has taken a beating over the past 12 months. A consistent decline has seen the Australian-based biotech company shed 20.91% over the year.
As of lunchtime today, the share price is 1.01% higher at $244.05 a piece.
The company has been hit by several headwinds, including lower-than-expected revenue growth and foreign currency fluctuations. US President Donald Trump's global tariff campaign has also hindered company growth. He plans to impose a potential 200% tariff on pharmaceuticals imported into the US from next year. The plan is aimed at reducing drug costs for Americans, but puts incredible pressure on companies such as CSL.
In response to pressure to reduce costs and spending, the company pulled studies or trials on three therapies last year. And now, the company has decided to cut its research and development network, the AFR reports.
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CSL to cut its research and development
Bill Mezzanotte, head of research and development at CSL, briefed staff on the decision earlier this week. The full details will be revealed when the company releases its full-year results on 19 August.
The AFR reported that Mezanotte said the company will consolidate its research and development teams in six cities, including Melbourne.
Instead, it will increasingly rely on external partnerships and potential acquisitions to fill gaps. There are no details about job cuts, but the workforce will be reduced.
An anonymous person at CSL told the AFR that there was speculation inside the company that up to one-third of the R&D staff could go.
CSL has already shut down its R&D hub for cell and gene therapy in Pasadena, California, with activities shifted to Massachusetts, according to reports in the trade press.
"We are streamlining the R&D organisation to foster collaboration, reduce duplication and improve efficiencies, and we are simplifying our operating mode," a CSL spokesman told the AFR.
"We will increasingly depend on a more optimal mix of internal capabilities and external partnerships to build and deliver our R&D pipeline. This will require a smaller global internal workforce in the future."
CSL invested US$1.4 billion ($2.1 billion) in R&D in 2024. This brings the total to US$5.8 billion over the past five years.
What next for CSL?
Despite continued headwinds facing the biotech business, analysts continue to have a positive stance on the stock. They expect big things from its share price in the coming months.
Just last week, Morgans Financial labelled the stock as "materially undervalued".
Morgans said the stock is trading on an EV/EBIT [enterprise value/earnings before interest and tax] of 18.2 times.
The broker notes that this is "more than 25% below its 10-year average" of 24.7 times EV/EBIT.
"Based on a conservative SOTP [sum-of-the-parts] valuation, we estimate fair value of A$196 billion, implying [an approximate] 35% upside from current trading levels," Morgans said.
Morgans has a buy rating on CSL shares with a 12-month price target of $303.70. That implies a potential upside of 24.44% from the trading price at the time of writing.
Data shows the consensus is a strong buy rating on CSL. Analysts have placed a maximum price target of $352.49 and an average of $308.82. This represents a potential upside of 41.18% and 23.64%, respectively, from the trading price at the time of writing.
