CSL slide continues despite 'buy' status

Investors continued to punish biotech big gun CSL (ASX: CSL) today, despite analysts recommending the stock as a definite buy.

The Melbourne plasma products and drug development company's shares were trading around $37, giving a market capitalisation of $5.9 billion compared to a market cap of more than $8 billion when the stock peaked at $52 in January.

But the shares were up compared to earlier in the week when the stock slumped to $35.45 - its lowest point in a year.

Analysts said the slide was partly a result of general negative sentiment in the health and biotech index.

They said it had probably also been influenced by a softening in the price of intravenous immunoglobulin (IVIG) caused by a drop in demand.

Almost two years ago, CSL predicted it would become one of the world's major producers of IVIG when it bought Swiss plasma manufacturer ZLB for an initial payment of $890 million.

Deutsche Bank analyst Kiara Bechta-Metti said there had been some speculation in the market that the bioplasma side of CSL's business had been affected by IVIG pricing.

"If you didn't like the stock, you'd say that negative pricing pressure and decreased demand are going to see the IVIG market slow," Bechta-Metti said.

"How we looked at it is if you look over the past year, September 11 had a negative impact on pricing of the product and demand in the product, but we are starting to see that change.

"Only a select number of indications are being treated with the product and there are a significant number of other indications that don't get treated with it because historically there was not enough of it to go around.

"In the long term, if this were an issue to continue, we'd have to say that these new indications would start to take up some of the excess supply."

She said Deutsche Bank didn't believe anything fundamental had changed and had retained its "buy" recommendation on the basis of some "very strong growth opportunities in the stock".

Tolhurst Noall analyst George Semerdjian said CSL had suffered harsh treatment at the hands of investors.

Semerdjian cited two key reasons for investors dropping the stock.

One was CSL's high price earnings ratio and fears it allowed no room in the share price for error, and the other a blow-out in working capital financing relating to its purchase of the Nabi antibody collection business in the United States last year.

Semerdjian agreed that concern had also been triggered by the recent surge in supply of plasma and the impact on the price of the product.

Nonetheless, the analyst also maintained a "buy" recommendation on the stock.

"We're just confident in the future direction of the company, we have a very good understanding of the company's position in the key IVIG market in the US and we are quite confident it will continue to live a solid growth," he said.

"In my opinion it is nothing more than a short term aberration for the company."

Assirt Equities Research analyst Chris Kallos said his organisation also gave CSL a "buy" recommendation, adding his belief that the stock was currently undervalued.

"There's nothing fundamental out there that would cause us to change our view on the stock," Kallos said. "It is a case of negative sentiment washing through the whole sector combined with increased scrutiny of high PE stocks."