Ladies and gentlemen, good morning and welcome to CSL's full year results call for fiscal 2019. It's Mark Dehring speaking. I have with me here in the room Paul Perreault, CSL's Chief Executive Officer, and David Lamont, CSL's Chief Financial Officer. As with past practice, Paul will provide an overview of the results and operations. David will be providing some additional detail on the financials. We'll move to question and answer session. Please note this briefing is being webcast. Lastly, before we start, I draw your attention to the forward statement disclaimer contained in your packs. I'll now pass you over to Paul Perreault. Paul?
Thank you, Mark. Good morning, everyone, and thank you for joining us today to review CSL's full year results for 2019. I'd like to take you through the highlights of what we've achieved over the financial year, and I'll also have David provide more detail on the financials before I finish up with the outlook for 2020. Following that, we'll be happy to take your questions. For fiscal year 2019, I'm pleased to report that CSL has delivered another strong year with revenue up 11% at constant currency and net profit after tax up 17% at constant currency, slightly ahead of our guidance. I would have to say that I believe this is an excellent performance given the strong result we achieved in the previous year, where fiscal year 2018, NPAT was up 28% at constant currency.
It also reflects what I believe is our continuing focus to deliver innovative medicines to patients around the world and really executing on the strategy that we have in place. Our largest franchise, immunoglobulins, has performed exceptionally well with Privigen up 23% and Hizentra 22%, which again, is outstanding growth in our core franchise. We've also seen a return to the growth of albumin, as predicted, and global sales up 15%, led by that strong resurgence in the second half through our China operations. Demand for our specialty products remains robust with sales of HAEGARDA up 61% and KCENTRA up 14%. The successful evolution of our hemophilia portfolio, especially with our hemophilia B product, IDELVION, which continues to be the product that is changing the shape of hemophilia B treatment, up in sales at 40%.
Finally, Seqirus, our influenza vaccine business, has achieved again strong sales and profit growth as we have seen that turnaround continue within Seqirus, and I believe we're well positioned to deliver on the strategy going forward. Turning to slide four, the growth that we achieved in 2019 does come down to the focus on delivering these life-saving and life-extending medicines for our patients and the successful execution of our strategy. A very important pillar of CSL's strategy is innovation. We have to keep developing innovative therapies to meet our patients' needs through our world-class R&D capabilities. The highlights for 2019 include our phase III study for CSL112, which is progressing well. Our phase II study in patients with HAE, the CSL312, Factor XIIa antagonist, is also now fully enrolled.
We've also initiated phase II and phase III organ transplant studies for the prevention of graft versus host disease with alpha-1 antitrypsin, or AAT. HIZENTRA and Privigen were approved for CIDP in Japan, as well as HIZENTRA for CIDP in Australia. Lastly, I'd say we're making very good progress on our early-stage portfolio of products. Along with innovation, efficiency is another hallmark of CSL. It's something we have to continually focus on, which helps to give us a competitive advantage. We continue to expand our plasma collection network by opening another 30 new plasma collection centers in the U.S. this past year, which again, is a rate unmatched in the industry. This provides us with access to the valuable raw material that we need to produce our plasma products and to meet that ever-increasing patient demand.
We've also made significant investment in our new ERP systems right across the group, and we opened a new research facility in Melbourne and have other major capital projects underway at all of our sites. More recently, you may have seen our announcement regarding our future move to the Parkville Biomedical Precinct in Melbourne. This will facilitate closer collaboration with our biomedical and academic science community, which is world-class and which is extremely important to CSL and our future. In terms of people and culture, over the last 12 months, we've made two new key executive appointments. Paul McKenzie, our Chief Operating Officer. He's an extremely accomplished global leader with diverse biotech experience, and he's responsible for our global end-to-end operations. Anjana Narain, who's the new Executive Vice President and General Manager of Seqirus.
Anjana is also a seasoned leader with broad experience in vaccines and the biopharma space. She has recently taken the reins at Seqirus from Gordon Naylor, who announced retirement earlier this year. Our global workforce this year grew by 13% to now be more than 25,000 employees strong. I am really pleased to report as well that 57% of our staff are females. CSL was named in the top 100 companies globally for diversity and inclusion by Thomson Reuters. I think people and culture are certainly the key to growth in CSL, and we're happy that we're making progress in this area. Turning now to slide five. CSL Behring recorded overall sales growth of 11% for fiscal 2019 at constant currency. Our core products in the immunoglobulins and albumin grew 16% and 15%, respectively.
Specialty products delivered a growth of 6%, whereas hemophilia recorded a modest decline of 3%. We'll go into a bit more detail on each of those therapeutic areas shortly. In terms of the geographic split, the pie chart on the right shows the broad global reach of CSL Behring sales. We recorded solid growth in all regions around the world, including our two major markets of North America and Europe, which were up 11% and 9%. The Asia Pacific market was up 10%, with the rest of the world group up 17%. Moving on to slide six, in immunoglobulins, our IG portfolio with more than $3.5 billion in revenue is our largest franchise and has really been a standout performer over the year for CSL Behring as well as, I'd say, the past few years.
Demand continues to be strong. We've achieved substantial above-market growth for the portfolio. We are a global leader and the global leader in IG, and we've been able to capitalize on our strong supply capability. Our two leading products in Privigen and Hizentra were exceptionally strong. Growth rates of 23% and 22%, as I mentioned earlier. Driving this demand has been driven by increased usage for chronic conditions such as primary immune deficiency and secondary immunodeficiencies. It's also been bolstered by our new CIDP indications for these products that has contributed to this demand, notably Hizentra being the only subcutaneous IG product with a CIDP label claim. Tempering the growth in the portfolio has been the phasing out of our older generation lyophilized product, Carimune.
This has been a very valuable product for the company through the last few decades, but we do need to focus our resources on the new generation immunoglobulin products. Turning to slide seven in albumin. Albumin sales for 2019 were up 15%. After only a 3% modest volume growth reported at the half-year, we've had a strong resurgence in sales of albumin into China in the second half, and year-on-year sales growth of albumin in China was about 14%. Going forward, we continue to expect overall market growth in China to remain strong. Sales in Europe and emerging markets were also strong, while in the U.S., we saw a bit more tempered growth. As we previously announced, CSL will be transitioning to our own direct distribution model in China in fiscal year 2020.
We expect to move over to this model by the end of the first quarter, and the benefits will phase in over the next six to 12 months. With this change comes a one-off financial effect on our albumin sales into China in fiscal 2020, which are expected to reduce by approximately AUD 340 million-AUD 370 million. The Chinese approval for Alburex, manufactured at Kankakee for China, is still pending, but we continue to be confident on receiving approval. We are turning to our hemophilia portfolio. Our total sales of hemophilia products has been overshadowed by our transitioning of the portfolio. Sales are down 3%. As many of you know, we've been phasing out HELIXATE, a product with a high sales value but low distributor-type margins, and growing our own factor VIII product, AFSTYLA, off a low base, but with a manufacturer's margin.
The transition from Helixate to AFSTYLA is all but complete, and the margin contribution from AFSTYLA in fiscal year 2019 has now more than replaced the economic return previously being derived from Helixate. Whilst an intensely competitive market, we believe the simplicity of Factor VIII replacement therapy and its safety history will still see many patients stay with this type of therapy for some time to come. AFSTYLA has now been launched in 16 countries, approved in over 40, and we expect to launch in additional countries within the next 12 to 18 months. This portfolio transition has hidden a real highlight in the portfolio, that being a 40% growth of IDELVION, our transformative recombinant Factor IX product for Hemophilia B patients. Physicians and patients continue to recognize the benefits of IDELVION, and it is achieving some of the highest rates of switches on a global basis.
IDELVION is also now approved in over 40 countries. To date, we've launched in 14. We expect more to come over the next 12 to 18 months. In countries where IDELVION is available, it has rapidly become the leading brand and the new standard of care for Hemophilia B patients. In the U.S., we gained share. We expect to be the market leader in calendar year 2019. I'd say that's an outstanding achievement since launching just three years ago. On the plasma-derived side, competitive pressures, tender volatility, has led to a 12% reduction in sales. Some of this competitive pressure actually comes from our own products, like IDELVION. Patients want that product for sure. We're seeing some cannibalization of patients away from our plasma-derived Factor IX product, MONONINE. On to slide nine in specialty. Our specialty product sales were up 6%.
Solid growth, but a little subdued because of the supply interruption experienced with ZEMAIRA this year, and the wound healing sales also came under pressure following a return of a competitor in Japan. The highlights in the portfolio were significant growth of HAEGARDA, our transformational therapy for patients with HAE or hereditary angioedema, with HAEGARDA sales up 61%. HAEGARDA has now been on the market in the U.S. for two years and has become the clear market leader. It is making a significant difference in improving patients' lives. Since launch, the commercial experience of HAEGARDA has reflected what was observed in the trial, that patients having sustained efficacy with a close to nearly elimination of all attacks without the use of rescue medications.
We've been gathering new referrals and patient starts each month. Since launch, every patient that has gone on HAEGARDA has had a consistent supply of HAEGARDA with no supply disruptions. This is a record we're quite proud of given the history in the industry on this particular subject. Having achieved market leadership, we will continue to work to increase our manufacturing capacity. Another specialty product of note is KCENTRA, which grew strongly, up 14%. U.S. sales have been driven by further penetration within large hospitals and greater acceptance within practitioners' armamentarium. The product profile of small volume, fast infusion is a very appealing proposition in stopping and preventing bleeds. KCENTRA is the gold standard for warfarin reversal. Whilst the number of patients on warfarin is declining, there is still a substantial growth opportunity for KCENTRA in the U.S. in the medium term.
Not all the specialty products performed so well. As a category, BERINERT, that has been impacted by the success of HAEGARDA. Some of the high-use BERINERT patients have now opted to switch to HAEGARDA. I mentioned wound healing earlier. This sales decline is following a return of a competitor in the Japanese market. Finally, we've had some ZEMAIRA supply issues which impacted supply and sales, which we've now resolved. Turning now to plasma collections. At CSL, we operate one of the world's largest and most efficient plasma collection networks. As you've heard me say many times in the past, the supply of plasma continues to be tight due to strong demand for our products in market. At the risk of stating the obvious, that's why we continue to grow our collection networks.
In fiscal year 2019, we opened another 30 centers in the U.S., now totaling 221 U.S. centers as of June 30th. I think today's number is around 236. We also have eight in Germany, three in Hungary, and five in China. We're not going to stop there. In fiscal year 2020, we're planning on opening around another 40 centers. As well as increasing the number of our centers, we continually look at ways to do things better and more efficiently through the network. To this end, we achieved efficiencies in both labor and yield this past year. We also acquired a manufacturing facility in South Carolina that makes liquid saline and sodium citrate, so the anticoagulant. You may recall a problem with supply and saline through the previous years. There's been ups and downs.
With this acquisition, we expect to mitigate the risk exposure for us and vertically integrate that piece and introduce an additional level of robustness to our supply chain. Moving on to slide 11 in innovation, where we have an update on some of the initiatives we're focusing on. CSL112, our phase III trial recruitment is well underway, with now close to 5,000 patients enrolled. CSL312, our Factor XIIa antagonist, which is currently in phase II development to increase our offerings for patients with HAE. We enrolled the last patient in the phase II study in June. We look forward to the first look at those results before the end of the calendar year. CSL964, currently enrolling patients in phase III.
This is a study to evaluate the appropriate dose and respective efficacy of alpha-1 antitrypsin for the prevention of acute graft versus host disease in patients receiving hematopoietic cell transplantation. CSL364, we now completed phase I with planning underway for phase IIa, proof of concept in patients with diabetic neuropathy to be initiated in the first half of 2020. CSL324 completed phase I. This is the monoclonal antibody that antagonizes the G-CSF receptor and has the potential to treat multi-inflammatory diseases. Phase I trial in healthy volunteers has been completed in 2018 and was safe and well-tolerated, and the phase I-B in HS patients has commenced with the first patient being dosed in July. On the slide, you can see we have several programs ready to move into the clinic. CSL889 in sickle cell, CSL200 in cell and gene therapy, and CSL311 targeting multiple chronic inflammatory indications.
Moving on to slide 12 in Seqirus, our influenza vaccine business. Seqirus has delivered another impressive year with total revenue growth of 12% in FY 2019, underpinned by growth in the sales of seasonal influenza vaccines, which was up 19%. The Seqirus portfolio of products continues to transition to the higher-valued quadrivalent influenza vaccines, and the sales of the adjuvanted influenza vaccine, Fluad, more than doubled, driving the 51% growth in sales in the European market. Pandemic reservation fees grew 18%, a function of really governments wanting to secure manufacturing capacity to protect their populations against the threats of pandemics. Continuing with some of the operating highlights of Seqirus. I mentioned the ongoing shift in the portfolio to differentiated products. This has really been gaining traction.
The past year, we've seen some very positive data in relation to the real-world effectiveness of FLUCELVAX, our cell-based vaccine that is manufactured at Holly Springs. That real-world effectiveness data published indicated that FLUCELVAX was 36% more effective than standard egg-based QIV in preventing influenza-like illness in the 2017-2018 season in the U.S. Other highlights included Fluad, which was granted preferred recommendations for the over 65s in the U.K. and Australia, which underpinned strong sales performance. All the strains of FLUCELVAX we're manufacturing this past year using cell-specific seed for the first time. For the upcoming Northern Hemisphere season, that'll be fully intact. The new pandemic reservation agreements were signed with the EU and Canada, and the FDA has accepted our submission for the world's first adjuvanted cell-based pandemic influenza vaccine.
As we look forward, we're expanding the market for FLUCELVAX by launching in the EU in the 2019/20 Northern Hemisphere season, and have submitted a dossier to the TGA in Australia. We have made very good progress on the fill and finish expansions we have underway at Liverpool and in Holly Springs. Overall, these results and the initiatives, I think, show that the strategy we embarked on for Seqirus some years ago is coming to fruition, and we're well on track to reach the long-range goals we had set for the business for 2020. With that, I'm going to turn over to David now for some of the financial highlights, and we can delve into the numbers. David, over to you.
Thanks, Paul, and good morning, everyone. As Paul said from the outset, CSL has delivered a strong result for the 2019 financial year, which followed on from a very strong comparative prior year. On Slide 15, you will see that our reported net profit after tax increased 11%, from $1.729 billion to $1.919 billion. On a constant currency basis, the net profit was $2.015 billion, an increase of some 17% after adjusting for a foreign currency headwind of $96 million. The FX headwind came in higher than foreshadowed and relates to unrealized FX losses on our debt portfolio following a move to using the US dollar as our functional currency. Looking at the financial highlights in more detail on Slide 16. Total revenue was up 11% on a constant currency basis to $8.757 billion.
Gross profit of $4.896 billion was up 12% at constant currency, with a 50 basis point improvement in gross margin. Earnings before interest and tax was up 8% on a constant currency basis. Cash flow from operations was strong at $1.644 billion, which was down 14%, largely underpinned by a deliberate effort to increase our inventory levels, together with a lift in other working capital in line with the company's overall growth. Impacting cash flow has been the lift in tax paid following last year's higher than trend effective tax rate. Return on invested capital was 24.3%. Earnings per share was up 16% at constant currency, in line with the net profit after tax growth. Finally, the final dividend is $1 per share, bringing the total for the year to $1.85 per share, an increase of 8%.
In Australian dollar terms, the total dividend for the year is AUD 2.68, an increase of 18%. Turning to the segment results on Slide 17. For CSL Behring, total revenue was up 10%, with gross profit up 11%, reflecting a robust business growth. The modest growth of earnings before interest and tax of 5% was due to the high expenses, such as research and development and other investments we are making in the business for the future. I will go into more detail on these in the next slide. Embedded within the other revenue line are the royalties we receive for Gardasil, which were up by 13%, driven by higher sales volumes in the U.S. and China. Last year, we extended our agreement with Merck in the U.S. out to 2028, and in China, we received a small royalty that goes out to 2024.
For Seqirus, as well as the strong revenue growth that Paul has already mentioned, the major highlight here is that earnings before interest and tax that Seqirus delivered of AUD 154 million, up strongly on the previous year and is on the right trajectory to hit the target that we set when Seqirus was formed over three years ago. On Slide 18 is a table showing the group's expenses with the changes for the period shown on a constant currency basis. Firstly, there is research and development, which is up AUD 150 million or 21% as we flagged to the market at the half year. This was predominantly driven by the phase III trial for CSL112, as anticipated, and to a lesser extent, the studies we are undertaking for transplant.
This brings our total research and development spend to just under 10% of revenue, as a percentage, which is in line with the guidance that we have previously given to you. On sales and marketing, this was up 13%, a little ahead of the overall growth of the business, following some additional spend on increased staff and our commercial launches into the neurology area with our CIDP indication for Hizentra and Privigen in the U.S. Also included in the growth was a one-off donation of Helixate to the World Federation of Hemophilia of almost $20 million. Similarly, looking at our general and administration expenses, they were up 13%. This increase is again related to the growth of the company and the expansion in our facilities.
We have been investing in people, and we have been investing in new technology. As a result of this investment, our total depreciation and amortization was up $79 million. Importantly, two-thirds of this is in the G&A line, with one-third up in our cost of goods sold line, which obviously impacts the margin. Finance costs increased as a result of our higher debt. On a reported basis, the net finance cost grew $64 million, which includes an unrealized FX loss on our debt portfolio as it is marked to market against the US dollar. The tax expense line for FY 2019 was lower. The main factors affecting this were, firstly, a number of one-off effects in the prior year, resulting in a higher than normal effective tax rate, then these matters did not repeat in the current year.
The full year impact of the lower U.S. tax rate introduced on the 1st of January 2018, and the geographic profit mix across the group. What I mean by that is that we have made a higher proportion of our net profit in lower tax jurisdictions, consistent largely with our growth in IG, as well as a lower tax rate in Seqirus arising from the historical losses in that business. Looking forward, for FY 2020, we expect the effective tax rate to be around 20%. Turning to slide 19. Here we have a chart of our inventory over the past four years and the various components that make up our total inventory. The main point to highlight here is our inventory levels have increased as we continue to produce for the increasing demand of our products.
If you look at the red line across the bars, you can see that as a % of revenue, our inventory levels have remained stable. In FY 2018, our inventory levels were extremely tight, and we have successfully built in some buffer to ensure that we have the flexibility to respond to changes in future demand. This, of course, has had a cash flow impact, which I referred to earlier. Turning to the next slide in capital expenditure. As you can see, we have stepped up our capital spend over the last couple of years, as we have been building out our new manufacturing capacity at all our sites to sustain our future growth. Some of the key capital projects underway include major expansions in our base fractionation capacity at Kankakee, Marburg, and Broadmeadows. We are also investing heavily in expanding our finishing capacity.
A prime example of this is the capacity expansion currently underway in Bern. For Seqirus, we are currently in the process of adding additional fill and finish capacity at both Liverpool and Holly Springs. As Paul mentioned, we continue to open new plasma collection centers, and we plan to open another 40 new centers in FY 2020. Lastly, we have been implementing a new ERP system across both CSL Behring and Seqirus. This has been a major transformational program for CSL. Looking forward, for FY 2020, we expect total capital expenditure to be around AUD 1.3 billion. Again, around two-thirds of this will be growth capital. With that, I'll now like to pass back to Paul.
Thanks, David. I'd now like to make a few comments on the outlook for 2020 before we take questions. At CSL, we do expect strong demand for our plasma products and our recombinant therapies to continue. That underlying demand of our core business is something that I believe really differentiates us from a lot of companies around the globe. That allows us to continue to go, but we have to continue to invest in that core. There will, however, be those one-off financial headwind in our albumin sales that we mentioned that is arising from our transition to our own distributor model in China, which will allow us better access to our customer base and direct sales to those customers.
We also expect to see a slight increase in margin arising from the product mix shift, and we expect Seqirus to continue to benefit from its product differentiation and the process improvements to deliver in line with the prior guidance that we've given you for that part of our business. Overall, CSL's net profit after tax for fiscal year 2020 is expected to be in the range of approximately AUD 2.05 billion-AUD 2.11 billion at constant currency. This is a growth of around 7%-10%, and that's after absorbing the one-off financial headwind of the China GSP process that we're going through. Revenue is expected to grow by around 6% in constant currency, or around 10% after adjusting for the GSP license. Of course, our forward-looking statements are always subject to the usual disclaimers, as mentioned at the start of the presentation.
With that, I'd be happy to start taking questions. Mark?
Good. Thank you, Paul. Operator, if I could ask you to open the lines up for questions. Just before we move to questions, could I ask everybody to limit your questions to two? This is just with a view to giving everybody an opportunity to ask their questions. Of course, if you do have further questions, you're of course welcome to join the queue again. Our first question comes from Chris Cooper at Goldman Sachs. Go ahead, Chris.
Hi, morning. Thank you for taking my questions. I'll stick to two, in which case I'll probably stick with specialty, please. Just on HAEGARDA firstly, I mean, it's an encouraging number in your first full head-to-head. Could you just comment, please, on how significant the new diagnoses are to that number? Secondly, on KCENTRA, can you just comment as well on how you're viewing the U.S. landscape for factor PCCs once you lose KCENTRA in the second half?
With HAEGARDA, the new patient starts are continuing at a fast pace. I'd say it's really limited by the current supply of HAEGARDA. We could go faster, but the new patient starts have been significant. We're not also getting switches from our current patients to the new products that are available on the market. Having said that, there is a competition for new patients with the new antibody that's in the marketplace. I don't have an exact number on the percentage of new patient starts, but I would say that based on our supply, we're getting our fair share. Remembering that a lot of these patients are new diagnosis.
Those that are severe patients are the ones that are coming over, and some of the patient starts are coming from short acting, and that's why we see BERINERT going slightly down while HAEGARDA continues to go up because as patients might have been on what you would call on-demand therapy. If they're having one a month or two a month and now they'll have zero, that's a lot better where before they would maybe not go to prophylaxis. We've seen that transition to more prophylaxis on HAEGARDA. The HAEGARDA supply is really the intermediate process, and we've been working on that transition with the upgrades in Kankakee as well as the transition to Marburg. We do expect that to resolve about mid-year in terms of relieving some of that pressure. We're very anxious to continue to go, and we're tracking that quite well.
In terms of KCENTRA, I'd say that we still see that growth continuing. I'd say that the rumors of the death of KCENTRA have been going on for some time. This is a long-term education process, and what we're seeing is continued expansion in that armamentarium of diagnosis and utilization within the hematology community within the hospitals where they get called in for consults. There's still a heck of a lot of people on warfarin, even though warfarin new starts are declining. The NOACs also need assistance when it comes to stopping bleeding, and the hematologists see it as a good option for them to deal with when patients are bleeding on the NOACs. Look, overall, I'd say it's that continued expansion.
It's hard to change treatment practice, especially in settings where you're dealing with emergency bleeding because everybody has all hands on deck, and they need to stop and think about what's available to stop the bleeding. I still think the outlook is quite strong. There are some competitors in the space in terms of looking at reversal agents, but they're not without some issues themselves in terms of supply and cold chain. I still think there's a good runway for KCENTRA as well.
Good. Thanks, Chris. Our next question comes from Steve Wheen at Evans & Partners.
Yeah, good morning. I just wanted to talk to margins. If we exclude the sort of distortions around R&D and G&A and FX, you can see that the margins are improving. Could you characterize what's driving that, whether it's price mix or efficiency? The follow-up to my question is around plasma collection on a cost per liter of plasma basis. When do you think that we'll start to see that cost per liter of plasma efficiency start to appear with that starting to trend down?
I'll have David talk to the margin, Steve, and then I'll pick up on the plasma.
Steve, I think you sort of summed it up nicely. In fact, there's not one factor, it's a combination of a lot of things. Certainly what we are seeing is that we're getting the efficiencies as we continue to look at what we can do over obviously improving yields and the overall cost structures that we have across the plants. We are seeing certainly also that the market is reasonably tight. As we have indicated, normally we would say to you, if you're thinking about price sort of CPI at best, we're probably doing a bit better than that at the moment, just as a result of where the overall market's at. Certainly then when you get down into the middle part, if you like, of the P&L, we have flagged obviously that step up in depreciation, which is reasonably significant on the back of the investments.
I would also just to focus you a bit on, we have flagged that we've got 13% increase in employees. Obviously that's flowed through to our overall wage bill as such. We do tend to have to invest ahead of. Again, when we're thinking about the launches that we're now looking at in Japan on the back of obviously getting approval there for CIDP, we need to invest with staff ahead of the launch. Some of that is a little bit ahead of obviously the revenue starting to flow. We're conscious of the fact that when you look at the middle part in both the sales side of things and also in the G&A, the growth rates there were slightly above where we are at the top line.
That's part of that pre-investment, and we certainly would expect them to ultimately come back more in line with our overall growth of the company.
In terms of the plasma side, Steve, I'd say that we have seen some moderation of the cost per liter already this past year, because it could have gone higher. The donor fees continue to be the biggest driver. We continue to see the competitors trying to keep up. As we've talked about before, many times, this is a business where you have to have that precious raw material from these wonderful donors. In order to do that, with the economies doing quite well, even though you hear about all of the geopolitical trade issues and things, the economy in the U.S. is actually doing pretty good. That does have an effect on donations. You do have to pay more, and of course, that's one of the highest input costs is the donor fees.
We're offsetting that with the efficiencies and the opening of the new centers and rationalizing our fleet. We're already the lowest cost collector in the business, and I would expect to start seeing incremental moderate improvements over the next two years.
Thanks, Steve. Our next question comes from Saul Hadassin at UBS. Saul?
Thanks, Mark. Yeah, good morning. A couple of questions from me. David, maybe if I start with you on the, you mentioned working capital in your prepared remarks. Just looking at cash conversion cycle, it's like receivables, day of receivable stepped up materially even more so than the inventory. I'm just wondering, has anything changed in terms of your customer base? Or do you expect that to wind back down through fiscal 2020 as you start to clear or collect on some of those receivables?
Specifically, the biggest impact that we actually saw was partly driven by the revenue going into China. The step-up in the second half of the year alongside Alburex and the transition that we are moving through alongside the GSP license has had some impact. Once we get to our own GSP license, we will see a big shift in relation to our overall receivables as well, because we will go from terms that are somewhere between 150 and 180 days back to something that's more like 30 to 60. Certainly, at the end of the year, we did see a little bit of an impact alongside our sales into China. Outside of that, if you look at our overall days sales outstanding, if you like, in the biggest market of the U.S., there was really no shift.
Great. Thanks. Just one more. Paul, can I ask you to talk to KCENTRA again? First half, I think the constant currency growth was 19% for that product. Looks like it was about 9% second half on the basis of full year did 14%. I'm just wondering, is that a more reflective of future growth for that product? Are you starting to see any competition from Andexxa coming through the U.S.? Just some commentary around the growth outlook for that product would be great.
No, look, I think, Saul, a lot of it is phasing half on half and deliveries and that sort of thing. I'd say it's still in that high single digit, low double digit growth rate. We aren't seeing really a major slowdown. Andexxa, I haven't seen a major impact as of yet, but certainly they'll gain some share. When people talk about the competition, I always say, "That's great." We don't mind competition. We do pretty well. There will be some pressures there. I think that it still has not really gotten to all the areas of the hospital where you can see the utilization of KCENTRA. I'm still pretty bullish on it. I'd say that it's still a good growth rate.
There was many people that thought three years ago we wouldn't see it grow anymore, and I think three years ago, I said I was surprised. I'm no longer that surprised because we understand more about the market and the penetration. I think there's still some growth coming on KCENTRA. It is moderating from the 17%, 18%, 20% range as we go. I wouldn't say that there's anything significant in the second half that really drove that.
Good. Thanks, Saul. Our next question comes from David Low at J.P. Morgan.
Thanks very much. Paul, if I could just start with the sort of feedback we're getting on supply shortage in the U.S. It's obviously been a topic you've talked about a lot in recent years. Just wondering how that's affecting the market. Are you worried about patient utilization being rationed and that having implications into the future?
Thanks, David. Yeah, look, I always worry about that, and I have raised that before because if you go back 20 plus years, we saw that happen when the market was much, much smaller. The shortages were highly exacerbated, and we did see that there was rationing, too, on label indications. I have been talking for quite some time about the fact that as an industry, we need to keep up, because I saw the growth coming, and we see this immune-mediated disease states that are really driving utilization in both secondary immunodeficiency, the continued, I would say, diagnosis and awareness of primary immunodeficiencies, and of course, the impact on neurological diseases and things like the CIDP indication. Am I worried about it? Sure, because we're here to service patients. If I could supply the whole market, I'd be more than happy to try.
As you know, this is a long, complex manufacturing collection and capacity process within our industry. You can't do it all at once. When I hear about this, when you look at our increases in terms of what we've delivered into the U.S. market, we're well ahead of the demand curve. I think we're doing our part. Certainly, I also have regular discussions with the patient organizations and with the agencies around what can we do to help in that vein. We're also a global leader in this area, and as always, we will continue to deliver to patients that we currently serve. We're not just going to shift for one market, but we will do what we can to help ameliorate maybe some shortages from competitors.
Great. Thanks very much. Just the other question I had is perhaps for David. You talked, David, about the faster growth in some of those expense lines. I was wondering if you could help us out on what to expect into FY 2020, thinking R&D, depreciation in particular, and whether you would be expecting those cost growth to moderate relative to revenue growth, please.
Certainly, the last point that you made is part of the focus. We wouldn't expect that some of those lines to be growing ahead of the top line moving forward. As I said earlier, part of that is due to the investment that we've had to make ahead of some of the markets and the launches. Certainly, looking at the depreciation and amortization, a fair portion of that is linked to our investments that we have made in our IT software. What you will see is we've started to have some of that impact through the P&L. By the first half of this year, we will have finished rolling out both in Seqirus and also in the Behring part of the business, effectively the new systems that we have. There will be some step up therefore in continued depreciation and amortization.
Equally, what I would say is that what we are looking to do is obviously leverage as much as we can as we move forward across those areas as well. I would also just highlight to you that in relation to the people side of things, a fair part of that is obviously sitting up also in the cost of goods sold, but the additional people do have to come with the additional infrastructure across the board as well. You would expect to see some leverage moving forward.
Good. Thanks, David. Next question comes from Sean Laaman at Morgan Stanley. Go ahead, Sean.
Thanks, Mark. Good morning, Paul. Good morning, David. Hope you're both well.
Hi, Sean.
I wonder if we could get a bit more commentary around gross margin. Looking at FY 2017, it seems pretty flat. Your guidance implies margin expansion. I understand most of that will probably come through SG&A and R&D, but what can we expect from gross margin?
Again, I think the part of the gross margin comes back to just the tightness that we're seeing in the market alongside pricing. So again, factor in there something around about the CPI-type markets as we've referred to earlier. Paul's already mentioned some of the cost pressures that we're seeing coming through in plasma collections. And as you know, that's a substantial amount of our cost of goods sold. Certainly what we are continuing to, though, be able to leverage is continued focus on how we maximize the throughput through the plants. We are, at the moment, still needing to continue with the expansions, and certainly if you think more of the medium to longer term as we bring on additional capacity, that actually does come favorably on our overall cost of goods sold side of things as well. And clearly, R&D is an investment into the future.
As we continue to enhance our portfolio, there's the opportunity of obviously top-line growth alongside that. Just to focus that a lot of those areas that we're talking about are more in our infra-marginal product mix, and that obviously has a fairly attractive gross margin.
All right. Thank you. One more question, David. Could I perhaps tease out an FX impact as you see it at the moment on fiscal 2020?
I was going to say, if you can predict the FX rate, you shouldn't be doing the job that you're doing. Become an FX trader. Look, where we are at the moment is we have looked to change our functional currency alongside where we see our major activities. We are running the company more and more as a U.S. dollar organization. As part of that, you will have seen in the results this year, we did have ballpark around about $50 million of unrealized FX movements on our debt portfolio for both the Swiss francs that we have in the private placement market and also the euro. I would expect as we transition to our functional currency that that will reduce moving forward.
The headwind that we had of AUD 96 million, what we would say is today, if rates are on a constant currency basis, that we shouldn't see anywhere near the same level of impact. With the trade aspects that are happening, certainly China and the movement that just happened in the Yuan does actually have a impact to us, given the sales that we actually have in there. At the moment, that's probably one of the bigger exposures that we have.
Right. Would it be half? Would it be at AUD 40 million?
If we take today's rates moving forward? Is that what you mean? Sorry.
Yes. Please.
Yeah, look, at today's rates, you would expect that last year, as I said, was AUD 96. Yeah, probably about half of that.
Okay. Thank you, David. Thank you, Paul.
Thank you.
Good. Thanks, Sean. Next question comes from Lyanne Harrison at Bank of America.
Hi. Thank you for taking my question. First one is on the albumin. Obviously, some really good growth there in the second half of 2019. Can you talk to whether or not that's just backfill of albumin in the prior period, or is there more runway to grow albumin revenues in China once you get licensing approval for Kankakee?
Thanks, Lyanne. Look, I think there's a combination of things, clearly, that we were discussing last year. One was optimizing the mix of brands of albumin that we have and making sure that we had the availability in China in the first half. We resolved a number of those logistics issues and were able to deliver in the second half. We did know that with some of the changes in China, there was a bit of local players that had put a lot of albumin into the market, and that had a one-off impact of artificially driving volume into the marketplace that has now been eaten up by the demand. We still see an underlying demand growth in China for albumin. I think there is a future for continuing to grow in China based on the demand there.
We still are quite positive on that, and that's why we continue to make sure that we have the right mix and the right access because the GSP license, it's our largest product, right? There's a lot of sales in China that we've developed over the last 20 years. That growth is also dependent on us having access to the direct customer, where before we were relying on distributors to sell albumin as one of their products in a portfolio product catalog of maybe 1,000 products. Getting your true focus from the distribution markets was quite difficult. That's the other reason for the change of the GSP license, to give us better access because we do, I think, know how to sell and market these products as well once we have access to the customers.
I think all of that, in a long way about, tells me that the growth for albumin should continue and China is the key driver. We have seen an increase in Europe in terms of some of the demand. The U.S. has been fairly flat, as I mentioned in the briefing. It's not growing in every market, but certainly China has been the driver.
My next question is on plasma collection centers. Can you give us an indication of what the average liters collected per mature center might be? You gave guidance on about 40 new collection centers for fiscal 2020. In your view, is that a soft or hard target?
That's a hard target in two ways. One, it's a hard target, and two, it's a hard target. It's hard to open 40 centers. You're talking about basically opening one center per week. We did manage 30 this past year. It's hard in terms of execution, but it's also, I wouldn't be looking to open more than 40 this year. I'd say that it'll be a good effort if the team gets to 40. It's certainly in their goals and objectives, so it's pretty hard. The execution will be more difficult.
The average collection per center, we don't actually talk about our model in terms of specifics, but I can tell you that on average, if you take a look at the number of collection centers in the U.S. and the number of collections, and you just take an easy average, it's going to be skewed to a low number for us. On average, you would expect that most collectors are somewhere about 60% of our average collection per center in terms of, one, where our mature centers get and what our target is. Some are running well above that's part of the expansion is also to try to normalize our operations and keep them efficient without having to extend opening hours, pay additional overtime, et cetera, in terms of the infrastructure.
It's a complex system, Lyanne, as you know, but the main answer is we're collecting more per center on average than our competitors across our fleet, and probably our target collection in terms of our mature centers would be higher than the industry.
Good. Thanks, Lyanne. Next question comes from David Bailey at Macquarie.
Yeah, good morning, guys. Thanks for taking my questions. Just firstly on HAEGARDA. Just interested if you saw growth in revenues in second half versus first half 2019. Secondly, just wondering if you'd be able to quantify the impact of the two new lease standards coming through on FY 2020 guidance. That'd be great.
Yeah. The revenue first half versus second half was fairly flat on HAEGARDA. There wasn't a lot of growth in revenue, but it's all about continuing to deliver product to patients consistently over that time period. It'd be nice if we could have really accelerated that, but it was fairly flat. Was there the leasing standard?
Yeah. In relation to the leasing standard, clearly we'll have a shift across the P&L. Currently all of our leases are treated as an operating lease and therefore are coming through either in the COGS line or down through the middle part of the P&L, and we will then shift that to become both a amortization cost and also a interest cost. There will be a shift across the P&L. Net though, what we are saying is that it will be a fairly immaterial movement. There will be an increase though but nothing too significant.
Good. Thanks, David. Next question comes from Andrew Goodsall at MST.
Thanks very much for taking my call, my question. Just on HAEGARDA and Alpha-1, does seem to supply an issue in the first half. Just trying to understand when that's rectified and how that flows into.
Yeah, I think I got that through the crackling. Andrew, thanks. With HAEGARDA, it's not a manufacturing supply issue in terms of not being able to produce. It's just the volumes that we're producing, we have bottlenecks in some of the intermediate steps. That is all getting resolved in the first half of this financial year. By mid-year, we expect those bottlenecks to be relieved. We're still producing, right? We're still making more product. It's just, we can't make it fast enough. In terms of ZEMAIRA, the issues that we had were manufacturing issues in Kankakee. Those have been resolved, and we're back producing. That has been resolved just recently.
Just in terms of how you expect that, do you expect that to turn into a tailwind just in terms of supply availability point?
Look, I think, certainly with ZEMAIRA, we have to compete again, because we have had some shortages, so we have to get back in there and compete. Certainly with availability at HAEGARDA, we're going to be still tight in the first half, but the second half should resolve that supply issue, and I expect that there will still be patients waiting for HAEGARDA.
Good. Thanks, Andrew. Next question comes from Gretel Janu, sorry, Gretel, Credit Suisse.
Hey, good morning, guys. Firstly, just going back to specialty sales, given some of the impacts you have seen in FY 2019, do you anticipate that sales growth rate to pick back up above that 6% that you've seen in FY 2019?
I missed the first part of the question.
Specialty sales.
Just on the specialty sales.
Oh, specialty sales.
Do you anticipate the sales growth to pick back up?
Yeah, specialty. Look, I still think specialty sales in general, I mean, not everything is growing, right? One of the big impacts we had, Gretel, in specialty was the portfolio in Japan with wound healing. We had a one-off effect where there was a major shortage in the Japanese market. We supplied, but in Japan, they're very loyal to Japanese-based products, especially when it comes to blood products. We could spend the next 30 minutes talking about that. Basically, once those competitors returned, the customers returned to Japanese product. The run rate that we had going into their shortage, we're back to that run rate, which showed a one-off big dip in terms of specialty. I don't expect that we're going to get any of that back.
That franchise in terms of wound healing will continue to be under pressure as it was prior to the shortage, and slightly decline year-on-year. Not everything grows in specialty. Even in our products like Haemocomplettan, RiaSTAP, small patient populations, small utilization of products overall, that aren't growing at a significant pace. Where we do have the opportunity to continue to grow is ZEMAIRA, which I just talked about, which has come back online in terms of production. Also HAEGARDA as we relieve some of the capacity issues there, and KCENTRA that we continue to see as well. The other thing is that we had, as I mentioned, I think on the call, BERINERT, which is in that specialty group, which is the on-demand product for HAE.
We do have cannibalization there into HAEGARDA as well, so that's a decline on one product but an increase on the other. To answer your question overall, I still think there's growth in specialty. There's ups and downs in terms of headwinds and tailwinds, but I still think it's a good part of our growth.
Great. Thanks. Then just on Seqirus, can you talk about the outlook for the FY 2020 flu season and how you are positioned versus competitors?
For Seqirus? Yeah, look, we're on track. We gave guidance four years ago on where we thought we would be by 2020. We're right on track to achieve that. I think the transition of the portfolio is the key thing. This year, we were first to market in the U.S., which is always important. The competitors seem to be lagging because there were some late season switches in the strains that the CDC and WHO imparted on the industry, which always makes it difficult to really try to change. You're changing engines while you're trying to fly the plane, which doesn't help. Being first to market was great. We were able to get many of our lots released first. You can't get them all released first because you're constantly making and releasing product as you go with flu.
You can't have it all at once. It's an important piece in terms of us getting it in, because once it gets into the market first, then gets utilized, those returns don't come once it's in the arm. Returns are a big part of this business as well that you try to manage. I think Seqirus is well on its way. Fluad has been great, doubled in sales. It's a differentiated product for the elderly. We've seen the benefit of that. The real-world effectiveness data on the cell culture vaccine with FLUCELVAX is just fantastic. We continue to try to improve that. We do have a few bottlenecks in fill and finish, which is why we're investing there in Seqirus as well. We're producing more, we're able to release more, and I think the mix of portfolio is also helping.
Good outlook for Seqirus, very pleased with what they've been able to do. With the new leader, Anjana is going to bring another perspective to that business with a good global expertise. We'll see how we go.
Good, thanks Gretel. Next question comes from John Deakin-Bell at Citigroup.
Good morning. Paul, would you mind just talking a little about the IG market in terms of price and volume? Just giving us a feel for the drivers there. I see that whilst Privigen and HIZENTRA grew about the same over the year, HIZENTRA grew a lot faster in the second half. I'm just trying to understand the dynamics between the two.
Thanks, John. Look, I think that it is a mix portion, some of it, and some is price. We've seen some pricing benefit in Europe, certainly with tender pricing as well. We've seen good uplifts in some of the tenders. In the U.S., because of the growth in CIDP, the more HIZENTRA that goes into CIDP, obviously that's been driving that as well, and HIZENTRA is a higher priced product than Privigen. You get a bit of mix and shift, geographic as well as product portfolio. That's where we've seen it. It's certainly volume as well. It's not all price, it's a mix issue, but the volume has come up, and that's with the decline of Carimune, which was a few million grams, that is now out of the marketplace.
The replacement of that, we've certainly picked up some of our own Carimune, as has our competitors, but we've continued to also compete with our competitors, especially in the neurology space. Again, not an easy answer, but I'd say you've got a mix shift and some pricing in some markets and especially on the tenders.
Just to follow up. With the tightness in the IG market in the U.S., has the customers' attitude towards price increases changed at all, or are they still as tough on you putting prices up as they always have been?
Yeah, look, it's probably not responsible or a good look, right? I don't want a personal invitation to Washington to try to explain those types of things. I think we have good value for medicine. I think the effectiveness of the product speaks for the value that we bring to the medicine. Yeah, nobody wants to pay more. That's clear. It's in every paper, every administration trying to reduce prices of healthcare, and the lightning rod is pharmaceuticals. I think we have to be realistic about what we expect and what we can produce. Certainly, we want the value as well, which all governments are looking for. They want value for medicine. This isn't your typical supply/demand marketplace nor area to try to work out compared to, say, I don't know, iron ore or something else that supply/demand really impacts economics readily.
This is a bit more complex.
Good. Thanks, John. Our last question comes from Nicolette Quinn from Morningstar. Go ahead, Nicolette.
Hi. My question is around working capital. Firstly, a little bit further on Saul's question into trade receivables. There's contract assets of AUD 182 million, which weren't there in the prior. If you could just talk to these a little more.
Yes, certainly. That is as a result of a new accounting standard, whereby we've had to look at our toll contracts that we have in place, the largest of which is actually at Broadmeadows, that we have with the National Blood Authority here in Australia. It was how we had to readjust to align with the new accounting standards, whereby you have to recognize the revenue over the period of the contract as opposed to when product actually physically flowed. A bit of noise, if you like, as a result of adopting new accounting standards.
Does that feed through into your cash flow or is it the cash flow as it was when product is delivered?
Yeah, no, that had no impact on cash flow. It's purely and simply an accounting adjustment that we needed to make, which, in the body of the accounts, we outlined the overall impact. It had a slight impact in the overall profit immaterial, but it does certainly change the face of the balance sheet, but had no cash impact.
If you're trying to look at the cash flows, then clearly, based on the discussions that we've had through many of the questions in terms of IG supply and the rest of it, we built inventory consciously, and that did impact our cash flows. The inventories in terms of raw material with plasma, doing some overcollection, as well as some of the intermediates that we've been processing. Trying to build ahead of demand and making sure that we continue the growth.
Nicolette, thank you for your question. Ladies and gentlemen, we've now exhausted all questions. Thank you for your attention and participation today. With that, I'll close the briefing. Thank you and good afternoon.