Thank you for standing by, and welcome to the CSL investor briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mark Dehring, Head of Investor Relations. Please go ahead.
Good. Thanks, operator, and good evening, ladies and gentlemen, and welcome to CSL's briefing on today's announcement about the tender offer to acquire 100% of Vifor Pharma Ltd. As just mentioned, it's Mark Dehring speaking, and joining me online is Paul Perreault, CSL's Chief Executive Officer, Joy Linton, CSL's Chief Financial Officer, and Bill Mezzanotte, CSL's Executive VP, Head of Research and Development, and Chief Medical Officer. Paul will be providing an overview of the transaction highlights, then Joy will provide some additional detail on the financials. And then, of course, we do have an opportunity for Q&A. With a view to giving everyone an opportunity to ask the questions, please limit your questions to two. If you have further questions, you are, of course, welcome to rejoin the queue. Please note this briefing is being recorded.
Lastly, before we start, I draw your attention to the forward-looking statement disclaimer contained in the slide deck. I'll now pass you over to Paul Perreault. Paul?
Thank you, Mark, and good evening, everyone. Thanks for joining us. We're thrilled to share news with you today on our agreement to acquire Vifor Pharma, which we announced after closing of the Australian market this afternoon. I'm excited about this transaction and what it means for CSL and, more importantly, for patients around the world. I'll begin with my thoughts on how Vifor Pharma aligns with and accelerates our long-term strategy. I will give an overview of Vifor Pharma's business and how the proforma company is well-positioned for success and continued growth. Joy Linton will then discuss the financial terms of the deal and walk you through how we plan on funding the transaction. Let me draw your attention to slide number five.
Hopefully, you've been able to download the presentation, and I'll start on slide five, which is really talking about the transaction highlights. You know, today's announcement represents a meaningful acceleration of our 2030 strategy by further enhancing our focus on our therapeutic leadership areas of innovation and sustainable growth. Importantly, this combination adds a complementary and leading nephrology business underpinned by a unique and durable joint venture with Fresenius Medical Care, and a portfolio of commercial and pipeline assets in nephrology dialysis and iron deficiency, which augments CSL's existing focus areas and adds logical new adjacencies. CSL's had a long and successful track record of identifying serious and life-threatening conditions, solving them through scientific research and innovation, and bringing safe and reliable products to patients.
Through this acquisition, our global reach, our R&D capabilities, and balance sheet will help accelerate opportunities to bring new and innovative products to the large and underserved community of renal disease patients. In addition to the strong strategic merit of this transaction, the acquisition fits strongly with our disciplined financial approach, significantly enhances our revenue and free cash flow generation. The acquisition is expected to deliver low to mid-teen NPATA per share accretion in the first full year of CSL ownership. We are also pleased to reaffirm CSL's FY 2022 NPAT guidance of $2.15 billion-$2.25 billion. Let me pass it to Joy to provide you the financial details of the transaction.
Thank you, Paul, and good afternoon and evening, everybody. I would like to reiterate our excitement on the announcement that Vifor Pharma will be hopefully joining the CSL group. On slide six, let me provide a brief summary of the transaction. The transaction is an all-cash public tender offer for all of the outstanding shares of Vifor Pharma in Switzerland for $179.25 per Vifor Pharma share, payable in U.S. dollars. The offer price implies an aggregate equity value of $11.7 billion or AUD 16.4 billion. We expect to fund the acquisition through a combination of a fully underwritten institutional placement, a committed debt bridge facility, and existing cash and undrawn facilities.
We will also undertake a non-underwritten Share Purchase Plan to eligible CSL shareholders, and we're targeting to raise up to AUD 750 million. CSL expects the transaction to provide low- to mid-teen net profit after tax but before amortization per-share accretion in the first full year of ownership, including full run-rate cost synergies. Our pro forma FY 2021 net leverage will be approximately 2.65x, and we have the ability to rapidly reduce our debt based on the strong cash flow and earnings growth profile of the combined business.
The transaction is expected to complete by the middle of calendar year 2022 and is subject to the customary tender offer conditions and regulatory approval. I'll now hand back to Paul to provide an overview of the Vifor Pharma business and to outline the strategic rationale for the transaction.
Thanks, Joy. Before I give you an overview of Vifor Pharma, let me highlight some of the key strategic rationale for why we're doing this deal. I'm on slide seven of the deck at this particular point. You know, this acquisition represents a rare opportunity for CSL to augment its business with successful products and an attractive pipeline that underscores complementary and adjacencies to our existing areas of focus and interest. I have to say that, you know, this type of a transaction, as all of you are well aware, CSL does not take on transactions every day. We take serious thought about what's going to fit with our strategy. It's all about maintaining our strategy that's made us successful as a growth company, and this strategic rationale fits exactly with that.
It strengthens CSL's strategy by adding this durable and growing business with leadership positions across nephrology, dialysis, and iron deficiency. It builds a significant renal franchise, becoming the partner of choice in a growing renal disease market, and we'll talk more about that. It extends the reach of CSL's high-value pipeline in the renal space by leveraging enhanced access to unique patient population and supports clinical trial execution. Also, it provides a complementary portfolio and provides an opportunity to build new adjacencies. As Joy pointed out, it materially enhances our scale and free cash flow, and finally provides this compelling financial profile. If we go to slide nine for an overview of Vifor Pharma. Vifor Pharma is one of the largest Swiss pharmaceutical companies and a leader in nephrology, dialysis, and iron deficiency, with revenues in excess of CHF 1.7 billion.
Chronic kidney disease is a key focus area for Vifor Pharma. It's a large and expanding market, affecting approximately 15% of adults in the U.S., for instance. Through its clinical and commercial leadership and its unique partnership with Fresenius Medical Care, Vifor Pharma has established itself as really the partner of choice in the nephrology space. Vifor Pharma has also been a pioneer in iron-based therapies, addressing a significant need and contributing approximately half of its revenue. Moving on to slide 10. Vifor Pharma really has an attractive product portfolio, and we're particularly excited about this portfolio.
You'll note that across nephrology and dialysis, there are four key commercial products, and it is expanding rapidly with the launch of up to another four new products in 2022 and 2023, and a deep pipeline ranging from early stage through mid to late stage, which is expected to provide durability and growth over the longer term. Moving to the right side of this page on slide 10, Vifor Pharma is a leader in iron deficiency with a highly profitable franchise, which brings significant future promise across heart failure, initially in Europe, but eventually also in the U.S., and the opportunity for geographic expansion in markets including China, Brazil, and Latin America. You know, based on the geographic footprint that CSL brings, this is a great adjacency for us to continue to look at growth.
If we move on to slide 11, Vifor Pharma has a highly collaborative and productive relationship with Fresenius Medical Care and owns a 55% of the stake in the Vifor Fresenius Medical Care Renal Pharma JV. The partnership was forged in 2010 and has achieved global leadership in the treatment of dialysis care. Vifor Fresenius Medical Care Renal Pharma's distinctive model is unique to Vifor Pharma and does not exist in any other pharmaceutical company. It truly accelerates innovation and improves drug development process through sharing of ideas, through collaboration, through better sourcing of innovation, and improved clinical trial design and execution, and naturally, better outcomes for patients, which is what we're all striving for. If we move on to slide 10 or sorry, slide 12.
Vifor Pharma also has an excellent track record for sourcing new products and developing products at launch. Vifor Pharma's revenue has grown significantly over the past 10 years, including a seven-fold increase in Vifor Fresenius Medical Care Renal Pharma to over three-quarters of a billion CHF. Vifor Pharma has a history of driving value through strategic partnerships, as I've mentioned, and evidenced by the formation of more than a dozen successful business development partnerships spanning multiple assets and geographies. The business development pipeline is rich with four potential new product launches in the 2022-2023 time frame coming from previous activity that Vifor has undertaken. If we move to slide 13 now. Let me take a minute to walk through the details of these potential near-term product launches.
These are highly indicative of our forward momentum within the neurology business. Along with its partner, Cara Therapeutics, Vifor Pharma announced the FDA approval of IV Korsuva in August 2021. Korsuva is the first and only approved therapy for the treatment of pruritus associated with chronic kidney disease in adults undergoing hemodialysis, a condition that affects approximately 40% of hemodialysis patients. We expect the promotional launch of Korsuva in the U.S. in fiscal quarter three of 2022 and potential EMA approval in fiscal quarter four of 2022. Vifor Pharma and its partner, ChemoCentryx, announced the FDA approval of TAVNEOS or avacopan in October 2021 and received a positive EMA CHMP opinion in November 2021. TAVNEOS is an oral first-in-class therapy for a rare and serious disease called ANCA or ANCA-associated vasculitis, AAV.
TAVNEOS reduces the inflammation and damage to small blood vessels, and the European launch is planned in fiscal quarter four of 2022. Rayaldee is approved for the treatment for secondary hyperparathyroidism, SHPT, in adults with stage three or four chronic kidney disease and low vitamin D levels. Vifor Pharma in-licensed Rayaldee from OPKO Health and expects to launch the product in Europe in fiscal quarter three, 2022. vadadustat is a potentially first-to-market oral investigational HIF-PH inhibitor currently under FDA review for the treatment of anemia related to chronic kidney disease. The drug is developed by Vifor Pharma's partner, Akebia, and Vifor Pharma has commercial rights across U.S. dialysis centers, excluding DaVita. vadadustat has a PDUFA date of March 29th, 2022, followed by a potential launch in 2022 or 2023.
As you can see, a very strong portfolio of pre-commercial products and up to four launches in the next couple of years. Moving on to slide 14. Beyond the four product launches, Vifor Pharma has novel pipeline across nephrology and dialysis, and it's clear that partnerships such as the in-licensing of Travere's sparsentan or acquisitions like Sanifit have enabled Vifor Pharma to continue to fill out its pipeline with assets across various stages of development. This generally reduces the risk profile of the development pipeline, and as these assets continue to progress through development, we expect to see them increasingly important, especially in the back half of the decade. Moving now to slide 15 and talking a little bit about the history of driving growth and the value that Vifor has developed through these strategic partnerships.
This is really to finish off on the Vifor Pharma's overview section, just to highlight their strong track record of delivering the value through these partnerships. This has really been a cornerstone of Vifor Pharma's growth strategy. Vifor Pharma's leading position in nephrology is built on the Vifor Fresenius Medical Care Renal Pharma's distinctive model, which makes it a highly attractive commercial partner for companies with innovative nephrology therapies. Vifor Pharma has also expanded its global reach through best-in-class partnerships with American Regent and Fresenius Kabi in China. Vifor Pharma's ability to continually expand its innovative portfolio by acquiring and in-licensing novel late-stage therapies is evidenced by the formulation of more than a dozen successful business development partnerships spanning multiple assets and geographies over the last six years.
If we move now to slide 17, and I touched on this earlier, which is the strategic rationale. You can see that what I've outlined here through Vifor's strategies and where they've been is really why we see this as such a compelling rationale to the deal. I'd like to walk you through this and really make sure that you understand where we're coming from and the fact that, you know, this is not a divergence from our strategy. It absolutely aligns with where CSL has been and where CSL will go into the future. Moving on to slide 18. You know, following the acquisition of Vifor, the combined group will have three leading segments.
You'll see from the pie chart the pro forma revenue contribution from three business units, 70% from Behring and the remaining 30% evenly split between Seqirus and Vifor. Moving on to slide 19. Through the JV with FMC, we gained preferential access to a large pool of clinical-stage nephrology assets. It is estimated that the market size for renal will grow from 2020, last year, about $13 billion in terms of market to $25 billion by 2026. You know, double-digit growth year-on-year over the next number of years, driven by an aging population and increased prevalence of chronic kidney disease arising from risk factors such as diabetes and heart disease.
Moving on to slide 20, you can see the key attributes of the renal disease market, and this really talks a bit about, you know, where these patients are and what's happening. You can see the key aspects here, and this represents the large and growing opportunity. Chronic kidney disease is a leading cause of mortality and morbidity globally. In the U.S. alone, there are approximately 15% of adults that have chronic kidney disease, and this number will continue to grow as the population ages. Furthermore, the need for dialysis is growing significantly, with 360 people every day beginning dialysis treatment for kidney failure. Moving on to slide 21. We see a significant overlap between CSL and Vifor Pharma's portfolios across some of our key focus areas.
As you can see from the graphic, we're engaged in exploring several common disease areas, but are also able to layer on adjacencies to really look at areas in our portfolio where we can fuel growth. Areas of key focus are cardiovascular, hematology and transplantation. Both CSL and Vifor Pharma have commercial and pipeline products supporting hemodialysis, especially as it relates to cardiovascular events, blood disorders like sickle cell disease, and renal indications like diabetic kidney disease. Vifor Pharma also brings in new disease areas through its iron franchise, with a significant opportunity in patient blood management, particularly in hematology, with a focus on beta thalassemia and of course, heart failure. These are natural adjacencies for us, and coming together will enable us to further our development and commercial efforts and find ways to deliver greater value to our patients and to our shareholders.
If we move on to slide 22. You can see that in slide 22, it brings together some of the key rationale for the value of the acquisition, highlighting how our collective renal assets are highly complementary and through the Fresenius joint venture, could accelerate progression of the CSL high quality renal assets through better use of patient data and treatment algorithms. As an example, plasmapheresis mab in phase III as a potential first-line treatment for antibody-mediated rejection in kidney transplant patients. Slide 23. Moving on. It's evident that Vifor Pharma brings a relatively well-balanced mid- to late-stage pipeline to CSL. It has eight clinical-stage assets across multiple indications and five registrational lifecycle projects, one of which, vadadustat, has a PDUFA target date in late March 2022.
This distribution and expected movement of assets across phases, layering in added long-term growth in the second half of the decade, with nephrology franchise becoming a meaningful contributor to the growth in the pro forma for the company. Moving on to slide 24. The impact of Vifor Pharma acquisition will meaningfully impact our financials with a substantial uplift in revenue and free cash flow. This increased scale positions the business to further explore and open opportunities for continued execution of R&D and future growth in our key therapeutic areas across our portfolio. Moving to the last slide that I have at the moment. This will be slide 25.
As Joy mentioned at the beginning of the call, we expect the transaction to provide low- to mid-teens% NPAT after amortization for share accretion in the first full year of CSL ownership, including the full run rate cost synergies that we've outlined in the ASX. We also expect to retain balance sheet flexibility with the pro forma net leverage of approximately 2.65x. We have the ability to de-lever based on the cash flow profile of the combined businesses. I'd like to now hand over to Joy to take you through the transaction funding. Joy.
Thank you very much, Paul. I know I'm on slide 27. As previously mentioned, the all-cash tender offer of $179.25 per share represents an aggregate equity value of $11.7 billion. This transaction will be payable in US dollars and will be funded via, firstly, a fully underwritten institutional placement of $4.5 billion. In Australian dollars, that is, AUD 6.3 billion and a fully committed debt bridge facility of $6 billion, as well as existing cash and undrawn facilities of $2 billion. We'll also be undertaking a non-underwritten share purchase plan, targeting to raise up to AUD 750 million. Under the SPP, eligible shareholders will have the opportunity to apply for up to AUD 30,000 of new shares.
We are planning to take out the debt bridge facility in the capital market. On slide 28, the equity raising involves a fully underwritten institutional placement of new, fully paid ordinary shares in CSL to eligible institutional investors to raise, as I've said, approximately AUD 6.3 billion. We'll also be undertaking, as I've mentioned, a non-underwritten SPP targeting to raise 750 million Australian dollars. First, focusing on the institutional placement. It's fully underwritten and is expected to result in approximately 23.1 million placement shares being issued at the underwritten floor price, representing just over 5% of CSL's ordinary shares on issue. The placement price will be determined by a bookbuild process commencing at AUD 273 per share, which represents an 8.2% discount to the last closing price of AUD 297.27 yesterday.
Eligible institutional shareholders who bid at the final placement price for an amount less than or equal to their pro-rata share of placement shares will be allocated their full bid on a best endeavors basis. The placement shares will rank equally with existing CSL ordinary shares at their issue. Eligible professional and sophisticated shareholders in Australia and New Zealand who wish to participate in the placement should contact their broker for further information, and priority will be given to broker bids that support existing shareholders. Secondly, as we have outlined in relation to the SPP, following the completion of the placement, CSL will offer existing eligible shareholders in Australia and New Zealand the opportunity to participate in the non-underwritten F-SPP up to AUD 30,000 per holder.
The issue price for the new shares under the SPP will be the lower of the placement price and a 2% discount to the five-day VWAP of CSL shares up to and including the closing date of the SPP. The number of shares received by SPP participants will be subject to the overall level of demand and any scale back. The scale-back methodology will ensure that subject to the 30,000 maximum application limit, participating shareholders will receive an amount of new shares that at least maintains their percentage shareholding in CSL prior to the announcement of the placement and SPP, or is equivalent to their application if that is lower than their pro-rata amount. As I've already mentioned, SPP shares will rank equally with existing CSL ordinary shares from their issue date.
More details will be available in the SPP offer document, which is expected to be sent to eligible shareholders next Tuesday, the 21st of December, when the SPP opens. On slide 29, moving to the timetable of the equity raise, and just outlining some key dates. The placement book build is now open and will be completed overnight, tonight and tomorrow, with trading resuming on Thursday, the 16th of December. The SPP is expected to open next week with an extended offer period to Monday, the 7th of February. As a management team, we've always said any acquisitions by CSL would be strategically strong and financially attractive. Hopefully you can see that Vifor Pharma business is just that. With that, I'll hand back to Mark to handle some Q&A.
Good. Thank you, Joy. Thank you, Paul. I'll ask the operator if you could open the lines, and I see we have some questions lined up. Our first question comes from Andrew Goodsall at MST. Please, if everybody could limit their questions to two. You are, of course, welcome to rejoin the queue afterwards. Go ahead, Andrew.
Thanks very much for taking my question. Just was going to ask on the synergies, the 75, just where that's coming from particularly, and the timing that you expect that to be delivered, you know, I guess sort of in terms of first, second and third year, roughly.
Would you like me to take that?
Joy.
Thank you, Andrew, for the question. The $75 million is after three years, and you know, we've just projected them equally over that three-year period. This is not a particularly big cost synergy. These are cost synergies with the $75 million. You know, they're the normal areas that you would expect from procurement to some of the enabling functions. This is the deal is much more about the growth and revenue synergies that we think we can deliver over time. That is not in that $75 million synergy number. That's just the cost synergies.
Perhaps then just turning to the growth, it seems the business has been hard impacted by COVID. Just the visibility that you're bringing to the, I guess, your own forward estimates and how you're sort of thinking about the recovery there and I guess obviously in context of the pipeline that you've got there as well.
Yeah. Look, thanks, Andrew. I think that as we take a look at where the opportunities arise here, you saw the growth that we see in the nephrology business and especially chronic kidney disease and those areas of dialysis. Yes, they were impacted by COVID, because, you know, they're patients with comorbidities. Actually, there were, you know, a number of patients that passed away in the process of COVID around the globe and some of these areas. You know, we see this continued growth. People continue to, you know, the population continues to age. We see the comorbidities, you know, not coming down, and we see more and more therapies that can come in here.
These are very complex patients in that area that, you know, actually, one particular product, and we talked about this with things like, you know, IG in our portfolio before. Finding one product to solve all the issues associated with the immune system or in this chronic kidney disease area is gonna be very, very difficult. There's lots of assets that, potentially can help these patients, and we have the way to deliver it. It's really about looking for that future growth and making sure that it's there. They also have a very, very strong iron franchise, as you know. You know, this is a leading company in iron replacement, and that's gonna go on for quite some time.
I think, you know, there's some real benefits there for us to be able to look at geographic expansion and potential indication expansion that we see, you know, having been in the cardiovascular and hematology area in terms of the focus areas of our therapeutic areas within CSL.
Perfect. Thank you.
Good. Thank you, Andrew. Our next question comes from Saul Hadassin at Barrenjoey Capital. Go ahead, Saul.
Yeah, good afternoon. Thanks for taking my questions. I've got two. First one, Paul, obviously, a key component to this business for Vifor has been the relationship and the JV with Fresenius Medical Care. Have you had any exposure or access to talking to that part of the business to assess sort of their view on this type of transaction, what the implications might be from their perspective?
Yeah, thanks, Saul. Look, yeah, I have spoken to the folks at Fresenius Medical Care, and I have to say, you know, it's just because we had not closed the deal, I mean, there was limited discussion. All I can tell you is that Fresenius and we do deal with Fresenius in a couple of areas already with some of the work we do with Hizentra and some of the filling of some of the products there. But I can tell you that very aligned on the patient focus that they bring to this area of dialysis and renal care. They are experts in this field.
They have a very large, you know, number of patients that they manage, the largest network of any other company in this space. I can say that my conversations and exposure has been nothing but extremely positive. They see this, you know, this has been going on for over a decade, this relationship. They see real value in this relationship and what's been created and the value that's been created for them, for Vifor, but mainly for the patients. I think, I'm very excited and enthused about the relationship. They're innovative, they're constantly thinking, and, you know, there's some really good things that they're doing in not only patient care, but reimbursement side of the business and a number of other areas.
Very impressed with what they've done and how they've grown and their real aspiration to continue to grow and to grow this relationship.
Thanks, Paul. Just one more. The key risks section of the presentation talks about patent litigation for that key iron infusion product. I'm just wondering if you can give us any sense of your assessment of that case. What are you expecting in terms of potential competition for Injectafer in coming years?
Look, Saul, I mean, we're very comfortable with where Vifor's management has managed this litigation. It's been going on for, you know, a number of years, so it's not new, and certainly in our diligence, we've looked at it. We think they've done a great job managing it, and we expect that, you know, they'll manage it through to fruition. This is a complex product manufacturing. This is not your typical small molecule biologics product that has a very steep, you know, curve. I think that it's more of a biosimilar type product and so it's difficult to manufacture. We all know that, and so do the other players.
This is a huge market at the moment, and this franchise will continue to grow for a number of years. If we can continue to add value and expansion and geographic expansion, I think it's gonna be, you know, much pretty sustainable business for us. We've taken all that into account with this deal, and we're very comfortable where we sit.
Thank you so much.
Thank you very much.
Next question comes from Steve Wheen at Schroders. Go ahead, Steve.
Thanks, Mark. Good afternoon, Paul. I've just a question on the portfolio of products that sit within the chronic kidney disease segment. There is one, I think it's called Mircera, which has come under some pricing pressure of late. I just wanted to try and understand what the main cause of that has been and whether or not its pricing level has found a new base. That can be my first question, yes.
Yeah. Thanks, Steve. Look, I think Mircera has. It's interesting, Roche is a great company as well, and they've done a great job of working with Fresenius to launch this product. When they launched it, the value of this JV was clearly known because they basically ran out of inventory pretty quickly after launch because of the uptake. But look, I think all products in this space are under pressure just because of the bundle of cost and package that goes into the treatment. So we think there's still plenty of upside and plenty of penetration that'll come.
You know, if you live in the U.S. at all, like I do sometimes, you know, drug pricing is constantly under pressure, and I expect that, you know, we'll continue to manage it. I don't see anything definitive here that's causing a major issue.
Okay, great. My second question is, I noticed you referenced the heart failure opportunity. Based on what I've read, the Ferinject does have some characteristics which stabilize patients after a heart attack, which sounds somewhat similar to the intent behind CSL 112. I just wonder how those two sort of opportunities sit alongside each other.
Well, I have Dr. Bill here with me, so I'm gonna throw to him.
Sure. Thanks for the question. Injectafer has done a fair amount of work, of course, Vifor for Injectafer on
The use of iron to stabilize and improve functional outcomes of people with congestive heart failure. That congestive heart failure, by the way, could be because of a previous myocardial infarction or some other causes. They have a study ongoing right now to prove the same dynamic that they've proven in Europe, in the United States. An exact overlap between these two products for the same patient will remain to be seen. Of course, we hope that CSL112 will be treating patients earlier, and maybe they won't even have the heart failure to begin with. Certainly this kind of approach and interest in heart disease is partly why this portfolio makes sense with us.
Thank you, Steve. Next question comes from Sean Laaman at Morgan Stanley. Go ahead, Sean.
Good evening, Paul, Joy, and Mark. Thanks for taking the time. Paul, you mentioned some of the synergies by taking the Vifor products and I guess sort of cross-selling them into some of CSL's channels, you know, internationalization, that type of thing. Is there much flow the other way from your existing portfolio and selling it into Vifor channels.
Look, I think. Thanks, Sean, for the question. I think as we look at the channels that Vifor has already established, it's really about some of our newer assets that, you know, will come online, you know, later in our portfolio. Dr. Bill, during the R&D Day, outlined a number of areas and that we're developing right now. I think as we look at the development of some of those assets, there's opportunity for us. I mentioned, you know, for instance, the Travere product that we talked about in transplantation. This also, you know, when you're talking about these kidney disorders, and you look at that marketplace, you know, there's multiple things that are driving that market to expand so rapidly.
whether it's transplantation and kidney disease or whether it's other areas.
Mm.
We think there's opportunities there to drive that. Again, you know, very complementary and adjacent to where we are, and I've always said that, you know, not being serial acquirers, you know, we look at things where we can add value, not just buy something to grow because we don't have another strategy. We've had a very strong strategy of base growth. They have a very strong base growth business, plus the opportunities to really optimize the portfolio. We bring scale to this, Sean. You know, we bring scale and geographic reach. We're gonna look both ways for sure.
Great. Thanks, Paul. Maybe a question for Joy. I mean, I know there's obviously no fiscal 2023 guidance out there, but you do talk to the accretion that this deal brings, and we can kind of grab a consensus for Vifor and work up a number. At the moment, it seems that the accretion implies an EPS outcome close to $5 versus $6 in 2023 for the existing business. Is there anything wrong with that rationale?
It's very strongly accretive, Sean, is what I would say, both on a reported, fully reported basis where, you know, saying it's immediately accretive in 2023. Then in the ASX announcement, you'll see we've used the language as the low- to mid-teens% in terms of accretion on a, you know, like, a cash equivalent, but it's NPATA minus amortization or adding back amortization. That, yeah, so it's strongly accretive in the first year. Then, of course, once the synergies flow through into the, you know, that accretion grows over that three-year period. Yeah, now your. I mean, I can't particularly, I don't recognize your AUD 6 specifically, but I would've thought, you know, every bit of that.
All right. Great. Thanks, Joy.
Good. Thanks, Sean. Next question comes from David Low at JP Morgan. Go ahead, David.
Thanks very much for taking my question. Paul, just you've outlined the growth opportunity and it does seem quite compelling. Could I get you to compare a little bit to, you know, how that growth outlook compares to the existing business, particularly the plasma products? I mean, are we to read into this that Vifor and its renal franchise is a better growth opportunity over the next five to 10 years?
Look, I wouldn't say so, David. I'd say it's complementary and the two together just make it even a stronger case, right? When you take a look at our portfolio and again, the good doctor outlined that at R&D Day in terms of what's in our pipeline, we're so excited about our current pipeline of products that you know, this is that opportunity at the right time that makes sense for us to add to the growth of the organization. I think the outlook for plasma products continues to be strong, especially you know, over the near, mid and later part of this decade. You know, we don't see the underlying demand for IG going away. We don't see those things happening.
We look at the portfolio across our therapeutic areas, and we've got some really good shots on goal. This adds to that portfolio. It is a growing area. You know, it's coming from a smaller base in some areas, but it's a big market in the nephrology area. You know, there's some real opportunities there and there's some adjacencies within nephrology and then hematology, iron, the heart failure that we talked about. I mean, there's a number of areas here really add to, and you look at that one slide that has all of the R&D projects, it's really filled out nicely with the addition of Vifor. Look, I wouldn't try to compare the two because there's opportunities in both areas, that will help.
I mean, Behring, you know, the Behring business is still, you know, 70%+ of the business moving forward, and that's gonna be a continued driver of base growth. That beautiful, strong base that many companies would kill to have in terms of, you know, the growth rates. I mean, you know, many of these pharma and biotech companies are struggling, especially the big ones, you know, people our size. They're struggling for 3%-4% growth, you know. So we're looking at our growth profile and really excited about the combination of the two.
I, you know, I love all my children and I see Vifor as part of the family, and I'm not gonna, you know, compare one to the other, and in that respect, we're gonna take the best assets forward for the company and for the patients, and whether it comes from Vifor, whether it comes from Behring or Seqirus, those are the ones we're gonna continue to invest the most in to accelerate.
Great. Thanks for that. I mean, I guess perhaps staying with the same topic. I mean, when I look at the businesses, they still seem quite separate. I mean, I think a salesperson in the plasma space, plasma products, you know, hematology or immunoglobulin isn't really gonna pick up these products and start selling them, or am I missing something? I guess in the same vein, I mean, are we talking about businesses that will still be run fairly separately and at least initially?
Look, I think that that's a fair call. You know, we have a lot of work to do. I've only been at this about an hour and a half, so, but, you know, what I can say is that, you know, they've done a really good job, and I'm not gonna go in and just disrupt things, right? We need to understand the business deeply like we do the rest of our business as we, you know, come together as one organization. When I say one organization, you're right, it doesn't. You know, we can't make iron in a plasma facility, right? Or vice versa. So, you know, operations-wise we need to be separate, clearly.
Commercially, you know, when you look at their business, a lot of it is done with partnerships and JVs and relationships and, you know. It's not necessarily the call point because the channel is through Fresenius Medical Care for a lot of these products as well, and that JV and what they bring to the party. You're right. I mean, this isn't your typical pharma deal where you've got tons of synergies because you're gonna cut 2,000 people out of the sales force and bring it together. That's not what this deal's about. It's about the pipeline, it's about the adjacencies, it's about the investments, and that's really where we see the compelling nature of this deal. That's why you don't see big synergy numbers that Joy pointed out earlier.
Good. Thanks very much for that.
Next question comes from John Deakin-Bell at Citigroup. Go ahead, John.
Thank you, Mike. Paul, I'm just interested in the strategically, how you got comfortable with the assets that you're buying because your a big chunk of your business is, it's protected. They're not patent protected, but there's manufacturing and a lot of infrastructure that goes into it, which has meant that the industry's been very tight, and particularly, you know, as you've consolidated it, so IG, albumin, et cetera, there's only minimal competition and there's no patents. Whereas here, you're moving into an area where patents start to become far more important and that at some point, unlike IG and albumin, which have been growing for 30 years and you haven't had to worry about it, you've got to think about it.
How, strategically, have you gotten comfortable about moving into a quite different mindset?
Thanks, John. I don't really see it as a different mindset in a lot of ways. You know, I'd like to say I haven't worried for 30 years about the plasma business, but the reality is I probably have, and as all of you have, yeah, because in our discussions, you know, there's always you know, the risk of IG going away with anti-FcRns or, you know, something else or, you know, whatever the flavor of the day is that seemingly could disrupt. Look, at some point there's disruption. I think that what I see in this business and the iron business, for instance, you know, continues to grow. Will there be some infringement later in terms of patents and will there be patent expiries in this business? Sure, that'll happen.
These are also complex products to make. They're not small molecules that you're trying to copy. You know, it's an interesting and difficult manufacturing process, much like plasma, right? In that respect. You know, there's that opportunity that we have to protect and really grow and expand geographically that business well ahead of, you know, threats and things coming our way. You know that we look at these things deeply to make sure that we're adding value.
In terms of the renal space, you know, the number of products that are going to be used going forward as you see this market continue to grow because of the comorbidities in nephrology and the renal disease area, there's opportunities for us to continue to expand because there will be products that could be coming out of the armamentarium. But with these patients, if you move one thing with these patients in terms of therapies or polypharmacy, it impacts something else in the system. These are complex patients that have a lot of interdependencies in their anatomy and biology that, you know, just don't get solved by one particular thing going off patent.
I think that's the beauty of the polypharmacy that we see here, is the opportunity to continue to treat patients and improve patients and improve their therapy because there'll be new things coming. I mean, you know, KORSUVA is something that's quite interesting because you think about it, and people think, well, you know, pruritus and itching and, you know, it can't be that big a thing. Well, you talk to a dialysis patient, it's serious. I mean, this is, you know, this really impacts their life. These are just, you know, side effects of other products that you have in this polypharmacy armamentarium. You know, when I look at the business and look, as you know, we have looked at a lot of things all the time, and we don't do too many deals, right?
We're not that "serial acquirer" that we've talked about, and I've said that for about the last, I don't know, nine or 10 years. That we have a good strategy, and whatever we would do has to fit with our strategic intent and our portfolio, our adjacencies, and be complementary, and that's what we've got here. Yeah, there's gonna be patent cliffs, but you know what? Some of our current portfolio that we're developing also, you know, will have competition because they're not necessarily plasma-based therapies as Bill outlined at our R&D Day. You know, when you take a look at where we're heading with the etranacogene dezaparvovec, you know, this is gonna be unique. This is gonna be different, but there's lots of people attempting to come into gene therapy as well.
You know, I see this as part of the evolution of CSL, but still having some very strong defensive positions while we see growth occurring. Man, you can't ask for more than that, to have growth with some defensible positions that even with patent expiries, you still have opportunities to continue to grow.
Thank you, Paul. That's very helpful. I just had one question for Joy. I am also struggling with this CPS decrease and getting to the same number. It depends on what your FY 2023 number is that using to start with. Can you just confirm what have you used as the base number? Is it a consensus number or?
Yes. Yes. We've used the Vifor consensus number and our-
No, no. For CSL. Yeah, for CSL.
For CSL. Yeah. Yeah.
You've used your consensus, yeah.
Yeah.
Thank you.
Okay, good. Thanks, Sean. Next question comes from Gretel Janu at Credit Suisse. Go ahead, Gretel.
Thanks, Mark. Good evening, everyone. Just in terms of returns, the returns that Vifor has achieved historically, it's been lower relative to what CSL has been able to achieve. Has this been due to kind of the greater earnings exposure to iron deficiency as opposed to nephrology and renal, which really seems to be the growth engine going forward? I guess how has that impacted your thinking in making this acquisition?
Thanks, Gretel for the question. As I've said before, I mean, the renal does show, you know, growth significantly from a lower base, and the growth rate will be higher. There's four new products potentially being launched in the next couple of years. That's going to add to the growth, as well. You know, I think iron still is growing. I mean, the next couple of years at least, you know, till you see the iron business continuing to expand and we're looking to really expand and defend that business. I think it's got, it's going to... With our scale, our geographic reach, you know, our capabilities, our investment in R&D, our complementary portfolio, it's gonna be a combined effort in terms of this growth.
You know, we have to look at where Vifor was as a standalone and now look at it as part of CSL. As you bring the two together, you know, the overall growth rate for CSL is going to be enhanced. The returns, you know, should also, you know, benefit from that because both companies will be contributing. I, you know, and when you say lower than CSL, that may be true, but when we looked at the portfolio, we see opportunities to at least match or, you know, continue to grow above those rates.
Okay. You don't think it will be dilutive to CSL returns in the medium to longer term once the pipeline products are launched?
No. No.
No.
Excellent. Just secondly, one for you, Joy. Just in terms of the balance sheet, 2.65 times leverage, that's above historical levels. Just wondering what the medium-term leverage target is and when do you think CSL will be able to reach that?
The business we're acquiring is highly cash generative, and we have a very speedy deleveraging profile, and we'll be back within our sort of guidance of sort of 1 to 1, or 1.5 times, you know, quite quickly, certainly in a way that we're, you know, expect to be able to maintain our credit rating.
Good. Thanks, Gretel. Next question comes from David Bailey at Macquarie. Go ahead, David.
Thanks, Mark. Hi, everyone. I just had a question on Vifor's physician or referrer base. I suppose I'm expanding a bit on Sean's earlier question about cross-sell opportunities. I'm just wondering, with that physician or referrer base, do you see any opportunities through CSL's existing products, pipeline products, and then maybe what it could mean for CSL112 if that gets approved?
Let Dr. Bill talk for just a second.
I just wanna go back to a question that was asked earlier about, you know, whether our products fit or there's separate businesses. In many of these diseases, as you're alluding to, it's still the same prescribing physician or groups of physicians that are working on it. In the case of CSL112, we're talking to the hospital cardiologist, interventional cardiologists, who may be closely aligned with the person who's in the heart failure clinic, working on with the iron product, hopefully in the future. There is some natural alignment there. Same with their hematology assets, sickle cell disease. We have our own product, and the treaters of sickle cell disease are not huge.
I’m sure Vifor’s product and our product will be used by the same physician. I think there’s a few examples of that, and I’m excited when I get another chance at R&D Day to talk about all these potential alignments.
Yep. Okay. Understood. There was a comment, I've just lost it, in terms of the strategic talking about enhanced access to a unique patient population supporting clinical trials execution, can you expand on that a bit again? Apologies if you talked about it already but just interested in what that means and the implications of that.
Yeah.
Here's Dr. Bill again.
You know, this patient population, as Paul alluded to, unfortunately, is a very complex population that has issues with anemia, issues with metabolic diseases, issues with cardiovascular complications. Of course, those are all areas that we have interest in with some of our medicines for rare and serious diseases. Vifor has done a very good job of delivering on their clinical trials in a very timely manner because of this network of dialysis centers. We can see with potential pipeline assets in the future and some of the broadening indications we're considering, that we could utilize this network to our advantage.
Yeah. It's a network really of the dialysis centers and the access to the treaters and the referring physicians that are doing the treating these complex patients that give you the access for, you know, additional access to the clinical trial recruitment. That's what we were referring to.
Yeah. That's helpful. That's clear. Thanks.
Thanks, David. Ladies and gentlemen, we are running out of time, but we do have time for one more question, and that is David Stanton from Jefferies. Go ahead, please, David.
Thanks very much. Lucky last. So I just wanna be sure on just getting back to beating a dead horse on the synergies. I didn't quite understand the accretion. I just wanna be sure it's low- to mid-teens NPATA accretive if I assume, you know, $25—essentially $25 million worth of synergies or $75 million worth of synergies in FY 2023, because you talked about it sort of an even split of synergy growth.
Yeah.
Across the board.
The answer is yes and yes. Both phase synergies and run rate synergies are in that range of low- to mid-teens% in the first full year. It just really reflects the fact that, yeah, it's a strong
Imagine.
No, you know, synergies is not a big part of the story.
Okay. Understood. Okay. You know, perhaps a question for Paul. You know, I know you love all your children, but I'm interested in understanding what attracted you the most to the business in terms of products and you know, specifically what, I guess, over the medium term, we should be looking for in terms of you know, great products coming out of the portfolio, I suppose, or existing products indeed.
Yeah, I think what excited me most was the alignment with our values of taking care of patients in an underserved area that has not been highly penetrated by a lot of competitors, right? I mean, when you take a look, this is one of those areas where, you know, you look at the business, and for many companies, they would look at it and go, "Well, I'm not sure how this fits." For us, it was pretty obvious, right? I mean, we've got areas of complementary adjacencies in our thinking, in our therapeutic areas. You know, we've got a complex manufacturing of a core product that continues to grow and will continue to grow, and we think we can expand and defend for quite some time, that generates very good, you know, returns, and is in high medical need.
We take a look at all of that together and, you know, this isn't the first time, you know, we've been looking at this company. I mean, the first time we looked at it was, you know, a number of years ago. For us, it's about does it fit strategically? You know, what is our current priority and what is our current situation in our strategy and in our strategic intent? We think this is the opportune time and having talked with the folks there and meeting the folks there and working through the due diligence, you know, we only confirm the fact that we think that this is a highly complementary business. It fits our strategy. It's not a diversion from anything else that we're doing.
It has its own portfolio and really these relationships that they forged was really key to us because it's a very unique company when it comes to these relationships, especially with, you know, the American Regent, Daiichi Sankyo and especially Fresenius Medical Care. This is. It's hard to find this type of an asset that fits so well into CSL and really is unique in the industry. You know, we're always a bit different. You know, we like to think we're a bit unique and we like hard stuff, but we also like the ability to take care of patients and drive.
That's what we find in this deal is the culture, the values, the portfolio, the access, the uniqueness that really fits with this core strategy that we've had and continue to have to grow CSL into the future. Really appreciate the question and, you know, we really believe in what's happening here. The management team's super excited and, we can't wait to get started.
Thank you.
Thank you, David. Ladies and gentlemen, apologies if we didn't manage to get to your particular question. I encourage you to drop a line to CSL Investor Relations, and we'll get back to you as soon as we can. In closing the meeting, thank you for your interest, and I'll draw the meeting to a close. Good night. Bye-bye.