CSL Ltd Annual Report 2019

4. Principal Activities, Strategy and Operating Model CSL is a leader in global biotechnology, which develops and delivers innovative medicines that save lives, protect public health and help people with life threatening medical conditions live full lives. CSL’s strategy is delivered through its five strategic objectives: Growth, Efficiency, Innovation, Influenza and People and Culture. More detail on CSL’s performance against its strategic objectives is available on CSL.com and in the 2018/19 Annual Report. The principal activities of the consolidated entity during the financial year were the research, development, manufacture, marketing and distribution of biopharmaceutical and allied products. CSL’s operating model for its two businesses, CSL Behring and Seqirus, leverages multifunctional teams that connect to share best practice. CSL’s operating model is based around four key value creation activities: early stage research, product translation, manufacturing and patient access. CSL’s commercial and functional areas operate at a global level, with the Global Leadership Group responsible for the day-to-day management of the group and delivery of CSL’s strategic objectives. CSL discloses financial performance primarily by business. This provides the most meaningful insight into the nature and financial outcomes of CSL’s activities and facilitates greater comparability against industry peers. The operating review of each business is summarised below. 5. Operating and Financial Review and Future Prospects (a) Financial Review CSL announced a net profit after tax of US$1,919 million for the twelve months ended 30 June 2019, up 11% when compared to the prior comparable period. Net profit after tax at constant currency 1 grew 17% when compared to the prior comparable period. Sales revenue was US$8,205 million, up 11% on a constant currency basis when compared to the prior comparable period, with research and development expenditure of $832 million. Net cash inflow from operating activities was US$1,644 million. (b) Operating Review CSL Behring Total revenue was US$7,343million, up 10% at constant currency basis when compared to the prior comparable period. Immunoglobulin (Ig) product sales of US$3,543 million grew 16% on a constant currency basis underpinned by strong demand for Privigen ® (10% liquid Ig) and Hizentra ® (subcutaneous Ig). 1 Constant Currency removes the impact of exchange rate movements to facilitate comparability of operational performance for the Group. This is done in three parts: a) by converting the current year net profit of entities in the group that have reporting currencies other than US Dollars, at the rates that were applicable to the prior comparable period ( Translation Currency Effect ); b) by restating material transactions booked by the group that are impacted by exchange rate movements at the rate that would have applied to the transaction if it had occurred in the prior comparable period ( Transaction Currency Effect ); and c) by adjusting for current year foreign currency gains and losses ( Foreign Currency Effect ). The sum of translation currency effect, transaction currency effect and foreign currency effect is the amount by which reported net profit is adjusted to calculate the result at constant currency. Global demand for immunoglobulin has continued, driven by increasing disease awareness and diagnosis as well as increased usage of immunoglobulin for the treatment of chronic therapies, including Primary Immune Deficiency and Chronic Inflammatory Demyelinating Polyneuropathy. In 2018, Privigen ® and Hizentra ® were both approved in the USA for the treatment of Chronic Inflammatory Demyelinating Polyneuropathy, which is the largest Ig indication, and this contributed to the strong growth in immunoglobulin sales achieved in 2019. Also contributing to immunoglobulin sales growth has been the expanding utilisation of the collective group of secondary immune deficiencies. Specialty product sales of US$1,572 million grew 6% on a constant currency basis. The two main drivers of this growth were Haegarda ® and Kcentra ® . Haegarda ® , CSL Behring’s subcutaneous C1 esterase inhibitor product for patients with hereditary angioedema, was successfully launched in the previous financial year supported by the product’s strong clinical profile. Building on this momentum, sales of Haegarda ® increased 61% on a constant currency basis driven by new patients. Sales of Kcentra ® (4 factor pro-thrombin complex concentrate) in the USA were strong, driven by an expansion of new accounts and expanding usage in existing accounts. Growth in specialty products was tempered by lower sales of Zemaira ® (alpha-1 proteinase inhibitor) due to manufacturing constraints, and lower wound healing sales in Japan following the return to market of a competitor. Haemophilia product sales of US$1,051 million declined 3% on a constant currency basis. The decline in Haemophilia sales was attributable to the decrease in plasma-derived coagulation products, which fell by 12% on a constant currency basis. This was largely driven by Haemate ® , CSL Behring’s plasma derived product containing factor VIII and von Willebrand factor, which experienced weaker sales following a new entrant in the market. Sales in Beriate ® and Monine ® also declined due to competitive pressures. This sales pressure was offset to a large extent by the positive performance of CSL Behring’s recombinant coagulation factors, which grew 7% on a constant currency basis over the prior comparable period. Idelvion ® , CSL’s Behring’s novel long-acting recombinant factor IX product for the treatment of Haemophilia B launched in 2016, continued to grow strongly and gain market share as patients recognised the benefits of Idelvion ® . Afstyla ® , a novel recombinant factor VIII product for the treatment of Haemophilia A patients, has also delivered strong growth since its launch in 2016. Despite intense competition in the Haemophilia A market, Afstyla continued to gain new patients in the USA and Europe. Albumin sales of US$1,018 million increased 15% on a constant currency basis underpinned by strong demand in China and to a lesser extent European markets. CSL Limited Annual Report 2019 51