By Chris Shaw

As noted by Credit Suisse, key plasma market data in the US showed some improvement in May. The numbers showed IVIG volume growth increased to 3.4% on a 12-month rolling basis. This compares to 2.7% growth in April and is the largest monthly increase since September of last year.

Credit Suisse also notes inventory data remained high for the month, while there were no significant changes to spot prices in May. The data were largely encouraging in the broker's view, though CS acknowledges it is early days in terms of any ongoing improvements.

Industry feedback suggests end-user IVIG demand is currently running at around 5% growth, so Credit Suisse suggests the recovery in 12-month rolling growth from 2.7% could simply be an indicator of the end of distributor de-stocking.

In terms of any impact for CSL ((CSL)), Credit Suisse suggests if IVIG volume growth was to remain constant from May 2010 to May 2011 it would imply 12-month rolling average growth of 6.4% in May of next year. This compares to its forecast for total global immunoglobulin (Ig) portfolio growth of around 5%.

BA Merrill Lynch figures indicate Ig volumes for May were up 15.8% on the previous corresponding period, which compares to an increase of 9.3% for April and a fall of 4.3% in March. But the broker is not as positive on the data as is Credit Suisse, noting there remains some uncertainty with respect to the pricing strategies of CSL competitor Baxter This is especially the case given feedback BA Merrill Lynch has received indicates volume growth remains a challenge for a number of market participants.

According to BA Merrill Lynch, this is particularly the case in the plasma derived Factor VIII market, where volume trends continue to weaken. This is an issue for CSL in the broker's view as the company doesn't have an in-house recombinant FVIII product, so Baxter could theoretically gain at CSL's expense by turning more aggressive in its FVIII strategy outside of the US in particular.

Elsewhere for the company, BA Merrill Lynch suggests there remains some upside to earnings forecasts from non-plasma M&A activity, as such a move would likely come with management's approval and so be well received by the market.

The broker sees this as offsetting its concerns about FY11 earnings, with BA-ML suggesting CSL will probably need some favourable US dollar moves for management to confirm the company will meet current market expectations in FY11. At present, BA Merrill Lynch is forecasting earnings per share (EPS) of 192c in 2010 and 200c in 2011, while Credit Suisse is forecasting EPS of 185.6c and 188.1c respectively.

Neither broker has adjusted forecasts for the latest plasma market data. Consensus EPS estimates according to the FNArena database stand at 187.7c and 199.6c for 2010 and 2011.

Following the update, both Credit Suisse and BA Merrill Lynch retain their Neutral ratings on CSL, while the FNArena database shows the stock overall is rated as Buy and Hold five times each. The average price target is $38.00.

Shares in CSL today are slightly weaker, trading down 7c at $32.79 as at 2.15pm, which compares to a trading range over the past year of $29.27 to $37.56. The current share price implies around 16% upside to the average price target according to FNArena's database.

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