CSL Limited (CSL) Earnings Call Transcript

We're ready to start. If I could just ask everyone to turn their mobiles off to start with. Thank you. So good morning, everyone. My name is Fiona Mead. I'm the Company Secretary here at CSL. It's a pleasure to welcome you to our 2024 Annual General Meeting. I'm going to run through the procedural aspects of the meeting. And I note that it's been held in a hybrid format. Thank you to all of you in the room today. We're in a new venue, so I hope you enjoy that. And I also welcome everybody who's joining remotely as well. For those that are here, if we do have an emergency, which I think will be unlikely, we ask that you follow the instructions from the RACV staff and listen to all announcements that come over the PA system. If we do have to evacuate, please calmly use the stars, which are located next to the lifts. There are assembly points on either corner of Bourke Street or William Street or on Queen Street. And if first aid's needed, please see the venue supervisor or RACV staff members for assistance. Shareholders and proxy holders present in the room can ask questions during the meeting by lining up at one of the microphones located in the aisles when we get to questions, which the Chair will invite. We ask that you advise the Computershare representative of your name and show them either your red or green voting card to indicate you are either a shareholder or a proxy holder. [Operator Instructions] Please note that while you can submit questions from now on, they won't be addressed until the relevant time in the meeting. And if you have any difficulties, please call our AGM help line number which is up on the screen now. Now I just will say questions may be moderated for inappropriate language. And if we receive a few questions that are similar but we may answer those together. If questions are too lengthy, we may need to summarize them in the interest of time. And also to ensure that everyone here and online has the opportunity to ask questions, we ask that shareholders restrict themselves to no more than two questions or comments initially. The Chair will take questions from shareholders in the room. We will then take questions from the online platform in writing. And then lastly, we'll take verbal questions from the online platform. Persons entitled to vote today are all shareholders, representatives and attorneys of proxy holders who hold red admission cards. On the reverse of your red admission card is your voting paper, please vote by marking a box beside each resolution to indicate how you wish to vote. Proxy holders have attached to their admission card a summary of proxy votes, which details the voting instructions, if any, for business items. You must vote in accordance with those instructions. In respect of any open votes, a proxy holder may be entitled to cast. You need to mark a box next to the motion to indicate how you wish to cast your open votes. Please ensure you print your name where indicated and sign the voting paper. When you finish filling in the voting paper, please lodge it in a ballot box before leaving the meeting to ensure your votes are counted, and the Computershare representatives will come around with the ballot boxes. Voting on all items of business will close 10 minutes after the meeting ends, during which time you have an opportunity to finalize your voting paper and lodge it in the ballot box. Please put your hand up if you need any help at all and a Computershare staff member will come and help you. For our online shareholders, once we declare voting is open on all items of business, and if you are eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. Your vote will be automatically recorded. There's no need to press submit or enter button. You do, however, have the ability to change your vote up until the time we declare voting is closed. And lastly, I would just say that there are forward-looking statements throughout today's presentation. On the screen behind me here is the relevant disclaimer, which is also available on the ASX website as part of the documents we've lodged this morning. That covers the logistics of the meeting, and I'll now hand over to our Chair, Dr. Brian McNamee.

Thank you, Fiona. And again, good morning, ladies and gentlemen. Thank you for joining us today. Those both here present and those online. I do like this new venue and I noticed, I think the food beforehand was well received, so I'm quite pleased with the venue. There is a quorum present, and I'm delighted to open the meeting. I would now like to introduce your Board of Directors. To my right, our Company Secretary, Ms. Fiona Mead. You've already heard from Fiona. Next is Ms. Elaine Sorg. Elaine is standing for election at this meeting, and you'll have an opportunity to hear from her later in the proceedings. Professor Andrew Cuthbertson is next and is standing for reelection at this meeting; and Ms. Carolyn Hewson. And to my left, Dr. Paul McKenzie, our Chief Executive Officer and Managing Director; Ms. Alison Watkins, also standing for reelection at this meeting. Ms. Samantha Lewis is standing for election at this meeting, and we'll have an opportunity to hear from her later; Dr. Megan Clark; and Professor Duncan Maskell; and finally, Ms. Marie McDonald. I have trouble seeing. [ Are you there? ] Thank you. Voting on all items of business will be conducted by poll, and I'm now declaring the poll open. As Fiona said, the poll will close 10 minutes after I declare the business of the meeting to be closed. Before we move to the formal business of the meeting, I will first provide some observations about your company, and the environment in which we operate. I'll then hand over to CSL's CEO and Managing Director, Dr. Paul McKenzie, who provide a review of the business and performance for the financial year 2024. We'll then move on to the procedural matters of today's meeting. And finally, as mentioned, we will take questions from those both in the room and online. So today, I want to provide a short commentary on your company. Firstly, though, a reminder about who we are. Since CSL is an established global leader in plasma-derived therapies, influenza vaccine and iron therapies, we operate globally in large and growing markets, and we deliver innovative life-saving medicines to patients in more than 100 countries. Since 1994, our culture has been integral to our success. It's founded on putting the patient first in all that we do, and having the best people who are empowered to make smart decisions. This culture keeps us intensely focused, and as you can see on this slide, highly competitive. This formula delivered USD 2.64 billion of net profit after tax in the financial year 2024. And we declared a final dividend of USD 2.64 a share, which is equivalent to around $4 per share. I'd like to extend my thanks to Paul and his leadership team, many of whom are in the room today, for their hard work as well as all our people around the world. Thank you. Capital and capability are 2 topics that I'd now like to discuss. Over the past decade, we've invested in building of scale of CSL's global business and in our people and in our R&D pipeline. The intent has always been to invest for our patients for public health and for our shareholders. We work diligently to evaluate the risk and opportunities associated with all options available to us. Over the past decade, we have completed our base fractionation facility down the freeway in Broadmeadows, upgraded our CSL Behring manufacturing sites in Switzerland and Germany and CSL Seqirus influenza facility in Holly Springs, United States. We've upgraded our R&D facilities in Marburg, Germany and Waltham in the United States, with progress construction of CSL's Seqirus cell culture-based influenza vaccine facility in Tullamarine and opened our brand-new global headquarters in Parkville Precinct here in Melbourne, containing R&D labs and clinical scale manufacturing. Whilst we're now entering a period of less capital-intensive growth, we will continue to grow as demand for our products increases and we may need to further add capacity to our network before the end of the decade. The other side of the equation is capability. Specifically, we need the right people with the right capability to guide the execution of our strategy and lead our operations. And certainly, those who are committed to their culture I outlined earlier. This begins at the Board level. A constant priority for us is to ensure we have the right skills and competencies that, in aggregate, can help us successfully navigate what is an increasingly complex global operating environment. These include traditional must-haves such as risk management, scientific and significant commercial aptitude as well as emerging skills such as digital and cybersecurity experience. This year, we welcomed 2 new Board members. In January, Ms. Samantha Lewis, joined -- where is Samantha? There you are, joined as a non-executive director. Samantha is a diligent and experienced Board member with deep financial, audit and risk management knowledge. In September, we welcomed Mr. Elaine Sorg as a Non-Executive Director. Elaine is based in the United States, and is a well-respected global leader in the biopharmaceutical industry with a track record of successfully building franchises and brands across therapeutic areas and segments. I'm sure you'll enjoy hearing from both Elaine and Sam later in the meeting. I'm also pleased to announce that Dr. Brian Daniels will be joining our Board of Directors from the 1st of December this year. Brian is also based in the United States, is a highly credentialed director with over 30 years of experience in the pharmaceutical industry, across clinical development, medical affairs and commercializations of medicines. Finally, Professor Duncan Maskell, who was appointed to the Board in 2021. He's relocating to the United Kingdom where his family resides. For this reason, he will be not standing for reelection and will retire from the Board at the end of this meeting. Professor Maskell has been a highly respected and valued member of the Board. I'd like to thank him for his valuable contribution to CSL during his time as a Director and wish him well for the future. While we're on the subject of capability, I want to discuss our approach to remuneration as it is aligned to who we are and what we do as an unique ASX-listed company. Although our heritage is proudly Australian, the global biotechnology sector and many of our executives are based in the United States. We compete for talent in that context. It is essential to our performance and long-term growth. Our remuneration structure needs to attract and retain talented people across the globe, including those who can navigate the complex science and manufacturing that underpins CSL. Your Board strongly believes our overall remuneration framework is aligned with this goal and fit for purpose of attracting top-tier global leaders who will steer the next growth for our shareholders. But we hear your discontent this year with some aspects of our approach. And of course, I'm disappointed in that. I want you to know that we're listing, and we will carefully consider the feedback we receive. Coming back to the people and talent. Paul has had his leadership team in Melbourne this past week to discuss strategy with us. He will speak about this more shortly. But we are confident he has the right team and the right strategy in place to deliver on our shared growth aspirations. Finally, as we get closer to our labs, manufacturing sites and functional offices, capability is equally important. This year, the Board traveled to Europe and the United States. As we visit our sites, we are impressed by the individuals and teams that run CSL on a day-to-day basis. Growth and opportunity are what I want to talk about next. Our investment has laid the foundation with the right skills and talent. Our people will maximize the value from them. This will put us in an excellent position to continue to deliver our medicines to our patients while maintaining sustainable, profitable growth into the future. This will come from the therapeutic areas in which we focus on. There remains significant unmet needs across these. Patients are not being helped and communities that need protection against infectious disease. Patients like Logan and Peter, you'll hear from later. We are dedicated to better serving these people. Sometimes it works out, hearing the testimonials from patients dosed with HEMGENIX at gene therapy for those suffering from hemophilia B, attest to that. However, there is inherent risks with any investment we make. And at times, things don't work out the way we hoped. At our R&D briefing last week, we informed the market that we're making the difficult but necessary decisions to stop some programs. This is unfortunate, but is the nature of the research we do. CSL continues to invest in innovating core immunoglobulin, plasma and vaccine platforms to support future growth, and we're focused on the rapid advancement of our research and early development programs towards late-stage development and registration. Finally, I want to speak to the opportunity within CSL Vifor. It has been 2 years since we closed the acquisition of the Vifor Pharma. We saw then, as we do now, a company that has the capabilities and competencies and clinical adjacencies to CSL that would contribute to our long-term growth agenda. This view has not changed, but shareholders will be aware that the business has experienced several near-term challenges. We were prepared for some, but others were not expected. This is disappointing, but we remain confident that the leadership group have the right plans in place to deliver growth from CSL Vifor over the long term. I will hand over to Paul shortly, and he will detail the outlook for the business units. But before I do, I'd like to summarize my view to our shareholders. Our desire to remain leaders in the markets where we operate remains unchanged. We've implemented a strategy where, over the past decade, we've invested in our operations for growth. The capabilities of people are critical to getting the best out of these. With these elements in place, along with the culture we have built at CSL, we can take advantage of the immense opportunities across CSL Behring, Seqirus and Vifor as well as our R&D pipeline. We're confident in delivering on this vision and delivering ongoing value for our shareholders. Thanks again for your support. I'll now hand over to Paul. Thank you.

Thanks, Brian. Thank you, Brian, and good morning, everyone. I traveled to Melbourne several times during the year, and it truly has become my home away from home. This is my favorite time of year to come to Melbourne because the weather is starting to turn, and it makes my morning swims at MSAC a little more enjoyable than in August. Most of you know I enjoy swimming. And as I do my morning laps, it always gives me a great chance to reflect on our journey here at CSL. I think about all of our colleagues, all 30,000 of them across the world. I think about our patients and whether we can do more to serve them around the globe. And I think hard about the opportunities that Brian just described and whether we are executing ruthlessly on our strategy. In October last year, we held our first ever Capital Markets Day, a chance to take a look and a deep dive under the various parts of our business. As a team, the CSL Global Leadership Group made several commitments to our investors. These were the priorities and plans that would underpin double-digit earnings growth over the medium term. I am pleased to report that we've made excellent progress across all fronts in fiscal year 2024. Some of the highlights of that progress: We've been rolling out our new plasmapheresis devices known as Rika. It's ahead of plan with deployment in 134 centers as of the end of September. Our partner, Terumo's individualized nomogram also received clearance from the FDA and has been released to CSL Plasma for introduction into our centers. Our CSL Plasma mobile app that our donors use continues to grow in popularity, and we just passed our 4 millionth download. I'm pleased to say that our yield initiatives, affectionately known as Horizon 1 and Horizon 2, are progressing to plan. These are a key lever for efficiency for our CSL Behring business. And on that topic, we've delivered on what we said we would do with a 120 basis point increase in CSL Behring's gross margin at constant currency as compared to fiscal year '23. This is a tremendous effort from the team. However, we all know there's much more to be done. We continue to expand our geographic footprint with the EU launches of HEMGENIX and TAVNEOS as well as the launch of Ferinject in both China and Canada. Developing innovative products is at the very core of why we exist. So we are committed to advancing our R&D pipeline, which I will speak about shortly. As you can see, we've made significant progress on all the strategic priorities outlined at our Capital Markets Day. This is a testament to all the hard work of all of our people around the world, but everyone is truly aware that there's more hard work to be done. We hope this progress to date demonstrates our ability to execute to plan and we believe, with these foundations established, CSL is in a strong position to continue to deliver annualized double-digit earnings growth over the medium term. As Brian mentioned, a key to achieving these goals is the quality of our leadership team. I have made several appointments over the last 18 months and I'm thrilled with the caliber of talent we have leading CSL, many of whom are here with us in the room today. This includes people who have deep CSL knowledge and experience as well as talent we've attracted from other global pharmaceutical companies. I'd like to thank them for their collaboration and leadership throughout the year. Now let's turn to the headline figures and operational highlights of fiscal year '24. As Brian mentioned, CSL has delivered an excellent result for fiscal year '24, was really driven by the strong performance of CSL Behring business. First, the headline numbers. Revenue was $14.8 billion, up 11% at constant currency. NPATA was $3 billion, up 15%. Net profit after tax was $2.6 billion, up 25%. For CSL Behring, where revenue was up 14% at constant currency, our IG franchise continued to show its strength. Sales were up 20% and with strong growth recorded across all geographies. Underlying demand for IG continues to be robust across our core indications of PID, SID and CIDP. In CSL Plasma, the underlying fundamentals of plasma collection remains strong with continued momentum in donation growth. We remain focused on our gross margin recovery. And as I highlighted earlier, we are making good progress. We continue to expand the geographic footprint of our plasma center network having opened 3 centers in Puerto Rico this past year. CSL Seqirus delivered solid sales growth, outperforming the market in a challenging season. Growth was primarily driven by our differentiated portfolio and led by our adjuvanted FLUAD product. I am very proud to let you know that this drug is now a blockbuster with vaccine sales over USD 1 billion last year. In partnership with Meiji, regulatory approval was received for the world's first-ever self-amplifying mRNA vaccine, KOSTAIVE, for the prevention of COVID-19 in adults. The first dose was recently administered, and we expect sales from the Japan launch in this fiscal year. The Phase III clinical trial for aTIVc completed enrollment earlier this calendar year, and the Phase I study for self-amplifying mRNA influenza is enrolling patients now. CSL Vifor continues to grow volumes in Europe despite the impact of generic competition on Ferinject. We remain confident in our plan to drive long-term value from the business. Moving on to the financial highlights. Total revenue was up 11% to $14.8 billion. The group operating result was up 13% to $6.5 billion. Research and development costs were at 12%, largely in line with our sales growth. General and administration costs were down 6%, due to the efficiencies that we have generated from our enabling functions and some FX impacts relative to the prior year. Net finance costs increased 7% due to the full 12-month impact of the Vifor debt and higher interest rates on our floating debt. NPATA attributable to shareholders of CSL was up 15%. Return on invested capital was lower at 10.5% as we foreshadowed, and this was due to the full year impact of the Vifor acquisition. To reiterate our statements from the Capital Markets Day, this is a low point, and ROIC is expected to improve over the medium term driven by our annual double-digit earnings growth. NPATA EPS was 11% and NPAT EPS was up 20%. The total dividend was up 12% to USD 2.64 per share. And as Brian mentioned, this translates to approximately AUD 4, which is up 10% on the previous year. Developing innovative products is at the very core of why we exist, so we are committed to advancing our R&D pipeline. A few highlights from fiscal year '24. In CSL Behring, garadacimab provides a great example of our innovative approach as we aim to build on our ongoing strength in HAE. We are working towards approval in multiple markets before the end of this fiscal year. We continue to reinforce our leadership position in Ig as we execute studies to expand indications that will benefit more patients around the world. For CSL Seqirus, product innovation remains a core focus with Phase III clinical work progressing well for our aTIVc product in seasonal influenza. At CSL Vifor, FILSPARI was approved in Europe, which is exciting for us to have a new treatment option for adults with kidney disease. On the sustainability front, we continue to make good progress. Since first announcing our sustainability strategy in 2021, we have evolved our approach and are focused on our sustainability vision for a healthier world. This year, we repositioned our sustainability strategy, taking a focus area approach across the pillars of healthier communities and healthier environment. Additionally, we have identified strategic themes of health equity and empowerment, of inclusion and belonging or actions through our focus areas can drive real outcomes across these pillars. As you have seen in our annual report, we have made our -- clear our ambition across each focus area, including some new goals. For example, we've announced new targets for waste and water. We continue to execute against our emissions reduction targets and reinforce our commitment to patient communities and plasma donors via our focus area ambitions. I'd now like to finish with a few comments on our outlook. Looking by business unit and starting at CSL Behring. We continue to expect strong demand for Ig across all of its core indications. With various positive global reimbursement decisions now in place, we look forward to increasing HEMGENIX patient uptake in fiscal year '25. We are preparing for regulatory approval for garadacimab, which, if achieved, will make this the next CSL product homegrown here in Australia to come to market. We will progress to full deployment of the Rika technology and the individualized nomogram. Horizon 1 and 2 yield initiatives will continue to advance to plan. All of these factors will drive the expansion of CSL Behring's gross margin contribution to the business. For CSL Seqirus, we expect continued market outperformance, driven by our differentiated portfolio, albeit in tough operating conditions across the world. Commercialization of KOSTAIVE in Japan, while continuing to progress registration for KOSTAIVE in both Europe and U.S. We remain prepared to deliver vaccines and adjuvants to be used against any potential outbreak of avian flu. For CSL Vifor, we are operating within an evolving iron market. And while there are pricing challenges for the near-term revenue growth, volume growth remains strong, and we continue to be the largest and most significant player in Europe iron market, and we'll continue to expand our geographic footprint with iron around the world. We will maintain growth momentum across our nephrology pipeline, capitalizing on the recent launches of TAVNEOS and Kapruvia and the just commenced launch of FILSPARI. We remain focused on identifying and unlocking value by leveraging capabilities across the entire CSL Group. In collaboration with CSL Behring, CSL Vifor will continue to advance the significant public health need and patient blood management. For CSL at the group level, I am pleased to reaffirm our financial guidance for fiscal year '25. Revenue growth is expected to be approximately 5% to 7% at constant currency, with NPATA expected to be in the range of approximately $3.2 billion to $3.3 billion at constant currency, growth of between 10% and 13%. Importantly, I reaffirm our annual double-digit earnings growth outlook over the medium term. I will now hand back to the Chair.

Hopefully, I don't need to use that. Fine. Thank you, Paul.

Thank you, Brian.

Thank you, Paul. So we'll now move to the formal part of the meeting. The items of business for consideration today are described in the Notice of Meeting, which I will take as read. In terms of running the AGM efficiently, we will read through all the items of business set out in the Notice of Meeting, following which we will address all shareholder questions at one time. I confirm that I'm holding available undirected proxies in my capacity as Chair of the meeting, and will vote all available proxies in favor of each resolution. The Board recommends that shareholders vote in favor of each resolution with interested directors abstaining from making a recommendation in respect to the resolution that they have an interest in. In order to conduct the poll, I appoint Michael Hutchison of Computershare Investor Services to act as a returning officer; Ms. Genevra Cavallo and Ms. Thea Cook of Deloitte to act as scrutineers. Voting is now open on all resolutions. We come to item 1 in the Notice of Meeting, which is to receive and consider the financial statements and the reports of the directors and auditors for the year ended 30th of June 2024. The item of business does not require shareholder approval. However, shareholders have an opportunity to ask questions on the reports and about management of the company. Ms. Genevra Cavallo and Ms. Thea Cook of Deloitte are also present today and available to answer questions in relation to the conduct of the audit, the preparation and content of the auditors' report, the accounting policies adopted by the company in relation to the preparation of financial statements and the auditors independence in relation to the conduct of the audit. As there is no resolution required to be put to the meeting in respect of item 1, I move to the second item of business, which is the reelection and election of directors. The qualifications and expertise of each of the candidates seeking election or reelection are outlined in the Notice of Meeting. Having reviewed the candidates' performance, the Board supports their reelection or election. Today, you'll hear from Ms. Sorg and Ms. Lewis, our new directors seeking election to the Board. I will now stand aside as Chair and Ms. Carolyn Hewson will take the role of Chair of the meeting for the reelection of directors for the items of business at 2a, 2b and 2c. I will then step back to introduce new directors and the items for 2d and 2e.

Thank you, Brian. Hello, everyone. Items 2a, 2b and 2c relate to the reelection of Dr. Brian McNamee, Professor Andrew Cuthbertson; and Alison Watkins, who are all existing directors. Brian is the Chair of the Board. Andrew is the Chair of the Innovation and Development Committee, and Alison is the Chair of the Audit and Risk Management Committee. You can read their resumes and details in the 2024 Notice of Meeting and also on the CSL's website. Brian, Andrew and Alison submit themselves for reelection, pursuant to clause 67a of CSL's constitution, and will retire at this meeting under the company's constitution and are eligible and willing to stand for reelection. The Board has determined that they are all independent directors. The Board, with Dr. McNamee, Professor Cuthbertson and Ms. Watkins abstaining, recommends that shareholders vote in favor of the reelection of these directors. I refer to the slide that has the details of the proxy position for these resolutions. As we are holding all our questions until the end, I will invite Brian to resume his role of Chair of the AGM and move to the items relating to the election of the new directors. Thank you.

Thank you, Carolyn. We now move on to item 2d, which relates to the election of Ms. Samantha Lewis, who is the existing Director of the Board and is submitting herself for election pursuant to clause 65c of CSL's constitution. Samantha retires at this meeting, and under the company's constitution, is eligible and willing to stand for reelection. Ms. Lewis' resume and details are contained in the 2024 Notice of Meeting and on CSL website. I'll now invite Samantha to briefly introduce herself to you. Thank you.

Thank you, Brian, and good morning to you all. And Brian, I did get the brief message. As we all know, CSL is a company that improves the lives of people with serious medical conditions and protects public health. It also has a successful history of delivering strong financial returns. It's therefore an enormous privilege and honor to be standing here with you all today for election to the CSL Board. I've been a non-executive director for over a decade, serving large ASX-listed companies in the capacity of Director and Audit Committee Chair. Prior to this, I was a partner at Deloitte in its Assurance and Advisory division where I acted as auditor and adviser to a number of major Australian-listed entities. I bring deep financial and accounting expertise to the Board and to the Audit and Risk Management Committee as well as strong experience in capital management and capital allocation, internal audit, risk management and compliance, M&A and ESG. My experience spans a variety of industries, including manufacturing, retail, infrastructure and industrial. I feel that my skills and experience are complementary to those of the existing and incoming Board members and that I can make a significant contribution to the governance priorities of CSL. In the short period I've been on the Board, I've appreciated the depth and talent of the management team, the collegiality and wisdom of its Board members and the deep focus on innovation, excellence and continual improvement, and above all, the passion and commitment of all of the team members to the core purpose of the organization. I understand the responsibility of being a Board member of CSL, one of Australia's most successful organizations. We're operating in a highly dynamic and challenging industry. I'm committed to serving your interest diligently and with integrity, and I look forward to positively contributing to CSL's journey ahead with your support as shareholders. Thank you.

Thank you, Samantha. The Board, with Ms. Lewis abstaining, recommends that shareholders vote in favor of the election of Ms. Lewis. I refer to the screen behind me that has details of the proxy position for this resolution. Congratulations. I will now move to item 2e, which relates to the election of Ms. Elaine Sorg, who is an existing Director of the Board and submitting herself for election pursuant to Clause 65c of CSL's Constitution. Elaine retires at the meeting under the company's constitution and is willing and eligible to stand for reelection -- for election, sorry. Ms. Sorg's resume and details are contained in the 2024 Notice of Meeting and on the CSL's website. I will now invite Elaine to briefly also introduce yourself to you. Thank you.

Thank you, Chair, and good morning, shareholders. Today, I stand for election as a Non-Executive Director of CSL. I have spent my entire career involved with companies that bring people and science together to improve the lives of patients. This purpose was the reason I chose to pursue a degree in pharmacy and to dedicate my life's work to improving the health of others. And it remained my motivation throughout my 35-year long career at biopharmaceuticals companies like Eli Lilly, Abbott and AbbVie. I want to continue to contribute to this purpose with CSL, a company that I have long admired. Viewing the company from the United States, it truly has been the quiet overachiever. CSL has a proud Australian heritage and a track record of delivering for patients and shareholders alike. I share your Board's optimism for the future as the company looks to build on its tremendous legacy. Governance and stewardship are essential to this ambition. The skills I have developed in similar global organizations will complement those of your existing Board members. Specifically, I have been involved in commercial operations, strategy, cross-functional R&D and drug development and proudly bringing several groundbreaking medicines to patients in need. In my final role before retirement at the beginning of this year and as an executive of AbbVie, I served as President of their U.S. organization and was accountable for 13,000 employees and contractors and delivering annual sales in excess of USD 40 billion. I also served on the Board of the Biotechnology Industry Organization, the largest advocacy organization in the world representing the biotechnology industry. More recently, I have acted as a senior adviser to the Boston Consulting Group's health care practice, where I help multinational organizations navigate the complexities of the health care sector. I believe that these skills and global perspectives will be valuable in helping steer CSL through its next phase of growth. I am acutely aware of the responsibility involved in serving such a well-respected value-led organization, and it would be my privilege to be elected to your Board. Thank you for your consideration.

Thank you, Elaine. The Board, with Ms. Sorg abstaining, recommends the shareholders vote in favor of this -- of electing Ms. Sorg to the Board. I refer to the screen behind me that has details of the proxy position for this resolution. Congratulations. We now come to item 3 of the Notice of Meeting, which is advisory vote on the remuneration report. To deliver on our promise to patients and to protect public health, we rely on our people and need to ensure a strong global talent supply. Executive remuneration framework enables us to attract, engage, retain talent, provide us with the flexibility to address talent challenges in various markets, and it allows us to compete with larger global pharmaceutical companies. The Board is committed to an executive remuneration framework that is focused on driving a performance culture and linking pay to the achievement of CSL's long-term strategy and business objectives. These, in turn, drive shareholder value. Under the Corporations Act, the company is required to include in the director's report a detailed remuneration report setting out certain prescribed information relating to the director and executive remuneration. The company is also required to submit this for adoption by resolution of shareholders at the Annual General Meeting. The vote on this resolution on this item is advisory and will not bind the directors of CSL. However, we will take the outcome of the vote into consideration when reviewing remuneration practices and policies of the company. The screen behind me display details of the proxy position for this resolution. We are disappointed we did not receive more support for our remuneration report today. And here are the concerns that have been raised by some shareholders. We'll revisit our remuneration process in the coming year and continue to engage with our stakeholders to address these issues. The Board unanimously recommends that the shareholders vote in favor of the adoption of the remuneration report. We'll now come to item 4, which seeks approval for the purpose of ASX Listing Rule 10.14 and other purposes for the grant of 38,065 performance share units under the company's executive performance and alignment plan to Dr. Paul McKenzie, CSL's Chief Executive Officer and Managing Director. The Board believe it is in the interest to provide Dr. McKenzie with an equity-based incentive to ensure there's alignment between satisfactory returns for shareholders and Dr. McKenzie's reward. It also considers important to obtain shareholder consent to the grant of performance share units to Paul. The Board, with Dr. McKenzie abstaining, recommends that shareholders vote in favor of the grant of performance units to Dr. McKenzie. I refer to the screen behind me that has details of the proxy position for these resolutions. We now move to item 5, which is a special resolution. The Corporations Act permits a company to include a provision in its constitution prohibiting the registration of a transfer of securities resulting from a proportional takeover bid unless the relevant holders of the securities in the meeting approve the bid. Under Corporations Act, these provisions must [ be ] renewed every 3 years or they cease to have effect. The directors consider that is in the best interest of shareholders to renew these provisions in their existing form. A special resolution is being put to shareholders under Section 648G of the Corporation Act to do this. More details on the reasons for renewing the proportional takeover provisions are set out in the Notice of Meeting. I refer to the slide that has details of the proxy position for this resolution. We now move to item 6 of the Notice of Meeting, which relates to the Australian law, which restricts the benefits that can be given without shareholder approval to individuals who hold management or executive office or have held such an office in the past 3 years in connection with the cessation of employment or retirement from their office with a CSL subsidiary entity. Shareholder approval is sought in relation to the -- to potential leaving entitlements for CSL subsidiary directors and CSL subsidiary entities towards sections 200b and 200e of the Corporations Act applied. The full details of these resolutions are contained in the 2024 Notice of Meeting. To be clear, a CSL subsidiary director excludes CSL Director, limited directors or its executive leaders. The Board considers that it is appropriate that shared approval for termination benefits for CSL subsidiary directors as described in the 2024 Notice of Meeting is supported. I refer to the slide that has been detailed the proxy positions of this resolution. And now we move to the final resolution of today's meeting. Shareholder approval is being sought to approve an increase in the maximum aggregate amount, which may be paid to non-executive directors fees in any financial year. The net fee cap by $500,000 from $4 million to $4.5 million. Under Rule 68b of the CSL's Constitution and ASX Listing Rule 10.17, the net fee cap may only be increased with shareholder approval. The current net fee cap was approved at the AGM in 2016. Since that time, as CSL has continued its international expansion of this business, it continues to be particularly important that CSL remains able to attract and retain directors with the appropriate experience, expertise, skill, diversity to oversee CSL's business and strategic direction. Further details of this resolution are contained in the notice -- 2024 Notice of Meeting. Again, the Board considers it appropriate to put this proposed increased net fee cap to our shareholders. The amendment will be treated as applying in respect of each financial year of the company commencing on or after the 1st of July 2024. If shareholder approval is not obtained, then the net fee will remain at the current amount of $4 million. The remuneration of non-executive directors for the year ending 30th June 2024 is detailed in the remuneration report. No securities have been issued to any non-executive director under ASX Listing Rule 10.11 or 10.14, with shareholder approval within the last 3 years. I refer to the slide that has the details of the proxy position for this resolution. Thankfully, that completes the items of business, which we now require, and so we can now move to shareholder questions. So please remember to cast your votes on each resolution. To allow shareholders extra time to submit their questions, we'll now move to address questions from shareholders here at the venue. And next, we will address written questions noting those questions may be moderated for appropriate language or content. And finally, we'll hear from shareholders verbal questions from online.

Are there any questions from the floor?

Mr. Chairman, Mr. Michael Muntisov representing the Australian Shareholders Association wishes to pose a question.

Good morning. My name is Mike Muntisov. I'm from the Australian Shareholders' Association. Today, I hold proxies from 688 shareholders, representing an aggregate of 1.1 million shares, which is equivalent to the 15th largest shareholder in the company. And Mr. Chair, I have 2 questions, 1 on item 1 and 1 on item 3. How would you like to deal with that?

I think 2 questions, and I'll try and answer them or get others to answer. Thank you.

Okay. You mentioned CSL Vifor had near-term challenges. You said, some of these were expected, but some were unexpected. Could you share with us what the challenges are and how CSL is responding?

Is there a second question?

Answer that one first.

Sure. Okay. Thank you, Michael. And again, thank you. We've always appreciated our relationship with the ASA. So thank you for coming here representing them. I mean, Vifor, I mean, we can describe the things that we like and the things that we've been disappointed in. I think we -- starting at the latter, we've been disappointed with 2 matters that, I think, we didn't get right in -- and they related to the impact in the U.S. market of a thing called step edit, which is a way in which the insurers tried to prioritize less expensive iron replacement medicines before they could go into the more expensive but more effective Vifor products. So there was a lack of detailed understanding of the impact that occurred as we will make doing the transaction, was the first thing. And the second one really related to the generic pathways, which we understood as the main -- Ferinject product was going to lose exclusivity in the European and the U.S. market. We did not correctly anticipate the mechanism by which the regulators would approve it, the generic competitions. We thought it would be a more cumbersome complex generic pathway for those drugs. So those are -- an example of 2 things we didn't get right. And clearly, that has had an impact on the speed and some of the economics of the business. So what do we like about Vifor still, because we do like things about it. I mean, I like the fact it generates. It's a really positive cash-generative business. So if you look at the history of CSL Behring and CSL Seqirus, it tends to be -- they're really good business, but they're capital-intensive business as well. We build big plans. We have to continue to reinvest. Vifor is a slightly different model where they have -- they're more capital light, it's more cash generative. And I think if you look at the de-gearing of the CSL balance sheet starting after acquisition as we're seeing happening now and will happen over the next few years, CSL Vifor has contributed significantly to the cash generating -- free cash generating capacity for us to reduce our debt. So I like the cash-generative nature of the business. What else do we like about it? I mean we do believe the iron market is an underserved market. We accept that we're dealing with loss of exclusivity. But we -- the team, I believe, has a strong plan to sustain significant volume growth in that business in many markets around the world. And in fact, we're now launching Ferinject in Canada. We have recent registration in China. So we're trying to balance the competitive pressures that we're seeing in the iron market with growth internationally. So we do like iron, and we do see good future in iron, but we're accepting we have had pressures. And then we move to nephrology and the whole area of renal disease. And I think that it has an excellent joint venture in North America with Fresenius. It has excellent pipeline of new products, of which we described today that we're launching. So we see optionality in the business model, but we all understand it hasn't delivered the growth that we were looking for. When we made the transaction, we talked about a transaction in the first 5 years. It's not. But we do believe that with investment in our own R&D complemented by their work and some of the partnering ranges we have with them, I believe Vifor can be a very fine asset for the company. As I said, we already like its cash generative capacity. We just have to now invest in its growth phase.

I have a comment or a question and comment on item 3 remuneration. We understand that CSL may be aiming to increase the CEO's long-term incentive opportunity to better match global standards over time. Based on the figures in the remuneration report, that implies a possible increase from the current long-term incentive of around AUD 12 million to AUD 19 million, which is a very significant increase. Perhaps you could confirm that, that is your thinking. And if so, we would like to suggest that the stretch performance targets to achieve that award should be significantly increased so that the target and stretch target levels are much more challenging than current levels.

Look, I think we'll answer the -- and thank you for the question because it's sort of that question that always hangs out there the whole time. I'll answer it at a high level, and I'd love Megan to comment specifically. Look, at a high level, the challenge for us is we've evolved from -- essentially, when I joined CSL Commonwealth Serum Labs, heaven forbid, we are 100% local company. If you look at this now, we do -- we generate 10% of our revenue from Australia and in fact, far less of our profitability, partly because we invest here. So -- and then where do we do our business? We operate so strongly in North America and Europe that we -- and that's -- you see it with some of the new directors, we're recruiting. We need to complement what we do and we need to ensure that we have the best people we can find to do the job. And these people, they live in America. We're not applying Australians to move to America to run the company. So it's a complicated thing. And the reality is on the ASX, putting News Corp to one side. I'm not sure what News Corp is, but it's certainly a very massive global company. We're really -- we're the only truly global Australian company in some ways. We truly operate globally. We're not -- my friend, Megan here, we don't dig it out of the ground and ship it to China. We're not -- that's not our business model. I'm not even sure that's global. I mean, they do a good job and thank goodness, the miners do their good job, don't get me wrong. But that's not us. We have to operate in the market. We have to recruit great people. We've got to retain them. We're going to motivate them. So I hear what you're saying, but it's -- I also get a lot of feedback, why can't we just get Australians to do the job? Well, the reality is these are imminently well-qualified, experienced people, and we have to match the market. That's a reality. Megan?

Thank you very much, Brian. And lovely to see, Mike, and as you said, we do appreciate the engagement that we have with ASA each year. I think taking the first point that you wanted to raise, which is in relation to how do we position our remuneration of our CEO. So we look at a set of global peers in the biotechnology sector. As the Chairman has outlined, we compete for our talent and particularly for our key KMP in the U.S. And therefore, we need to make sure that our remuneration package can attract and retain that. As we look at the CEO's remuneration, if you look at the long-term incentive and as you know, our remuneration is certainly geared to the long-term performance shares in the long-term incentive. Our CEO sits at 69% of the median, so below the median in that sector. So you can see that for a performing company of ours and for the caliber of CEO, the caliber of our executive. We look at -- we don't aim to go above the median, but we do look to be fair to make sure that our executives are paid appropriately. And we also look at where we sit relative in that peer group in terms of market capitalization. In terms of any increase, that's actually a discussion that we will have over several years, which I highlighted in the remuneration report. It's not something that we would do overnight. It must be linked to performance but we would certainly, as a principal, look to pay our executives fairly and equitably in the -- in relation to the pharmaceutical market. I think that's your first question. And as I said, we will engage slowly and year by year with shareholders on that particular issue. In relation to the targets we set, the targets are consistent with our long-term plan. And as both Chairman and the CEO have been clear, if you look at our long-term targets, they require the company to deliver double-digit earnings growth over the medium term year-on-year. That's an extremely challenging target for the executives. And we also make sure that when we look at those targets, we talk them through, of course, with the shareholders as well. But it's very challenging for the executive. And as we set the boundaries around that, this year, we've actually set the lower boundary. We've tightened that up as well, just to really focus on the growth elements. Our long-term incentive, coupled with our short-term incentive, short-term focusing on the delivery and execution of the plan. But the long-term incentive's really looking at, as our Chairman outlined, how do we actually deliver that growth that you, as shareholders, expected. So we focused those targets very clearly on growth metrics of our return on invested capital and earnings per share growth. Thanks, Mike.

Next question from the floor. Thank you.

I have a question from [indiscernible].

Thank you.

Thank you very much, McNamee. And I'm asking a question totally differently to what the others are. I note in your aim, really, that you are doing blood management technology. Is this the only area that you're focused on and probably have a relative advantage worldwide? But I was wondering in the newer area of -- to take note of all of this, in the mucosal system, there seems to be such a huge area of -- in the future, to do work that would be -- it's a new frontier, I suppose. Had there been any scoping study about any of this area? Or are you really very focused on your only area?

Thank you. Look, thank you for the question. We're always looking for other areas in which we can compete and create a sustainable business model around. The human body has a number of mucosa as well. I mean, there's a lot of work in the gut that we're certainly aware of. And we're also looking at our respiratory medicines. We have -- we're looking at delivering our immunoglobulin inhaled for certain chronic bacterial diseases, particularly in lungs. So certainly, mucosa is a reasonable target. And look, I think that we -- our R&D folks diligently look for areas in which we can compete effectively. So we try to be broad, but also make sure we can be competitive. Thank you.

Mr. Chairman, a question from Mr. Chris Maxworthy, a shareholder.

Well, Mr. Chair, first thing, 30 years ago, the IPO for CSL, June? Do we celebrate?

You just reminded me. Yes, that's funny. Did we...

6th of June it was.

6th of June. Look, it's -- yes, great memory. Great memory. Yes. So look, thank you for reminding me. We are doing a celebration. I know next year, I'm going back to [ Bern ] to celebrate our 25th anniversary of buying ZLB, the Swiss company. So that's a big thing. It is interesting. I mean we love being a public company compared to what Commonwealth Serum Laboratories was like under the dead hand of government ownership. Let's be clear.

The dead hand.

The dead -- that's the kindest thing I can say. So in any event, look, look, it wasn't -- look, I mean, it's sort of interesting. We love growth. We want to keep growing. I mean, so it's nice to look back and yes, I can -- I just was sitting there, hearing we paid AUD 4 dividend last year, and we listed at $0.76. People think it was $3. They forget about the split. We listed $2.40. But essentially, it's pre-split was $0.76. So it's been a great journey. So thank you for reminding me.

Okay. I'm one of those fortunate people that bought in 40 -- sorry, 30 years ago.

Well done.

So the dividend pays for what I originally invested every year. So I'm grateful for that.

Thank you, Chris.

Okay. On previous occasions, I've commented that CSL under promises and over delivers. This year, not so much. Okay. So the thing that I'd like to clarify is, we all walk past some protesters downstairs that I presume are affected by hemophilia and perhaps contaminated blood products some years ago. I'd just be curious about what CSL is doing in relation to those people because I recall that United Kingdom, the government has settled in that regard. And I would look at CSL as being so large that if we were to hold out or to say not our problem, it's a government problem, that could have adverse impact on our profile and our commitment to people and a healthier community. So I'd be interested in your comments.

Look, thank you for that. I mean, with regard to the matter downstairs, I mean, of course, in the '70s and '80s, it was a terrible time for the whole blood sector, whether it be the whole blood transfusion sector and whether it be the plasma fractionation industry because none of us, none of us went in this industry kind of playing that, that would be the case. I mean, certainly, I wasn't there, but it's still a terrible thing to remind ourselves that every day, we have to do things better. We have to ensure we put in place incredible checks and balances, whether it be the way we -- the steps we take to check the blood and check the donors and manufacturing process and in activation. So we are very, very, very confident, of course, today at the quality of our products. If I go back to the '70s and '80s, remembering, I was not there at Commonwealth Serum Labs, and this was a complicated relationship between the Australian Red Cross and then the Department of Health -- Federal Department of Health that was both our owner and our regulator and our funder. So we had a variety of things. And clearly, the pain and suffering is terrible, and I expressed my deep sympathies to that. That's sort of none of us want to be in that business. The challenge is it is a long time ago, and as whether it be the transactions we've done subsequently in the plasma sector, let's say, the Aventis Behring transaction or whether it be the process for which we sold to the public, the IPO of CSL, indemnities were always given by the owners. That was just the way it was done. At this stage, it was the Australian government, but it was also Aventis. They gave us an indemnity with regard to historical viral transmissions. That's normal practice. So look, we completely understand it. We have deep sympathy for them. It's occasionally a little complicated to understand what they're asking of us. But they have our deepest sympathy, and we -- our job is to just make sure this never happens again and that we put in processes in place to try and make our products as safe as possible to be frank, and whether it's a plasma product or a new recombinant protein or whatever. That's our job. Thank you.

If I may, what I would like to suggest to the Board and the senior leadership is that it's in the interest of CSL, particularly given our size in the Australian market to not become a target. And I understand what you're saying that perhaps leadership on our part in order to pull together the various governments, the Australian Blood Authority in order for us to find a way forward and in order for us to make this as a risk to our reputation go away. So I hear your words of sympathy, but I think that action of some form where we take the lead and are seeing not necessarily as the owners of the problem, but the people investing in an outcome. I think that would be helpful.

Look, I hear what you say. Thank you. Let's hope the other parties...

I think it's tough to ask. We have the marketing and political influence and the ability to connect at senior levels in order to have an outcome that politically works for those that are in power and works for us in terms of reputation. All right.

Thank you. Well, yes. Good. Noted.

And I think some people might agree here, too...

Look, I think, it's fine. Let's see...

Actions. Actions, I think, will help.

Thank you. Next?

Mr. Chairman, the next question is from Mr. Anton Nigro, a shareholder.