VIEWS: 205 PAGES: 37 POSTED ON: 6/2/2011
CSL Limited Annual Report 1998 - 1999 CSL Limited ACN 051 588 348 CSL Limited develops, manufactures and markets pharmaceutical products of Contents biological origin. 1 CSL’s Year at a Glance 2 Financial Highlights Our business is health care: 3 The Year in Review 8 Pharmaceutical Business •Life-saving products derived from human 10 New Product Development plasma; 12 Bioplasma Business 14 Veterinary Business •Pharmaceuticals and diagnostics essential 16 Biosciences Business to community health; 18 Our People •Veterinary vaccines and diagnostics to 18 Mission Statement protect livestock and companion animals. 20 The CSL Group Chart 20 Controlled Entities 21 Organisation Chart 22 Directors’ Profiles Annual General Meeting 24 Corporate Governance Thursday 14 October 1999 at 10:00am 27 Corporate Citizenship Function Centre, National Tennis Centre 28 Finance Report Melbourne Park, Batman Avenue Melbourne 3000 29 Five Year Summary 29 CSL Monthly Share Price 30 Share Information Financial Calendar 31 Shareholder Information 1999 32 CSL Business Offices 27 September Shares traded ex-dividend 1 October Record date for final dividend 14 October Final dividend paid 14 October Annual General Meeting Front Cover photographs: 31 December Half year ends CSL’s new facility for the manufacture of novel biopharmaceuticals. CSL’s clinical trial 2000 programs will now be underpinned by a 9 February Half year profit and interim dividend announcement capacity to produce genetically engineered 6 April Shares traded ex-dividend candidate vaccines and other biologicals. 12 April Record date for interim dividend 26 April Interim dividend paid 30 June Year ends 15 August Annual profit and final dividend announcement 22 September Shares traded ex-dividend 28 September Record date for final dividend 12 October Final dividend paid 12 October Annual General Meeting 31 December Half year ends CSL’s Year at a Glance Group revenues of $424.9m from CSL’s businesses in 1998-99 (up 16%) have produced an after tax profit of $47.4m - an increase of 16% on the previous year’s comparable figure. Bioplasma Division ($129.8m sales revenue) Bioplasma Division delivered revenue growth of 10% through processing higher volumes of plasma and introducing new products. The Division entered into an agreement with the American Red Cross to manufacture products on their behalf Pharmaceutical Division (from plasma they supply) and to co-develop an important new fibrin bandage product. ($166.5m sales revenue) Pharmaceutical Division again achieved excellent growth in sales revenue by continuing to develop domestic business for vaccines and in-licensed products, building international markets and introducing important new products. Sales increased in all key areas of business. Veterinary Division ($42.2m sales revenue) Veterinary Division had a very good year with substantial sales growth in Australia. In its first year under CSL ownership, Biocor Animal Health, Inc, our new subsidiary in the USA, performed well to achieve its sales revenue targets. In support of a strong product pipeline, the Division continued to expand investment in new product development. The Biosciences Group ($75m sales revenue) Following a major business review, the Biosciences Group now includes CSL’s American, European and Australian-based operations under one umbrella. JRH Biosciences’ strong growth in cell culture business delivered sales revenue of $61.8m - an increase of 26% on the previous year. Australian sales revenue ($13.2m) was similar to last year’s result ($13.5m). Australian operations have been restructured to eliminate low margin New Product Development agency products and to significantly reduce operating costs. During the year, all of CSL’s businesses introduced new products into the marketplace. Our major collaborations for key research and development projects proceeded according to plan. Construction of CSL’s new facility for the manufacture of novel biopharmaceuticals was completed on time and under budget. CSL’s Year at a Glance 1 Financial Highlights Financial Highlights Year ended 30 June All figures in $A million unless otherwise stated. 1998-1999 1997-1998 % change Total revenue 424.9 366.7 16.0 Sales revenue 413.5 353.5 17.0 Research and development 40.8 39.1 4.3 Operating profit before interest and income tax 68.7 58.5 17.6 Operating profit after tax before abnormal item 47.4 40.9 15.8 Abnormal income tax credit 3.9 Profit after tax and abnormals 47.4 44.8 Capital investment 39.0 21.3 83.1 Total assets at 30 June 561.5 523.8 7.2 Shareholders’ funds at 30 June 414.9 390.3 6.3 Net tangible assets per share at 30 June ($) 3.15 2.97 6.1 Weighted average number of shares (million) 131.4 131.1 0.2 Earnings per share (cents) 36.1 34.2 5.6 Dividend per share (cents) 21.0 18.0 16.7 There is a five year statistical summary on page 29. Dividends to Shareholders An interim dividend on ordinary shares of 7 cents per share (franked at 36%) was paid on 28 April 1999. A final dividend on ordinary shares of 14 cents per share (franked at 36%) will be paid on 14 October 1999. The total dividend for the year of $27.6m (21 cents per share) represents a payout ratio of 58% of net profit. 2 Financial Highlights The Year in Review In a year of sustained growth, our Group revenues rose 16% to $424.9m, producing a net profit after tax of $47.4m, an increase of 16% on the previous year’s comparable figure. All businesses contributed to this growth in profit Corporate Objectives for 1998-99 During the year, we continued to implement strategies for international growth in our plasma products, veterinary Our corporate objectives for the year as stated to and cell culture businesses. shareholders in the last Annual Report were to continue to focus on building domestic financial strength and global The Bioplasma Division reached a major milestone with competitiveness for plasma and veterinary products, while the signing of an agreement with the American Red Cross maintaining competitive returns. covering contract fractionation and co-development of new products. CSL is required to achieve US FDA approval We are pleased to report that our objectives have been for its products and the Broadmeadows plant. attained and financial performance continues to improve. This is a significant collaboration for the Company and Outcomes has the potential to increase our plasma products Our international growth has been particularly encouraging, business substantially. sales having risen 42% to $97.5m comprising 24% of total sales. Other international successes this year have included the integration of our new subsidiary in the USA, Biocor It has also been a strong year for the introduction of new Animal Health Inc, under operational control of the and innovative products, derived from our R&D programs Veterinary Division. Biocor has contributed strongly to our and in-licensing. These products provide a platform for offshore growth in its first full year of CSL ownership. future growth. CSL Chairman, Colin Harper (left), Vice Chairman, Peter Wade (centre) and Chief Executive and Managing Director, Dr Brian McNamee, outside CSL’s new facility for the production of components for new vaccines and other biologicals. The Year in Review 3 CSL Total Revenue CSL Profit Before Interest & Tax ($ millions) ($ millions) 68.7 450 424.9 70 400 58.5 366.7 60 350 318.1 48.1 290.6 50 300 41.6 256.8 250 40 33.2 200 30 150 20 100 10 50 94-95 95-96 96-97 97-98 98-99 94-95 95-96 96-97 97-98 98-99 JRH Biosciences Inc, the backbone of our cell culture Sales of Fluvax® influenza vaccine, our leading product, business, has expanded its activities in its US domestic continue to grow, which has required us to increase market and internationally, particularly in Europe where production capacity accordingly. additional technical and distribution capabilities are under development in the United Kingdom (UK). Bioplasma Division The Bioplasma Division achieved an increase of 10% in Pharmaceutical Division sales revenue, to reach $129.8m. Domestically, competition has continued to intensify, conforming to the global trend. Subsidiaries of The Australian Red Cross has continued to collect greater multinational enterprises (mainly based in the USA and volumes of Australian plasma which has enabled us to UK) provide approximately 90% of the value of prescription continue to increase the supply of plasma products. sales, the majority of which are subsidised by the Federal The most significant development for the Division is a Government through the pricing control and access major collaboration with the American Red Cross. Plasma system of the Pharmaceutical Benefit Scheme (PBS). products, manufactured for the American Red Cross from Against this background, the Pharmaceutical Division plasma which it will supply, will first, however, require continued its strong growth pattern, with revenue registration in the USA. This in itself will be a substantial increasing by 14% over the prior year to $166.5m. task for the Division’s clinical and regulatory specialists. The Division has achieved this by continuing to develop its The Division has also committed a small team of engineers domestic business for vaccines and in-licensed products, and process specialists to work with LFO in Poland on the developing new international markets, and introducing new design and construction of the plant and equipment to products. fractionate Polish plasma. The building that will house the plant has been completed. In the domestic vaccine market, the most significant product launch was Tripacel*, a diphtheria, tetanus and Some of the Division’s product development activities acellular pertussis (whooping cough) vaccine for childhood which came to fruition during the year were the immunisation. registration and launch of MonoFIX® - VF (purified factor IX) and Thrombotrol® - VF (antithrombin III) in Australia. Pentavax*, a polyvalent vaccine co-developed by CSL and Intragam® P, an immunoglobulin developed by CSL for Merck & Co Inc, designed to protect children against treatment of severe infections, has also received product diphtheria, tetanus, pertussis, hepatitis B and haemophilus registration from the Australian Therapeutic Goods influenzae B, has been recommended for marketing Administration (TGA). approval. A component in CSL’s strategy for children’s vaccines, Pentavax* will be available later this year. Veterinary Division The Veterinary Division had a very strong year with sales Two in-licensed products which received PBS listing are of $42.2m, an increase of 57.5% over the prior year. Avonex* and Daivonex*. Avonex* slows the progression of disability in people with multiple sclerosis, and Record sales were achieved in the domestic market for Daivonex* is a treatment for psoriasis. sheep vaccines, enhanced by the introduction of new Glanvac® Vitamin B12 products. * See inside back cover 4 The Year in Review CSL Post Tax Profit Before Abnormal CSL R&D Investment ($ millions) ($ millions) 50 47.4 45 40.8 39.1 45 40 40.9 36.6 40 35.2 35 30.2 35 29.0 30 27.1 30 24.5 25 25 20 20 15 15 10 10 5 5 94-95 95-96 96-97 97-98 98-99 94-95 95-96 96-97 97-98 98-99 Longrange™ botulinum vaccine and Leptoshield® bovine The Biosciences product range has been further leptospirosis vaccine supported growth in the cattle rationalised to remove some agency products. vaccine market. A new Canvac® C5 multi-component canine vaccine was successfully launched, and uptake has New Product Development been good. The central Research and Development Division continues to provide two key roles within the Group. These are to New and differentiated products resulting from our R&D develop innovative biopharmaceutical products and to programs continue to position the Division as a successful provide support for manufactured and in-licensed specialist animal health business. pharmaceutical products. A major undertaking for the Division has been integration The current major R&D programs are proceeding according into the CSL Group of our US bacterial and viral vaccine to plan. These are projects to develop vaccines to prevent manufacturing and marketing operation, Biocor Animal human papillomavirus infection, to treat peptic ulcers, and Health Inc. Biocor is based in Omaha, Nebraska. to develop our ISCOM™ adjuvant technology, designed to The General Manager of the Division has relocated to the stimulate the immune response to vaccines. Progress is USA, as have certain other senior personnel, and key outlined more fully in the “New Product Development” appointments in R&D, business development, regulatory section of this Annual Report. affairs, sales and marketing have been made. The USA is A new facility for pilot-scale production of vaccines and the world’s largest market for veterinary vaccines. other biologicals for use in clinical trials of new products in Biosciences Group man (pictured on the front cover of this Annual Report) has been completed on time and within its budget of $14m. Following a business review, the Biosciences Group now Validation of the plant is now in progress. encompasses both the international operations of JRH Biosciences Inc and CSL’s Australian-based operations. CSL continues to fund certain early stage research projects The combined revenue for the Group was $75m, an in universities and research institutes and is an active increase of 20%, with another record performance by JRH. participant in the government-funded Co-operative Research Centre for Vaccine Technology. Major upgrades were undertaken at JRH’s serum processing facility at Lenexa, Kansas, USA, to streamline Industry and Government processes. This follows enhancement and expansion of the Globally, the pharmaceutical industry faces a number of JRH plant at Denver, Pennsylvania, where we have challenges arising from the complex policy environment in consolidated media manufacturing, as announced last which it operates. Growing regulatory requirements have year. Filtron Pty Ltd at Brooklyn, Victoria, has also had its increased the time it takes to release new products, and serum products manufacturing capability expanded to this has led to some erosion of patent life. meet increasing demands. A considerable, and growing, amount of R&D is conducted New cell culture and related products are being developed with external groups, with extensive alliances being put in which include the incorporation of recombinant proteins to place between industry and academic partners. improve performance. Recombinant growth factors are being in-licensed. Ex-Cell™ 525 media has recently been launched for growth and production of certain cells used in gene therapy applications. The Year in Review 5 CSL Divisional Sales 1998-99 CSL Divisional Sales 1997-98 Pharmaceutical $166.5 million Pharmaceutical $146 million Bioplasma $129.8 million Bioplasma $118.2 million Biosciences Group $75 million Biosciences Group $62.5 million Veterinary $42.2 million Veterinary $26.8 million Total Sales Revenue 1998-99 $413.5 million Total Sales Revenue 1997-98 $353.5 million The Federal Governments’ Factor (f) scheme, which has The Board enabled the Company to expand its R&D program for the In accordance with the Constitution of the Company, the past several years, terminated on 30 June 1999, and was Chairman will retire from the Board at the conclusion of replaced by the Pharmaceutical Industry Investment the Annual General Meeting. Program (PIIP). CSL was successful in obtaining the maximum possible PIIP allocation of $60m over five years. Mr Peter Wade has been appointed Deputy Chairman by the Board and will become the next Chairman. He was As with Factor (f), the PIIP aims to provide only partial elected to the Board for his present term in 1994. compensation to pharmaceutical manufacturers for the Previously, from 1985 to 1993, Mr Wade served CSL as effects of low prices for products purchased by both a Commissioner and a Director, including an extended Government under the PBS and other programs. period as the Acting Chairman during 1988. This funding will continue to be used by CSL to support its R&D programs, together with funds derived from operational income. 6 The Year in Review CSL’s Chairman to retire in October CSL’s Chairman, Mr Colin Harper, will retire from the Board at the conclusion of the Annual General Meeting in October this year. Mr Harper was appointed to the Commonwealth Serum Laboratories Commission as its Chairman in 1988. During his eleven years as Chairman, Mr Harper has been closely involved in CSL’s transition to an unlisted public company (1991), our privatisation and sale by public float in 1994, and the development and international expansion of our businesses. The CSL Board wishes to express its great appreciation of his leadership and his many contributions during a time of significant change, growth and development for the Company. CSL Chairman, Colin Harper. The Year Ahead Thanks to Management and Staff The Company’s objectives for the year ahead may be summarised Once again, we are pleased to report such a successful year for as follows: the Company. We are proud and appreciative of the contributions • We will continue to improve returns as a growing made by management and staff, and on behalf of the Board and international company; shareholders we give them our thanks. • We will further entrench our domestic market position by building on competitive strengths; • We will develop our international plasma products, veterinary vaccines and cell culture businesses, and evaluate the international potential for other niche biological products. • We will position the Pharmaceutical Division and Biosciences Group for sustainable growth and profitability, and we will foster Colin Harper Brian McNamee innovation, new product development and leadership in a high Chairman Chief Executive performance work environment. The Year in Review 7 Pharmaceutical Business The Pharmaceutical Division develops, manufactures and markets vaccines for human use, and markets vaccines, antibiotics and pharmaceutical products supplied by other manufacturers. 1998-99 Business Report The Pharmaceutical Division continued its strong growth pattern again this year recording a 14% increase in sales revenue with improvement in all key areas of business. Supported by the launches of important new pharmaceuticals, established lines such as Fluvax®, Pneumovax* 23 (Merck & Co Inc) and the Pharmaceutical Sales $166.5 million measles/mumps/rubella product M-M-R II* (Merck & Co Inc) recorded particularly strong performances. Travel vaccine sales have grown substantially over the past three years as a result of an increasing awareness by Major pharmaceutical products Australians of the need to seek medical advice before marketed in Australia by CSL travelling overseas. Travellers are taking up vaccination against influenza, hepatitis A and B, typhoid, cholera and Vaccines For prevention of: Japanese Encephalitis. Fluvax® Influenza Pneumovax* Pneumococcal infection New Products Triple Antigen™ Diphtheria, tetanus and whooping cough A major product launch during the year was Tripacel* ADT® Diphtheria and tetanus (Connaught Laboratories Limited), a diphtheria, tetanus Tet-Tox® Tetanus H-B-VAX II* Hepatitis B infection and five-component acellular pertussis combination PedvaxHIB* HIB disease vaccine. Several other vaccines are now well advanced in Typh-Vax® (Oral) Typhoid the registration process including Comvax* (Merck & Co Typhim VI* Typhoid Inc), Varivax* (Merck & Co Inc) and Orochol* (Swiss Vaqta* Hepatitis A infection Serum and Vaccine Institute Berne). Comvax* is a combination of hepatitis B and haemophilus influenzae B, Anti-infectives For treatment of: both important in Australia’s National Childhood Flopen® Severe staphylococcal infections Immunisation programs. We anticipate marketing approval Moxacin® Bacterial infections Clavulin* Bacterial infections Fucidin* Bacterial infections Other products For treatment of: Antivenoms Envenomation Lonavar* Delayed puberty (males) Turners Syndrome (females) Daivonex* Psoriasis Advantan* Inflammatory dermatoses Avonex* Multiple sclerosis * See inside back cover for trade marks 8 Pharmaceutical Business Pharmaceutical sales representative, Sonia Tsoukas, introducing CSL’s new ten-pack box of Fluvax® influenza vaccine. Fluvax®, CSL’s leading product, now comes in tamper evident syringe packaging. before the end of 1999 for Varivax*, a varicella (chicken multiple sclerosis and has had a good uptake since its pox) vaccine, and Orochol*, an oral cholera vaccine. listing. Daivonex* ointment, a breakthrough treatment for psoriasis, has also been far more widely prescribed since Pentavax* (Merck & Co Inc) was recommended for being listed under the Pharmaceutical Benefits Scheme. marketing approval during the year and joins Tripacel* and Comvax* as a key component in CSL’s strategy for Omnic*, a new product shown to be effective in relieving children’s vaccines. Pentavax* is designed to protect the symptoms of benign prostatic hyperplasia, has been children against diphtheria, tetanus, whooping cough, granted marketing approval by the Australian Drug hepatitis B and haemophilus influenzae B. Evaluation Committee this year. CSL gained access to Omnic* as a result of our developing commercial CSL’s production of influenza vaccine increased again this relationship with Yamanouchi Europe BV. year to cater for the growing demand for influenza vaccine in both our domestic and international markets. Sales to One of the core competencies CSL has developed over the Europe and South Africa improved and we established new past several years is the capacity to store and transport markets in South America. As we increase vaccine pharmaceuticals under strict temperature control production capacity, we also enhance CSL’s ability to meet conditions. This capacity led to our being appointed the needs of the Australian community in the event of an distributor on behalf of the Victorian Government for the influenza pandemic. vaccines they use in immunisation programs. We have now also successfully tendered for cold chain vaccine Two important pharmaceutical products being marketed in distribution for the New South Wales Government. Australia by CSL, Avonex* (Biogen Inc) and Daivonex* (Leo Pharmaceutical Products Ltd AS) achieved listing under the Pharmaceutical Benefits Scheme in February this year. Avonex* slows the progression of disability in people with * See inside back cover Pharmaceutical Business 9 CSL scientists Andreas Meister (left) and Dallas Hartman analyse an antigen sample in our new protein chemistry laboratory at Parkville. Inside the purification suite of CSL’s new facility for manufacture of novel biopharmaceuticals, scientist Heidi Elmer isolates genetically engineered recombinant proteins. 10 New Product Development New Product Development Australia’s largest investor in pharmaceutical research and development, CSL directs its activities towards biological products designed to act on or through the immune system. Vaccine to Prevent HPV Infection New Facility Our collaboration with Merck & Co. Inc (USA) and the We have completed construction of a new facility for the University of Queensland to develop a virus-like particle manufacture of novel biopharmaceuticals. Our clinical trial (VLP) vaccine to protect against the four major programs will now be underpinned by a capacity to papillomaviruses responsible for venereal warts and produce genetically-engineered, candidate vaccines and carcinoma of the cervix continues to make good progress. other biologicals in line with international standards of Two of the strains have been studied in healthy volunteers Good Manufacturing Practice. and shown to be safe and immunogenic. The project has now moved into early Phase II clinical studies in the United Completed on time and under budget, the new States. manufacturing facility will be used initially to produce recombinant antigens for the eradication of chronic Peptic Ulcer Treatment Helicobacter pylori infections. CSL’s collaboration with Astra Zeneca and the University of As part of a continuing program to upgrade facilities, our New South Wales is also progressing well. Several protein chemistry group has been relocated to a modern, antigens have been expressed and purified, and novel purpose built laboratory. delivery systems are being investigated. The aim of this project is to develop a vaccine to treat Helicobacter pylori New Projects infections, known to be associated with the development Two earlier stage projects, which are currently not of peptic ulcers and gastric cancer. partnered, are under way. The first is to develop a vaccine ISCOM™ Technology for treatment of women who are chronically infected with HPV and have developed signs of carcinoma of the cervix. CSL’s licensed Immune Stimulating Complex (ISCOM™) Initial clinical studies with a recombinant antigen technology is being evaluated in primates and man, using formulated with ISCOMATRIX™ are planned in the coming several antigens of clinical importance. This work is being year. The second project, which arose from a collaboration carried out in conjunction with major pharmaceutical with the Dental School at the University of Melbourne, companies and research institutes, such as the Ludwig aims to develop a vaccine for the prevention or treatment Institute for Cancer Research (New York). of periodontal disease. The ISCOM™ technology developed by Iscotec AB CSL continues to fund early stage research projects in (Sweden) has been shown to stimulate cellular and universities and research institutes, including Australia’s humoral immune responses in laboratory animals. Co-operative Research Centre for Vaccine Technology: the Federal Government has recently renewed funding for this Centre for a further seven years. We also maintain collaborative projects with a number of major international organisations. CSL’s strategy for research and development is to identify, secure and add value to intellectual property as the basis for the development of innovative biopharmaceutical products. New Product Development 11 Bioplasma Business CSL’s Bioplasma Division is the exclusive manufacturer in Australia of products derived from human plasma. CSL also processes plasma supplied by other countries into a range of products. 1998-99 Business Report The Bioplasma Division has recorded a 10% growth in revenue this year, from $118.2m to $129.8m, with increased sales coming from the higher volumes of plasma being processed and from the introduction of new products. The Australian Red Cross Blood Service Bioplasma Sales $129.8 million The Australian Red Cross Blood Service again increased its supplies of plasma to CSL to help meet the continuing strong domestic demand for plasma products. CSL’s Major plasma products MonoFIX® - VF (a high purity Factor IX) and Thrombotrol® - VF (antithrombin III), both recently Clotting Factors For treatment of: introduced into the Australian market, have been well Factors VIII and IX Bleeding disorders such as haemophilia received by haematologists. Growing demand in Asian markets for our plasma fractionation services resulted in Immunoglobulins For treatment of: a 22% increase in international revenue and included Intragam® Infections and a range of autoimmune our first business with the Republic of China (Taiwan) diseases and India. Plasma volume American Red Cross Biomedical Services expanders For treatment of: CSL has entered into an agreement with American Red Albumex® Acute blood loss (in emergency trauma situations) and severe burns Cross Biomedical Services to develop and manufacture plasma products. The largest provider of blood, plasma and tissue products in the USA, the American Red Cross People born deficient in Factor VIII and Factor IX experience severe provides almost half of America’s blood supply. bleeding into their joints and muscles which causes extreme pain A substantial task for CSL will be to obtain US FDA as well as long periods of impaired mobility. Treatment with clotting factors minimises bleeding episodes and allows people to approval of our facilities and registration of our products. lead active lives. CSL will manufacture plasma products from a given Intragam® is an intravenous immunoglobulin used to treat people with congenital or acquired deficiencies which make them susceptible to recurrent infections. Intragam® can allow these people to live healthier lives as active members of the community. 12 Bioplasma Business CSL continues to work closely with the Australian Red Cross Blood Service (ARCBS) to improve the quality and availability of plasma products. Shown here (left to right) are ARCBS Chief Financial Officer and Company Secretary, Gavin Wigginton, ARCBS Chief Executive Officer, Dr Robert Hetzel, CSL Managing Director, Dr Brian McNamee, and the General Manager of CSL’s Bioplasma Division, Peter Turner. volume of blood plasma provided by the American Red Customer Relations Cross, and co-develop a fibrin bandage product. Because The Bioplasma Division works closely with the Australian of its ability to stem major arterial bleeding, fibrin bandage Red Cross Blood Service and similar international blood has the potential to revolutionise treatment of transfusion services to improve the quality and availability haemorrhage caused by trauma and surgery. of plasma products. Laboratorium Frakcjonowania Osocza Sp. z.o.o. (LFO) Plasma collected by the Australian Red Cross from The building that will house LFO’s new plasma Australian volunteer donors is supplied to CSL for fractionation plant at Mielec in Poland has been completed manufacture of plasma-derived products which are and work on the design and construction of the plant and returned to the Red Cross for distribution to Australia’s equipment is now under way. health care community. Funding provided by the Federal Government ensures that plasma products manufactured The Bioplasma Division has a small team of engineers and by CSL on behalf of the Australian Red Cross are provided process specialists working in Europe on this project. CSL to all Australians free of charge. will receive royalties on the sale of plasma products processed at the new facility in return for the Products manufactured on behalf of other countries, using manufacturing technology we have licensed to LFO. plasma they supply, are returned to their country of origin. In addition, plasma from sources outside Australia, New Product Development approved by the Australian Therapeutic Goods CSL has obtained Australian market approval for Administration, is fractionated on behalf of additional Intragam® P (a high purity, pasteurised intravenous international customers who cannot supply plasma for immunoglobulin), and for an improved range of fractionation at CSL. intramuscular immunoglobulins. Clinical trials for Biostate® (high purity, double virus inactivated Factor VIII) have been completed and we anticipate marketing approval in 2000. Bioplasma Business 13 Veterinary Business The Veterinary Division develops, manufactures and markets vaccines for the prevention of disease in farm livestock (sheep, cattle and pigs) and companion animals (horses, dogs and cats). 1998-99 Business Report In an excellent result for the Veterinary Division, substantial sales growth in Australia combined with revenue generated by CSL’s new subsidiary, Biocor Animal Health, Inc, delivered sales revenue of $42.2m - an increase of 57.5% on the previous year. In Australia, we achieved significant growth in revenue Veterinary Sales $42.2 million across our entire product range despite declining livestock numbers and static dog and cat populations. We achieved record sales in the highly competitive Major veterinary products domestic market for sheep vaccines, supported by new marketed in Australia by CSL additions to our Glanvac® vitamin B12 range and the launch of our new Scabigard® vaccine applicator. Vaccines For prevention of: Glanvac® Cheesy gland and clostridial diseases, The launches of our Longrange™ botulinum vaccine and selenium deficiency and vitamin B12 Leptoshield® bovine leptospirosis vaccine helped to deficiency in sheep provide growth in cattle product sales. Revenue growth Ultravac® 5 in 1 Clostridial diseases in cattle and sheep from equine vaccines was also encouraging. Scabigard® Scabby mouth in sheep Canvac® Viral and bacterial diseases in dogs In a very successful year for small animal vaccines, our Fevac® Viral diseases in cats new Canvac® C5 multi-component canine vaccine gained Equivac® Bacterial diseases in horses a substantial market share. Against aggressive Longrange® Botulism in cattle competition, our sales of small animal vaccines also Ultravac® 7 in 1 Leptospirosis and clostridial diseases in cattle increased significantly in New Zealand. Diagnostic Products For diagnosis of: Bovigam® Bovine tuberculosis Parachek® Johne’s disease in cattle 14 Veterinary Business West Australian merino stud breeder, Murray Groves, uses Glanvac 6S B12 vaccine to protect his sheep from cheesy gland and clostridial diseases, selenium deficiency and vitamin B12 deficiency. Biocor Animal Health, Inc International Market Growth CSL subsidiary, Biocor Animal Health, Inc, manufactures Sales growth in Europe and the Middle East has been very and markets a range of small animal vaccines and carries encouraging, particularly in sheep vaccines. We expect the out contract manufacturing of vaccines for livestock. demand to increase for Parachek™ and our products Acquired by CSL in June 1998, Biocor’s manufacturing against clostridial diseases in sheep. plant is located in Omaha, Nebraska. In Europe and the United States, the product registration In the world’s largest market for veterinary vaccines, process is under way for Improvac™, a vaccine to improve our new American operation has achieved its vaccine the meat quality in male pigs. Improvac™ has been sales targets in this first year under CSL ownership. submitted to the European Medicines Evaluation Agency Our stronger focus on marketing small animal vaccines, for registration in European Union countries. In the USA, new and improved packaging, and close attention to the initial application has been made to the Food and developing customer service, have all helped to boost Drug Administration. sales substantially. The Veterinary Division continues to expand investment in CSL’s diagnostic kit (Parachek™) for detecting Johne’s new product development in support of our strong product disease in cattle has been submitted to the US Department pipeline. We will further consolidate our leading position in of Agriculture for registration and further applications will Australia by building new market segments and by be made in the coming year. Biocor’s strong growth maintaining a strong focus on developing customer potential is supported by the pipeline of new products relationships. Internationally, an increasing focus on the we plan to introduce into the American market. US market through Biocor is expected to continue the strong sales performance achieved this year. The Biocor team has been significantly strengthened during the year with key appointments in research and development, business development, regulatory affairs, sales and marketing. Veterinary Business 15 Biosciences Business The Biosciences Group develops, manufactures and markets cell culture reagents, blood grouping reagents and human diagnostics. Our cell culture reagents include dry powder media, liquid media and sera, used in the manufacture of vaccines, biopharmaceuticals and gene therapy products. 1998-99 Business Report JRH Biosciences has achieved another record performance with strong growth in cell culture media business delivering sales revenue of $61.8m, an increase of 26% on last year’s $49m. Following a major business review, the Biosciences Group now includes CSL’s American (JRH), European (JRH) and Biosciences Sales $75 million Australian-based operations under one umbrella. Sales revenue from our Australian operations was $13.2m, Major Biosciences Group products similar to the result for the previous year ($13.5m). Total revenue for the new Biosciences Group was $75m. Biotechnology products used in cell culture For use in: The strong growth in revenue from JRH’s media products has been driven by the successful pharmaceutical industry Sera The production of vaccines, commercialisation of new biotechnology-derived products. monoclonal antibodies and Media recombinant proteins. Sera, Profitability also increased significantly due to improved media and growth factors are margins and cost savings resulting from consolidation of Growth Factors also extensively used in research all media manufacturing activities at our Denver, and diagnostic laboratories. Pennsylvania plant last year. In cell culture, sera are used to grow cells in vitro (in the laboratory): A major upgrade of our serum processing facilities at media are combined with sera or growth factors to grow cells in vitro. Growth factors are a synthetic source of protein used to stimulate Lenexa, Kansas has been undertaken during the year. cell growth. This facilities upgrade will enable us to manufacture 2000 litre batches of serum and will include clean-in-place and Product Customisation steam-in-place systems, as well as automatic dispensing The Biosciences Group offers expertise in media development, capabilities. The new plant is scheduled to be fully large volume batches of product, media customisation and media operational by the end of 1999. handling systems to satisfy the specialised cell culture needs of the health industry. Disease diagnostic systems For detection of: QuantiFERON® diagnostics A range of disease states Blood grouping reagents For determination of: Blood groups Blood group antibodies Biotechnology products For use in: Pharmaceutical manufacture Research laboratories 16 Biosciences Business At the American Society of Gene Therapy meeting held in Washington DC in June this year, Matt Caffrey (right), one of JRH Biosciences’ Technical Support Specialists, talks to Julian Hanak of Cobra Therapeutics about the benefits of EX-CELL™ 525. Successfully launched during the year, EX-CELL™ 525 is the preferred media for the growth and production of PerC6 cells used in gene therapy applications. During the year, our Australian-based serum operation, Biosciences Business Review Filtron Pty Ltd, successfully completed an upgrade to As stated earlier in this report, the revenue from our enable the manufacture of serum products in 2000 litre Australian-based Biosciences operations was similar to batches. Filtron’s ability to manufacture larger batches of the previous year. Following a review of Australian serum will deliver our customers significant savings in operations, a major business restructure has been their pre-acceptance testing costs. undertaken including the rationalisation of low margin Our new product development focus remains on safe, agency products and a significant reduction in regulatory-friendly media formulations. The use of operating costs. The future direction of Australian recombinant proteins continues to be a key to the success operations will be underpinned by a much sharper focus of our media formulations, from both performance and on profitable products. regulatory perspectives. EX-CELL™ 525 media for PerC6 Key objectives for Biosciences’ Australian business will cells was successfully launched during the year and is the be to entrench our domestic market position in blood preferred media for the growth and production of PerC6 bank diagnostics and cell culture reagents and to cells used by our customers in gene therapy applications. successfully commercialise our novel QuantiFERON® JRH continues to focus its resources and capabilities diagnostic technology in key international markets, on partnering with commercial companies that use particularly North America. mammalian, insect cell culture and gene therapy As well as providing the basis for the tuberculosis techniques to develop and manufacture therapeutics diagnostic test that we now market in Australia and and vaccines. Given an expected increase in the are trialling in the United States and Japan, CSL’s successful commercialisation of new biopharmaceutical QuantiFERON® technology has potential for other products by our customers, JRH remains well positioned diseases that were previously difficult to diagnose. for future growth. Biosciences Business 17 Our People The focus of CSL’s human resources activities is to develop a flexible, committed and skilled workforce that is rewarded for excellence and innovation. Our Mission Leadership and Management Training Throughout the year, CSL has continued to focus on Our mission is to be a growing developing the skills and leadership capabilities of its Australian public company employees, and on building a quality work environment. specialising in biological Our senior leadership development program, "Leading for Competitive Advantage" continues to provide our products benefiting Australian leadership group opportunities for involvement in CSL’s and international health care. cultural and strategic development. During the next year, this program will move into its third phase which will specifically focus on developing individual skills. To enhance shareholder wealth, we will: We have continued to develop the "Frontline Management • Meet customers’ expectations with quality Initiative" we began last year. This program is being products and excellent service; carried out in collaboration with the Royal Melbourne • Invest in the development of new products and Institute of Technology (RMIT) and is expanding the skills the introduction of those products into Australian and leadership capacity of our middle management group. and international markets; Both our senior leadership and middle management • Pursue collaborations which build on our programs are leading edge initiatives through which CSL scientific, manufacturing and marketing expertise; leaders benefit from exposure to the latest management and leadership thinking. • Develop a flexible, committed and skilled workforce rewarded for excellence and innovation; Staff Opinion Survey • Ensure our workplace is healthy for employees In what has become a bi-annual event, all CSL employees and the community; were invited to participate in our 1999 opinion survey. Survey results were distributed to employees, and each • Strive for continuous improvement in all areas division gave presentations about divisional results. of our business. The Australian Employees Survey Group of 226 Australian private and public organisations provides benchmarks against which we are able to check our results. In ten of the twelve categories that we included in our 1999 survey, CSL achieved equal or better results than those recognised benchmarks. 18 Our People Corporate Human Resources Course Coordinator (standing left), Helen Politis and the Course Facilitator, Catherine Smithson (right) introduce a module of CSL’s leadership development program. CSL’s opinion surveys have also enabled us to identify Further initiatives to develop a quality work environment areas of progress since 1994 when the Company was are being developed as part of CSL’s latest Enterprise privatised. Since that time, we have recorded significant Agreement, currently being negotiated with CSL employee increases in positive responses to more than 25% of our representatives and unions. survey questions. The 1999 Enterprise Agreement will deliver greater Feedback from our surveys has also enabled us to review workplace flexibility, as well as new pay for areas requiring improvement and introduce new strategies performance provisions. These and other positive where they have been needed. outcomes are being achieved as the result of CSL’s consultative and cooperative approach to the development A Quality Work Environment of a quality workplace. Initiatives have been put in place as part of our "preferred employer" strategy to enable CSL to maintain a quality work environment. The range of incentives include an extensive communication and training program against harassment in the workplace, the further development of our equal employment opportunities, and new remuneration packaging arrangements. These and other initiatives enhance our recognised position as a progressive and "family-friendly" organisation. Our People 19 Controlled Entities The CSL Group CSL Limited ACN 051 588 348 Coselco Insurance Filtron Pty Ltd CSL International CSL (New Zealand) Iscotec AB Cervax Pty Ltd Pty Ltd Pty Ltd Limited ACN 006 691 925 ACN 051 958 377 ACN 066 194 938 Incorporated in NZ Incorporated in Sweden ACN 079 857 177 100 % 100 % 100 % 100 % 100 % 74 % Filtron Pty Ltd is CSL (New Zealand) Limited is operationally part of the operationally part of the CSL Biosciences Group. Pharmaceutical, Bioplasma CSL UK Limited and Veterinary Divisions and Incorporated in the the Biosciences Group. United Kingdom 100 % CSL US Inc JRH Europe Limited Incorporated in the Incorporated in the USA United Kingdom 100 % 100 % JRH Biosciences Inc JRH Biosciences Biocor Animal Biocor Animal Inc is operationally Health Inc is CSL Bioplasma Inc Health Inc part of the operationally part Incorporated in the USA Incorporated in the USA Incorporated in the USA Biosciences Group. of the Veterinary 100 % 100 % Division. 100 % CSL Limited, based in Melbourne, is a public company listed on CSL UK Limited, based in London, is a subsidiary of CSL the Australian Stock Exchange and the parent company of the International Pty Ltd. CSL US Inc, and JRH Europe Limited are CSL Group. All subsidiary companies in the Group are wholly subsidiaries of CSL UK Limited. owned by the parent company except Cervax Pty Ltd, a company in which CSL has a majority shareholding. JRH Europe Limited, based in London, is a subsidiary of CSL UK Limited and is the European sales and marketing agent for Coselco Insurance Pty Ltd, registered in Melbourne, provides a JRH Biosciences Inc. range of insurances for CSL. CSL US Inc is a wholly owned subsidiary of CSL UK Limited. Filtron Pty Ltd, based in Melbourne, is operationally part of CSL’s JRH Biosciences Inc, Biocor Animal Health Inc and CSL Biosciences Group. Filtron manufactures quality Australian serum Bioplasma Inc are subsidiaries of CSL US Inc. used to produce cell culture media. JRH Biosciences Inc is a subsidiary of CSL US Inc. Based in CSL (New Zealand) Limited, based in Auckland, is the New Kansas in the United States, JRH is one of the largest Zealand marketing arm for CSL’s Pharmaceutical, Bioplasma and manufacturers of specialised cell culture media in the world. Veterinary Divisions and the Biosciences Group. The company Operationally part of CSL’s Biosciences Group, JRH has also manufactures a range of veterinary viral vaccines at a manufacturing sites in Kansas and Pennsylvania. dedicated plant in Upper Hutt, near Wellington. Biocor Animal Health Inc, is a wholly owned Iscotec AB, a Swedish company, is a wholly owned subsidiary subsidiary of CSL US Inc. Based in Omaha, Nebraska, of CSL. Iscotec has technology that enhances the immune in the United States, Biocor manufactures and markets response to vaccines. veterinary vaccines. Cervax Pty Ltd, 74% owned by CSL Limited, is a CSL Bioplasma Inc, is a wholly owned subsidiary of company formed to undertake a specific research and CSL US Inc. CSL Bioplasma Inc has been established to development project. undertake clinical trial programs related to registration of CSL’s portfolio of plasma products in the United States. CSL International Pty Ltd, located in Melbourne, is a holding company for the international operations of the CSL Group. 20 Controlled Entities Organisation Chart Managing Director Dr Brian McNamee Company Secretary & General Counsel Peter Turvey Research and Development Pharmaceutical Division Corporate Projects Professor Ian Gust, AO - Director Stan McLiesh - General Manager Bob Moses - Vice President Finance Bioplasma Division Human Resources Peter Turner - General Manager Kelvin Milroy - Corporate Manager Tony Cipa - General Manager Veterinary Division Business Services Dr Hugh Middleton - General Manager David Doherty - General Manager Each member of CSL’s Executive Management Group reports Biosciences Group directly to the Managing Director. Paul Bordonaro - President Organisation Chart 21 Directors’ Profiles Colin J Harper, CA (Scots), FAICD - Chairman (age 68) - Corporate Governance, Finance (resident in Victoria). Mr Harper was appointed Chairman of the Commonwealth Serum Laboratories Commission in November 1988. He was formerly General Manager and Chief Executive of the merchant bank Australian United Corporation Ltd. Since 1976, Mr Harper has been a professional non-executive director and has gained experience by serving at various Colin J Harper Brian A McNamee times on the Boards of more than twenty companies. Mr Harper is currently a Director of Australia and New Zealand Banking Group Limited, from which he will retire on 30 September 1999. Brian A McNamee, MB, BS - Managing Director (age 42) - Pharmaceutical Industry, Medicine (resident in Victoria). Dr McNamee is the Chief Executive and Managing Director of CSL. Dr McNamee completed Bachelor of Medicine and Bachelor of Surgery Degrees at the University of Melbourne in 1979. Before taking up his Peter H Wade Elizabeth A Alexander present position in 1990, Dr McNamee was Managing Director and Chief Executive of Pacific Biotechnology Limited in Sydney, NSW (1988-89), General Manager, Faulding Product Divisions, F H Faulding & Co Limited, Adelaide, South Australia (1984-87), and International Product Manager, Dr Madaus & Co, based in Cologne, West Germany (1982-84). He is a Director of the Royal Botanic Gardens Board. Peter H Wade, FCPA, FAICD - Deputy Chairman (age 65) - Finance, Management (resident in Victoria). C Ian R McDonald Ian A Renard Mr Wade was elected to the Board in 1994. He had previously served CSL as a Commissioner and Director from 1985 to 1993 including a period as Acting Chairman during 1988. Mr Wade is Chairman of Acacia Resources Limited, a Director of Tabcorp Holdings Limited, former Managing Director, North Limited and former Chairman, Energy Resources of Australia Limited, and Gunns Kilndried Timber Industries Limited. Kenneth J Roberts Arthur C Webster 22 Directors’ Profiles Elizabeth A Alexander, AM. BCom, FCPA, FAIM, FCA, Kenneth J Roberts, AM, BEc, FCPA, FAIM, FAICD FAICD (age 56) - Accounting (resident in Victoria). (age 61) - International Pharmaceutical Industry, Management, Marketing (resident in NSW). Miss Alexander was appointed to the CSL Board in July 1991. She is a Partner of PricewaterhouseCoopers, and a Mr Roberts was appointed to the Board in February 1996. Director of Amcor Limited and Boral Limited. She is He was formerly Chairman and Managing Director of National Vice President of the Australian Institute of Wellcome Australasia and Director of Marketing Company Directors, a Member of the Corporations and Development for the Wellcome worldwide group. He is Securities Panel of the Australian Securities and Managing Director of the Australian Technology Group Investments Commission, past National President of the Limited, Chairman of the Royal Australasian College of Australian Society of Certified Practising Accountants, a Physicians Research and Education Foundation and a Member of the Council of the Australian Defence Force Member of the Boards of the Australian Genome Research Academy and a Member of the Deputy Prime Minister’s Facility and the University of Queensland Centre for Drug Trade Policy and Advisory Committee. She was a Member Design and Development. of the National Commission of Audit. Miss Alexander is Chairman of the Audit and Risk Management Committee. Arthur C Webster, BVSc, DipBact (Lond) (age 55) - Animal Health Industry, Commerce (resident in NSW). C Ian R McDonald, BSc (Hons) (age 66) Dr Webster was appointed to the CSL Board in March - International Pharmaceutical Industry (resident in NSW). 1998. He was formerly Technical Director then Managing Mr McDonald was appointed a Director of CSL in October Director of the animal health company Cyanamid Webster 1992. Mr McDonald was formerly Group Vice President, Pty Ltd and a Member of the Board of Governors, Pharmaceuticals, of Syntex Corporation, President of University of Western Sydney. Syntex Pharmaceuticals International Limited, Vice President Asia Pacific of G D Searle & Co and a former Company Secretary and General Counsel Director of Agen Limited Group. He is a past Managing Peter R Turvey, BA/LLB Director of Searle Australia Pty Limited and Mead Johnson Pty Limited, and is a Director of Rothschild Bioscience Managers Limited. Mr McDonald is a Member of the Audit and Risk Management Committee. Ian A Renard, BA, LLM, FAICD (age 53) - Law (resident in Victoria). Mr Renard was appointed to the CSL Board in August 1998. He is a Partner of Arthur Robinson & Hedderwicks, solicitors, practising in company and commercial law. He is a Director of AMP Limited, Newcrest Mining Limited, Ericsson Australia Pty Ltd and Hillview Quarries Pty Ltd, and was formerly a Director of North Limited. Mr Renard is also President of the Library Board of Victoria, a Member of the Council of the University of Melbourne and a Member of the Board of Governors of Melbourne University Private Limited. Directors’ Profiles 23 Corporate Governance This statement outlines the Company’s main Corporate The Nomination Committee is comprised of the full Board. Governance practices, all of which were in place In the event of the Nomination Committee inviting a person throughout the financial year. to become a Director, that person will be subject to election by the shareholders at the next general meeting in Shareholders accordance with Corporations Law. The Board of Directors seeks to ensure that the The composition of the Board is determined based on the shareholders are informed of all major developments following principles: affecting the economic entity’s state of affairs. • Non-executive directors should be independent of the The participation of shareholders at the Annual General Company and its management; Meeting is appreciated. • The Chairman should not be a current or past executive The Board of Directors and its Committees of the Company; The Board is responsible for the corporate governance of • The majority of the Board should comprise directors the Company including strategic direction, establishing who are independent and non-executive; and operational criteria and monitoring the achievement of • The Board should comprise directors who represent a objectives and conduct of operations. The Board delegates broad range of expertise, qualifications, experience responsibility for executive management of the Company to and age. the Managing Director who has regard to matters reserved for the Board, and who is accountable to the Board. The Criteria for selection of non-executive directors include Board reports to the shareholders. ability, experience and specific skills such as strengths in the pharmaceutical industry, financial, legal, marketing or The Board is responsible for the internal control framework other areas, including international experience. When a and has developed a set of policies, procedures, practices vacancy is foreseen or where it is considered that the and various committees which set criteria and enable the Board would benefit from the services of a new director Board to monitor compliance with statutory, legal, with particular expertise, unless an obvious candidate stakeholder and best practice requirements. This exists, a panel of candidates with appropriate skills and framework is regularly reviewed. experience is considered. Appointees should desirably be able to serve for at least eight years before retiring from the The Board delegates certain powers to Committees which Board no later than the AGM following their 68th birthday. assist it by examining various issues and making recommendations to the Board. Committees of the Board Membership and performance of the Board is reviewed are the Audit and Risk Management Committee, annually, six months before the Annual General Meeting. Remuneration Committee, Securities Committee and The composition of the Board is reviewed in relation to the Nomination Committee. The Board also delegates specific appropriate mix of skills and experience. responsibilities to ad hoc committees of directors from time to time. Directors have adopted guidelines which, in addition to the above, relate to the size of the Board and maximum length Composition of the Board of service on the Board (15 years). Procedures to bring about the retirement or removal of a director should there Profiles of the directors of the Company, including details of be less than adequate contribution to the Board are their qualifications, age and experience, are set out on included in the guidelines. These guidelines also contain a pages 22 and 23 of this Annual Report. policy regulating the dealings by directors in securities of The Managing Director is CSL’s only executive director. The the Company. Chairman and all of the other directors are non-executive Independent professional advice may be sought by and are independent. No director acts as a nominee or directors, at the Company's expense, to allow directors to representative of any particular shareholder. carry out their duties. Prior approval of the Chairman is Nomination Committee required. The director should give reasons for the request, nominate the person from whom advice is to be sought and The Nomination Committee is responsible for reviewing the obtain a quote. Independent professional advice obtained Board’s membership and making recommendations on new this way will be made available to the whole Board. appointments. The composition, powers and authority of the Boards of controlled entities are subject to the approval of the parent Board. 24 Corporate Governance Audit and Risk Management Committee The appointment of Arthur Andersen as Auditor took effect on 28 June 1994, following a competitive tendering The Audit and Risk Management Committee is comprised process. The performance of the auditor is reviewed by of three to five non-executive directors appointed for terms the Audit and Risk Management Committee. of three years. Membership is confirmed annually. The names of current Committee members are included in Remuneration Committee the directors’ profiles. The internal and external auditors, Managing Director, General Manager Finance, General The Remuneration Committee is comprised of all non- Manager Business Services, and the Manager - Internal executive directors. The Committee meets at the Audit, attend all Audit and Risk Management commencement of each financial year in relation to the Committee meetings. remuneration of the Managing Director and General Managers, and from time to time as required on other The Board has policies in place which require regular business within its responsibility. reports from the insurance subsidiary, Coselco Insurance Pty Ltd, and an executive committee responsible for The responsibilities of the Remuneration Committee are: managing areas of risk within the Company. This • Deciding the remuneration of non-executive directors in committee, which reports to the Audit and Risk accordance with Rule 88 of the Company’s Constitution Management Committee, is responsible for maintaining and the remuneration of directors for extra services in oversight of risk assessment and management practices as accordance with Rules 89 and 90; they apply to systems, the environment, health, safety, • Deciding the remuneration of the Managing Director in product liability, physical assets, security, disaster recovery, accordance with Rule 100; risk financing and compliance. Borrowings, guarantees and capital expenditure programs beyond minor levels require • Considering and recommending to the Board the terms Board approval. of the service contract of the Managing Director; • Endorsing remuneration proposals of the Managing Procedures are in place to ensure immediate reporting to Director in relation to General Managers; the Board of any significant occurrences. • Overseeing of the Company’s Senior Executive Responsibilities of the Audit and Risk Management Share Ownership and General Employee Share Committee Ownership Plans. The primary objective of the Audit and Risk Management Executives are remunerated on the basis of a salary Committee is to assist the Board to discharge effectively its competitive with market rates and a performance-based fiduciary responsibilities with regard to accounting, control incentive related to individual, divisional and corporate and reporting practices of the Group, which comprises the performance during the past financial year, on the internal control environment and management of recommendation of the Managing Director. A Senior stewardship over corporate assets. Executive Share Ownership Plan ("SESOP") was approved by shareholders in general meeting. The SESOP was In addition, the Audit and Risk Management modified at a subsequent general meeting ("SESOP II"). Committee will: All General Managers and certain key executives • Enable non-executive directors to maintain oversight participate. The Board maintains a direct interest in of the Company’s finances and confidence in the succession planning for senior managerial positions. financial reports; Remuneration of Directors • Enhance the credibility and objectivity of financial reports with other interested parties including shareholders, Non-executive directors’ fees of an amount not exceeding regulators and creditors; $400,000 in total are provided for in the Company’s • Provide an independent communication forum for Constitution. This sum can only be increased by the directors, management and auditors in relation to the Company at a general meeting. Non-executive directors’ financial affairs of the Company, and thus maintain the fees for 1998-99 are contained in the notes to the independence of a strong audit function; accounts. Remuneration for any extra services by individual directors may be approved under Rules 89 and 90 from • Review and recommend the adoption of the annual time to time. and half-yearly accounts; • Review risk management and report to the Board on its effectiveness in safeguarding the Company’s assets. Continued on page 26 Corporate Governance 25 CSL’s volunteer Emergency Response Group team includes (left to right) Peter Schoofs, Steve Gwyer and Ian Liddle. All members of the team have been trained to manage any hazardous workplace situations. Continued from page 25 A non-executive directors’ retirement benefit plan was Year 2000 Exposure approved by shareholders in general meeting of the The Company has made two statements concerning its Company as a result of which directors have agreements potential exposure to the Year 2000 problem to the with the Company which conform to the Constitution of the Australian Stock Exchange on 26 June 1998 and 26 March Company in respect of entitlements. 1999. Copies of these statements are available on request The Managing Director has a contract of employment with from the Company Secretary. the Company which contains, inter alia, the arrangements A multi-disciplinary corporate project team coordinates all regarding payment of remuneration in the form of salary Year 2000 activities, the objective of which is to ensure that and incentive awards. Shareholders at general meetings the Company’s business operations will not be interrupted have approved the issue to the Managing Director of a total as a consequence of century dating problems with systems 900,000 options, with matching interest free loans, under and/or equipment, and to put in place contingency plans the terms of the SESOPs. A proportion of these options has which will allow the Company’s business operations to been exercised. continue uninterrupted as a consequence of century dating Securities Committee problems with systems and/or equipment. A Securities Committee, comprising any two directors, is The tasks being undertaken to complete the project are at responsible for the allotment, registration and transfer of various stages of completion. securities, approving releases to the Australian Stock Exchange and associated media, which are made in Ethical Standards accordance with the Corporations Law and Listing Rules, All directors, executives, managers and employees are matters relating to the location of the Share Register and expected to act with integrity and objectivity and maintain any other formalities which may be required in relation to appropriate ethical standards which are articulated in the matters affecting the share capital. Company’s Code of Ethical Practices. The Company abides by the Code of Conduct of the Australian Pharmaceutical Manufacturers Association, the Code of Good Manufacturing Practice, the Code of Good Laboratory Practice and similar standards applicable to the pharmaceutical and veterinary industries. 26 Corporate Governance Corporate Citizenship Our continuing aim is to ensure that CSL’s business operations are carried out in workplaces that are safe and healthy for our employees, for the community and for the environment. Occupational Health and Safety The Environment It is CSL’s policy to comply with relevant health and safety Each CSL site is involved in activities aimed at minimising laws and regulations in all the jurisdictions in which we the impact of our operations on the community and are located and to ensure our facilities continue to operate the environment. to the satisfaction of the regulatory authorities concerned. CSL maintains a number of agreements for the proper Our employees are encouraged to participate in a wide disposal of solid and liquid wastes. At each location, we range of activities through which we maintain and develop have agreements for the discharge of liquid waste to the safe and healthy workplaces, supported by policies, sewer, and with licensed operators for the safe disposal of guidelines and standard operating procedures. biohazardous and other forms of solid waste. This includes the Health, Safety and Environment Advisory Committee, and related networks throughout the Company We regularly review waste management practices looking in which employees are actively encouraged to participate for new ways of waste minimisation, recycling and and which have appropriate union representation. material re-use. During the year, CSL’s Bioplasma Division joined the select The Australian National Pollutant Inventory, coordinated by group of organisations to achieve advanced level the Federal Government, requires all major manufacturing SafetyMAP accreditation from the Victorian WorkCover operations to report on atmospheric emissions for certain Authority (VWA). Established to provide a benchmark specified chemicals. In this regard, CSL’s only requirement for assessing and improving health and safety is to report on combustion products from our natural management processes, this award is given only to gas boilers. organisations that can demonstrate an effective system The Company has also been pro-active at reviewing its for the management and delivery of occupational health use of electricity, gas, water and other inputs to ensure and safety in the workplace. their efficient use and to reduce operational costs. As an CSL administers rehabilitation programs which assist example, our veterinary plant in Upper Hutt, New Zealand employees injured in the workplace to return to work in has managed to reduce monthly water consumption by the shortest possible time. Our lost time injury frequency more than 30%. rates (LTIFRs) and medical treatment injury frequency rates have continued to fall. For instance, our LTIFR fell from 26 per million hours worked in 1996, to 14 in 1997 and 9 in 1998. Workers compensation costs (and current outstanding liabilities) have fallen by more than 50% since 1994 and are expected to fall again this year. This improvement in performance has been reflected in a reduction in our payment for workers compensation insurance. Corporate Citizenship 27 Finance Report Strong growth in revenues and profitability was sustained during the 1998-99 year. Revenues increased by 16% to $424.9m with all business units recording growth over the previous year. Of particular note is the contribution to the Group from international revenues which increased 41.6% during the year to $97.5m. Nearly one quarter of Group revenue is now generated from sales to customers located outside Australia. Operating Profit Dividend Operating profit before interest and tax increased by 17.6% The directors have declared a final dividend of $18.4m (14 to $68.7m. cents per share) fully franked. The total dividend for the year of $27.6m represents a payout of 58% of net profit This is consistent with the Group's stated objective of after tax consistent with prior years. continued growth in profitability. Profit after tax of $47.4m was an increase of 15.8% over the profit after tax and Cash Flow before abnormals recorded last year. Group investment in Working capital management continues to be a priority in research and development grew by 4.3% to $40.8m. all CSL Group companies. The increase in inventory Earnings Per Share reflects the need for the Group to continue to invest in future growth through adequate stocks of new products. Earnings per share of 36.1 cents represents an increase of 16% over the prior year figure (excluding the abnormal Capital investment during the year was $39.0m. Another item) of 31.2 cents. strong year generated cash flow from operations of $72.4m. Net cash on hand (cash and investments less Shareholders Funds borrowings) increased by $9.2m to $36.6m ensuring that Shareholders funds increased by 6.3% to $414.9m. Total the Company continues to be well placed to take assets of $561.5m were 7.2% higher than last year. This advantage of investment opportunities that may arise. reflects the revaluation of land and buildings at 30 June 1999 which contributed $8.4m of the increase. Net tangible assets per share have increased by 6.1% to $3.15. 28 Finance Report Five Year Summary All figures are in $A million unless otherwise stated. 1998-99 1997-98 1996-97 1995-96 1994-95 Total revenue 424.9 366.7 318.1 290.6 256.8 Sales revenue 413.5 353.5 305.0 281.1 250.4 Research and development 40.8 39.1 36.6 30.2 27.1 Operating profit before interest and income tax 68.7 58.5 48.1 41.6 33.2 Operating profit after tax before abnormal item 47.4 40.9 35.2 29.0 24.5 Abnormal income tax credit 3.9 Profit after tax and abnormals 47.4 44.8 Capital investment 39.0 21.3 16.6 16.2 31.4 Total assets at 30 June 561.5 523.8 511.1 474.7 472.3 Shareholders’ funds at 30 June 414.9 390.3 363.0 341.6 331.2 Net tangible assets per share at 30 June ($) 3.15 2.97 2.79 2.62 2.53 Weighted average number of shares (million) 131.4 131.1 130.0 130.0 130.0 Earnings per share (cents) 36.1 34.2 27.0 22.3 18.9 Dividend per share (cents) 21.0 18.0 15.5 13.0 12.0 CSL Monthly Share Price: June 1994 to June 1999 $15.00 June 1999 $14.00 $13.00 $12.00 June 1998 $11.00 $10.00 June 1997 $9.00 $8.00 $7.00 June 1996 $6.00 $5.00 June 1995 $4.00 June 1994 $3.00 $2.00 J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Five Year Summary 29 Share Information CSL Limited Substantial Shareholders Issued Capital: See page 31 of this Annual Report. Ordinary shares: 131,652,084 Voting Rights Details of Incorporation At a general meeting, subject to restrictions imposed on significant foreign shareholders and some other minor CSL’s activities were carried on within the Commonwealth exceptions, on a show of hands each shareholder present Department of Health until the Commonwealth Serum has one vote. On a poll each shareholder present has one Laboratories Commission was formed as a statutory vote for each fully paid share held. corporation under the Commonwealth Serum Laboratories Act 1961 (Cth) [the CSL Act] on 2 November 1961. On 1 In accordance with the CSL Act, CSL’s Constitution April 1991, the Corporation was converted to a public provides that the votes attaching to significant foreign company limited by shares under the Corporations Law of shareholdings are not to be counted when they pertain to the Australian Capital Territory: it was renamed the appointment, removal or replacement of more than Commonwealth Serum Laboratories Limited. These one-third of the directors of CSL who hold office at any changes were brought into effect by the Commonwealth particular time. A significant foreign shareholding is one Serum Laboratories (Conversion into Public Company) Act where a foreign person has a relevant interest in 5% or 1990 (Cth). On 7 October 1991, the name of the Company more of CSL’s voting shares. was changed to CSL Limited. The Commonwealth divested all of its shares by public float on 3 June 1994. Significant Foreign Shareholdings The CSL Sale Act 1993 (Cth) amends the CSL Act to There are no significant foreign shareholdings as at impose certain restrictions on the voting rights of persons 30 June 1999. having significant foreign shareholdings, and certain restrictions on the Company itself. CSL ordinary shares have been traded on the Australian Stock Exchange since 30 May 1994. Melbourne is the Home Exchange. Distribution of Shareholdings as at 30 June 1999 Range Holders Shares % Total Shares 1 - 1000 14,220 11,443,935 8.70 1001 - 5000 12,198 29,553,000 22.45 5001 - 10000 999 7,465,633 5.67 10001 - 100000 415 10,478,116 7.95 100001 and over 89 72,711,400 55.23 Total Shareholders 27,921 131,652,084 100.00 Number of shareholders with 34 216 less than a marketable parcel of 38 shares (based on the share price at 30 June 1999). 30 Share Information Shareholder Information Share Registry Change of address should be notified to the Share Registry in writing without delay. Shareholders who are Computershare Registry Services Pty Ltd Broker sponsored on the CHESS sub-register must notify Level 12, 565 Bourke Street their sponsoring Broker of a change of address. Melbourne Victoria 3000 Telephone: 03 9611 5711 Direct payment of dividends into a nominated account Facsimile: 03 9611 5710 may be arranged with the Share Registry. GPO Box 2975EE The Annual Report is produced for your information. Melbourne Victoria 3001 However, should you receive more than one or wish to be 1800 646 882 outside Melbourne removed from the mailing list for the Annual Report, please advise the Share Registry. You will continue to receive Shareholders with inquiries should telephone or write Notices of Meetings and Proxy. to the Share Registry at the above address. The Annual Meeting will be held at the Function Centre, Separate shareholdings may be consolidated by National Tennis Centre, Melbourne Park, Batman Avenue, advising the Share Registry in writing. Melbourne at 10:00am on Thursday 14 October 1999. CSL’s Twenty Largest Shareholders as at 30 June 1999 Shareholder Account Shares % Total Shares 1 Westpac Custodian Nominees Limited 11,843,122 9.00 2 National Nominees Limited 7,862,189 5.97 3 Chase Manhattan Nominees Limited 4,409,601 3.35 4 AMP Life Limited 3,834,012 2.91 5 Citicorp Nominees Pty Limited 3,180,865 2.42 6 MLC Limited 2,882,572 2.19 7 SAS Trustee Corporation 2,666,068 2.03 8 Perpetual Trustees Nominees Limited 2,388,265 1.81 9 Queensland Investment Corporation 1,978,891 1.50 10 BT Custodial Services Pty Limited SUB CUS 1,448,731 1.10 11 Perpetual Trustees Australia Limited 1,412,239 1.07 12 Permanent Trustee Australia Limited FIR0027 1,383,312 1.05 13 Permanent Trustee Australia Limited FIR0020 1,326,711 1.01 14 Permanent Trustee Australia Limited FIR0018 1,204,244 0.91 15 ANZ Nominees Limited 1,066,192 0.81 16 Tower Life Australia Limited 994,355 0.76 17 GIO Personal Investment Services Limited 955,339 0.73 18 AMP Nominees Pty Limited 927,093 0.70 19 Perpetual Trustees Victoria Limited IMPUTA 828,400 0.63 20 Perpetual Trustees Victoria Limited SUPER 804,750 0.61 In addition, substantial shareholding notices have been received from the following: Maple-Brown Abbott Limited 9,626,534 7.31 AMP Limited 8,379,674 6.36 Shareholder Information 31 CSL Business Offices CSL Limited International Offices Registered Head Office CSL (New Zealand) Limited 45 Poplar Road Pharmaceutical Division Parkville Bioplasma Division Victoria 3052 Australia Biosciences Group Telephone: + 61 3 9389 1911 Level 4, Building 10 Facsimile: + 61 3 9389 1434 666 Great South Road Central Park, Penrose Bioplasma Division Auckland 6 189 Camp Road New Zealand Broadmeadows Telephone: +64 9 579 8105 Victoria 3047 Facsimile: +64 9 579 8106 Telephone: + 61 3 9246 5200 Facsimile: + 61 3 9246 5299 CSL (New Zealand) Limited Veterinary Division State Sales Offices 2-6 Shakespeare Avenue Upper Hutt Victoria and Tasmania New Zealand 45 Poplar Road Telephone: +64 4 527 9088 Parkville Facsimile: +64 4 527 9332 Victoria 3052 Telephone: CSL UK Limited - Pharmaceutical: + 61 3 9389 1408 JRH Europe Limited - Veterinary: + 61 3 9389 1251 1st Floor, The Ice House - Biosciences: + 61 3 9389 1644 Dean Street Facsimile: + 61 3 9389 1727 Marlow Buckinghamshire SL7 3AB New South Wales England 25-27 Paul Street North Telephone: +44 1628 474 739 North Ryde Facsimile: +44 1628 474 665 New South Wales 2113 Telephone: (02) 9887 4433 JRH Biosciences Inc Facsimile: (02) 9887 3171 13804 W. 107th Street Lenexa Queensland Kansas 66215 USA 14 Dividend Street Telephone: +1 913 469 5580 Mansfield US Toll Free: +1 800 255 6032 Queensland 4122 Facsimile: +1 913 469 5584 Telephone: (07) 3849 6140 Facsimile: (07) 3849 6141 Biocor Animal Health Inc 2720 North 84th Street South Australia and Northern Territory Omaha 11 Coongie Avenue Nebraska 68134 USA Edwardstown Telephone: +1 402 393 7440 South Australia 5039 Facsimile: +1 402 393 4712 Telephone: (08) 8276 3200 Facsimile: (08) 8277 0556 Western Australia 293-297 Fitzgerald Street Perth Western Australia 6000 Telephone: (08) 9328 7322 Facsimile: (08) 9227 6196 32 CSL Business Offices Major pharmaceutical products Major veterinary products marketed in Australia by CSL marketed in Australia by CSL Vaccines For prevention of: Vaccines For prevention of: Fluvax® Influenza Glanvac® Cheesy gland and clostridial diseases, selenium deficiency and vitamin B12 Pneumovax* Pneumococcal infection deficiency in sheep Triple Antigen™ Diphtheria, tetanus and whooping cough Ultravac® 5 in 1 Clostridial diseases in cattle and sheep ADT® Diphtheria and tetanus Scabigard® Scabby mouth in sheep Tet-Tox® Tetanus Canvac® Viral and bacterial diseases in dogs H-B-VAX II* Hepatitis B infection Fevac® Viral diseases in cats PedvaxHIB* HIB disease Equivac® Bacterial diseases in horses Typh-Vax® (Oral) Typhoid Longrange® Botulism in cattle Typhim VI* Typhoid Ultravac® 7 in 1 Leptospirosis and clostridial diseases Vaqta* Hepatitis A infection in cattle Anti-infectives For treatment of: Diagnostic Products For diagnosis of: Flopen® Severe staphylococcal infections Bovigam® Bovine tuberculosis Moxacin® Bacterial infections Parachek® Johne’s disease in cattle Clavulin* Bacterial infections Fucidin* Bacterial infections Other products For treatment of: Antivenoms Envenomation Major Biosciences Group products Lonavar* Delayed puberty (males) Turners Syndrome (females) Biotechnology products Daivonex* Psoriasis used in cell culture For use in: Advantan* Inflammatory dermatoses Avonex* Multiple sclerosis Sera The production of vaccines, monoclonal antibodies and Media recombinant proteins. Sera, media and growth factors are Growth Factors also extensively used in research and diagnostic laboratories. Major plasma products In cell culture, sera are used to grow cells in vitro (in the laboratory): Clotting Factors For treatment of: media are combined with sera or growth factors to grow cells in vitro. Factors VIII and IX Bleeding disorders such as haemophilia Growth factors are a synthetic source of protein used to stimulate cell growth. Immunoglobulins For treatment of: Product Customisation Intragam® Infections and a range of autoimmune diseases The Biosciences Group offers expertise in media development, large volume batches of product, media customisation and media han- Plasma volume dling systems to satisfy the specialised cell culture needs of the health expanders For treatment of: industry. Albumex® Acute blood loss (in emergency trauma situations) and severe burns Disease diagnostic systems For detection of: QuantiFERON® diagnostics A range of disease states Blood grouping reagents For determination of: People born deficient in Factor VIII and Factor IX experience severe bleed- Blood groups ing into their joints and muscles which causes extreme pain as well as Blood group antibodies long periods of impaired mobility. Treatment with clotting factors min- Biotechnology products For use in: imises bleeding episodes and allows people to lead active lives. Pharmaceutical manufacture Research laboratories Intragam® is an intravenous immunoglobulin used to treat people with congenital or acquired deficiencies which make them susceptible to recurrent infections. Intragam® can allow these people to live healthier lives as active members of the community. * See inside back cover flap Trade Marks CSL, CSL Biosciences, Bioplasma, and JRH are all trade marks of CSL Limited. ® Registered trade mark of CSL Limited. ™ Trade mark of CSL Limited. * Trade marks of companies other than CSL and referred to in this Annual Report are listed below: Biogen, Inc Avonex Bio-Technology General Corp. Lonavar Connaught Laboratories Limited Tripacel Leo Pharmaceutical Products Limited AS Daivonex Fucidin Merck & Co, Inc Comvax H-B-Vax II M-M-R II PedvaxHIB Pentavax Pneumovax Vaqta Varivax Pasteur Mérieux Serums et Vaccins Typhim VI Schering AG Advantan SmithKline Beecham (Australia) Pty Ltd Clavulin Swiss Serum and Vaccine Institute Berne Orochol Yamanouchi Europe BV Omnic About CSL Limited CSL Limited is an Australian public company specialising in the development, manufacture and marketing of biologically based health care products which benefit the community. Our products include human and veterinary pharmaceuticals (notably vaccines), products derived from human plasma, diagnostics, and cell culture reagents. Our aim is to continue building CSL in ways which will benefit our shareholders. We will accomplish this by: • Meeting customers’ expectations with quality products and excellent service; • Investing in development of new products - and introducing those products into Australian and international markets; • Pursuing collaborations which build on our scientific, manufacturing and marketing expertise; • Developing a flexible, committed and skilled workforce rewarded for excellence and innovation; • Ensuring our workplace is healthy for employees and the community; • Striving for continuous improvement in all areas of our business. CSL is firmly committed to research and development, quality assurance and the development of international product and marketing alliances. The Company is the largest investor in Australian pharmaceutical research and development, and one of the largest employers in Australia’s pharmaceutical manufacturing industry. The Company’s earnings are supported by established brands with strong domestic market shares. The Company also has a long-term contract with the Federal Government for the manufacture of plasma-derived products for the Australian Red Cross. Continuing improvements in profitability will be achieved as CSL expands its business nationally and internationally by actively marketing products developed both by CSL and in collaboration with partners. Internet http://www.csl.com.au
"CSL Limited (PDF)"