Rocky horror health show

It has been a horror year for Australia’s healthcare stocks, including former market darlings and two of the country’s bluest of blue chips, on a rollercoaster ride heading one way—down. Cochlear plummeting 63% year-to-date. Pro Medicus collapsing 45%. CSL falling 43%. Resmed sliding 23%. And Sonic Healthcare slipping only 17%, though from more modest heights to begin with. 

If investors thought the bad news couldn’t get any worse, this week brought another shocker: a 90-day financial review from the interim CEO of plasma and vaccine giant, CSL, that lowered the outlook for both revenue and profit for fiscal year 2026 (ending June 30) and announced a further US$5 billion in non-cash, pre-tax impairments on top of the US$1.5 billion announced in February this year with the interim results.

To appreciate the gravity of this situation, CSL was trading around A$270 two years ago in May 2024. It is now down to A$97, a drop of two thirds. In fact, the picture is bleaker because the company’s shares traded above $310 in late 2021, early 2023 and then again in July 2024.

Why do we care? Because not too long ago CSL was an Aussie superstar. A rare example of a company that transformed itself from a wholly owned state enterprise into a global biotech phenomenon. The “C” stands for “Commonwealth”, which in Australia refers to the federal government. Commonwealth Serum Laboratories was founded in 1916 and privatised in 1994.

It is genuinely hard to exaggerate the magnitude of this achievement in a country where many other blue chips—banks, airlines, supermarkets—benefit from extracting rents in cosy domestic oligopolies and are about as international as vegemite.

We also care because the CSL story is one about governance. Where a transformative CEO, Brian McNamee, who led the company’s privatisation and global growth from the early 1990s to 2013, then stepped away and came back as chairman in 2018, appears to have hung on for too long.

Questions are now being asked in the country’s business media as to why he didn’t leave earlier? After the February 2026 interim results, which announced an 81% drop in profits and was preceded by the hurried sacking of then CEO, Paul McKenzie, The Australian newspaper was early out of the blocks and asked of the company, “could a deference to the past be holding it back?”

This week the Australian Financial Review penned a poignant editorial which concluded that McNamee’s “recent stewardship suggests he may not have been the right person to return the company to a growth and innovation mindset”, adding this was a conclusion it “reaches with reluctance”. You could feel the editorial writer’s pain.

But an equally fair question is why didn’t the media start asking these questions earlier? The red flags were surely there. CSL’s share price began sliding in mid-2024 and, apart from a short reprieve over July and August 2025, it didn’t stop. The company’s shareholders then voted in large numbers against the board remuneration report at its AGMs in October 2024 and 2025—26% and 42%, respectively—indicating a growing disquiet with management. Votes against these reports of 25% or more in Australia are called a “strike” and carry important regulatory implications.

Indeed, given investor concerns about management, why did they keep voting en masse for the directors? Director elections in October 2024, which included the re-election for three years of McNamee, produced votes in favour of between 97% and almost 100%. The election of two directors in October 2025 saw each receive close to 100%. (Director elections are typically staggered in Australia, not carried out annually.)

A final question: did the board show too much deference to NcNamee? No outsider knows what is said within board meetings. Or what directors really think. But here are some facts worth noting: of the company’s seven independent directors, two have served for around 5 to 7 years, one is almost at 2.5 years, and the remainder are less than 2 years. Two have been on the board for less than 1 year.

While CSL’s directors are all highly experienced and successful businesspeople, it takes time for any new director to find their feet. Perhaps they did push for McNamee’s early departure. Or perhaps there was just a polite discussion in the board room on the topic. Either way, he appears to be staying until his term is up in October 2027—and no doubt praying that the share price recovers some of its former glory by then.

jallen@fireflyreads.com

Copyright: Ninepin Ltd, 2026

Note: The author became a shareholder of CSL this week and also holds shares in Resmed. This article is not intended to provide investment advice.