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Deconstructing the infectious machinery of SARS-CoV-2

Scientists collaborate to model the complex protein responsible for SARS-CoV-2 replication, revealing its potential weak spots for drug development Credit: Greg Hura/Berkeley Lab In February 2020, a trio of bio-imaging experts were sitting amiably around.

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Scientists collaborate to model the complex protein responsible for SARS-CoV-2 replication, revealing its potential weak spots for drug development

Credit: Greg Hura/Berkeley Lab

In February 2020, a trio of bio-imaging experts were sitting amiably around a dinner table at a scientific conference in Washington, D.C., when the conversation shifted to what was then a worrying viral epidemic in China. Without foreseeing the global disaster to come, they wondered aloud how they might contribute.

Nearly a year and a half later, those three scientists and their many collaborators across three national laboratories have published a comprehensive study in Biophysical Journal that – alongside other recent, complementary studies of coronavirus proteins and genetics – represents the first step toward developing treatments for that viral infection, now seared into the global consciousness as COVID-19.

Their foundational work focused on the protein-based machine that enables the SARS-CoV-2 virus to hijack our own cells’ molecular machinery in order to replicate inside our bodies.

From structure to function to solutions

“It has been remarked that all organisms are just a means for DNA to make copies of itself, and nowhere is this truer than in the case of a virus,” said Greg Hura, a staff scientist at Lawrence Berkeley National Laboratory (Berkeley Lab) and one of the study’s lead authors. “A virus’s singular task is to make copies of its genetic material – unfortunately, at our expense.”

Viruses and mammals, including humans, have been stuck in this battle for millions of years, he added, and over that time the viruses have evolved many tricks to get their genes copied inside us, while our bodies have evolved counter defenses. And although viruses often perform a long list of other activities, their ability to harm us with an infection really does come down to whether or not they can replicate their genetic material (either RNA or DNA, depending on the species) to make more viral particles, and use our cells to translate their genetic code into proteins.

The protein-based machine responsible for RNA replication and translation in coronaviruses – and many other viruses – is called the RNA transcription complex (RTC), and it is a truly formidable piece of biological weaponry.

To successfully duplicate viral RNA for new virus particles and produce the new particles’ many proteins, the RTC must: distinguish between viral and host RNA, recognize and pair RNA bases instead of highly similar DNA bases that are also abundant in human cells, convert their RNA into mRNA (to dupe human ribosomes into translating viral proteins), interface with copy error-checking molecules, and transcribe specific sections of viral RNA to amplify certain proteins over others depending on need – while at all times trying to evade the host immune system that will recognize it as a foreign protein.

As astounding as this sounds, any newly evolved virus that is successful “must have machines that are incredibly sophisticated to overcome mechanisms we have evolved,” explained Hura, who heads the Structural Biology department in Berkeley Lab’s Molecular Biophysics and Integrated Bioimaging Division.

He and the other study leads – Andrzej Joachimiak of Argonne National Laboratory and Hugh M. O’Neill at Oak Ridge National Laboratory – specialize in revealing the atomic structure of proteins in order to understand how they work at the molecular level. So, the trio knew from the moment they first discussed COVID-19 at the dinner table that studying the RTC would be particularly challenging because multitasking protein machines like the RTC aren’t static or rigid, as molecular diagrams or ball-and-stick models might suggest. They’re flexible and have associated molecules, called nonstructural and accessory proteins (Nsps), that exist in a multitude of rapidly rearranging forms depending on the task at hand – akin to how a gear shifter on a bike quickly adapts the vehicle to changing terrain.

Each of these Nsp arrangements give insights into the protein’s different activities, and they also expose different parts of the overall RTC surface, which can be examined to find places where potential drug molecules could bind and inhibit the entire machine.

So, following their serendipitous convergence in Washington, the trio hatched a plan to pool their knowledge and national lab resources in order to document the structure of as many RTC arrangements as possible, and identify how these forms interact with other viral and human molecules.

Science during shutdowns

The investigation hinged on combining data collected from many advanced imaging techniques, as no approach by itself can generate complete, atomic-level blueprints of infectious proteins in their natural states. They combined small-angle X-ray scattering (SAXS), X-ray crystallography, and small-angle neutron scattering (SANS) performed at Berkeley Lab’s Advanced Light Source, Argonne’s Advanced Photon Source, and Oak Ridge’s High Flux Isotope Reactor and Spallation Neutron Source, respectively, on samples of biosynthetically produced RTC.

Despite the extraordinary hurdles of conducting science during shelter-in-place conditions, the collaboration was able to work continuously for more than 15 months, thanks to funding for research and facility operations support from the Department of Energy’s Office of Science National Virtual Biotechnology Laboratory (NVBL). During that time, the scientists collected detailed data on the RTC’s key accessory proteins and their interactions with RNA. All of their findings were uploaded into the open-access Protein Data Bank prior to the journal article’s publication.

Of the many structural findings that will help with drug design, one notable discovery is that assembly of the RTC subunits is incredibly precise. Drawing on a mechanical metaphor once more, the scientists compare the assembly process to putting together a spring-based machine. You can’t put a spring in place when the rest of the machine is already in position, you must compress and place the spring at a specific step of assembly or the whole device is dysfunctional. Similarly, the RTC Nsps can’t move into place in any random or chaotic order; they must follow a specific order of operations.

They also identified how one of the Nsps specifically recognizes the RNA molecules it acts upon, and how it cuts long strands of copied RNA into their correct lengths.

“Having the vaccines is certainly huge. However, why are we satisfied with just this one avenue of defense?” said Hura. Added Joachimiak: “This was a survey study, and it has identified many directions we and others should pursue very deeply; to tackle this virus we will need multiple ways of blocking its proliferation.”

“Combining information from different structural techniques and computation will be key to achieving this goal,” said O’Neill.

Due to the similarity of RTC proteins across viral strains, the team believe that any drugs developed to block RTC activity could work for multiple viral infections in addition to all COVID-19 variants.

Reflecting back to the beginning of their research journey, the scientists marvel at the lucky timing of it all. When we started to talk, said Hura, “we had no idea that this epidemic would soon become a pandemic that would change a generation.”

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This study was supported by the DOE Office of Science through the NVBL, a consortium of DOE national laboratories focused on the response to COVID-19, with funding provided by the Coronavirus CARES Act; and by the National Institutes of Health. The Advanced Light Source, Advanced Photon Source, High Flux Isotope Reactor, and Spallation Neutron Source are DOE Office of Science user facilities.

Media Contact
Matthew Nerzig
mnerzig@lbl.gov

Original Source

https://newscenter.lbl.gov/2021/07/19/infectious-machinery-of-covid19/

Related Journal Article

http://dx.doi.org/10.1016/j.bpj.2021.06.006

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EyePoint poaches medical chief from Apellis; Sandoz CFO, longtime BioNTech exec to retire

Ramiro Ribeiro
After six years as head of clinical development at Apellis Pharmaceuticals, Ramiro Ribeiro is joining EyePoint Pharmaceuticals as CMO.
“The…

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Ramiro Ribeiro

After six years as head of clinical development at Apellis Pharmaceuticals, Ramiro Ribeiro is joining EyePoint Pharmaceuticals as CMO.

“The retinal community is relatively small, so everybody knows each other,” Ribeiro told Endpoints News in an interview. “As soon as I started to talk about EyePoint, I got really good feedback from KOLs and physicians on its scientific standards and quality of work.”

Ribeiro kicked off his career as a clinician in Brazil, earning a doctorate in stem cell therapy for retinal diseases. He previously held roles at Alcon and Ophthotech Corporation, now known as Astellas’ M&A prize Iveric Bio.

At Apellis, Ribeiro oversaw the Phase III development, filing and approval of Syfovre, the first drug for geographic atrophy secondary to age-related macular degeneration (AMD). The complement C3 inhibitor went on to make $275 million in 2023 despite reports of a rare side effect that only emerged after commercialization.

Now, Ribeiro is hoping to replicate that success with EyePoint’s lead candidate, EYP-1901 for wet AMD, which is set to enter the Phase III LUGANO trial in the second half of the year after passing a Phase II test in December.

Ribeiro told Endpoints he was optimistic about the company’s intraocular sustained-delivery tech, which he said could help address treatment burden and compliance issues seen with injectables. He also has plans to expand the EyePoint team.

“My goal is not just execution of the Phase III study — of course that’s a priority — but also looking at the pipeline and which different assets we can bring in to leverage the strength of the team that we have,” Ribeiro said.

Ayisha Sharma


Remco Steenbergen

Sandoz CFO Colin Bond will retire on June 30 and board member Remco Steenbergen will replace him. Steenbergen, who will step down from the board when he takes over on July 1, had a 20-year career with Philips and has held the group CFO post at Deutsche Lufthansa since January 2021. Bond joined Sandoz nearly two years ago and is the former finance chief at Evotec and Vifor Pharma. Investors didn’t react warmly to Wednesday’s news as shares fell by almost 4%.

The Swiss generics and biosimilars company, which finally split from Novartis in October 2023, has also nominated FogPharma CEO Mathai Mammen to the board of directors. The ex-R&D chief at J&J will be joined by two other new faces, Swisscom chairman Michael Rechsteiner and former Unilever CFO Graeme Pitkethly.

On Monday, Sandoz said it completed its $70 million purchase of Coherus BioSciencesLucentis biosimilar Cimerli sooner than expected. The FDA then approved its first two biosimilars of Amgen’s denosumab the next day, in a move that could whittle away at the pharma giant’s market share for Prolia and Xgeva.

Sean Marett

BioNTech’s chief business and commercial officer Sean Marett will retire on July 1 and will have an advisory role “until the end of the year,” the German drugmaker said in a release. Legal chief James Ryan will assume CBO responsibilities and BioNTech plans to name a new chief commercial officer by the end of the month. Marett was hired as BioNTech’s COO in 2012 after gigs at GSK, Evotec and Next Pharma, and led its commercial efforts as the Pfizer-partnered Comirnaty received the first FDA approval for a Covid-19 vaccine. BioNTech has also built a cancer portfolio that TD Cowen’s Yaron Werber described as “one of the most extensive” in biotech, from antibody-drug conjugates to CAR-T therapies.

Chris Austin

→ GSK has plucked Chris Austin from Flagship and he’ll start his new gig as the pharma giant’s SVP, research technologies on April 1. After a long career at NIH in which he was director of the National Center for Advancing Translational Sciences (NCATS), Austin became CEO of Flagship’s Vesalius Therapeutics, which debuted with a $75 million Series A two years ago this week but made job cuts that affected 43% of its employees six months into the life of the company. In response to Austin’s departure, John Mendlein — who chairs the board at Sail Biomedicines and has board seats at a few other Flagship biotechs — will become chairman and interim CEO at Vesalius “later this month.”

BioMarin has lined up Cristin Hubbard to replace Jeff Ajer as chief commercial officer on May 20. Hubbard worked for new BioMarin chief Alexander Hardy as Genentech’s SVP, global product strategy, immunology, infectious diseases and ophthalmology, and they had been colleagues for years before Hardy was named Genentech CEO in 2019. She shifted to Roche Diagnostics as global head of partnering in 2021 and had been head of global product strategy for Roche’s pharmaceutical division since last May. Sales of the hemophilia A gene therapy Roctavian have fallen well short of expectations, but Hardy insisted in a recent investor call that BioMarin is “still very much at the early stage” in the launch.

Pilar de la Rocha

BeiGene has promoted Pilar de la Rocha to head of Europe, global clinical operations. After 13 years in a variety of roles at Novartis, de la Rocha was named global head of global clinical operations excellence at the Brukinsa maker in the summer of 2022. A short time ago, BeiGene ended its natural killer cell therapy alliance with Shoreline Biosciences, saying that it was “a result of BeiGene’s internal prioritization decisions and does not reflect any deficit in Shoreline’s platform technology.”

Andy Crockett

Andy Crockett has resigned as CEO of KalVista Pharmaceuticals. Crockett had been running the company since its launch in 2011 and will hand the keys to president Ben Palleiko, who joined KalVista in 2016 as CFO. Serious safety issues ended a Phase II study of its hereditary angioedema drug KVD824, but KalVista is mounting a comeback with positive Phase III results for sebetralstat in the same indication and could compete with Takeda’s injectable Firazyr. “If approved, sebetralstat may offer a compelling treatment option for patients and their caregivers given the long-standing preference for an effective and safe oral therapy that provides rapid symptom relief for HAE attacks,” Crockett said last month.

Steven Lo

Vaxart has tapped Steven Lo as its permanent president and CEO, while interim chief Michael Finney will stay on as chairman. Endpoints News last caught up with Lo when he became CEO at Valitor, the UC Berkeley spinout that raised a $28 million Series B round in October 2022. The ex-Zosano Pharma CEO had a handful of roles in his 13 years at Genentech before his appointments as chief commercial officer of Corcept Therapeutics and Puma Biotechnology. Andrei Floroiu resigned as Vaxart’s CEO in mid-January.

Kartik Krishnan

Kartik Krishnan has taken over for Martin Driscoll as CEO of OncoNano Medicine, and Melissa Paoloni has moved up to COO at the cancer biotech located in the Dallas-Fort Worth suburb of Southlake. The execs were colleagues at Arcus Biosciences, Gilead’s TIGIT partner: Krishnan spent two and a half years in the CMO post, while Paoloni was VP of corporate development and external alliances. In 2022, Krishnan took the CMO job at OncoNano and was just promoted to president and head of R&D last November. Paoloni came on board as OncoNano’s SVP, corporate development and strategy not long after Krishnan’s first promotion.

Genesis Research Group, a consultancy specializing in market access, has brought in David Miller as chairman and CEO, replacing co-founder Frank Corvino — who is transitioning to the role of vice chairman and senior advisor. Miller joins the New Jersey-based team with a number of roles under his belt from Biogen (SVP of global market access), Elan (VP of pharmacoeconomics) and GSK (VP of global health outcomes).

Adrian Schreyer

Adrian Schreyer helped build Exscientia’s AI drug discovery platform from the ground up, but he has packed his bags for Nimbus Therapeutics’ AI partner Anagenex. The new chief technology officer joined Exscientia in 2013 as head of molecular informatics and was elevated to technology chief five years later. He then held the role of VP, AI technology until January, a month before Exscientia fired CEO Andrew Hopkins.

Paul O’Neill has been promoted from SVP to EVP, quality & operations, specialty brands at Mallinckrodt. Before his arrival at the Irish pharma in March 2023, O’Neill was executive director of biologics operations in the second half of his 12-year career with Merck driving supply strategy for Keytruda. Mallinckrodt’s specialty brands portfolio includes its controversial Acthar Gel (a treatment for flares in a number of chronic and autoimmune indications) and the hepatorenal syndrome med Terlivaz.

David Ford

→ Staying in Ireland, Prothena has enlisted David Ford as its first chief people officer. Ford worked in human resources at Sanofi from 2002-17 and then led the HR team at Intercept, which was sold to Italian pharma Alfasigma in late September. We recently told you that Daniel Welch, the former InterMune CEO who was a board member at Intercept for six years, will succeed Lars Ekman as Prothena’s chairman.

Ben Stephens

→ Co-founded by Sanofi R&D chief Houman Ashrafian and backed by GSK, Eli Lilly partner Sitryx stapled an additional $39 million to its Series A last fall. It has now welcomed a pair of execs: Ben Stephens (COO) had been finance director for ViaNautis Bio and Rinri Therapeutics, and Gordon Dingwall (head of clinical operations) is a Roche and AstraZeneca vet who led development operations at Mission Therapeutics. Dingwall has also served as a clinical operations leader for Shionogi and Freeline Therapeutics.

Steve Alley

MBrace Therapeutics, an antibody-drug conjugate specialist that nabbed $85 million in Series B financing last November, has named Steve Alley as CSO. Alley spent two decades at Seagen before the $43 billion buyout by Pfizer and was the ADC maker’s executive director, translational sciences.

→ California cancer drug developer Apollomics, which has been mired in Nasdaq compliance problems nearly a year after it joined the public markets through a SPAC merger, has recruited Matthew Plunkett as CFO. Plunkett has held the same title at Nkarta as well as Imago BioSciences — leading the companies to $290 million and $155 million IPOs, respectively — and at Aeovian Pharmaceuticals since March 2022.

Heinrich Haas

→ Co-founded by Oxford professor Adrian Hill — the co-inventor of AstraZeneca’s Covid-19 vaccine — lipid nanoparticle biotech NeoVac has brought in Heinrich Haas as chief technology officer. During his nine years at BioNTech, Haas was VP of RNA formulation and drug delivery.

Kimberly Lee

→ New Jersey-based neuro biotech 4M Therapeutics is making its Peer Review debut by introducing Kimberly Lee as CBO. Lee was hired at Taysha Gene Therapies during its meteoric rise in 2020 and got promoted to chief corporate affairs officer in 2022. Earlier, she led corporate strategy and investor relations efforts for Lexicon Pharmaceuticals.

→ Another Peer Review newcomer, Osmol Therapeutics, has tapped former Exelixis clinical development chief Ron Weitzman as interim CMO. Weitzman only lasted seven months as medical chief of Tango Therapeutics after Marc Rudoltz had a similarly short stay in that position. Osmol is going after chemotherapy-induced peripheral neuropathy and chemotherapy-induced cognitive impairment with its lead asset OSM-0205.

→ Last August, cardiometabolic disease player NeuroBo Pharmaceuticals locked in Hyung Heon Kim as president and CEO. Now, the company is giving Marshall Woodworth the title of CFO and principal financial and accounting officer, after he served in the interim since last October. Before NeuroBo, Woodworth had a string of CFO roles at Nevakar, Braeburn Pharmaceuticals, Aerocrine and Fureix Pharmaceuticals.

Claire Poll

Claire Poll has retired after more than 17 years as Verona Pharma’s general counsel, and the company has appointed Andrew Fisher as her successor. In his own 17-year tenure at United Therapeutics that ended in 2018, Fisher was chief strategy officer and deputy general counsel. The FDA will decide on Verona’s non-cystic fibrosis bronchiectasis candidate ensifentrine by June 26.

Nancy Lurker

Alkermes won its proxy battle with Sarissa Capital Management and is tinkering with its board nearly nine months later. The newest director, Bristol Myers Squibb alum Nancy Lurker, ran EyePoint Pharmaceuticals from 2016-23 and still has a board seat there. For a brief period, Lurker was chief marketing officer for Novartis’ US subsidiary.

→ Chaired by former Celgene business development chief George Golumbeski, Shattuck Labs has expanded its board to nine members by bringing in ex-Seagen CEO Clay Siegall and Tempus CSO Kate Sasser. Siegall holds the top spots at Immunome and chairs the board at Tourmaline Bio, while Sasser came to Tempus from Genmab in 2022.

Scott Myers

→ Ex-AMAG Pharmaceuticals and Rainier Therapeutics chief Scott Myers has been named chairman of the board at Convergent Therapeutics, a radiopharma player that secured a $90 million Series A last May. Former Magenta exec Steve Mahoney replaced Myers as CEO of Viridian Therapeutics a few months ago.

→ Montreal-based Find Therapeutics has elected Tony Johnson to the board of directors. Johnson is in his first year as CEO of Domain Therapeutics. He is also the former chief executive at Goldfinch Bio, the kidney disease biotech that closed its doors last year.

Habib Dable

→ Former Acceleron chief Habib Dable has replaced Kala Bio CEO Mark Iwicki as chairman of the board at Aerovate Therapeutics, which is signing up patients for Phase IIb and Phase III studies of its lead drug AV-101 for pulmonary arterial hypertension. Dable joined Aerovate’s board in July and works part-time as a venture partner for RA Capital Management.

Julie Cherrington

→ In the burgeoning world of ADCs, Elevation Oncology is developing one of its own that targets Claudin 18.2. Its board is now up to eight members with the additions of Julie Cherrington and Mirati CMO Alan Sandler. Cherrington, a venture partner at Brandon Capital Partners, also chairs the boards at Actym Therapeutics and Tolremo Therapeutics. Sandler took the CMO job at Mirati in November 2022 and will stay in that position after Bristol Myers acquired the Krazati maker.

Patty Allen

Lonnie Moulder’s Zenas BioPharma has welcomed Patty Allen to the board of directors. Allen was a key figure in Vividion’s $2 billion sale to Bayer as the San Diego biotech’s CFO, and she’s a board member at Deciphera Pharmaceuticals, SwanBio Therapeutics and Anokion.

→ In January 2023, Y-mAbs Therapeutics cut 35% of its staff to focus on commercialization of Danyelza. This week, the company has reserved a seat on its board of directors for Nektar Therapeutics CMO Mary Tagliaferri. Tagliaferri also sits on the boards of Enzo Biochem and is a former board member of RayzeBio.

→ The ex-Biogen neurodegeneration leader at the center of Aduhelm’s controversial approval is now on the scientific advisory board at Asceneuron, a Swiss-based company focused on Alzheimer’s and Parkinson’s. Samantha Budd-Haeberlein tops the list of new SAB members, which also includes Henrik Zetterberg, Rik Ossenkoppele and Christopher van Dyck.

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Deflationary pressures in China – be careful what you wish for

Until recently, China’s decelerating inflation was welcomed by the West, as it led to lower imported prices and helped reduce inflationary pressures….

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Until recently, China’s decelerating inflation was welcomed by the West, as it led to lower imported prices and helped reduce inflationary pressures. However, China’s consumer prices fell for the third consecutive month in December 2023, delaying the expected rebound in economic activity following the lifting of COVID-19 controls. For calendar year 2023, CPI growth was negligible, whilst the producer price index declined by 3.0 per cent.

China’s inflation dynamics

China’s inflation dynamics

Chinese consumers are hindered by the weaker residential property market and high youth unemployment. Several property developers have defaulted, collectively wiping out nearly all the U.S.$155 billion worth of U.S. dollar denominated-bonds. 

Meanwhile, the Shanghai Composite Index is at half of its record high, recorded in late 2007. The share prices of major developers, including Evergrande Group, Country Garden Holdings, Sunac China and Shimao Group, have declined by an average of 98 per cent over recent years. Some economists are pointing to the Japanese experience of a debt-deflation cycle in the 1990s, with economic stagnation and elevated debt levels.

Australia has certainly enjoyed the “pull-up effect” from China, particularly with the iron-ore price jumping from around U.S.$20/tonne in 2000 to an average closer to U.S.$120/tonne over the 17 years from 2007. With strong volume increases, the value of Australia’s iron ore exports has jumped 20-fold to around A$12 billion per month, accounting for approximately 35 per cent of Australia’s exports. 

For context, China takes 85 per cent of Australia’s iron ore exports, whilst Australia accounts for 65 per cent of China’s iron ore imports. China’s steel industry depends on its own domestic iron ore mines for 20 per cent of its requirement, however, these are high-cost operations and need high iron ore prices to keep them in business. To reduce its dependence on Australia’s iron ore, China has increased its use of scrap metal and invested large sums of money in Africa, including the Simandou mine in Guinea, which is forecast to export 60 million tonnes of iron ore from 2028.

The Chinese housing market has historically been the source of 40 per cent of China’s steel usage. However, the recent high iron ore prices are attributable to the growth in China’s industrial and infrastructure activity, which has offset the weakness in residential construction.

Whilst this has continued to deliver supernormal profits for Australia’s major iron ore producers (and has greatly assisted the federal budget), watch out for any sustainable downturn in the iron ore price, particularly if the deflationary pressures in China continue into the medium term.

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Deterra Royalties half-yearly result: stable performance and growth Initiatives

Deterra Royalties (ASX:DRR) was established through a strategic demerger from Iluka Resources Ltd (ASX:ILU) in 2020. At the core of Deterra Royalties portfolio…

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Deterra Royalties (ASX:DRR) was established through a strategic demerger from Iluka Resources Ltd (ASX:ILU) in 2020. At the core of Deterra Royalties portfolio lies long-life, Mining Area C (MAC), a premier iron ore mining operation in the Pilbara region of Western Australia, operationally managed by BHP. This key asset is underpinned by a royalty agreement that ensures Deterra Royalties receives quarterly payments equivalent to 1.232 per cent of the revenue generated, alongside substantial one-off payments of A$1 million for each dry metric tonne increase in annual production capacity. 

South flank, a critical component of the MAC, exemplifies BHP’s latest advancement in iron ore mining, marking its inaugural production in May 2021. In financial year 2023, MAC annual iron ore production amounted to 126 million wet metric tonnes, up 14 per cent on the prior year. The company has reiterated that capacity payments have been set at 118 million tonnes last year and are expected to be updated to current production of 126 million tonnes in June 2024, with potential upside to 145 million tonnes shortly after that. Thus, there is potential upside to dividends of $8 million in capacity payments by June 2024. Meanwhile, revenue amounted to $215.2 million plus a $13 million capacity payment from south flank expansion. Net profit after tax came in at $152.5 million. 

The company distributes 100 per cent of its profits as dividends. 

In a global landscape marked by burgeoning uncertainty and China’s post-COVID-19 economic malaise, Deterra Royalties emerges as providing iron exposure with greater stability. Deterra Royalties offers investors exposure to the iron ore market with distinctly reduced volatility compared to traditional mining entities. 

With that background established, the company released its half-yearly results for FY24, reporting figures that were largely in line with both internal expectations and market consensus. The company continues to explore avenues for portfolio expansion, particularly in bulk, base, and battery commodity royalties, although no deals have been finalised. With substantial undrawn debt facilities of $500 million and recent declines in junior mining company stocks, Deterra Royalties may be moving closer to securing new deals to create new royalties or purchase existing royalties. 

Deterra Royalties reported a net profit after tax (NPAT) of $78.7 million for the first half of FY24, matching internal projections and closely aligning with market estimates, albeit slightly below consensus by three per cent. The declared dividend of $14.89 conditions precedent, representing 100 per cent of NPAT in accordance with Deterra Royalties dividend policy, also fell within anticipated ranges but slightly missed consensus. Revenue for the period stood at A$119 million, consistent with the pre-reported royalty revenue update. 

Operating costs dipped by two per cent from the previous half-year to A$4.3 million but were up by four per cent year-on-year. Notably, business development costs surged to A$1.3 million, marking a 50 per cent increase from the previous period and a 140 per cent rise from the same period last year. This uptick reflects Deterra Royalties intensified efforts to evaluate growth opportunities, as managing director Julian Andrews highlighted. 

Deterra Royalties remains steadfast in its pursuit of growth opportunities, maintaining a flexible approach in both the size and type of investments/royalties sought. The company’s focus spans non-precious metals, including bulk, base, and battery metals, primarily targeting developed mining jurisdictions across Australia, North America, South America, and Europe. Deterra Royalties continues to prioritise royalties for production or near-production companies. 

A company that pays 100 per cent of its earnings as a dividend is relatively easy to value with a discounted cash flow (DCF). Adopting a required return of 6-7 per cent of the weighted average cost of capital (WACC), Deterra Royalties valuation falls in a range between A$4.70 and $5.10 per share. 

In summary, Deterra Royalties’ half-yearly results provided the stable and somewhat predictable operational performance our portfolio managers value, whilst also providing iron ore exposure. 

The Montgomery Fund and the Montgomery [Private] Fund owns shares in Dettera Royalties. This blog was prepared 19 February 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Deterra Royalties, you should seek financial advice. 

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