The CSL Limited (ASX: CSL) share price has continued its poor form and has been unable to climb higher with the market on Tuesday.

This is even after the release of a promising announcement this morning.

At the time of writing the biotherapeutics company’s shares are down 2.5% to $277.99.

What did CSL announce?

This morning CSL announced that it has agreed to exercise its right to acquire clinical-stage biotechnology company Vitaeris.

Vitaeris is currently focused on the phase 3 development of a treatment for rejection in solid organ kidney transplant patients.

Both companies entered into a strategic partnership in 2017 to speed up the development of this program. This partnership included the option for CSL to acquire Vitaeris in full at a later date.

It has now exercised this option, which means Vitaeris’ research assets will now join CSL842 and CSL964 as part of CSL’s portfolio of products in late-stage development to address significant unmet needs in the transplant community.

What is Vitaeris’ treatment?

According to the release, Vitaeris’ lead phase 3 program is investigating the role that a monoclonal antibody called clazakizumab has in treating a naturally occurring inflammatory gene (interleukin6 or IL-6).

This inflammatory gene is the leading cause of long-term rejection in kidney transplant recipients.

CSL’s Executive Vice President and Head of Research and Development, Bill Mezzanotte, spoke positively about the acquisition.

He said: “Clazakizumab has been a promising monoclonal antibody in the Transplant therapeutic area since we started working with Vitaeris several years ago.”

“Acquiring Vitaeris and their associate expertise helps us to continue to grow our strategic scientific platform of recombinant proteins and antibodies. We look forward to continuing to advance this treatment candidate as a potential option for people experiencing rejection, an area where current treatment options for transplant recipients are limited, at best,” he added.

What now?

CSL notes that the cost of acquisition is modest and does not materially change its profit expectation for FY 2020.

The terms of agreement include sales-based milestones and the company will incur additional research and development expenses. These are associated with the completion of the phase 3 clinical trial.

In FY 2021, these additional expenses are estimated to be between US$30 million to US$50 million. While this might seem like a large expense, it isn’t in comparison to its overall research and development spend.

CSL traditionally spends in the region of 11% to 12% of sales on research and development activities. This led to the company pumping US$832 million into these activities in FY 2019.

More reading

• ASX 200 jumps 2.5%: Big four banks surge higher, CSL announces an acquisition
• Why CSL, Elders, Evolution, & Xero shares are dropping lower
• 2 ASX 200 biotech shares to consider buying today
• ASX 200 Weekly Wrap: ASX bulls crash through 6,000 points
• ASX shares could be the best way to grow your wealth in 2020

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The iron ore spot price continues to go from strength to strength, topping US$100 per tonne for the first time this year. China’s iron ore futures market opened more than 6% higher on Monday after top miner Vale SA was ordered to shut operations at a site that accounts for approximately 10% of its output.

Could supply woes make the Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share prices a buy?

Vale SA to close multiple sites 

The Australian Financial Review (AFR) reports that a Brazilian labor court judge ordered Vale SA to close multiple sites after a COVID-19 outbreak among workers.

Investors may remember Vale’s tailings dam collapse in late January 2019. This tragic incident killed 237, left 33 missing and nearly 1,000 displaced. The closure of this mine site resulted in significant supply woes for the global iron ore market. This supply imbalance caused the iron ore spot price to soar from ~US$70 to more than US$120 per tonne in July 2019. This also saw the Rio Tinto, Fortescue and BHP share prices hit record highs or price levels not seen since the GFC.  

Australia is the largest iron ore producing country in the world and is also fortunate enough to have largely tackled the spread of the coronavirus. However, other producers that play a vital role in the iron ore supply chain such as Brazil, Russia and India are still at various stages of the curve and ranked 2nd, 4th and 5th, respectively, for active cases globally. This is likely to see an impact on various parts of their economies, including mining. 

Aussie miners to benefit 

The Rio Tinto, Fortescue and BHP share prices are likely to continue to push higher following strong spot prices. Elevated iron ore prices will continue to support the market-leading dividends paid by Aussie miners. At the time of writing, Rio Tinto currently pays a dividend yield of 5.77%, BHP pays 5.87% and Fortescue pays 6.88%.

From a risk/reward perspective, it may be challenging for investors to buy Fortescue at its current record all-time high prices. Alternatively, I believe it is feasible for the Rio Tinto and BHP share prices to revisit their previous highs. This can be further supported by the swift recovery of other commodities such as copper, coal and oil that make up a small proportion of the ASX 200 miners’ materials portfolios.

More reading

• ASX 200 Weekly Wrap: ASX bulls crash through 6,000 points
• 3 high quality ASX dividend shares you can buy today
• 5 things to watch on the ASX 200 on Tuesday
• 2 strong ASX dividend shares to bolster your income
• Want high-paying dividends? Try Wesfarmers shares and these 2 other ASX options

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Brainchip Holdings Ltd (ASX: BRN) share price is charging higher today after the small-cap ASX tech share announced a joint development agreement with a tier 1 automotive supplier.

About Brainchip

Brainchip produces a neuromorphic processor that brings artificial intelligence to the edge in a way it believes is beyond the capabilities of other products. 

By mimicking brain processing, BrainChip has been able to pioneer a spiking neural network called Akida, which is both scalable and flexible to address the requirements in edge devices. Simply put, an edge device is any piece of hardware that controls data flow at the boundary between two networks, such as a router or a smartphone. 

Akida has been designed to provide a complete ultra-low power and fast AI Edge Network for vision, audio, olfactory and smart transducer applications. The reduction in system latency provides faster response and a more power-efficient system that can reduce the large carbon footprint of data centres.

Why is the Brainchip share price spiking?

This morning, the company announced it has signed a joint development agreement with Valeo Corporation that utilises Brainchip’s Akida neuromorphic System-on-Chip (SoC).

Valeo Corporation is a tier 1 European automotive supplier of sensors and systems for autonomous vehicles (AV) and advanced driver assistance systems (ADAS).

The agreement will see the two companies collaborate on the development of neural network processing solutions for AV and ADAS.

Brainchip believes the validation of its Akida device by a tier 1 supplier of this nature is a significant development.

In AV and ADAS applications, real-time processing of data is critical for the safety and reliability of autonomous systems. Suppliers and manufacturers in the automotive industry have reportedly recognised that the Akida SoC is ideally suited to process data at the “Edge” for their advanced system solutions.

According to Brainchip, by combining the Akida neural network processor with sensors, the resulting system can achieve ultra-low power, minimum latency, maximum reliability, and incremental learning.

“The Akida neural processor’s game-changing high performance and ultra-low power consumption, enables smart sensor integration by solving power and footprint challenges for a variety of sensor technologies,” the announcement read. 

Brainchip was a little light on details but stated the agreement provides for specific performance milestones and payments that are expected to cover the company’s expenses. The term of the agreement is defined by the achievement of performance milestones and the availability of the Akida device.

At the time of writing, the Brainchip share price has surged 42.04% higher to 12.5 cents per share. This takes the company’s current market capitalisation to around $183 million.

More reading

• CSL share price drops lower despite announcing a new acquisition
• Are the Rio Tinto, Fortescue and BHP share prices a buy right now?
• The ANZ share price has soared 37% in 2 weeks. Here’s why.
• Will ASX 200 shares hit a record high in June?
• ASX 200 jumps 2.5%: Big four banks surge higher, CSL announces an acquisition

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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