Scott Power: Which stock fell off its perch on poor trial results this week?

Percheron fell ~90% in a week Morgans analyst Scott Power described as one of both good and bad news for the ASX healthcare sector.

There's no holiday cheer for one biotech's shareholders in particular. Pic via Getty Images

• Percheron shares tumbled on negative Duchenne muscular dystrophy phase 2b trial results this week

• EBR Systems edged closer to FDA approval for WiSE with a manufacturing pre-approval inspection in early January

• ASX health stocks fell 1% over past five days, while the broader market ticked down 2.3% 

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, gives his take on the ASX healthcare sector for the week and his ‘Powerplay’ stock pick. 

'Twas the week before Christmas and all… wasn't exactly tip-top with the ASX healthcare sector. The Grinch left his cave and stole most of the share value of Percheron Therapeutics (ASX:PER) on Wednesday after the company announced a poor trial result.

The share price of Percheron fell almost 90% on news its phase 2b trial of Percheron's lead candidate avicursen (ATL-1102) into non-ambulant (unable to walk unassisted) boys with Duchenne muscular dystrophy failed to achieve its primary endpoint, which measured upper limb function at week 25 of treatment, compared with placebo.

"There were no statistically significant differences in efficacy on available secondary endpoints, nor was there a clear directional trend toward benefit associated with administration of avicursen," the company said in an ASX announcement.

"After careful consideration of these results, and in consultation with investigators, the company has determined that it is not in the best interests of patients or shareholders for the study to continue and has therefore resolved to terminate it as soon as practicable."

Morgans health care analyst Iain Wilkie said the result was "very disappointing and a clear failure".

"Current cash backing likely sits around $20 million but considering cash burn and trial close-out costs we see Percheron sitting with around $10 million (equivalent to 1 cent/share) in 12 months time, which is where our target price now sits," he said.

Morgans has cut its 12-month target price for Percheron from 24 cents to 1 cents and its rating from a speculative buy to reduce.

'Tis the season to be jolly for Neurizon

For Neurizon Therapeutics (ASX:NUZ) 'tis the season to be jolly.

The company made several positive announcements during the week including revealing the filing of an Investigational New Drug (IND) application with the US Food and Drug Administration (FDA) for lead drug candidate NUZ-001.

That's a drug that has the purpose of treating amyotrophic lateral sclerosis (ALS), also known as motor neurone disease.

An IND application provides the FDA with essential information to authorise the safe testing of an investigational drug in humans or an approved drug for a new use or patient population.

The filing marks a pivotal step in enabling start of phase 2/3 trial of NUZ-001 within the Healey ALS Platform Trial framework, a prestigious US program aimed at speeding up the assessment of new ALS treatments by evaluating several experimental drugs at once.

The FDA has a period of 30 days to review the IND application. The company is looking to start patient enrolment in early H1 CY25.

Neurizon also announced this week the European Medicines Agency had granted orphan medicinal product designation for NUZ-001 and released a  positive interim eight-month update on its ongoing 12-month OLE study of the drug in patients with ALS.

Power's Powerplay: EBR Systems getting closer to FDA approval for WiSE

Medtech EBR Systems (ASX:EBR) is Power's pick of the week with the company announcing it was edging closer to FDA approval for its WiSE CRT (cardiac resynchronisation therapy) system, which holds the distinction of being the world’s first leadless pacemaker for the heart’s left ventricle.

EBR announced this week a manufacturing pre-approval inspection (PAI) with the FDA had been scheduled for the week commencing January 6, 2025.

The key milestone follows the FDA’s start of its substantive review process of EBR’s pre-market approval (PMA) submission for WiSE in late September.

Silicon Valley-based EBR said the key purpose of the PAI was to confirm manufacturing, processing and packing procedures comply with quality system regulations and its facility can consistently produce devices that meet the approved specifications.

The substantive review involves comprehensive evaluation, feedback and information requests prior to an approval decision.

"EBR is stepping closer to that FDA approval, which the company expects in the first quarter of next year with our best guess sometime in February," Power said.

"That share price has rallied to ~$1 on the news."

Morgans has a speculative buy rating on EBR and 12-month target price of $1.76.

ASX healths stocks fall

At 10.40am (AEDT) on Friday the S&P/ASX 200 Health Care index (ASX:XHJ) was down 1% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 2.3% for the same period.

The markets fell heavily on Thursday after the US Federal Reserve’s cautious outlook on future rate cuts triggering a broad sell-off.

"We've got to remember the markets have had a huge rally for much of the year,"  Power said.

"The US cut interest rates by 25bps which was in line with expectations but the expectations of rate cuts next year has moderated which took the air out of our Christmas rally balloon."

Morgans upgrades Sigma on Chemist Warehouse merger

On the bigger end of town Power said the scheme booklet and prospectus had been released for the merger between privately owned discount pharmacy chain Chemist Warehouse and pharmaceutical distributor Sigma Healthcare (ASX:SIG).

"We've got some dates for the merger and all things being equal those two businesses will come together on February 13, 2025," Power said.

"We expect there will be a fair amount of passive index buying as the business re-weights its position in the ASX 200 and in the March rebalance it will probably get into the ASX 100, which will generate additional buying.

"It will also get into some of the global indices like the MSCI and FTSE."

Morgans has changed its recommendation from a hold to an add rating on Sigma and has increased its 12-month target price from $2.67 to $2.98.

"Our view is that clients should have this quality retail healthcare name as part of their portfolio," Power said.

Research Corner: Restoring brain function in Alzheimer's patients

An ultrasound therapy developed at The University of Queensland (UQ) to potentially restore brain function in Alzheimer’s patients has been licensed to Ceretas, a new spin-off company.

Created by Professor Jürgen Götz from UQ's Queensland Brain Institute, the technology uses sound waves to enhance neuronal signalling and clear toxic amyloid and tau proteins linked to Alzheimer’s.

“The therapy increases neuronal signalling and thereby restores memory and cognition by enhancing communication between brain cells," Professor Götz said.

"But it also targets and clears the build-up of the proteins toxic amyloid and tau by activating the brain's intrinsic clearance mechanism."

He said while current Alzheimer’s treatments address symptoms and slow disease progression, they don’t offer a cure.

Ceretas will now advance the system toward clinical use with results of a safety trial expected in early 2025, offering hope as global dementia cases rise to a projected 82 million by 2030.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

At Stockhead, we tell it like it is. While Neurizon Therapeutics and EBR Systems are Stockhead advertisers, the companies did not sponsor this article.

Originally published as Scott Power: Which stock fell off its perch on poor trial results this week?