Percheron Therapeutics (ASX:PER) picks itself up in 2025

Percheron Therapeutics (ASX:PER)

It’s a fact of life in the biotech game: drugs often fail in clinical development. Percheron Therapeutics (ASX:PER) had one of those failures late last year. It was working on Avicursen for the treatment of Duchenne Muscular Dystrophy and had reason to believe from earlier work that the drug had potential to reduce muscle damage found in Duchenne by reducing inflammation. Alas, the top line data from its Phase 2 showed it didn’t.

Percheron Therapeutics, under the leadership of CEO Dr James Garner, chose to take advice from Jerome Kern at this point, as per that famous 1936 song ‘Pick Yourself Up’. It picked itself up, dusted itself off and started all over again by talking to the business development teams of numerous pharma companies globally to see what drug development programmes were available for in-licensing. It took over six months of project evaluation and due diligence but, after looking at well over 100 programmes, it found one that was compelling, a cancer immunotherapy drug called HMBD-002. We’ve looked at this new potential company-maker, and we liked what we saw.

Standing on the shoulders of giants

HMBD-002 is a monoclonal antibody that targets an immune checkpoint called ‘VISTA’. The immune system has numerous molecular checkpoints that can either turn up or turn down an immune response. Back in the 1990s, as scientists were beginning to understand these checkpoints, it was realised that they would make useful cancer drug targets. One of the reasons cancers get going inside a person’s body is that the tumour, in effect, turns off an immune response. America’s James Allison and Japan’s Tasuku Honjo won the 2018 Nobel Prize for Medicine for figuring out that if you drug a checkpoint, the immune system can, in effect, get its anti-cancer mojo back. Allison’s work got the cancer immunotherapy revolution going with a Bristol-Myers Squibb drug called Yervoy, which targets the CTLA-4 checkpoint and gained FDA approval in 2011. Honjo went one better with his work on PD-1. He effectively helped create the mother of all blockbusters, Merck & Co.’s Keytruda, FDA approved in 2014 and in 2024 worth a massive US$29.5bn in sales – that’s right, US$29.5bn in just one year.

The decade since Keytruda has seen various pharma companies go after other immune checkpoints looking for the next blockbuster. Immutep (ASX: IMM) went after a checkpoint called LAG-3 and it’s now in late-stage clinical development with eftilagimod alpha. GSK has an antibody called cobolimab which hits a checkpoint called TIM-3, and that drug is in Phase 2/3 in non-small cell lung cancer patients. And so on. And now Percheron joins the search with its new monoclonal antibody drug that targets VISTA. It has in-licensed HMBD-002 from Hummingbird Bioscience, a privately held company based in Singapore, and that company has completed a Phase 1 study across multiple tumour types where data is expected to be available shortly.

Watch our interview with Dr James Garner, CEO of Percheron Therapeutics

T cells and Helper T cells

VISTA is short for ‘ V-domain immunoglobulin suppressor of T cell activation’. As the name suggests, it’s function in the immune system seems to be to blunt too much T cell activation, T cells being the cells that either kill cancer cells directly (Cytotoxic T cells) or signal to other immune cells that there’s a bad guy to go after (Helper T cells). It’s a reasonable bet that a drug that hits VISTA can have anti-cancer effects. The molecule shows up in multiple tumour types, and there’s evidence that a high level of VISTA expression on a patient’s white blood cells is associated with resistance to PD-1 inhibition, which means that patients that fail on Keytruda could successfully be treated with a VISTA inhibitor like Percheron’s new drug.

Other companies have tried and then abandoned anti-VISTA drugs, and Hummingbird Bioscience believes that’s because of toxicity issues. So, it was careful what kind of antibody it developed. Hummingbird used its drug designed smarts to create a different kind of antibody. Most monoclonals in medicine are one of four subclasses of immunoglobulin. There’s a subclass called IgG4 which can modulate immune responses but not pack such a punch that it arranges to kill the cells that it binds to. Keytruda is an IgG4 antibody, and HMBD-002 is an IgG4-based monoclonal antibody to VISTA.

Data publishing soon

Hummingbird’s Phase 1 of HMBD-002 was a 48-patient study in which 28 patients just got HMBD-002 and 20 got HMBD-002 plus Keytruda. The full data set from this study isn’t yet available, but what we know is that the safety profile of the drug is excellent, with no dose limiting toxicities reached and only a modest level of treatment-related adverse events. Now, this was primarily a safety study, and the patients evaluated had advanced tumours, had been heavily pre-treated, and many had failed previous rounds of immunotherapy drugs. So, Percheron isn’t pushing the idea of a large level of responses in its patients. What it does feel at liberty to say is that ‘several patients showed encouraging duration of response’.

It’s interesting that some of the patients had triple-negative breast cancer – an aggressive cancer with a generally poor prognosis – and they had failed on Keytruda but went at least ten more cycles with HMBD-002. Percheron is now working on bringing the data from Phase 1 together and getting it published, if possible, in a prestigious peer-reviewed journal. Then comes the choice of development pathway – to run a Phase 2 as a monotherapy or a combination, which kind of patients to recruit, and what other drugs, if any, to use in the combination.

Virtually no cash down and plenty of upside

Hummingbird licensed HBMD-002 to Percheron on very favourable terms. The Australian company is on the hook for up to US$287 in milestone payments, plus royalties on net sales. They’ll be payable once everyone knows this drug has legs. But the upfront was a mere US$3m. So, why should investors come and look at Percheron again only six months after the failure of Avicursen? We see several reasons.

Firstly, HMBD-002 is a well-crafted programme likely to move into mid-stage clinical development shortly.

Secondly, it represents a way for investors interested in cancer immunotherapy to invest in an emerging but well understood target.

Thirdly, the team under James Garner has the drug development skills to move it forward.

But, perhaps most compelling, you can virtually get Percheron Therapeutics stock for free – this stock has dropped to cash backing, and there remains $9m to fund the next stage. James Garner likes this opportunity so much he’s been an on-market buyer of stock lately.

Sure, drug development is risky, but not a one-in-a-million shot. One 2010 study from Tufts University in Boston, which hosts a Center for the Study of Drug Development, found that the clinical approval success rate in America over the previous 15 years for pharma companies where the company had originated the compound was 32% for large molecules. Since this drug is through Phase 2, an investor’s chances here are better than one in three. And that’s if they stick around for the entire journey.

We see potential for a re-rate just back to the kind of pricing a mid-stage cancer immunotherapy drug programme would attract, which is perhaps $20-50m more than the effective zero now afforded by Percheron Therapeutics stock. We believe it’s worth looking at!

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