Recce Pharmaceuticals Ltd (ASX:RCE, OTC:RECEF) has been highlighted as a stock potentially poised for significant growth by Edison Research, based on the potential to commercialise its synthetic anti-infective platform, specifically its topical treatment RECCE® 327 for diabetic foot infections (DFIs).
DFIs are a significant complication of diabetes, often leading to severe morbidity, including amputations. Up to 34% of those with type 1 or 2 diabetes will have at least one foot ulcer in their lifetimes.
Some 50% to 60% of those ulcers develop infections and up to 20% will require amputations – in the first year following diagnosis, up to 10% of patients die.
Complicating matters, recurrence rates at 3-5 years are very high at 65%, leading to a 5-year mortality rate of 50% to 70%.
Phase 3 clinical trial for R327
Recce announced it would advance its R327 trials in Indonesia to Phase 3 in April this year, targeting registration to begin this quarter, Q3 2024.
Edison sees the decision as a strategic one, given the high incidence of diabetes and a significant need for treatment in the region.
Previous trials showed strong results, effectively resolving or curing infections in most patients.
“We anticipate that positive results from the trial could lead to Recce’s earliest R327 commercialisation opportunity, through a launch in South-East Asia in the DFI indication in H2 CY26,” Edison Research healthcare analyst Pooya Hemami wrote in the report.
The company's approach leverages R327's unique mechanism of action, which involves the irreversible destruction of bacterial cell walls, thereby reducing the likelihood of resistance development — a common issue in DFI treatment.
Recce is also advancing R327 in an intravenous formulation for complicated urinary tract infections (cUTIs) and urosepsis, and the topical treatment for burn wound infections as well as DFI.
Read: Recce Pharmaceuticals reports positive data from Phase 1/2 UTI/urosepsis rapid infusion clinical trial of RECCE® 327
Market potential and valuation
Edison’s report estimates the incidences of mild DFIs suitable to be treated with topical therapies would be about 150,000 per year in the US, with potential for R327 to be used in about 25% of cases.
“We continue to assume an average net per-course pricing of approximately US$1,500 at US launch, this results in estimated peak combined sales across both the US and Europe of US$102 million in 2033,” the report reads.
The market research firm anticipates Recce could achieve commercialisation with R327 by the second half of 2026 in Indonesia and other ASEAN countries, offering a potential market of about 195,000 cases per year in the region.
“At 20% assumed peak market share in the region, this would translate into [about] A$50 million in peak sales, with Recce entitled to a 25% royalty according to our forecasts.”
The combination of a recent A$10 million capital raise, new research and development grants and rebates, as well as a delay for R327 clinical trials – which is expected to shift initiation to later in the 2025 financial year due to the involvement of US study sites – led Edison to reduce its FY25 R&D expenditure estimates for RCE.
Read: Recce Pharmaceuticals granted US$2 million from US Department of Defense for RECCE® 327 Gel
“We maintain our R327 commercial launch timing estimates and we obtain an rNPV valuation, inclusive of the A$10 million financing, of A$688.5 million (or A$3.07 per share), versus A$661.3 million (or A$3.27 per share) previously,” Edison Research healthcare analyst Pooya Hemami wrote.
“The reduced value per share is due to the anticipated increase in share count (from 204 million pre-placement to 226.2 million) following the A$10 million financing.”
Recce Pharmaceuticals is currently trading at A$0.46.