Edison Investment Research has revised its valuation for Recce Pharmaceuticals Ltd (ASX:RCE, OTC:RECEF) to A$535.6 million (or A$3.00 per share), up from A$497.4 million previously, following an eventful period for the company.
Recce secured ethics approval in April 2023 to start Phase I/II clinical trials in healthy volunteers for the intravenous (IV) formulation of its lead broad-spectrum synthetic polymer anti-infective compound, RECCE 327 (R327), using a more rapid infusion rate.
A Phase II efficacy study in patients with uncomplicated or recurrent urinary tract infections (UTIs) is expected to start in H2 CY23.
The following is an extract from Edison’s research update:
Recent months have been eventful for Recce Pharmaceuticals, with the company presenting its Q323 operational update and announcing ethics approval in April 2023 to commence Phase I/II clinical trials in healthy volunteers for the intravenous (IV) formulation of its lead broad-spectrum synthetic polymer anti-infective compound, RECCE 327 (R327), using a more rapid infusion rate. The Phase I part of the study will assess faster infusion rates of R327 in c 16 healthy participants across three cohorts, with the first cohort recently having successfully completed a 2,500mg R327 dose. A Phase II efficacy study in patients with uncomplicated or recurrent urinary tract infections (UTIs) is expected to commence in H2 CY23. While several potential value inflection points may arise in the next 12 months, obtaining financing is likely to be a near-term strategic priority given the current cash at hand (A$4.6m at 28 April 2023). We value Recce at A$535.6m, up from A$497.4m previously.
Several upcoming catalysts
Following a successful Phase I single dose-escalation safety study of the IV formulation in doses up to 6,000mg (over a one hour infusion) in over 60 volunteers, the ongoing Phase I IV study is assessing faster IV infusions of R327 to evaluate antibacterial effects of the treatment in c 16 healthy volunteers (first cohort of 2,500mg already completed in both male and female subjects). The Phase II portion in patients with UTIs, with a focus on efficacy, is also planned to start in H2 CY23 with readouts in or around year-end CY23. We expect insights from this study to influence the design of the planned Phase II trial in urosepsis in CY24 (c 25% of all sepsis cases are caused by UTIs). Upcoming data readouts from the Phase I/II burn wound infection and diabetic foot infection (DFI) trials are expected in Q4 CY23 and we view these as potential inflection points for Recce.
Financing likely to be a near-term focus
Recce ended Q323 with a cash balance of A$4.0m supported by a A$4.3m R&D receipt from the Australian tax office and a further A$1.9m in advance payments received from Radium Capital during the quarter. An additional A$0.97m was received from Radium Capital in April, taking the total cash balance to A$4.61m as at 28 April. We expect this will be sufficient to fund operations into Q3 CY23. We model that the company will raise A$55m before the end of FY24.
Valuation: Upward revision to A$536m
We have rolled our model forward and updated our forex assumptions, while keeping other underlying assumptions unchanged. Our revised valuation for Recce is A$535.6m (or A$3.00 per share), up from A$497.4m previously