Edison Investment Research has raised its valuation of Recce Pharmaceuticals Ltd (ASX:RCE, OTC:RECEF) to reflect the rolling forward of Edison’s estimates and reductions in R&D and SG&A cost projections, following Recce’s most recent quarterly cash flow update.
The research firm now has a risk-adjusted net present value (rNPV) of A$652.6 million (or A$3.20/share) for Recce, versus A$551.1 million previously.
The change in valuation follows Recce announcing several positive developments in recent weeks relating to its therapeutic programs, particularly for lead anti-infective candidate RECCE® 327 (R327).
Recce entered a strategic collaboration with an Indonesian biomedical company, PT Etana Biotechnologies (Etana), which may support the engagement of relatively lower-cost clinical trial sites with potentially deep patient pools in South-East Asia (SEA).
The company also recently disclosed positive efficacy results among five patients treated in its Phase I/II study of topical R327 in patients with diabetic foot infections (DFI), and it now plans to expand this program to additional domestic and global sites.
Edison continues to view the IV formulation as Recce’s strongest commercial opportunity, specifically the sepsis (and/or urosepsis) and cUTI indications.
Recce is prioritising development in this area as it continues to advance a Phase I/II study assessing the safety, tolerability and pharmacokinetics of R327 IV at faster infusion rates (compared to R327-001, its initial single-dose IV R327 dose escalation trial).
The company expects that faster infusion rates could enable broader access to the drug in primary care and acute patient care settings.
Edison expects Recce to submit an Investigational New Drug application to the US FDA and then start this separate multiple-dose Phase II efficacy study in UTIs/urosepsis in or around mid-CY24.
The research firm assumes that if the results of the urosepsis study are positive, the pivotal Phase III program (and overall commercial sepsis program) would include all forms of sepsis.
Edison anticipates the start of such pivotal sepsis studies (in Europe and the United States) in H2 CY25 and it maintains its estimate for potential approval and commercialisation in sepsis in H2 CY28.
Cash runway
Recce’s cash flow statement for the quarter ended 31 December 2023 showed a quarterly operating cash flow loss of A$2.29 million, dampened by the receipt of a A$2.28 million R&D tax rebate during the period.
The company ended the period with a gross cash balance of A$4 million.
Edison now anticipates FY24e and FY25e net operating cash burn rates of A$24.7 million (down from A$32.7 million previously) and A$54.9 million (A$61.0 million previously).
The research firm estimates that the company’s cash runway will last into Q2 CY24 and models the company will raise A$15 million (A$25 million previously) in total additional funding before the end of FY24.