A research note published yesterday by Edison Investment Research reinforced the strategy behind Recce Pharmaceuticals Ltd’s current activities, including pulling together a substantial war chest that funds clinical trial progression through to upcoming Phase 3 trials.
Funding to support trials
Recce has raised up to A$15.8 million through the combination of a share placement and entitlement offer to fund two pivotal Phase 3 clinical trials for its lead anti-infective candidate, R327 topical gel (R327G).
Edison said in its report that this augured well for the anti-infective company, while adjusting its valuation to A$2.51 per share, down from A$2.68, reflecting the increased share count following a recent A$5 million placement.
The fundraising consists of the aforementioned completed A$5 million share placement to a private investor, and an entitlement offer to existing shareholders aimed at raising up to a further A$10.8 million.
Both tranches are priced at A$0.28 per share, representing a 13.8% discount to Recce’s closing price on April 9.
If fully subscribed, the offer would result in the issue of an additional 38.6 million shares, and the A$15.8 million in gross proceeds would support Recce’s operations into the second quarter of the 2026 financial year.
Edison noted that this funding is expected to cover the costs of the company’s lead clinical activities, regulatory filings and general working capital.
Focus on diabetic foot infection trial
The bulk of the proceeds will be directed towards a registration-enabling Phase 3 trial of R327G for the treatment of diabetic foot infections (DFIs), to be conducted in Indonesia.
The company plans to begin the trial in the second quarter of calendar year 2025, with patient enrolment and dosing expected to commence imminently.
The trial will be hosted at PT Siloam International Hospitals, the country’s largest private hospital network.
Edison noted that around A$5.6 million of the fundraising proceeds will be allocated towards Recce’s Phase 3 Indonesian study, which will follow a double-blinded, placebo-controlled design.
The study is expected to recruit 300 patients, with 200 receiving R327G and 100 allocated to placebo.
Recce anticipates that the trial may demonstrate statistically significant efficacy after treatment of 106 patients, at which point interim results are expected by the first quarter of 2026.
“Positive interim results … could lead to commercial launch in Indonesia and other Association of Southeast Asian Nations (ASEAN) member state countries in H2 CY26,” Edison noted.
Australian trial and US regulatory progress also funded
In parallel, Recce will also commence a separate Phase 3 trial of R327G for acute bacterial skin and skin structure infections (ABSSSI) in Australia during the second half of 2025.
A$4.6 million has been allocated to support this study.
While this trial is initially designed for the Australian market, Edison added that “IND clearance by the FDA … would also enable Recce to either expand this planned Phase 3 Australia ABSSSI R327G study to include US study sites, or to start a separate US-based Phase 3 ABSSSI study.”
To enable US clinical development, Recce is planning to submit an Investigational New Drug (IND) application to the United States Food and Drug Administration (FDA) in late 2025 or early 2026.
“This should allow R327 to be assessed in US clinical trials,” Edison said, anticipating potential commercialisation of R327G in ABSSSI in both the US and Australian markets in calendar year 2028.
The company is also allocating A$2 million from the raise to regulatory filings with the Indonesian Food and Drug Authority (BPOM) and to support IND application work.
In addition, A$2.5 million is directed to Recce’s US Department of Defense-supported burn wound program, while the remaining A$1.1 million is earmarked for general working capital and associated offer costs.
Alongside the planned Indonesian study, Recce recently received Human Research Ethics Committee approval to enrol up to 20 additional DFI patients into its ongoing open-label Phase II study in Australia.
This trial had previously reported that 86% of patients achieved clinical response after seven days of treatment, with 93% responding by 14 days.
Edison noted that this extension “provides an opportunity to strengthen the clinical data profile of R327G and to support future regulatory submissions.”
Valuation and financial outlook
Following the A$5.0 million placement, Edison calculated a Q2 FY25 pro forma net cash position of A$3.0 million.
Should the entitlement offer be fully subscribed, the company’s pro forma cash balance at 31 December 2024 would rise to A$17.7 million.
Edison’s report noted that: “This would be enough to fund the company’s operations into Q226 (Q4 CY25),” also noting an expected A$8.5 million R&D rebate in Q4 2025 and a further A$10 million in non-dilutive funding potentially available via an R&D advance facility.
The broker maintained its rNPV valuation of A$615.1 million, equivalent to A$2.51 per share, adjusted from A$2.68 solely due to the expanded share base.
If the entitlement offer is fully exercised, Edison estimates that the per-share valuation would further decline to A$2.17.
The valuation incorporates projected sales for each indication and assigns probabilities of success ranging from 15% to 35%, reflecting their respective stages of development and market maturity.
Funding needs remain, but pathway is clear
Edison continues to model that Recce will require additional funding of A$125 million through FY29 to fully execute its clinical pipeline, including R327 IV formulations for sepsis and complicated urinary tract infections.
That said, if the company were to prioritise R327G in ABSSSI and DFIs and put its remaining development programs on hold this funding need would reduce.
Edison concluded that partnerships or non-dilutive funding mechanisms “could also reduce the future funding need,” but these are not currently included in the base case.
Despite the challenges of advancing a multi-indication clinical portfolio, the broker reiterated that the upcoming Phase 3 trials represent a critical inflection point.
“Recce’s next key catalyst is starting the R327G registration-enabling Phase 3 pivotal study that, if successful, would transition the company to a commercial-stage entity,” the report concluded.