Recce to raise up to A$15.8m
On 10 April 2025, Recce announced it is raising up to A$15.8m in equity fundraising through a A$5.0m share placement to an Australian-based private investor, priced
at A$0.28/share (a 13.8% discount to the 9 April closing price of A$0.325/share) and
up to A$10.8m through an entitlement offer to the remaining shareholders to allow
them to buy a proportionate amount of shares at the same price. The placement has
now completed and settled, with the 17.9m new shares now listed for trading.
Under the entitlement offer, the remaining Recce shareholders who held shares on 16
April will have the option to buy one new Recce common share for every six shares
held at an issue price of A$0.28 per share. The entitlement offer will run from 22
April to 5 May and any new shares not applied or subscribed for will form part of
a shortfall facility. Eligible shareholders who take up their full entitlement may
then apply for additional new shares under the shortfall facility. All in, if maximally
subscribed (including the shortfall facility), we estimate that an additional 38.6m
shares could be issued from the entitlement offer, resulting in A$10.8m in gross proceeds.
The allotment of new shares under the entitlement offer and their start of trading
(and listing) is expected between 5 and 9 May.
Funds largely directed towards a topical R327G programme
Recce’s primary focus for CY25 is on advancing the topical gel formulation (R327G)
of its lead anti-infective therapeutic drug candidate, R327. The company is gearing
up to start a registration-enabling pivotal Phase III Indonesian study in Q2 CY25
for R327G as a treatment for DFIs, as detailed in our earlier note, and is expected to start imminently. Approximately A$5.6m of the proceeds from the
fundraising will be allocated to this study. If results are supportive and consistent
with earlier data from a Phase I/II DFI study (reported January 2024) and more recent data (reported February 2025) from Recce’s open-label Phase II R327G study in ABSSSI, we anticipate potential commercialisation in Indonesia and ASEAN countries in H2
CY26. This would provide Recce’s earliest R327 commercialisation opportunity.
| Exhibit 1: Allocation of proceeds from Recce’s Q2 CY25 placement and entitlement offer |
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| Source: Recce Pharmaceuticals |
In addition to funding the Indonesian Phase III study, Recce also plans to spend A$2.0m
of the financing proceeds to prepare for the regulatory approval application for R327G
to the Indonesian Food and Drug Authority (BPOM) and for the potential filing of an
IND application with the FDA. IND clearance would then allow US clinical studies of
R327 to begin. As discussed in our earlier note, we expect Recce will complete and submit an IND application to the US FDA in H2
CY25 or H1 CY26, for both the topical and IV formulations of R327. We anticipate the
IND clearance of the intravenous (IV) formulation to inform development steps for
a Phase II complicated urinary tract infection (and urosepsis) trial of IV R327 with
US study sites, but we do not anticipate a study to start until H1 CY26.
In addition, Recce has earmarked A$4.6m from the financing to start a separate Phase
III ABSSSI registrational study in Australia. The company had signalled its plans
to start this Phase III ABSSSI study in Australia in H2 CY25 and we await details
on the planned design for the study. We expect that IND clearance by the FDA (as discussed
above) would also enable Recce to either expand this planned Phase III Australia ABSSSI
R327G study to include US study sites, or to start a separate US-based Phase III ABSSSI
study. Altogether we continue to model commercialisation of R327G in ABSSSI in the
US and Australia in CY28.
In addition, A$1.1m of the financing has also being allocated for general working
capital purposes. At end-H125 (31 December), Recce reported gross cash of A$1.94m
and A$3.96m in debt, resulting in a net debt position of A$2.02m (excluding A$0.8m
in lease liabilities). After considering the A$5.0m placement and provided that Recce’s
A$10.8m entitlement offer is fully subscribed, its pro forma gross cash balance (at
end-December 2024) would then be A$17.7m. We expect this would be enough to fund the
company’s operations into Q2 FY26.
Recce to add up to 20 DFI patients in open-label Phase II R327G study
The company recently announced that it has received Human Research Ethics Committee approval for up to 20 additional
patients to receive R327G as part of the existing open-label Phase II study protocol
for this Australian study. Recce first announced in February 2025 that this study in ABSSSI achieved all primary and secondary efficacy endpoints,
whereby after seven days of treatment, 86% of patients (25 of 29) treated with R327G
had a successful clinical response, and at 14 days of treatment, 93% (27 of 29) had
achieved a primary efficacy endpoint. The addition of up to 20 additional DFI patients
to this study protocol provides an opportunity to strengthen the clinical data profile
of R327G and to support future regulatory submissions. Recce expects this study to
run in parallel to the company’s Indonesian Phase III DFI study (discussed further
below) and the company’s planned Australian Phase III study in ABSSSI (due to begin
in H2 CY25).
Topical R327G set to start Indonesian Phase III study
Recce’s next key catalyst is starting the R327G registration-enabling Phase III pivotal
study that if successful would transition the company to a commercial-stage entity.
Recce is in final stages of manufacturing of the topical gel product and placebo.
Once completed and the product has been sent to Indonesia, Recce expects to start
patient dosing imminently.
The Indonesian Phase III study will be a double-blinded placebo-controlled design
with a planned total enrolment of 300 patients, where R327G will be compared to placebo
(with 200 subjects planned to receive R327G and 100 to receive placebo). The study
will be initially conducted at PT Siloam International Hospitals, the largest private
hospital network in Indonesia. The company expects the study to run for approximately
12 months. Recce anticipates the Indonesian registrational Phase III DFI study may
reach statistically significant efficacy after completing treatment on 106 patients
(compared to the trial’s planned enrolment of 300 patients). Recce expects to report
interim data (on 106 patients) from the Phase III study, consistent with the BPOM-approved
study protocol, by Q1 CY26. If positive, the company expects to be able to launch
R327 in Indonesia in CY26 and our model continues to assume a potential launch in
Indonesia and other ASEAN territories in H2 CY26.
Financials and valuation
Our operating forecasts are essentially unchanged; see our last note for details.
As Recce’s current share price is at or above the exercise price (A$0.28) of the entitlement
offer, our model and forecasts assume the entitlement will be exercised in full, resulting
in gross proceeds of A$10.8m (leading to total Q2 CY25 financing of A$15.8m in gross
proceeds including the closed A$5.0m private placement). This also results in an increase
in shares outstanding by 38.6m (from an estimated 249.7m after the A$5.0m share placement).
We estimate the A$15.8m in gross proceeds will support Recce’s operations into Q226
(Q4 CY25), as it initiates the Phase III Indonesian study and the Phase III Australian
ABSSSI study.
Given it has not yet closed, our baseline Recce valuation does not include proceeds
(or related share issuances) from the entitlement offer. The only difference compared
to our last valuation is that we now consider the A$5.0m in gross proceeds received
by the institutional placement in April 2025. At end-H125 (31 December), Recce reported
gross cash of A$1.94m and A$3.96m debt. Given the A$5.0m placement, we calculate a
Q225 pro forma net cash position of A$3.0m (excluding A$0.8m in lease liabilities).
| Exhibit 2: Recce Pharmaceuticals rNPV valuation |
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| Source: Edison Investment Research |
We now obtain an rNPV, including A$3.0m Q225 pro forma net cash, of A$615.1m (or A$2.51
per share), versus A$610.1m (or A$2.68 per share) previously. The reduction in the
per-share value is due to the 17.9m increase in shares outstanding after the placement.
If we assume full allotment of the entitlement offer (A$10.8m), our per-share valuation
would decrease to A$2.17 per share.
If the entitlement offer is fully exercised, we calculate the company’s pro forma
gross cash position at end-H125 to be A$17.7m. As stated earlier, we assume this cash
level will be enough for Recce to maintain its operations into Q226 (Q4 CY25). We
continue to assume clinical trial-related costs for each of the four indications in
our model (ABSSSI, sepsis, cUTIs and burn wounds) will ramp up significantly in FY26.
Any delays to the start of such activities would reduce our funding estimates but
may push back our potential launch forecasts.
Depending on the availability of capital, the company may decide to prioritise certain
programmes, which could affect the timing of launches in non-prioritised indications
and our overall valuation. Our funding model assumes Recce will advance all four programmes
in parallel. However, if the company prioritises R327G in ABSSSI and DFIs and puts
its remaining development programmes on hold until the initial R327G commercial approval,
its overall funding need will reduce as it could then apply post-launch commercial
revenue towards resuming R&D and product development activities in the remaining targeted
indications. Partnerships and/or non-dilutive forms of funding (such as third-party
sponsorship of clinical trials) could also reduce the future funding need, although
these are not specifically included in our forecasts.
Assuming Recce continues to develop all four planned clinical-stage indications, we
project it would need to raise A$125m in total net proceeds by FY29 (vs A$140m previously)
before becoming sustainably cash flow positive. As per the usual Edison method, we
model these raises as illustrative debt. If our projected funding need of A$125m is
raised through equity issuances at the prevailing market price of c A$0.29, our effective
value per share would decrease to A$1.09 (including cash raised via equity).
| Exhibit 3: Financial summary |
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| Source: Company accounts, Edison Investment Research |
