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MST Access - RCE Update Report - 21Jul23.pdf

Recce Pharmaceuticals (RCE.AX) | Analyst: Chris Kallos, CFA

Update Note – Phase 1 R327 IV Study: Meets Primary Endpoints, Safe/Well Tolerated

Price: A$0.69; Valuation: A$2.77 (unchanged): Market Cap: A$123m

·  Independent confirmation of Phase 1 R327 study in 80 subjects – strong data with no serious adverse events

·  Potential in sepsis and urinary tract infections (UTIs)

·  Study suggests R327 also supports healthy cells

Phase 1 study of 80 subjects now complete – Recce Pharmaceuticals has announced that the study of lead asset R327 as an IV formulation is complete, with no serious adverse events. The study randomised 80 healthy male subjects into 8 single-dose cohorts, with 60 receiving R327 and 20 receiving a placebo.

Better-than-expected potential: not only sepsis but also UTIs: The study showed a significant dose-dependent concentration of R327 in urine and plasma., and showed a consistent, steady, and proportional linear increase across measured doses of R327, which should help formulating a dosing regimen for evaluation as a sepsis drug candidate. Notably, the concentration of R327 in urine also rose overall as the dose increased – up to 21X of that in plasma, suggesting strong potential in urosepsis. Also, the drug quickly reduced viable E. coli in urine by more than 99.99%, a promising indicator of its potential in UTIs.

Patients remained safe and healthy; R327 appears to support healthy cells: R327 was well tolerated, with good safety across all doses (50–6,000 mcg). The study saw no significant adverse effects to liver/kidney function, blood clotting properties, hematology or urinalysis parameters, or vital signs, and recorded no cardiac events or abnormalities. All treatment-related adverse effects were mild and resolvable. In fact, the study found indications that R327 supports cell health, with the study specifically seeing signs of improved kidney health.

Developing a new class of anti-infectives for hard-to-treat infections: Recce is developing synthetic polymer anti-infective agents for bacterial and viral infections that are difficult to treat with existing medications. Its agents are based on the proprietary and novel acrolein polymer technology developed by Recce’s founder and inventor, Dr Graham Melrose.

Novel mechanism of action: Recce’s lead asset, R327, shows a novel mechanism of action in in-vitro testing. It is water-soluble at all pH levels, including that of the human stomach.

Fighting back against antimicrobial resistance – even superbugs: R327 is a novel, broad-spectrum anti-infective that is designed to overcome antimicrobial resistance, including superbug forms, even after repeated use.

Substantial promise in preclinical testing: R327 has shown significant selective interaction with a broad range of bacterial cells and viruses in preclinical testing to date.

We maintain our A$2.77/share valuation, calculated using a risk-adjusted net present value (rNPV) method to discount future cash flows.

Beyond technological risk, Recce is subject to various risks typically associated with biotech companies in the early stages of drug development, including the possibility of unfavourable outcomes in clinical trials.

MST Access Updated Report