Recce Pharma seeks range of options to advance new antibiotic, including partnerships, M&A

Published by Louise Weihart, Senior Journalist for Mergermarket, Sydney

05 JUN 2019

Recce Pharmaceuticals [ASX: RCE], a Sydney, Australia-based synthetic polymer antibiotic developer, is actively seeking partnership or M&A opportunities to advance its Phase 1-ready lead compound, Recce 327 for sepsis, Executive Director James Graham, said.

These could include regional licensing deals, joint ventures (JVs), a sale of the Recce 327 asset, or an outright sale of the company, Graham told Mergermarket on the sidelines of last week’s Wholesale Investor event in Sydney.

Interest in the AUD 24m (USD 17m) market capitalization company is increasing as it advances Recce 327 and in the wake of peers’ struggles, Graham said, citing Achaogen’s [NASDAQ: AKAO] filing for Chapter 11 bankruptcy, and RedX Pharma [LON: REDX] and MotifBio [NASDAQ: MTFB] moving out of anti-infectives.

Recce is receiving informal interest from strategic and financial parties, particularly from the US, and Asian markets such as Hong Kong, China, and Singapore, which are facing burgeoning superbug problems and where governments are looking at ways to support new treatments, the exec said.

Recce, which is developing a new class of synthetic antibiotics made from polymers to treat bacteria and superbugs, differentiates itself from other new antibiotic developers in that Recce 327 has been shown in mice to treat both Gram-positive and Gram-negative bacteria as well as superbugs, and has a universal mechanism of action that overcomes any mutations made by bacteria to become resistant, Graham said.

Gram-positive and Gram-negative bacteria’s cell walls have different compositions and react differently in Gram stain tests. Gram-positive bacteria’s cell walls are composed mostly of peptidoglycan, or murein, and stain purple after gram staining, while Gram-negative bacteria’s cell walls have only a thin layer of peptidoglycan and an outer membrane with a lipopolysaccharide component not found in Gram-positive bacteria, and stain red or pink after gram staining.

Recce is having ongoing discussions with the US Food and Drug Administration (FDA) for a clinical and regulatory pathway for a Phase I trial for Recce 327 in the US and has also received Australian Therapeutic Goods Administration (TGA) permission for a last-resort first-in-human trial under its Special Access Scheme, Graham said.

Recce’s largest shareholder is Executive Chairman Graham Melrose with 28.3%, followed by Acuity Capital and Graham with around 4% each, the executive director said, noting that the company will be undertaking non-deal roadshows in Australia, Hong Kong, Singapore and the UK this month (June).

Recce would need about AUD 5m for Phase I and AUD 10m for Phase II trials if it opts to go it alone, Graham said. In February this year, it raised AUD 1.8m via a private placement at AUD 0.14 per share, and the company is now trading at around AUD 0.22 per share, he noted.

About Recce Pharmaceuticals Ltd (ASX: RCE)

Recce Pharmaceuticals Ltd (ASX: RCE) is pioneering the development and commercialisation of a new class of synthetic antibiotics with broad-spectrum activity designed to address the urgent global health problem of antibiotic-resistant superbugs.

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