Recce highlights continuing progress in anti-infective pipeline
Recce held a pipeline update presentation on 19 March, highlighting ongoing advancement of its Phase III Indonesian-focused study of the
topical gel formulation (R327G) of its lead anti-infective therapeutic drug candidate,
RECCE 327 (R327), for the treatment of DFIs. Recce remains on track for potential
market launch and commercialisation of the drug in Indonesia by end-CY26 (and other
ASEAN territories in CY27), pending positive interim results from the study (expected
H2 CY26). Success on this front would mark Recce’s potential transition into a commercial-stage
pharma company with recurring revenue to help fund pipeline expansion. The company
also elaborated on its preclinical-stage collaborations with the US Department of
War (DOW) for advancing R327G for burn wound applications, as well as its internal
programmes for inhaled formulation for the treatment of drug-resistant HAP/VAP.
Indonesian Phase III DFI study continues to progress
Recce has in recent years prioritised clinical development on the topical gel formulation
of R327G, which was a sensible decision as this appears to provide the quickest pathway
to potential commercialisation. The company showed material evidence of a topically-delivered
R327 drug’s potential efficacy in the treatment of DFIs in early 2024, when its Phase I/II study in DFIs met all primary endpoints on five patients, providing
proof-of-concept for topical R327 in this indication. In the trial, patients with
mild skin and soft tissue DFIs were treated with topical R327, either daily or every
second day, for 14 days. Recce reported that the study’s independent safety committee
confirmed the study achieved its primary safety, tolerability and efficacy endpoints
(including resolving or curing bacterial DFIs). In 80% (four of five) of patients,
R327G led to complete cure at the end of the 14-day therapy period, and in all cases,
at the midpoint of therapy (day seven), a significant reduction of the infection was
shown.
As a reminder, DFIs are frequent complications of patients who have diabetes mellitus,
particularly if the condition is not adequately controlled. More than 40 million people have diabetes in the US (and Recce estimates c 21 million adults in Indonesia alone)
and among this population, about 2–4% will experience foot ulceration each year, of which 50–60% will result in DFIs due
to the invasion and multiplication of surrounding microorganisms in the area. DFIs
are the leading cause of foot morbidity in diabetic patients as well as the most common
complication from diabetes leading to hospitalisation. About 20% of moderate to severe
DFIs lead to amputation. Generally, targeted systemic (oral or intravenous, IV) antibiotic or anti-infective
therapy is the primary approach for treating DFIs, but certain more complex forms,
such as osteomyelitis (inflammation of the bone), require surgical debridement.
| Exhibit 1: Burden of diabetic foot infections |
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| Source: Recce Pharmaceuticals Webinar presentation, March 2026. |
The Indonesian Phase III study started in September 2025, and it is a double-blinded,
placebo-controlled design, with a planned total enrolment of up to 310 patients, where
R327G will be compared to placebo. The study has activated five clinical study sites
across one of the world’s largest DFI patient populations. The company expects the
study to run for approximately 12–18 months. However, given the high efficacy response
rates shown in the Phase II ABSSSI study, Recce anticipates the Indonesian registrational
Phase III DFI study may reach a statistically significant efficacy result after the
completion of treatment on c 155 patients (compared to the trial’s planned enrolment
of up to 310 patients).
| Exhibit 2: Overview of Recce’s Phase III registrational R327G DFI study |
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| Source: Company presentation, March 2026. |
Recce expects to report interim data (on c 155 patients) from the Phase III study,
consistent with the BPOM (Indonesian Food and Drug Authority) approved study protocol,
by mid-CY26 (vs its prior guidance of Q1 CY26, as initial enrolment was slower than
originally planned). If study results are positive, we continue to assume a potential
launch in Indonesia in H2 CY26. Consistent with management guidance, we have pushed
back our projected timeline for launch into other ASEAN territories (which include
Malaysia, the Philippines, Singapore and Thailand) to CY27, versus H2 CY26 previously.
| Exhibit 3: R327 Topical Gel (R327G) characteristics |
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| Source: Recce Pharmaceuticals, Corporate presentation |
One of the key competitive advantages for R327G in the treatment of DFIs is that,
to our knowledge, no topical antibiotic has specific globally recognised approval
for usage in this indication. Treatment guidelines from the International Working Group on the Diabetic Foot and the Infectious Diseases
Society of America indicate that currently available topical therapies or antibiotics
have limited effectiveness in the treatment of DFIs.
However, we believe R327G is well-differentiated from previously assessed or utilised
topical agents (including existing topical antibiotics, silver preparations, antiseptics
and bacteriophage therapy) as it has distinct and multi-faceted mechanisms of action and is being advanced as a front-line standalone therapy. Hence, success in the indication
could present a substantial opportunity for Recce’s R327G, as we expect a standalone
topical therapeutic option would be convenient for patients (given the relative ease
of drug administration), aid in treatment compliance, provide a concentrated dose
at the presumed site of interest and also lower the risk of systemic side effects
often associated with oral or IV antibiotics.
Phase III Australian studies in broader ABSSSI indication expected in CY26
ABSSSIs comprise a broader range of indications than the DFIs or burn wound infections
(the first infectious skin conditions that R327 was tested in clinical trials). In
February 2025, the company reported positive results from its open-label Phase II Australian study for R327G in the treatment of ABSSSI. ABSSSIs comprise a broader range of indications
than the DFIs and burn wound infections assessed in prior topical R327 human trials.
The Phase II, primarily conducted by Barwon Health, was designed to assess R327G’s effectiveness and safety in treating a broad range
of ABSSSI indications, which, in addition to DFIs, can include necrotising fasciitis,
post-operative wound infections, simple abscesses, boils, cellulitis and others. In
the Phase II ABSSSI trial, R327G was applied once daily for seven days to the site
of infection, followed by safety and efficacy evaluations. A possible additional seven-day
R327G treatment period was considered at the investigator’s discretion if indicated,
with repeated safety and efficacy evaluations.
The study achieved all primary and secondary efficacy endpoints and met plasma pharmacokinetics
(PK) expectations. 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. Clinical outcomes were assessed using
the Lipsky Clinical Resolution of Infection Scale and/or the Bates Jensen Wound Assessment Tool, both FDA-recognised measures. Importantly, R327G was reported to be safe and well tolerated, with no
serious adverse events. The study enroled 30 patients in total, with one withdrawing
due to pre-existing pain at the wound site that was deemed unrelated to R327G.
| Exhibit 4: Phase II ABSSSI study results |
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| Source: Recce Pharmaceuticals corporate presentation. |
The global ABSSSI market was valued by Fortune Business Insights at
US$13.7bn in 2024 and is projected to reach
US$30.7bn in 2034. Drug-resistant bacterial strains, particularly methicillin-resistant Staphylococcus aureus (MRSA), remain an area of particular concern in many skin and skin structure infections.
Recce expects to start a registrational Phase III ABSSSI study in Australia in CY26,
although details (enrolment target, endpoints, duration) have not yet been made public.
We now model that this trial is likely to start in H2 CY26, and we expect the company
to receive Investigational New Drug (IND) clearance by year-end CY26, which would
permit the inclusion of US study sites. We now model that potential commercialisation
for R327G in ABSSSI will occur in H2 CY28 (vs H1 CY28 previously) in the US and Australia.
We believe the company’s near-term focus on advancing the ABSSSI and DFI indications
for R327G provides a clear path to future revenues.
Building stronger evidence for the treatment of severe drug-resistant conditions
While a key priority remains the Indonesian Phase III study (and the path towards
near-term commercialisation), Recce continues to strengthen R327’s data package in
other indications and areas. It announced in November that, as part of an ongoing research collaboration with Murdoch Children’s Research
Institute, R327 has shown substantial antibacterial activity in a preclinical HAP/VAP
mouse model study against carbapenem-resistant Acinetobacter baumannii (CRAB). CRAB can cause deadly infections and outbreaks in hospital settings. It is
designated as an urgent public health threat by the US Centers for Disease Control and Prevention and as one of only three critical priority group pathogens by the World Health Organization.
In the study, nebulised R327 showed a four-log reduction in CRAB (>99.99% lower burden),
nearing the limit of detection, at 24 hours post-infection, suggestive of strong local
infection control. Preliminary reductions in pro-inflammatory indicators were also
observed in the R327-treated groups. Importantly, the ability for R327 to be delivered
through a nebuliser can potentially provide a more rapid and direct treatment for
HAP/VAP in acute settings, should future studies also be supportive. Nebulised drug
delivery for R327 can be advantageous when targeting HAP/VAP given that a nebulised
drug (which is formulated to small-sized, often <5 micron, respiratory particles)
is generally more effective at reaching the respiratory tract, whereas ‘simpler’ intranasal
formulations result in larger ‘droplets’ that are more likely to settle in the nasal
passage and either act locally in the nose or reach systemic circulation through the
rich network of blood vessels in the nasal cavity; thus intranasal delivery is not
as effective in directly targeting the lung tissue. Overall, the preclinical data
for R327 in CRAB is highly encouraging in our view and boosts the potential breadth
of R327’s applicability in anti-infective indications.
| Exhibit 5: R327 efficacy against CRAB lung infection model |
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| Source: Recce Pharmaceuticals webinar presentation, March 2026. |
Altogether, we view the advancement of nebulised R327’s for HAP/VAP as highly sensible
and strategic, given that there is clear unmet need in this indication, as cases of
HAP/VAP are often caused by multidrug-resistant (MDR) bacteria that are increasingly
resistant to carbapenem drugs, often leading clinicians to employ drugs like cefiderocol
(Fetroja) or polymyxins, which may have toxicity concerns or limited availability.
Further, crossing the blood-alveolar barrier is a challenge for systemic (eg oral
or IV) drugs, resulting in insufficient drug concentration at the site of infection,
which makes the ability to deliver R327 through a nebulised ‘mist’ directly to the
lung, a key potential benefit for R327.
Altogether, VAP affects c 5–40% of patients receiving invasive mechanical ventilation (IMV) for more than two days in a hospital
setting, and is the leading cause of hospital-acquired infection in patients receiving
IMV globally. Mortality rates are up to 50% for all-cause mortality and 13% for direct
VAP-related mortality. VAP significantly increases hospital length of stay, treatment
complexity and costs, with an average cost of c $40.1k per case in the US.
We wait further advancement of the nebulised R327 programme into clinical development
stages before incorporating it into our Recce valuation.
Increasing depth of collaborations with US DOW
The US DOW has also recognised R327’s potential for in-field use, and in February
Recce announced that it expanded its collaborations with the DOW by entering into a second Cooperative Research and Development Agreement
(CRADA) with the US Army. This new arrangement with the US Army Institute of Surgical
Research (USAISR) will study whether R327G will reduce the bioburden of MRSA and Pseudomonas aeruginosa (P. aeruginosa) on burn wounds using the USAISR Walker-Mason rat model.
This second CRADA supports R327G’s potential for deployment in a practical setting
(eg in frontline deployment in medical field kits) as a hydrogel wound dressing, for
the treatment of burn wounds and potentially also extending to other clinical applications
and post-operative care. The study will aim to determine whether R327G can substantially
reduce the bacterial burden against MRSA and P. aeruginosa, two pathogens frequently isolated in burn patients, in the Walker-Mason rat model,
which has been designed to mimic battlefield injuries and study systemic responses
to burns and infections.
| Exhibit 6: Collaborations with US Department of Defense (War) |
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| Source: Recce Pharmaceuticals corporate presentation, April 2026. |
This builds on the company’s first CRADA (announced Q2 CY25), which was with the US Army Medical Research Institute of Infectious
Diseases (USAMRIID) and covered the testing of R327 against a battery of highly virulent
biodefence pathogens in USAMRIID’s established and specialised in vitro infection
models.
The expanding US government interest in R327 across multiple therapeutic applications
signals added external validation of the company’s proprietary synthetic broad-spectrum
anti-infective platform, which has already shown very encouraging activity against
multidrug resistant bacterial strains.
Recce expects to continue the preclinical work projects under its DOW collaborations
over CY26 and H1 CY27, and potentially start reigstrational R327G studies for burn
wounds in H2 CY27.
IV R327 opportunities intact, expecting US Phase II in CY27
While R327G provides the clearest path to near-term commercialisation revenue and
pipeline de-risking, we continue to view the IV formulation as Recce’s strongest long-term
commercial R327 opportunity, specifically in the sepsis (and/or urosepsis) and complicated
urinary tract infections (cUTI) indications. The company in June 2024 reported it had completed the Phase I/II ‘rapid infusion’ study (trial ID ACTRN12623000448640
at anzctr.org.au) assessing the safety, tolerability and PK of IV R327 in healthy volunteers. This
Phase I/II rapid infusion study met all of its primary endpoints and demonstrated
significant antibacterial activity (discussed in further detail in a prior note).
The Centers for Disease Control and Prevention estimates that at least 1.7 million American adults develop sepsis annually, with
350,000 of them dying of the acute disease or being discharged to hospice (end of
life) care. One in three people who die in a hospital have sepsis. The Sepsis Alliance
reiterates that sepsis is the leading cause of death in US hospitals, and that timely
diagnosis and treatment are critical, as the risk of mortality from death increases
by 4–9% for every hour that treatment is delayed. Globally, sepsis results in more
than 11 million annual deaths worldwide.
Recce continues to plan a Phase II study of IV R327 in patients with cUTIs (including
urosepsis patients) that may include US study sites. Given that management’s near-term
priority is on the two Phase III R327G studies discussed above (the Indonesian DFI
study and the Australia-focussed ABSSSI study), which will focus on the topical (R327G)
formulation, we have pushed back our expectation for the commencement of this cUTI/urosepsis
IV R327 study into CY27 (vs Q4 CY26 previously), in line with management’s most recent
guidance (see Exhibit 7).
| Exhibit 7: Recce Pharmaceuticals pipeline and catalyst guidance |
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| Source: Company webinar presentation, March 2026. |
We continue to model potential approval and commercialisation of IV R327 in sepsis
and cUTI in CY30, although we plan to revisit our assumptions once greater clarity
is provided by management on the expected data points and timelines for future US-centric
IV R327 studies.
Financials
Recce’s H126 financial results (for the 6 months ending 31 December 2025) reflected a A$15.7m operating loss, or
A$12.6m normalised after removing a non-recurring A$2.4m fair-value remeasurement
of option and warrant liabilities, as well as stock-based compensation (A$0.77m) and
intangible amortisation (A$0.07m). This compares with an A$6.9m normalised EBIT loss
in H125, with the difference largely due to the company having reported an A$6.7m
R&D tax incentive (RDTI) payment in H125 while reporting nil RDTI in H126. The difference
in RDTI recognition was primarily due to timing, as we note that the company received
an A$5.3m RDTI cash payment form the Australian Tax Office in January 2026, and we
expect Recce to report this as revenue in H226. R&D expenses came in at A$7.7m (vs
A$8.4m in H125), largely driven by the ongoing Phase III Indonesian DFI study, and
SG&A was A$6.0m (vs A$5.5m in H125). Altogether, the company reported an H126 operating
cash burn rate of A$9.5m (vs A$6.9m in H125). The company ended the period with A$0.365m
gross cash and A$9.9m in gross debt, reflecting an A$9.5m period-end net debt figure.
However, we calculate pro forma gross cash of A$5.7m and net debt of A$4.2m to reflect
the RDTI received in January 2026. The company also expects to receive an additional
A$3.6m in April 2026 (Q426).
We have updated our forecasts and valuation to reflect the recent fx changes (we now
assume
US$0.70/A$, versus our prior assumption of
US$0.65/A$). We now expect FY26e net R&D expense of A$15.7m (vs A$16.9m previously) and SG&A
of A$12.6m (vs A$16.2m). Part of the reduction in our FY26e R&D expenditure forecast
is that we now model that the Phase III ABSSSI Australian study will start in H2 CY26
(FY27) versus our prior expectation of an earlier start (H1 CY26). Related to this,
and consistent with management guidance, we have now refined our timing expectation
for ABSSSI such that we expect commercialisation in the US and Australia in this indication
to start in H2 CY28 (vs H1 CY28 previously). Altogether, for FY26, we now expect a
normalised operating loss of A$17.6m (vs A$25.2m previously) and free cash outflow
of A$15.7m (vs A$26.6m previously)
Given the timing changes in our ABSSSI study start expectations, we have also reduced
FY27 R&D expenditures, to A$38.6m (vs A$41.5m previously). Our new projection still
represents a strong y-o-y increase, driven by Phase III R327G studies (Australia and
US) in ABSSSI and the commencement of a US Phase II IV R327 study in cUTI/urosepsis.
We now model FY27e free cash outflow of A$50.0m (vs A$57.3m previously).
AOF adds clarity for future R&D reimbursement
Recce Pharmaceuticals reported in late CY25 that the Australian government has agreed to provide it with up to A$85m in future
cash rebates over the next three years to reimburse the company’s upcoming R&D expenditure
towards its proprietary synthetic anti-infective programmes. This binding Advanced
Overseas Finding (AOF) agreement with the Australian government’s Department of Industry,
Science and Resources (AusIndustry) extends the rebate programme, which customarily
reimburses 43.5% of eligible R&D expenditures incurred within Australia, to cover
the anti-infective R&D activities Recce undertakes anywhere in the world. This is
particularly noteworthy given that much of the costs for the company’s pivotal Phase
III Indonesian-focused DFI study of R327G will be incurred outside of Australia, with
this AOF decision therefore potentially benefiting Recce. This AOF awarded by AusIndustry
is reported to be one of the largest in Australian history, and we believe it signals that the Australian government continues to recognise
the vital importance of developing novel anti-infective therapeutics to combat antimicrobial
resistance. The added clarity from this AOF on the future reimbursement of overseas
R&D activities is beneficial and helps de-risk future funding for Recce given our
expectation that clinical trials outside of Australia (and including US sites in particular)
will be needed to maximise the commercial potential of R327 in areas such as ABSSSIs,
sepsis and urosepsis and cUTIs.
Additional capital raising expected in coming months
We model that the company’s cash on hand (pro forma A$5.7m as of Dec 2025), plus its
expectation of an additional A$3.6m RDTI rebate in April, should be sufficient for
the company to maintain operations for most of Q426 (Q2 CY26). We anticipate the company
will likely raise funds in the coming months. In June 2025, Recce had entered into an A$30m debt facility with Avenue Capital Group, with the company
receiving the first tranche of A$11.5m (
US$7.5m) at the time, with the remaining c A$19m to be available until end-CY27 and subject
to draw down conditions (which have not been fully specified). For modelling purposes,
we project the company will raise A$30m in debt (including the A$19m remaining under
the Avenue Capital Facility) in H226 (H1 CY26).
Assuming Recce continues to develop all four planned clinical-stage indications (ABSSSI
including DFIs, burn wounds, sepsis/urosepsis, and cUTI), we continue to project it
would need to raise A$145m in total net proceeds by FY29 (vs A$135m previously) before
becoming sustainably cash flow positive. We model these raises as illustrative debt.
Valuation
Our valuation is based on a relative rNPV calculation with a 12.5% cost of equity.
We have rolled forward our estimates, adjusted our fx projections (assuming
US$0.70/A$), and as stated earlier, slightly refined our R327G launch timeline for the ABSSSI
indication to H2 CY28 (vs H1 CY28 previously).
| Exhibit 8: Recce Pharmaceuticals rNPV valuation |
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| Source: Edison Investment Research |
Given the above, we now obtain an rNPV, including A$4.2m H126 pro forma net debt of
A$611.2m (or A$2.28 per share), versus A$600.2m (or A$2.24 per share) previously.
As stated above, we project Recce would need to raise A$145m in proceeds between FY26
and FY29 to reach sustainable positive cash flows. While we model these raises as
illustrative debt, if our projected funding need is raised through equity issuances
at the prevailing market price of c A$0.52, our effective value per share would decrease
to A$1.33 (including cash raised via equity).
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 would 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.
| Exhibit 9: Financial summary |
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| Source: Company accounts, Edison Investment Research |
