Global fund takes stake in Recce as synthetic antibiotic developer raises $11m

Global fund takes stake in Recce as synthetic antibiotic developer raises $11m

Recce Pharmaceuticals CEO James Graham

Recce Pharmaceuticals (ASX: RCE), a company developing a new class of synthetic antibiotics, is raising $11 million to boost its research program, bolster manufacturing capabilities and expand further into the US.

The Sydney-based company, founded in Perth by infectious diseases expert Dr Graham Melrose in 2008, has already secured $8 million from an institutional placement that Recce says positions a global fund as a substantial shareholder in the company with an interest of more than 5 per cent.

The $3 million balance will come via an entitlement offer currently under way for existing shareholders.

While the placement announced yesterday has been priced at 44c per share, a steep discount to the 63c that the shares were trading prior to the announcement, Recce’s share price surged more than 11 per cent this morning to be trading at 58c at 11.32am (AEST).

Recce has yet to reveal the identity of the offshore fund that has taken a position in the company, but it is understood to have extensive interests in the medical and research field.

“We are thrilled to receive such strong financial interest, particularly among global investment funds,” says Recce CEO James Graham.’

“It was important to the Recce team that our shareholders be offered the same opportunity and are pleased to make this available to them.

“As the world’s most clinically advanced new class of Anti-Infectives at this time it is clear the commercial potential is recognised. With a strengthened balance sheet and multiple clinical trials current, we are now well positioned for the time ahead.”

Recce Pharmaceuticals is developing new classes of broad-spectrum synthetic antibiotics in a bid to combat antibiotic resistance.

Unlike traditional antibiotics, which lose their efficacy as bacteria develop resistance, Recce says its synthetic antibiotic compound remains potent and effective.

Recce's lead candidate, R327, represents one of the first new classes of antibiotics in over 30 years. The company says that early clinical data is promising as its shows no side effects or issues in healthy subjects.

The company plans to allocate $6 million from the capital raise for clinical trials to treat conditions ranging from urinary tract infections to burn wound and diabetic foot infections.

Recce will spend $2 million to build out an advanced pre-clinical portfolio and a further $1 million to boost manufacturing and to expand its operations in the US. A further $2 million will be applied as working capital.

Recce’s synthetic antibiotics were co-developed by Melrose and Michele Dilizia, who is Recce’s current chief scientific officer.

Melrose, Recce’s former chief research officer, retired from the company in 2020 although he still retains an interest of more than 20 per cent in the company.

The Melrose family ties run deep at Recce Pharmaceuticals under Graham’s leadership as he is Melrose’s grandson.

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