Investors are returning to the biotech and pharmaceutical sector after a slow couple of years where valuations were paired back, and companies focused on managing cash flow and core operations.
The reversal began in 2023, when biotech merger and acquisition activities recorded the second-best year on record with over US$ 120 billion in transaction value.
This highlights the strong possibility for acquisitions of companies with great science, strong management, business models and a broad addressable market.
Biotech and Pharma companies listed on the ASX have also had a strong start to 2024 with the ASX Healthcare index up over 11% to six months to April 2024.
Investors are following companies with strong clinical pipelines that are addressing global unmet medical needs.
Two companies reporting impressive clinical data, strong investor support and hitting key milestones are Recce Pharmaceuticals (ASX: RCE) and Dimerix (ASX: DXB).
Recce Pharmaceuticals Ltd
One of the largest global health threats is Sepsis caused by antibiotic-resistant superbugs.
Sepsis is a life-threatening condition that arises when the body’s response to infection causes injury to its tissues and organs. A recent scientific publication by the World Health Organisation (WHO) reported that sepsis affects an estimated 49 million people and causes 11 million deaths globally every year.
Sepsis currently kills more people in the UK than breast, bowel and prostate cancer combined, and the number is growing, as more people develop resistance to antibiotics, commonly known as antimicrobial resistance (AMR).
Antimicrobial resistance (AMR) is the process of bacteria evolving defence mechanisms against the drugs that are used to treat them. This is progressing so quickly that the World Bank is addressing AMR as a “global health emergency” that is expected to account for nearly € 1 trillion in additional healthcare costs by 2050.
The WHO even lists AMR among the top 10 threats to global health, threatening human and animal welfare, the environment, food and nutrition, security and safety, economic development, and equity within societies.
The term “superbugs” is used to refer to strains of bacteria that are resistant to multiple types of antibiotics. Superbugs threaten all modern medicine. As they become increasingly common, patients having routine surgery or care will become susceptible to infections that may be increasingly difficult to treat.
Recce Pharmaceuticals has been on a mission to treat Sepsis and Superbugs since 2007 when it was founded by Dr. Graham Melrose, a former executive director, and head of research at Johnson & Johnson Asia Pacific and Australia, with a passion for investigating novel forms of treatment for infections.
Recce Pharmaceuticals (ASX:RCE, FSE: R9Q) is developing a synthetic broad-spectrum anti-infective that is hoped will eliminate AMR, Sepsis and Superbugs for good.
Its lead compound RECCE® 327 (R327) has to date demonstrated a patented ability to continuously kill bacteria and superbugs without tendency for the emergence of resistance, even with repeated use. It is undergoing clinical trials to investigate R327 against sepsis, urosepsis, urinary tract infections (UTIs), diabetic foot infections and burn wound infections.
Recce has a strong financial footing in 2024 with which to embark on further clinical trials.
The Company recently received €6.7 million as a Research and Development (R&D) advance from Endpoints Capital - which offers innovative financing solutions for biotech companies without dilution to shareholders.
The Australian Government recently agreed to provide up to €33 million in future cash rebates to reimburse R&D expenditure until June 2025 with Endpoints Capital to provide advance credit against this payment to ensure the progression of clinical trials.
James Graham, CEO, said “This non-dilutive funding not only extends our financial runway but facilitates the acceleration of our multiple clinical programs”.
Recce Pharmaceuticals has made strong progress in the last 12 months, advancing its clinical trials and operational milestones as well as gaining strong support from global investors.
The Company is advancing the intravenous (I.V.) formulation of R327, especially for lead indication sepsis (and/or urosepsis) as well as urinary tract infections.
Recce’s Phase I/II UTI and Urosepsis trial has demonstrated promising minimum inhibitory concentration (MIC) activity, with the trial expected to advance to the next dosage increase within the next few weeks.
The global addressable market for urosepsis alone was €3.3 billion in 2022. The World Health Organization (WHO) recently added Recce’s portfolio of anti-infective compounds R327, R435, and R529 to its list of antibacterial products in clinical development for priority pathogens, recognizing Recce’s efforts to combat antimicrobial resistance.
A major milestone was achieved in March 2024 when the Company confirmed that 3,000 mg dosing administered intravenously at varying infusion times between 15 and 60 minutes was shown to be safe.
It is anticipated the Company will submit an Investigational New Drug (IND) application to the USFDA and then commence a global Phase II study for UTIs/urosepsis in H2 2024. A Phase III study would likely commence (including locations in Europe and the United States) in H2 2025 with potential approval and commercialisation of R327 in 2028.
The U.S. Department of Defense has recommended R327 Gel (R327G) for grant funding of €2.1 million as a topical treatment for burn wound infections. The U.S. burn care market size was estimated at around €880 million alone in 2022.
Recce is also expanding clinical trials internationally into countries where its treatments are most needed. Recce recently engaged in a strategic partnership and Memorandum of Understanding in South-East Asia with leading Indonesian biomedical company Etana.
Recce Pharmaceuticals considers that topical R327 could be a useful treatment for DFIs. The ongoing Phase I/II Diabetic Foot Infection (DFI) clinical trial has demonstrated efficacy in all patients, and is planning a move to a Phase III registrational trial in Indonesia, set to begin in the third quarter of this year.
Diabetic foot ulcers are frequent complications of patients who have diabetes mellitus if the condition is not properly controlled. Around 15% of diabetics will experience a foot ulcer at some point in their lives. In many cases, amputation is the only solution. According to several studies, as many as 25-50% of diabetes patients must undergo an immediate amputation on their first admission due to a co-existing infection.
In Europe alone the diabetic foot ulcer market was around €1.4 billion in 2021. Germany has the highest incidence rate of European countries.
Attracting impact investors is particularly important for companies such as Recce Pharmaceuticals where they are working on a product or service that is designed to be a net benefit to society.
A 2023 Impact Investing Survey by asset manager Vontobel, found 71% of institutional and professional investors globally are planning on increasing their allocations to impact investing in public markets over the next 3 years.
The CEO of Recce, James Graham supported this impact-based philosophy earlier this year stating, “The Company is dedicated to delivering impactful solutions to combat infectious diseases and improve global health outcomes”.
The key catalysts for Recce Pharmaceuticals in next 12 months are the results from the three ongoing clinical trial and developments as the Company files an Investigational New Drug (IND) application with the US FDA in the second half of CY24, with initiation of a pivotal clinical trial in the US to occur in the first half of CY25.
Recent Broker Research Report on Recce Pharmaceuticals
Recent Investor Presentation: Recce Pharmaceuticals
Dimerix Limited
Australian listed Biopharmaceutical company, Dimerix Limited (ASX: DXB, “Dimerix”) is also hitting some key milestones.
The company is developing new treatments for types of inflammatory kidney and respiratory diseases and has recently announced successful interim results of a Phase 3 trial of DMX-200 in patients with the rare disease Focal Segmental Glomerulosclerosis (FSGS) that attacks the kidney’s filtering units.
The chronic kidney disease causes inflammation and scarring of the kidney and affects both children and adults and leads to permanent kidney damage and eventual kidney failure, requiring dialysis or transplantation on average within five years.
Globally, there are no drugs approved for FSGS.
Following the successful Phase 3 trial in 72 patients, Dimerix will now open new clinical sites in more countries including China and expand the patient base to include children over the age of 12. The treatment, DMX-200, was co-invented by Harry Perkins Institute of Medical Research Head of Molecular Endocrinology and Pharmacology’s Professor Kevin Pfleger.
Earlier this year, Dimerix received firm commitments to raise AU $20 million (€12.5 million) via an institutional placement. The proceeds will be used to complete the ACTION3 Phase 3 clinical study in patients with FSGS, the preparation and submission of regulatory applications, as appropriate, as well as partnering activities. The Company also announced a focus on the execution of potential licensing deals for available jurisdictions, including in the US and China.
A key value inflection point for Dimerix was the signing in October 2023 of an agreement with ADVANZ PHARMA – a UK headquartered global Pharma company with a strategic focus on speciality, hospital and rare disease medicine in Europe, Canada, and Australia – for the commercialisation of Dimerix’s Phase 3 drug candidate DMX-200 for treatment of FSGS kidney disease after regulatory approvals.
Dimerix received an upfront payment of €6.5 million and is eligible to receive up to €132 million subject to key development and commercialisation milestones plus tiered royalty payments on all net sales of DMX-200 if successfully commercialised.
Dimerix shares are on the run with a 12-month appreciation of 407% for the 12 months with shares increasing from AU$ 0.07 to current share price on 20 May 2024 of AU$ 0.36.
Recent Broker Research Report: Dimerix
Recent Investor Presentation: Dimerix
Interest in quality biotech and pharma stocks should continue to gather momentum in 2024 with merger and acquisition activity, strong clinical trial results and global interest in drugs companies ability to change lives for the better expected to drive valuations.
Both Dimerix and Recce Pharmaceuticals are working on drugs with multi-billion-dollar opportunities, and both should continue to find strong support from Australian and global investors.