2 ASX Small Cap Companies to buy in FY20.

Team Veye | 21st Feb 2020

Recce Pharmaceuticals Ltd (ASX: RCE)

Positive Data From RECCE® 327 Antibiotic Range Finding Toxicity (Safety) Studies in Animals

Recce Pharmaceuticals Ltd (ASX: RCE) (Company), the company developing a new class of antibiotics, on 10 February 2020 announced successful in-vivo Toxicity (Safety) studies in small and large animal species, conducted by an industry-leading independent research laboratory, has further reinforced indications of a wide therapeutic window.

Highlights:

  • 24-hour dosing up to 4000mg/kg (80x indicated efficacious dose) in Rats & Dogs well tolerated
  • NOAEL (No Observed Adverse Effect Level) of 24-hour 500mg/kg (10x indicated efficacious dose)
  • Expanded daily dosing to 7 days, up to 4000mg/kg – dosing limits identified
  • Therapeutic dose window appears considerably wider than Vancomycin and other antibiotics
  • Phase I Human Clinical Trial Protocol reduced in size/number
(Chart source: TradingView)

Quarterly Cash Flow Statement & Operational Highlights

Recce Pharmaceuticals Ltd on 31 January 2020 reported its December 2019 quarter results and operational highlights.

Financial update

The business ended the quarter with cash reserves of $4.66m. Research and Development was the largest expenditure of $0.96m as part of its intensive antibiotic development program. During the quarter, the Company retired all outstanding debt. The Company expects to see an increase in expenditures in coming quarters with the progress of its human clinical programs. We continue to manage ongoing operating costs effectively.

Operational Highlights

The Company continues to receive positive news on its lead drug candidate RECCE® 327 antibiotic and recently, it has the opportunity to expand its therapeutic programs. Recce reported positive data in a rat topical burns model in addressing the unmet medical needs of burns treatment and associate difficulties in wound closure. The study results saw significant in vivo antibacterial activity against the superbug Methicillin-Resistant Staphylococcus aureus (MRSA) in rats with topical burns. (Data Source – Company Reports)

Veye’s Take

Recce continues to demonstrate the potential of RECCE® 327 as first-line therapy for the treatment of superbug infections. This sees the company in an encouraging position ahead of their anticipated Phase I human clinical studies. The Company continues to advance its intravascular (I.V.) sepsis program and expects to formalise a Clinical Trial Agreement for a Phase I trial in Australia during the existing quarter. The Company believes that its current capital reserves, including R&D credits, are sufficient to support the current clinical and business development programs through to the achievement of early clinical milestones from their Phase I study and related clinical activities. The stock has retraced a bit after touching new highs. The stock can have good potential on the upside. It has strong support at $0.35. “Buy” was given to “Recce Pharmaceuticals Ltd” at the price of $0.22 on 11 July 2019. It has already grown by more than 77% in just seven months. Veye maintains a “Buy” on “Recce Pharmaceuticals Limited” at the current price of $0.495


Oventus Medical Ltd (ASX: OVN)

Oventus launches three additional US ‘lab in lab’ sites, provides pipeline update

Obstructive Sleep Apnoea (OSA) treatment innovator, Oventus Medical Ltd (ASX: OVN) on 13 February 2020 announced the launch of its ‘lab in lab’ model across a further three clinical delivery sites in the United States and to provide an update on the status of total sites contracted under the Company’s ‘lab in lab’ business model.

Key highlights:  

  • Three additional sites now launched in South Carolina, Illinois and Texas, bringing the total number of launched sites to 14 out of the 36 sites contracted
  • Lead time to first patient bookings and revenue has been reduced for subsequent launches
  • Current average rate of site launch is one per week, with minimal capital expenditure
  • Strong growth expected quarter on quarter for CY 2020
  • Cash burn forecast for Q3 FY20 reduced
  • Deal pipeline now valued at over A$33m, compared to A$20m at end CY 2019
(Chart Source: TradingView)

Oventus quarterly business review: additional sites contracted and launched

Oventus Medical Ltd on 14 January 2020 announced its Appendix 4C and quarterly business activities review for the three month period ended 31 December 2019 (Q2 FY2020).

Key highlights:  

  • Three further material contracts secured, 36 sites now contracted with 11 sites deployed and five more in the implementation phase under ‘lab in lab’ business model
  • Additional agreements signed with:
  • California Center for Sleep Disorders in California
  • Bogan Sleep Consultants in South Carolina
  • Sleep Watchers in Illinois
  • First revenue booked from the lab in lab program during December quarter
  • Cash receipts for December quarter increased to A$112,000 representing early revenues from sites coming online; Company expects sales to continue to increase in the March quarter as site activity increases and further sites are deployed. Cash burn for the quarter down from forecast due to CAPEX efficiencies from utilising scanning equipment across multiple sites
  • Board composition strengthened to support current strategy, including the appointment of Paul Molloy as Non-Executive Director which will be of significant benefit as Oventus continues with the commercial execution of the lab in lab program; Paul replaced co-founder, CTO, and Non-Executive Director, Neil Anderson
  • Oventus strongly positioned to invest in growth and scale sales with further agreements expected to be announced throughout the remainder of CY2020 (Data Source – Company Reports)

Veye’s Take

Oventus had the number of online sites doubled in the last month and revenue growth was expected to accelerate quarter on quarter through calendar 2020. Oventus expects to secure further agreements across its key markets over the coming months with the company currently in advanced negotiations with a large number of groups including some large regional and national sleep networks. With approximately 140 unique patient consultations up to the end of January, the unit sales through the lab in the lab program doubled from December to January and patients scheduled to be scanned in February are already sitting at more than double January unit sales. At the same time, Oventus deal pipeline has increased to more than $33 million from $20 million as of 31 December 2019. The company has no debt. We recommend a “Buy” on “Oventus Medical Limited” at the current price of $0.655

Disclaimer

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