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Why the Recce Pharmaceuticals (ASX:RCE) share price crashed 15% lower today

red arrow pointing down, falling share price
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The Recce Pharmaceuticals Ltd (ASX: RCE) share price has come under pressure on Wednesday after returning from its trading halt.

The pharmaceutical company’s shares crashed as much as 15% lower to $1.38 this morning.

They have since recovered the majority of this decline but are still down over 3% to $1.58 at the time of writing.

Why is the Recce share price sinking lower today?

Investors have been selling Recce’s shares after it completed a placement of shares to institutional, professional and sophisticated investors.

The company raised a total of approximately $28 million before costs at an issue price of $1.30 per share. This represents a sizeable 20% discount to its last close price.

Why is Recce raising funds?

Recce launched the capital raising in order to fund the advancement of its synthetic anti-infective pipeline.

This comprises the RECCE 327, RECCE 435 and RECCE 529 compounds which are addressing the urgent global health problems of antibiotic resistant superbugs and emerging viral pathogens.

The company notes that there will be additional financial support from the Australian Government’s 43.5% R&D rebate on R&D applicable activities.

This ensures it is fully funded to complete its Phase I human clinical trial, SARSCoV-2 (COVID-19) pre-clinical program, Helicobacter pylori preclinical program, and the anticipated Phase I/II topical study at a leading Australian teaching hospital.

Recce’s Chief Executive Officer, James Graham, commented: “We greatly appreciate the support shown by both our existing investors and new institutional investors. Their financial support comes at a transformative time for Recce as we prepare to advance human clinical trials. We welcome all new investors and look forward to updating the market as our pivotal trials progress in the coming months.”

There certainly is a lot of optimism around these compounds. Despite its share price weakness today, the Recce share price is up over 360% since the start of the year.

The coming months will soon reveal whether investors were right to back this one.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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