Thank you @mikebrisy for researching PNV’s diabetic foot wounds (DFW) announcement. I have an interest in diabetic foot infections (DFI) from my investment in Recce Pharmaceutical (RCE) and I have very little knowledge of PNV other than as a competitor when I had briefly invested in AVIAT Medical several years ago.

Below are my notes relating to DFI from my Recce notes which may be of interest. I am interested in your view on how the treatment of the infection is likely to complement or compete with the treatment of the wound.

My understanding is that the infection develops from the wound, but complicates treatment and healing. So a plausible scenario would be treatment of the wound with Novosorb BTM and treatment of the associated infection with R327G (Recce’s treatment).

Recce has started Phase 3 trials in Indonesia, which has some of the highest incidence of DFI in the world and is a registration gateway to ASIAN. Plus they are about the start Phase 3 trials for ABSSSI (which included DFI) in Australia for US FDA registration. If successful, the commercial sales in FY27 in ASIAN and FY28 in the US are the target, with the studies funded with current cash from the recent funding and R&D rebates.

I welcome your thoughts on how the success of PNV and RCE’s respective treatments (or similar products from other companies) may impact each other.

Cheers

Diabetic Foot Infection (DFI) - ABSSSI

Average 2030 Market Size: US$11.3b

·        The global diabetic foot ulcer treatment market size was estimated at USD 5.18 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 6.0% from 2024 to 2030.( Diabetic Foot Ulcer Treatment Market Size Report, 2030 (grandviewresearch.com))

·        The global industry was valued at US$10.5b in 2022 and is projected to grow at a CAGR of 6.0% from 2023 to 2031 and reach more than US$17.7b by 2031. (Diabetic Foot Ulcers Treatment Market Size & Share to 2031 (transparencymarketresearch.com))

·        The Global Diabetic Foot Ulcers Market reached US$ 5,812.7 million in 2022 and is projected to witness lucrative growth by reaching up to US$ 9,300.6 million by 2031. The diabetic foot ulcers market is expected to exhibit a CAGR of 6.2% during the forecast period 2024-2031. (Diabetic Foot Ulcers Market Size, Share and Report 2024-2031 (datamintelligence.com)

Clinical Progress announcements for DFI & Wound Infections:

·        17Feb25: Phase 2 ABSSSI results positive with 27 out of 29 (93%) achieving a primary efficacy endpoint after 14 days. This will allow progress to Phase 3 studies in Australia for FDA approval but also support the current Phase 3 Indonesian studies.

·        21Jan25: Phase 2 ABSSSI study dosing complete, no serious adverse events.

·        28Oct24: Confirmation of unanimous agreement by Non-Data Safety Monitoring Board that R327G is safe and well-tolerated.

·        9Oct24: Halfway through recruitment for Phase 2 ABSSSI study (30 patients).

·        8Jul24: Positive Efficacy Data from Murdoch Children’s Research Institute in Study against WHO Priority Pathogen Acinetobacter baumannii (6.5 log reduction in A. baumannii [an ESKAPE pathogen with high mortality] in MCR study).

·        24Jun24: Recce Pharmaceuticals Receives Ethics Approval to Centralise and Broaden RECCE® 327 Gel Clinical Trials across all Topical Bacterial Skin Infections (Approval to commence Phase 2 & HREC approval to consolidate DFI and Wound Infection studies into one clinical testing program for Acute Bacterial Skin and Skin Structure Infections [ABSSSI], to be conducted by Barwon Health)

·        26Feb24: Independent Safety Committee Approves Expansion of Phase I/II Clinical Trial for Diabetic Foot Infection Treatment (Independent Safety Committee of Liverpool Hospital NSW confirm achievement of primary endpoints of safety and efficacy)

·        18Jan24: Phase I/II Clinical Trial Results for Diabetic Foot Infection Treatment - Positive Human Efficacy Data to Support Site Expansion (5 patient study, effective in all)

·        22Aug23: Patients Dosed in RECCE® 327 Phase I/II Diabetic Foot Infection Clinical Trial (results announced on 18Jan24 – later than anticipated)

What is DFI:

·        a soft tissue or bone infection that is often associated with neuropathy or peripheral arterial disease in diabetic patients. The most frequent cause of hospitalization for diabetic patients is due to foot infections.

·        As with most infections, antibiotic treatment is necessary to cure a diabetic foot infection. If the wound is not treated by a medical professional, the infection can spread, leading to pain, discomfort, necrosis, and, in the worst cases, amputation

@Tom73 I have only superficially researched diabetic foot wounds (DFW) and infection (DFI) in the context of uses of dermal repair susbstitutes.

Basically, as I understand it, there are well established guidelines and "gold standard" pathways for DFW/DFI treatment:

• Rapid infection control with systemic antibiotics when infected
• Sharp debridement and off-loading (i.e. taking pressure and shear contact off the wound) preferably via a non-removable knee-high device and
• Vascular assessment/revascularisation when PAD (peripheral artery disease) is present (as this condition inhibits healing).

However, because of the compexity of DFWs (variations, different pathways etc., difficulty of healing) there are many adjunct treatments. For example, even negative pressure wound therapy (NPWT) (where studies are are currently being undertaken of combination therapy using Novosorb BTM) is not strictly part of the core, common standard of care, but is guided in cases where wound healing hasn't occurred using standard methods (dressings). In fact, there is a Cochrane study (a systemic meta review of all clinical trials) which concluded we cannot be certain that NPWT works,... which is presumably why $PNV have been seeing if using it in conjunction with BTM leads to better outcomes.

So, with respect to DFI treatment, the SoC is to use a systmemic antibiotic if infection is present. So investigations of topical treatments look to me to be another form of adjunct treatment currently being investigated. From a quick review, the idea of the topical treatment is that wounds are quickly covered in a biofilm. Biofilms are a place where harmful bacteria can attach and colonise, and because the film is a surface coating it is less susceptible to treatment by the systemic antibiotic. I think that's the theory. But the clinical research in this area is ogoing, such as the R327G trial.

Which is all leading to my answer: basically I haven'y any clue as to the potential inter-relationship between the use of topical antibiotics in conjunction with dermal substitutes, as a general proposition, let alone any potential relationship between R327G and Novosorb BTM.

I'm tempted to posit that the success and failure of each product will have no interaction on the other, as the products are performing quite different functions in the treatment. R327G killing harmful bacteria, and BTM helping the wound to close. Both functions are necessary and complementary. But you'd need to get the view of a podiatric surgeon who was well across the status of innovation in the field to get an opinion on this! (I'm not even sure I can frame the prompt appropriately to task my BA to investigate this!)

There appears to be a lot of clinician-led innovation ongoing in this area, trying different combinations of treatment methods and pathways. And not all of it is documented in published clinical studies.

As you point out in your post, the market is so vast here, that even applications of treatments in specific subsectors can be commercially attractive particularly if the treatment can make it onto a treatment guideline. Hence there are a lot of products vying for this space. So, for example, the US$0.3-$1.0bn segment of dermal substitutes in the US in DFW has over 20 products (by my count) vying for it.

In the healthcare space, it is very common for firms to claim a "market opportunity of $X bn". I've found it generally essential to interrogate these claims carefullly. Afterall, a market of $X bn can sound impressive, but when you realise that the actual addressible market is $X/10 bn because what is actually being quoted is the full value of all treatments and related costs for the condition, and if in addition there are 5 or 20 products chasing it, it can help you to better dimension the real opportunity. (I think unsophisticated investors in healthcare are often easily sucked in by these impressive market size numbers.)

Of course, in these large markets if you can build the evidence to show a differentiated outcome (a% reduction in infection, b% reduction in amputations, c% reduction in time to heal, d% reduction in re-admission to hospital) then the rewards can be significant, particularly if your product can make it onto a treatment guidline.

Hope that helps.

@mikebrisy, looking into NPWT as part of the treatment options for DFW, it is only appropriate for use if the wound is not infected. Hence this separates the use of anti-infectives and the treatment of the wound itself from each other in the process of treating a DFW. So this suggests the use of Novosorb BTM (in conjunction with NPWT) and anti-infectives as complementary in the treatment process rather than competitive.

Your point on systmemic antibiotics and their use in treatment is notable for Recce, which is currently leading with a topical treatment R327G (gel). They do have an intravenous version, but the gel has been prioritised in terms of path to market (for reasons that I am not fully aware of). R327G offers a solution to anti-bacterial resistance which is an issue with first line antibiotics, so may be a second line treatment if systmemic antibiotics do not work and then once the infection is under control the treatment would switch to NPWT.

A question to ask around Novosorb BTM is whether it can be used in advance of NPWT, ie does it also need to wait for any infection to be addressed prior to use.

This all circles back to your key point, there are and will continue to be many subsectors to this treatment market. The figures I presented where whole of market and not intended to infer that Recce or Novosorb BTM would consider these amounts as serviceable, simply to confirm that there is opportunity even with only being able to service a small slice of the DFI/DFW market which can be very hard to get figures that carve these out.

It is also good to note your point that this is an innovative and adapting treatment market which is likely to see a large variety of treatment options seen as SOC in different countries and possible across specialists within countries. This will both challenge take up of a new treatment but also offer opportunities for new treatments to find a place in the market.

Thank you for the additional information and prompting me to do additional research. It’s now another facit I will keep an eye out for and pay some more attention to PNV if only to better inform my view on RCE.

Cheers.

@Tom73 all good points.

Generally speaking, as far as I know, dermal substitutes require an infection-free site, and so this makes sense regarding your comments and their use with NPWT. In fact, one of the key endpoints in studies for dermal substitutes is the frequency of infection, as this can be a failure mode for the dermal repair, leading to removal, recleaning of the wound and a new attempt at closure. (Even as a non-medic I can see that it makes no sense to close a wound that is infected!)

What I don't have a view on is whether an infected wound that was successfully treated with antibiotics (whether systemically or topically) might then go on to be treated with a dermal substitute. What I am about to say next has no empirical grounding but, logically, after successful treatment of the infection, if the wound was debrided and judged to benefit from assistance to achieve closing, then it seems logical that use of a dermal substitute would be relevant. But I am only applying simplistic logic here, and don't have any sources to cite for this. This illustrates the multiplicity of pathways in treatment of these complex wounds and helps to explain why there are so many adjunct therapies.

The more we've gotten into this, the more I feel there is neither competition nor synergy between R327G and BTM. The future demand for each is probably independent of the other. I think the bigger drivers of demand are 1) for R327G, the relative effectiveness of alternative infection control measures and 2) for BTM in DFW, the relative performance of other substitutes on metrics like: a) time to close; b) amputation frequency; 3) occurrence of infection; and 4) failure leading to re-application. But, this is at a pretty superficial level of understanding, so I would be happy to be corrected.

Another ASX firm to keep an eye on in this space is Aroa ($ARX). Their products are further advanced than $PNV, as I understand, in application to the DFW market. Again, all are adjunct treatments:

Endoform Natural: this is a restorative extracellular matrix (ECM) product made from ovine forestomach matrix (OFM). It’s used for acute and chronic wounds, including diabetic foot ulcers.

Endoform Antimicrobial: a similar matrix, but with 0.3% ionic silver to provide antimicrobial protection (especially when there’s a higher risk of infection).

Symphony: this combines the OFM matrix with hyaluronic acid, intended to help in the proliferative phase of wound healing, especially in cases of impaired healing.

The reason I highlight these is that $ARX appear to be addressing protection from infection in their product development. These guys are also quite active is getting clinical studies done comparing their products to other treatments. I have only really come to think in a deeper way about DFWs since the recent $PNV announcement, but it might be worth a deeper dive.

So, coming back to the question of complementarity vs. competition, I guess if innovations lead to dermal substitutes becoming more resistent to infection, then that could reduce the need for antibiotic treatments once the wound has advanced from initial stablisation/preparation into the closing phase.

In any event, I think $ARX's progress underscores the point that having products which are adjunct treatments with many competitors leads to slower revenue growth. In fact, it was the $ARX experience which tempered my enthusiasms for the recent Novosorb BTM announcement on DFW. (I guess I should have made this bias more explicit in my initial write-up.)

Disc: I currently hold $AVH. I have previously held $ARX and $PNV. I do not hold $RCE

Well AROA (ARX) looks interesting @mikebrisy, particularly their soon to be marketed Symphony product. It is quite telling that there are at least 3 well advanced or commercial dermal replacement or repair companies just on the ASX (ARX, PNV, AVH), it’s quite a battle for that market. One I acknowledged I had no edge in understanding when I sold out of AVH a few years ago.

We are on the same page in assessing no head-to-head competition between wound and infection treatment, but there will be some element of substitution which will be unquantifiable (at least now) and probably tangential to any core thesis for PNV or RCE. Namely that poor infection control limits the use of dermal repair, but also good dermal repair reduces the likelihood of subsequent infection.

Turtle’s all the way down trying the unravel that.

Key learning for me is that the DFI and DFW markets are complex, segmented and highly competitive. Hence any assumptions on revenue from products in these markets needs to be weighted to the conservative end unless the treatment offers a quantum leap that will render alternatives clearly obsolete, but even then only a fraction of the TAM is serviceable.

Which is kind of why I am interested in Recce, if it can address the 50 year+ issue of AMR then it’s a moon shot. If it’s a “me too” anti-infective, well DFI or any other application are going to be very small opportunities in a large competitive market.

Thanks again for expanding my horizons @mikebrisy .

Disc: I own RCE in both RL+SM