Recursion Pharmaceuticals (NASDAQ:RXRX) - Decoding Biology to Industrialize Drug Discovery

Published on September 24, 2024 | Ticker: RXRX

Recursion Pharmaceuticals is a leading clinical-stage TechBio company that is decoding biology to industrialize drug discovery. The company's Recursion Operating System (OS) is a platform built across diverse technologies that enables it to map and navigate trillions of biological and chemical relationships within its proprietary Recursion Data Universe, one of the world's largest datasets spanning over 50 petabytes.

Recursion's unbiased, data-driven approach to understanding biology is driving the development of its expansive pipeline of internally developed clinical and preclinical programs focused on precision oncology and genetically driven rare diseases. The company also has transformational partnerships with leading biopharma and technology companies to map and navigate intractable areas of biology, identify novel targets, and develop potential new medicines.

Financials

Recursion's financial performance has been marked by significant investments in research and development as the company continues to expand and upgrade its platform, advance its preclinical pipeline, and progress through various clinical trials. For the full year 2023, the company reported annual revenue of $44.6 million and a net loss of $328.1 million. The company's annual operating cash flow was -$287.8 million, and its annual free cash flow was -$300.3 million.

In the first quarter of 2024, Recursion reported revenue of $13.8 million, a 14% increase compared to the prior-year period. The company's net loss for the quarter was $91.4 million. Recursion's operating cash flow for the quarter was -$102.3 million, and its free cash flow was -$109.0 million.

Pipeline Advancements

Recursion's pipeline is a key driver of value for the company, with multiple catalysts expected over the next 18 months. The company is progressing several programs through clinical development, including:

Cerebral Cavernous Malformation (CCM) (REC-994): The Phase 2 SYCAMORE trial is fully enrolled, with the majority of participants entering a long-term extension study. Recursion expects to share Phase 2 data in Q3 2024.

Neurofibromatosis Type 2 (NF2) (REC-2282): The adaptive Phase 2/3 POPLAR trial is ongoing, with enrollment in adults expected to complete in Q2 2024. Recursion expects to share Phase 2 safety and preliminary efficacy data in Q4 2024.

Familial Adenomatous Polyposis (FAP) (REC-4881) and AXIN1 or APC Mutant Cancers (REC-4881): The Phase 1b/2 TUPELO trial for FAP and the Phase 2 LILAC trial for AXIN1 or APC mutant cancers are both underway, with Recursion expecting to share Phase 2 safety and preliminary efficacy data in H1 2025 for both programs.

Clostridioides difficile Infection (REC-3964): Recursion plans to initiate a randomized Phase 2 study in patients at high risk for C. difficile infection recurrence in 2024, following the presentation of full Phase 1 data in June 2024.

Advanced HR-Proficient Cancers (RBM39): Recursion intends to submit an IND in H2 2024 and initiate a Phase 1 open-label study of its lead candidate in participants with relapsed/refractory cancer.

Undisclosed Indication in Fibrosis (Target Epsilon): Recursion is advancing this program through IND-enabling studies, with an IND submission expected in the near-term.

Platform Advancements

Recursion's platform is a key competitive advantage, and the company continues to make significant investments to enhance its capabilities. Notable advancements include:

Supercomputer Expansion: Recursion has partnered with NVIDIA to design and build BioHive-2, its next-generation supercomputer with over 500 H100 GPUs. The company believes BioHive-2 may be one of the most powerful supercomputers owned and operated by any biopharma company.

Whole-Genome Transcriptomics Map: Recursion has scaled its transcriptomics technology, sequencing its 1 millionth transcriptome, and is advancing the development of a whole-genome knockout transcriptomics map.

Active Learning: Recursion is applying active learning approaches to predict where its OS should generate and enrich biological and chemical datasets, enabling the company to more rapidly expand its data moat and move towards autonomous drug discovery.

Partnerships and Collaborations

Recursion's partnerships and collaborations are another key driver of value for the company. Notable partnerships include:

Roche and Genentech: Recursion is collaborating with Roche and Genentech to discover and develop therapeutic small molecule programs in gastrointestinal cancer and neuroscience.

Bayer: Recursion has an ongoing collaboration with Bayer in the area of undruggable oncology targets, with the potential for near-term program and map options.

Tempus: Recursion has leveraged Tempus' oncology data to identify novel targets and develop programs, including in non-small cell lung cancer.

Helix: Recursion has entered into a multi-year agreement with Helix to access hundreds of thousands of de-identified records, including genomic and longitudinal health data, to train causal AI models and design biomarker and patient stratification strategies across broad disease areas.

Liquidity

As of March 31, 2024, Recursion had cash and cash equivalents of $296.3 million, providing the company with a robust runway to execute on its strategic priorities. The company's recent financing activities, including an at-the-market offering and a private placement with NVIDIA, have further strengthened its balance sheet.

Outlook

Recursion's management team is confident in the company's ability to continue advancing its pipeline and platform, with multiple catalysts expected over the next 18 months. The company's guidance includes the potential for additional partnerships in large, intractable areas of biology or technological innovation, as well as the possibility of option exercises associated with existing partnerships.

Conclusion

Recursion Pharmaceuticals is a leading TechBio company that is poised to redefine the future of drug discovery. The company's unique approach to decoding biology, combined with its expansive pipeline, robust platform, and strategic partnerships, positions it as a key player in the industry. As Recursion continues to execute on its strategic priorities, investors will be closely watching for the company's upcoming pipeline and platform milestones, which could serve as significant catalysts for the stock.

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