Recursion Pharmaceuticals, a leading clinical-stage TechBio company, is at the forefront of a transformative shift in the pharmaceutical industry. By seamlessly integrating cutting-edge technology, data-driven insights, and a relentless pursuit of scientific advancement, Recursion is poised to redefine the drug discovery paradigm.
Company Background and Early Development
Founded in 2013, Recursion has rapidly emerged as a pioneer in the TechBio space, leveraging its proprietary Recursion Operating System (OS) to map and navigate the vast interconnections of biology and chemistry. This innovative platform, built on diverse technologies, enables the company to harness the power of trillions of biological and chemical relationships, fueling its drug discovery efforts. In its early years, Recursion focused on building and refining the Recursion OS, which integrates physical and digital components to explore the complex relationships between biology and chemistry. Prior to its initial public offering (IPO) in 2021, the company successfully raised $448.9 million in equity financing from investors, demonstrating strong support for its innovative approach.
Milestones and Strategic Partnerships
Recursion's journey has been marked by remarkable achievements and strategic partnerships that have solidified its position as a driving force in the industry. In April 2021, the company completed a successful initial public offering, raising $462.4 million in net proceeds to fund its ongoing research and development initiatives. This milestone IPO saw Recursion issue 27.9 million shares of Class A common stock at a price of $18 per share, providing the company with substantial capital to advance its platform and pipeline.
Pipeline and Therapeutic Focus
One of Recursion's key strengths lies in its diverse and robust pipeline of internally developed clinical and preclinical programs. As of June 30, 2024, the company had approximately 10 potential readouts in the next 18 months, spanning various therapeutic areas including precision oncology, genetically driven rare diseases, and infectious diseases. This impressive pipeline showcases Recursion's ability to identify and advance novel drug candidates with significant market opportunities.
Some of the key drug candidates in Recursion's pipeline include:
1. REC-994 for Cerebral Cavernous Malformation (CCM) - Currently in a Phase 2 clinical trial 2. REC-2282 for Neurofibromatosis Type 2 (NF2) - Currently in an adaptive Phase 2/3 clinical trial 3. REC-4881 for APC or AXIN1 Mutant Cancers and Familial Adenomatous Polyposis (FAP) - Currently in Phase 2 clinical trials 4. REC-3964 for Clostridioides difficile Infection - Currently preparing to initiate a Phase 2 study 5. REC-1245 targeting RBM39 for advanced HR-Proficient Cancers - Preparing to submit an IND and initiate a Phase 1/2 study 6. Undisclosed fibrosis program targeting Epsilon - Advancing through IND-enabling studies
Additionally, Recursion is advancing several other programs, including a CDK7 inhibitor and an LSD1 inhibitor, both currently in monotherapy dose escalation studies. The company expects to provide an update on the CDK7 inhibitor program by the end of 2024. Recursion is also developing a HER2-targeted program, though specific details have not been disclosed.
Collaborations and Partnerships
Complementing its internal pipeline, Recursion has forged transformational partnerships with leading biopharmaceutical and technology companies. These collaborations have not only expanded the company's reach but also diversified its therapeutic focus. Partners such as Roche, Genentech, and Bayer have tapped into Recursion's expertise, resulting in the option of over 10 programs across oncology, neuroscience, and undruggable targets. In January 2022, Recursion received a substantial $150 million upfront payment from its collaboration with Roche and Genentech, further strengthening its financial position and validating its platform's potential.
The Roche/Genentech partnership is focused on using Recursion's maps and data to discover and develop programs in neuroscience and gastrointestinal oncology. Meanwhile, the Bayer partnership is centered on discovering potential new therapeutics against undruggable oncology targets. These partnerships, along with others, are expected to potentially generate over $200 million in milestones over the next two years, with the potential for over $20 billion in milestones before royalties in the longer term.
Technological Capabilities and Data Assets
Recursion's success in attracting these high-profile partnerships can be attributed to its industry-leading dataset and computational capabilities. The company has meticulously curated over 50 petabytes of proprietary data, encompassing large language model-derived disease relevance, target-compound relationships, protein-ligand binding interactions, and a wealth of multimodal experimental data. This comprehensive dataset, coupled with Recursion's advanced artificial intelligence and machine learning models, empowers the company to navigate the complex landscape of biology and chemistry, identifying novel targets and translating insights into potential new medicines.
Strategic Acquisitions
The proposed acquisition of Exscientia, announced in August 2024, further strengthens Recursion's position. Exscientia's expertise in automated, AI-driven small molecule design and synthesis complements Recursion's strengths in biology and target discovery. By combining these capabilities, the merged entity will possess an end-to-end technology-enabled platform that can drive down the time and cost of drug development, while improving the probability of success. Recursion expects this acquisition to close by early 2025, subject to shareholder and regulatory approvals.
Financials and Liquidity
Recursion's financial position remains robust, with $474.3 million in cash and cash equivalents as of June 30, 2024. The company's strategic initiatives, including the recent public offering and private placements, have provided the necessary resources to fuel its ambitious growth plans. Additionally, the anticipated operational synergies from the Exscientia acquisition are expected to extend the combined entity's cash runway into 2027, with the combined company projected to have around $850 million in cash at the end of Q2 2024.
However, it's worth noting that Recursion has faced financial challenges, reporting significant operating losses each year as it continues to invest heavily in research and development, platform improvements, and infrastructure. As of December 31, 2023, the company had accumulated a deficit of $967.6 million, reflecting the substantial investments made in its technology and pipeline.
For the fiscal year 2023, Recursion reported revenue of $43.88 million, a net loss of $328.07 million, operating cash flow of -$287.78 million, and free cash flow of -$300.33 million. In the most recent quarter (Q2 2024), the company's revenue increased 31% year-over-year to $14.42 million, driven by increased revenue recognized from the Roche partnership as work on the gastrointestinal cancer performance obligation progressed. However, the net loss for Q2 2024 was $97.54 million, with operating cash flow of -$82.22 million and free cash flow of -$86.40 million. These figures reflect increased R&D and G&A expenses as the company continues to expand its platform and pipeline.
As of June 30, 2024, Recursion's debt-to-equity ratio stood at 0.068, with a current ratio and quick ratio both at 6.07. These metrics indicate a strong liquidity position, allowing the company to meet its short-term obligations and continue investing in its growth initiatives.
Conclusion
Despite the inherent risks and challenges associated with the biotechnology industry, Recursion's unwavering commitment to innovation, strategic partnerships, and financial prudence position the company as a promising contender in the race to transform drug discovery. The company's focus on leveraging AI and machine learning in drug discovery aligns well with key industry trends, potentially improving efficiency and the probability of success in developing new therapies.
As Recursion continues to execute on its ambitious vision, with approximately 10 clinical and near-clinical readouts expected over the next 18 months across its internal pipeline, investors and patients alike eagerly await the potential breakthroughs that may emerge from Recursion's technology-powered approach to revolutionizing the pharmaceutical landscape. The company's expanding pipeline, which now includes programs in precision oncology for both hematological and solid tumors, rare diseases, infectious diseases, and potentially immunology through partnerships, demonstrates its commitment to addressing a wide range of unmet medical needs.
While Recursion has yet to generate revenue from product sales and continues to incur significant losses, its strong cash position, strategic partnerships, and the potential synergies from the Exscientia acquisition provide a solid foundation for future growth. As the company progresses its pipeline and platform, it has the potential to deliver substantial value to both patients and shareholders in the years to come.