Sushree Mohanty
3 min read
In This Article:
The biotech industry offers numerous opportunities for investors who are willing to wait for the underlying business to reach its full potential.
One such rising star is Recursion Pharmaceuticals (RXRX), which uses artificial intelligence (AI), robotic biology, and massive phenotypic screening to automate and scale drug discovery. Instead of relying on traditional hypothesis-driven R&D, Recursion created a discovery platform, which is a scalable, AI-driven discovery engine with pipeline-agnostic capabilities.
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This philosophy sets Recursion apart in a crowded biotech market. Furthermore, Nvidia’s (NVDA) support catalyzes the company’s expansion. In its most recent 13F filing, Nvidia disclosed a $40.7 million investment in the company.
While Recursion stock is down 23.5% year-to-date, Wall Street expects the stock to climb higher.
Recursion has built a data- and compute-intensive pipeline with near-term clinical events, resulting in a one-of-a-kind platform that combines AI, biology, and chemistry. Its diverse business model is capable of producing both pipeline-driven value and platform revenues. In May 2024, Recursion completed BioHive 2, a custom Nvidia DGX supercomputer. The performance quadrupled compared to the previous system (BioHive 1), allowing deep learning models to run on biological data gateways.
Their computing power, combined with years of phenotypic data, creates a strong foundation. It powers two major value engines: internal drug pipeline advancement and platform commercial tools like licensing models, data partnerships, and pharmaceutical collaborations.
Furthermore, Recursion’s all-stock acquisition of UK-based Exscientia in late 2024 was a strategic win. Following its integration with Exscientia, more than five internally developed programs are now underway, each powered by Recursion OS 2.0.
In the first quarter, Recursion reported revenue of $15 million, marking a 7% increase from the prior-year quarter, owing primarily to collaboration agreements. However, as a clinical-stage biotech, the company remains unprofitable. The net loss for the quarter totaled $203 million. The company ended the quarter with $509 million in cash, cash equivalents, and restricted cash balances. Furthermore, to improve financial sustainability, Recursion has reduced its projected fiscal 2025 cash burn to less than $450 million, from $600 million in 2024. It accomplished this through contract optimization, integration of high- and low-cost operations, and automation-driven efficiency, all without jeopardizing R&D advancement. The company remains well-capitalized, with a runway that extends through mid-2027. Additionally, strategic alliances with Sanofi (SNY), Roche (RHHBY), and Genentech have yielded over $450 million in non-dilutive capital. The company has no immediate plans to raise capital.
