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Recursion Pharmaceuticals, Inc.
Healthcare | Biotechnology
⚡ Executive Summary
📊 The Bottom Line
Recursion Pharmaceuticals is a clinical-stage TechBio company that leverages an AI-driven platform to industrialize drug discovery. While possessing a promising pipeline and strategic partnerships, it has yet to bring a drug to market and faces substantial R&D expenses and operating losses.
⚖️ Risk vs Reward
At current levels, RXRX exhibits a high-risk, high-reward profile typical of a clinical-stage biotech. Wall Street analysts see significant potential upside, indicating a belief in the long-term value of its AI platform despite ongoing cash burn and the inherent uncertainties of drug development.
🚀 Why RXRX Could Soar
- • Successful advancement and positive data from ongoing clinical trials for key drug candidates like REC-994, REC-2282, and REC-4881 could significantly de-risk the pipeline and unlock substantial value.
- • Further validation and expansion of its AI-driven drug discovery platform could accelerate drug development, reduce costs, and increase the probability of successful market entry for new therapies.
- • New or expanded strategic collaborations with major pharmaceutical companies could provide additional funding, expertise, and commercialization pathways, validating Recursion's technology and pipeline.
⚠️ What Could Go Wrong
- • Clinical trial failures, unexpected safety issues, or delays in regulatory approvals for its drug candidates would severely impact the company's prospects and stock valuation.
- • Continued high R&D expenses and significant operating losses could lead to further substantial cash burn, necessitating additional capital raises and potential shareholder dilution.
- • Intensifying competition from other AI-driven biotech firms and larger pharmaceutical companies integrating AI could dilute Recursion's market position and slow its path to commercialization.
🏢 Company Overview
💰 How RXRX Makes Money
- • Recursion Pharmaceuticals utilizes its proprietary 'Recursion OS' platform, which integrates AI, automation, and bioinformatics, to decode biology and chemistry for industrializing drug discovery and development.
- • The company is focused on advancing a pipeline of clinical-stage drug candidates targeting various therapeutic areas, including oncology, rare diseases, neuroscience, and inflammation & immunology.
- • Revenue is primarily generated through strategic collaborations and milestone payments received from partnerships with major pharmaceutical companies such as Bayer AG, Roche/Genentech, and Takeda.
Revenue Breakdown
Collaboration Revenue
100%
Revenue derived from strategic partnerships and milestone payments for drug discovery and development activities.
🎯 WHY THIS MATTERS
This business model allows Recursion to fund its extensive research and development efforts while leveraging external validation and expertise from established pharmaceutical partners. Success is intrinsically linked to advancing its internal pipeline and achieving milestones in its collaborative agreements, which is inherently capital-intensive and carries significant risk given the early stage of development.
⭐ Competitive Advantage: What Makes RXRX Special
1. AI-Native Drug Discovery Platform
Recursion's core strength is its proprietary 'Recursion OS' platform, which leverages artificial intelligence, high-throughput automation, and diverse datasets to uncover novel biological insights and accelerate drug candidate identification. This technology aims to overcome the traditional inefficiencies and high failure rates in pharmaceutical R&D by enabling rapid, unbiased exploration of therapeutic possibilities.
2. Broad and Diversified Pipeline
The company maintains a broad pipeline with multiple clinical-stage programs across various therapeutic areas, including neurofibromatosis type 2, cerebral cavernous malformation, and certain cancers. This diversification helps mitigate the risk associated with any single drug candidate's failure, offering multiple shots on goal for future commercial success.
3. Strategic Pharmaceutical Partnerships
Recursion has forged significant collaborations with leading pharmaceutical companies like Roche/Genentech and Takeda. These partnerships provide crucial non-dilutive funding through milestone payments, access to broader scientific expertise, and potential pathways for late-stage development and global commercialization, validating Recursion's technology and reducing its financial burden.
🎯 WHY THIS MATTERS
These distinct advantages position Recursion as a potential leader in the evolving TechBio space, aiming to revolutionize drug discovery. The combination of its advanced AI platform, diversified pipeline, and strong partnerships provides a robust framework for developing transformative therapies and capturing a significant share of the rapidly growing AI in drug discovery market.
👔 Who's Running The Show
Najat Khan
CEO, President & Director
Najat Khan, Ph.D., is the CEO, President, and a Board Member of Recursion Pharmaceuticals. An accomplished biopharma leader, she previously built Johnson & Johnson's 250-person AI team as Chief Data Science Officer. Dr. Khan is driving Recursion's strategy to industrialize drug discovery, optimizing its pipeline, and expanding its AI platform, leveraging deep expertise in science and data science.
⚔️ What's The Competition
The landscape for AI-driven drug discovery is intensely competitive, with a mix of specialized 'TechBio' companies and established pharmaceutical giants increasingly investing in artificial intelligence. Competition centers on the effectiveness of AI platforms in identifying novel drug candidates, reducing R&D timelines and costs, and successfully navigating rigorous clinical development and regulatory approval processes.
📊 Market Context
- Total Addressable Market - The global AI in drug discovery market was valued at US$3.6 billion in 2024, projected to grow to US$49.5 billion by 2034 at a CAGR of 30.1%, driven by demand for faster R&D.
- Key Trend - The most significant trend is the increasing adoption of AI for target identification, lead optimization, and drug repurposing to overcome the high cost and failure rates of traditional drug development.
Competitor
Description
vs RXRX
BenevolentAI
A clinical-stage AI-enabled drug discovery company based in the UK, using its platform to identify and develop novel drug candidates.
Similar AI-first approach but operates with a different drug pipeline focus and geographic base, targeting various therapeutic areas.
Insitro
An AI-driven drug discovery and development company applying machine learning and human genetics to create better medicines.
Also emphasizes a data-first and AI-driven approach to drug discovery, often focusing on earlier-stage target identification and validation.
Schrödinger, Inc.
Provides a physics-based computational platform used by biopharmaceutical companies to accelerate drug discovery and materials science.
Offers a software platform to other companies for drug discovery, whereas Recursion is primarily focused on developing its own internal drug pipeline and partnerships.
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 5 Hold, 1 Buy, 2 Strong Buy
5
1
2
12-Month Price Target Range
Low Target
US$3
-28%
Average Target
US$7
+67%
High Target
US$11
+163%
Closing: US$4.19 (30 Jan 2026)
🚀 The Bull Case - Upside to US$11
1. Positive Clinical Trial Outcomes
Medium Probability
Successful results from current Phase 1b/2 and Phase 2/3 trials for REC-994 (CCM), REC-2282 (NF2), and REC-4881 (FAP/cancers) could significantly validate Recursion's platform and de-risk its pipeline, driving a re-rating of the stock. Each successful advancement could lead to substantial revenue from milestone payments or future drug sales.
2. Enhanced AI Platform Capabilities
High Probability
Continuous advancements in the Recursion OS, including new machine learning models and data generation, could further accelerate the discovery of novel drug candidates. This could lead to a broader and more robust pipeline, increasing the probability of future drug approvals and strengthening its competitive moat against other TechBio companies.
3. Expansion of Pharma Collaborations
Medium Probability
Forging new, high-value partnerships or expanding existing ones (e.g., with Roche/Genentech) could provide additional upfront and milestone payments, reducing cash burn and validating its platform. These collaborations could also accelerate the development and commercialization of Recursion-discovered assets, enhancing market reach and profitability.
🐻 The Bear Case - Downside to US$3
1. Clinical Trial Failures and Delays
High Probability
The inherent high failure rate of clinical trials, particularly in early stages, poses a significant risk. Any setbacks or failures for Recursion's lead candidates could lead to substantial value destruction, pipeline contraction, and a loss of investor confidence, severely impacting the stock price.
2. High Cash Burn and Dilution Risk
High Probability
As a clinical-stage company, Recursion has significant R&D expenses and currently operates at a loss. Continued high cash burn without substantial revenue growth from milestones could necessitate further equity financing, leading to dilution for existing shareholders and downward pressure on the stock price.
3. Intense Competition and Market Adoption
Low Probability
The AI drug discovery space is increasingly crowded with both specialized startups and large pharmaceutical companies developing their own AI capabilities. Failure to demonstrate clear differentiation or superior efficiency could result in slower adoption of its platform and difficulty securing profitable partnerships, hindering long-term growth.
🔮 Final thought: Is this a long term relationship?
Owning Recursion for a decade requires a strong conviction in the transformative potential of AI in drug discovery and its ability to consistently outperform traditional methods. The long-term durability hinges on successfully translating its extensive data and AI insights into approved therapies. While management has a strong vision, the capital intensity and high failure rates of biotech R&D remain significant hurdles. Success would mean a paradigm shift, but sustained losses and competition are ever-present risks. This is a speculative long-term play on a future technology, not a stable compounder.
📋 Appendix
Financial Performance
Metric
31 Dec 2024
31 Dec 2023
31 Dec 2022
Income Statement
Revenue
US$0.06B
US$0.04B
US$0.04B
Gross Profit
US$0.01B
US$0.00B
US$-0.01B
Operating Income
US$-0.48B
US$-0.35B
US$-0.25B
Net Income
US$-0.46B
US$-0.33B
US$-0.24B
EPS (Diluted)
-1.69
-1.58
-1.36
Balance Sheet
Cash & Equivalents
US$0.59B
US$0.39B
US$0.55B
Total Assets
US$1.45B
US$0.65B
US$0.70B
Total Debt
US$0.11B
US$0.05B
US$0.05B
Shareholders' Equity
US$1.03B
US$0.46B
US$0.49B
Key Ratios
Gross Margin
22.7%
2.9%
-21.7%
Operating Margin
-819.0%
-797.8%
-619.3%
Return on Equity
-44.81
-70.79
-49.29
Analyst Estimates
Metric
Annual (31 Dec 2025)
Annual (31 Dec 2026)
EPS Estimate
US$-1.60
US$-1.17
EPS Growth
+5.2%
+27.0%
Revenue Estimate
US$0.1B
US$0.1B
Revenue Growth
+4.7%
+34.2%
Number of Analysts
8
8
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| P/E Ratio (TTM) | -2.28 | Measures the current share price relative to the trailing twelve months' earnings per share, indicating how much investors are willing to pay for each dollar of earnings. A negative P/E implies the company is not profitable. |
| Forward P/E | -3.58 | Indicates the current share price relative to estimated future earnings per share, offering a forward-looking view of valuation. A negative forward P/E suggests analysts expect continued losses. |
| Price/Sales (TTM) | 49.99 | Measures the stock price relative to trailing twelve months' revenue per share, often used for companies with negative earnings or in early growth stages. A high ratio indicates strong market expectations for future revenue growth. |
| Price/Book (MRQ) | 1.97 | Compares a company's stock price to its book value per share, reflecting how much investors are willing to pay for each dollar of net assets. A ratio above 1 indicates investors believe the company is worth more than its accounting value. |
| EV/EBITDA | -2.52 | Compares Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. It is often used for valuing companies across different capital structures; a negative value is common for loss-making companies like Recursion Pharmaceuticals, Inc. with negative EBITDA. |
| Return on Equity (TTM) | -0.91 | Measures a company's profitability in relation to the equity invested by shareholders, indicating how efficiently shareholder investments are being used to generate profits. A negative value indicates net losses. |
| Operating Margin | -33.28 | Measures the percentage of revenue remaining after paying for operating expenses, reflecting a company's operational efficiency. A negative margin indicates that operating expenses exceed revenue. |
Peer Comparison
| Company | Market Cap (B) | P/E Ratio | P/B Ratio | Revenue Growth (%) | Operating Margin (%) |
|---|---|---|---|---|---|
| Recursion Pharmaceuticals, Inc. (Target) | 2.18 | -2.28 | 1.97 | N/A | -819.0% |
| Abivax SA | 4.51 | -23.36 | N/A | N/A | N/A |
| Krystal Biotech Inc. | 4.75 | 42.23 | 5.04 | N/A | N/A |
| Schrödinger, Inc. | 1.32 | -7.50 | 3.99 | N/A | N/A |
| Sector Average | — | 3.03 | 3.67 | N/A | -819.0% |