Core Insights - The artificial intelligence (AI) revolution is significantly impacting various industries, with healthcare being one of the sectors that is beginning to adopt AI technologies [1][2][3] Group 1: AI in Healthcare - Despite the slow adoption of AI in healthcare, there are promising opportunities for investors as companies begin to commercialize AI solutions [3] - Recursion Pharmaceuticals has developed Recursion OS, a platform that utilizes 36 petabytes of biological and chemical data to virtually test drug potentials at a fraction of the cost of traditional clinical trials [7][9] - Tempus AI offers practical AI solutions for caregivers, helping with disease diagnosis, clinical trial suggestions, and treatment efficacy predictions, which enhances patient outcomes [15][16] Group 2: Company Performance - Recursion Pharmaceuticals reported a revenue of just under $34 million in the first half of the year, with a net loss of $374 million, but analysts expect revenue to triple by 2027 while halving losses [11][12] - Tempus AI generated $693 million in revenue last year, reflecting a 30% year-over-year growth, and is projected to become profitable by fiscal 2027 as it continues to grow [14][18]

Core Points - Recursion Pharmaceuticals (RXRX) has seen its stock value decrease by more than 17% week-to-date as of Thursday night, primarily due to an analyst price target cut and insider stock sales [1][2][4] - Morgan Stanley analyst Sean Laaman reduced the price target for Recursion from $5.00 to $4.80 while maintaining an equal-weight recommendation [2] - Several executives, including CEO Christopher Gibson and Chief R&D Officer Najit Khan, sold significant amounts of stock, with Gibson selling 40,390 shares and Khan selling 40,388 shares, primarily to meet tax obligations related to restricted stock units [5][6] Summary by Categories Analyst Actions - Morgan Stanley's Sean Laaman cut the price target for Recursion Pharmaceuticals by $0.20 to $4.80, while keeping an equal-weight recommendation [2] Insider Trading - CEO Christopher Gibson and Chief R&D Officer Najit Khan sold 40,390 and 40,388 shares respectively, with the sales primarily for tax withholding purposes related to restricted stock units [5] Market Reaction - The stock's decline of over 17% reflects the volatility typical in biotech stocks, where even minor negative news can significantly impact share prices [1][6]

Group 1 - Nvidia-related stocks experienced a decline on Tuesday, with NEBIUS (NBIS.US) and CoreWeave (CRWV.US) dropping over 6% [1] - Recursion Pharmaceuticals (RXRX.US) fell more than 5%, while Applied Digital (APLD.US) decreased nearly 5% [1] - Arm Holdings (ARM.US) saw a decline of over 3% [1]

Group 1 - Nvidia-related stocks experienced a decline on Tuesday, with NEBIUS (NBIS.US) and CoreWeave (CRWV.US) dropping over 6% [1] - Recursion Pharmaceuticals (RXRX.US) fell more than 5%, while Applied Digital (APLD.US) decreased nearly 5% [1] - Arm Holdings (ARM.US) saw a decline of over 3% [1]

Core Insights - Recursion Pharmaceuticals reported disappointing quarterly earnings, leading to a nearly 5% decline in stock price, which was worse than the S&P 500's 0.5% dip [1] Financial Performance - In the second quarter, Recursion generated $19.2 million in revenue, an increase from $14.4 million in the same period of 2024, but the GAAP net loss deepened to almost $172 million ($0.41 per share) compared to a $97.5 million loss in the previous year [2][4] - Analysts had expected lower revenue of $15.4 million but had estimated a narrower net loss of $0.35 per share [4] Pipeline and Collaborations - Recursion focuses on developing investigational drugs for cancer and rare disorders, with its most advanced program, oncology drug REC-617, entering phase 1/2 clinical trials in the first half of the year [4] - The company generates modest revenue primarily through collaborations with major pharmaceutical companies, including Bayer and Merck [5] - A notable collaboration with Sanofi has the potential to yield over $300 million in milestone payments [6]

Financial Data and Key Metrics Changes - The company ended the quarter with a strong cash balance of $533 million, reflecting effective expense management and cash inflows from partnerships and tax credits [43][44]. - The expected cash burn for 2026 is projected to be 35% less than previous estimates, demonstrating a commitment to operational efficiency [44]. Business Line Data and Key Metrics Changes - The company is advancing a pipeline of internal programs in oncology and rare diseases, alongside collaborations with partners like Roche, Sanofi, Bayer, and Merck KGA [8][12]. - The ClinTech platform is being deployed across all programs, enhancing patient stratification and trial execution, with potential for 50% faster enrollment at high-quality sites [6][7]. Market Data and Key Metrics Changes - The company is leveraging proprietary datasets and AI to enhance drug discovery and clinical trial design, which is expected to improve the quality and speed of bringing medicines to market [9][12]. - The partnership with Sanofi has achieved multiple milestones, indicating strong collaboration in challenging therapeutic areas [40][68]. Company Strategy and Development Direction - The company is focused on building a comprehensive drug discovery platform, integrating various data layers to enhance the probability of success in drug development [47][81]. - The Recursion OS 2.0 platform aims to bring unique biological insights and new targets to the clinic, emphasizing high-quality programs that address unmet medical needs [47][48]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting a catalyst-packed calendar with multiple readouts expected in the coming quarters [48]. - The company is committed to maintaining high standards of quality while advancing its innovative platforms and partnerships [46][47]. Other Important Information - The company has made significant advancements in AI-driven drug design and patient connectivity, which are expected to enhance the efficiency of clinical trials [17][19]. - The integration of the ClinTech platform is anticipated to streamline operations and improve patient outcomes in clinical trials [6][7]. Q&A Session Summary Question: Is Bolts 2 the initiative with a major partner on foundational protein structure modeling? - Yes, Bolts 2 is the partnership mentioned earlier, aimed at enhancing protein structure modeling [49]. Question: Why open source versus keeping it internal? - The company believes in commoditizing certain technologies to foster collaboration while retaining proprietary tools that provide a competitive advantage [50]. Question: What standard of care is allowed in the CDK7 combo expansion cohort in ovarian cancer? - The standard of care will include single-agent chemotherapy plus Bevacizumab, with median progression-free survival (PFS) around 6.7 months [53]. Question: Will multiomic profiling dictate patient enrollment in future studies for RBM 39? - Yes, the multiomic approach will help identify relevant patient populations for enrollment based on biological insights [56][58]. Question: What is the differentiation of RBM 39 compared to other CDK targeting assets? - RBM 39 is not a kinase and offers selectivity advantages over similar targets like CDK 12 and CDK 13, which have challenges in selectivity [62][63]. Question: What is the threshold for success in the upcoming FAP data readout? - The company is looking for meaningful improvement in polyp burden reduction compared to existing off-label therapies [65]. Question: Can you provide details on the $7 million milestone achieved under the Sanofi collaboration? - The milestone was achieved for a challenging target in the immunology space, reflecting progress in the partnership [68].

Financial Data and Key Metrics Changes - The company ended the quarter with a strong cash balance of $533 million, reflecting effective expense management and cash inflows from partnerships and tax credits [42][43] - Expected cash burn in 2026 is projected to be 35% less than the previous year, demonstrating a commitment to operational efficiency [43] Business Line Data and Key Metrics Changes - The company is advancing a pipeline of internal programs in oncology and rare diseases, alongside collaborations with partners like Roche, Sanofi, Bayer, and Merck KGA [7][39] - The ClinTech platform is being deployed across all programs, enhancing patient stratification and trial execution, with projections for 50% faster enrollment at high-quality sites [6][7] Market Data and Key Metrics Changes - The company is leveraging proprietary datasets and AI to enhance drug discovery and development, with significant advancements in partnerships and internal programs [11][39] - The partnership with Sanofi achieved its fourth milestone, indicating progress in challenging targets within immunology and oncology [39] Company Strategy and Development Direction - The focus is on building a comprehensive drug discovery platform, Recursion OS 2.0, integrating various data sources and technologies to improve the efficiency and success rate of drug development [46][47] - The company aims to bring unique biological insights and new targets to the clinic faster and at lower costs, emphasizing the importance of high-quality programs [8][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting a catalyst-packed calendar with multiple readouts expected in the coming quarters [48] - The company is committed to maintaining a high bar for quality while exploring innovative approaches to drug discovery and development [46][47] Other Important Information - The company is actively working on a virtual cell model to predict cellular responses to various interventions, which could significantly enhance drug discovery efforts [78][80] - The integration of AI and multiomic data is central to the company's strategy, allowing for more precise patient targeting and drug design [16][57] Q&A Session Summary Question: Is Bolts two the initiative with a major partner on foundational protein structure modeling? - Yes, Bolts two is the partnership mentioned earlier, aimed at enhancing protein structure modeling [49] Question: Why open source versus keeping it internal? - The company believes in commoditizing certain technologies while retaining proprietary tools that provide a competitive advantage [50] Question: For the CDK7 combo expansion cohort in ovarian cancer, what standard of care are you allowing in the trial? - The standard of care will include single-agent chemotherapy plus Bevacizumab, with a median PFS of about 6.7 months [52][53] Question: Do you expect the data from multiomic profiling for RBM 39 to dictate future patient enrollment? - Yes, the data will help select patients for future studies, focusing on those with specific biomarkers [55][57] Question: What is the differentiation of RBM 39 compared to other CDK targeting assets? - RBM 39 is not a kinase and offers selectivity advantages over similar targets like CDK 12 and CDK 13 [61] Question: What visibility do you have on the potential $100 million in milestones by 2026? - The guidance is based on existing partnerships and programs, with probability-weighted estimates for milestone achievements [70][71] Question: How does the company plan to achieve its cash runway guidance through Q4 2027? - The company is focused on cash flows, managing expenses efficiently, and executing existing partnerships to ensure a sustainable cash runway [72][75] Question: What ambitious initiatives are being planned to reflect the next level of thinking? - The company is investing in large-scale compute initiatives and developing a virtual cell model to enhance drug discovery capabilities [78][80]

Company Performance - Recursion Pharmaceuticals reported a quarterly loss of $0.41 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.35, representing an earnings surprise of -17.14% [1] - The company posted revenues of $19.22 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 33.71%, compared to revenues of $14.42 million a year ago [2] - Over the last four quarters, Recursion Pharmaceuticals has not surpassed consensus EPS estimates and has topped consensus revenue estimates only once [2] Stock Movement and Outlook - Shares of Recursion Pharmaceuticals have declined approximately 14.2% since the beginning of the year, contrasting with the S&P 500's gain of 7.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is -$0.32 on revenues of $13.37 million, and for the current fiscal year, it is -$1.35 on revenues of $68.39 million [7] Industry Context - The Medical - Biomedical and Genetics industry, to which Recursion Pharmaceuticals belongs, is currently ranked in the bottom 43% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40323 RECURSION PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 46-4099738 (State or other ...

[Executive Summary and Q2 2025 Highlights](index=1&type=section&id=Recursion_Q2_2025_Report_Overview) Recursion reported Q2 2025 financial results, business updates, and CEO statements, highlighting platform power and clinical program progress [Q2 2025 Highlights and CEO Statement](index=1&type=section&id=Q2_2025_Highlights_CEO_Statement) Recursion reported Q2 2025 financial results and business updates, including a **$7 million** Sanofi milestone and progress on clinical programs REC-1245 (RBM39) and REC-617 (CDK7) - Achieved fourth partnered discovery milestone with Sanofi, reflecting tangible momentum across the joint pipeline[3](index=3&type=chunk) - The platform's power allows for discovery and development of potential new medicines and insights on patient populations, leveraging advanced models like Boltz-2 for rapid ligand design[3](index=3&type=chunk) [Summary of Business Highlights](index=1&type=section&id=Summary%20of%20Business%20Highlights) Recursion provided updates on its internal and partnered programs, including clinical advancements, new acquisitions, and significant platform developments [Portfolio - Internal and Partnered Programs](index=2&type=section&id=Portfolio_Internal_Partnered_Programs) Recursion provided updates on its internal pipeline, including REC-1245 (RBM39 degrader) and REC-617 (CDK7 inhibitor) with refined patient population strategies, and the acquisition of full rights to REC-102 (ENPP1 inhibitor) [Internal Pipeline Updates](index=2&type=section&id=Internal_Pipeline_Updates) Recursion advanced several internal programs, including REC-1245 (RBM39 degrader) with ongoing Phase 1/2 DAHLIA study enrollment and early safety/PK data expected in 1H26 - REC-1245 (RBM39 degrader) Phase 1/2 DAHLIA study is enrolling select tumor types to identify responsive populations, with early safety and PK data from dose-escalation on track for 1H26[5](index=5&type=chunk)[6](index=6&type=chunk)[8](index=8&type=chunk) - REC-617 (CDK7 inhibitor) initiated a combination dose escalation portion of the ELUCIDATE Phase 1/2 trial in 1H25, selecting platinum-resistant ovarian cancer as the first combination cohort based on clinical, preclinical, and causal AI modeling data[5](index=5&type=chunk)[8](index=8&type=chunk) - Acquired full rights to REC-102 (ENPP1 inhibitor) for hypophosphatasia (HPP), with Phase 1 initiation on-track for 2H26 and preclinical data to be presented at ASMBR 2025[8](index=8&type=chunk) - Additional data for REC-4881 (MEK1/2) in FAP from TUPELO is expected in 2H25[8](index=8&type=chunk) [Partnered Discovery Updates](index=4&type=section&id=Partnered_Discovery_Updates) Recursion's collaborations yielded significant progress, including a **$7 million** milestone payment from Sanofi for an immunology program, marking the fourth such milestone in 18 months - Achieved a **$7 million** milestone payment from Sanofi in Q2 2025 for an immunology program, marking the fourth partnered program reaching a significant discovery milestone in 18 months[10](index=10&type=chunk) - Potential for over **$100 million** in partnership milestones by the end of 2026, with several programs advancing towards potential development candidate designation over the next 12-15 months[10](index=10&type=chunk) - The Roche and Genentech collaboration has built a whole-genome knockout phenomap from over one trillion iPSC-derived neural cells and identified potential neuroscience targets for validation[10](index=10&type=chunk) - Bayer collaboration nominated multiple early discovery precision oncology programs against previously 'undruggable' targets, with work underway to advance them to lead series milestone decisions[10](index=10&type=chunk) - Collaboration with Merck KgAa, Darmstadt, Germany, is ongoing to identify first-in-class and best-in-class targets[10](index=10&type=chunk) [Platform (Recursion OS 2.0)](index=5&type=section&id=Platform) Recursion OS 2.0 continues to drive program development across biology, chemistry, and clinical development, expanding its Virtual Cell and releasing the open-source Boltz-2 model - Recursion OS 2.0 is driving program development with applications across biology, chemistry, and clinical development[13](index=13&type=chunk) - Released Boltz-2 open-source model, which is over **1,000 times faster** than physics-based FEP calculations for binding affinity prediction and has been downloaded by over **40,000 unique users**[15](index=15&type=chunk) - Expanding the Virtual Cell to understand and predict cellular behavior across a wider range of biology, incorporating diverse cell types and disease areas beyond oncology[15](index=15&type=chunk) - Expanding ClinTech platform by integrating high-quality, linked patient datasets (Tempus, HealthVerity, and Helix) to strengthen programs, bolster preclinical and early clinical data, and optimize recruitment[15](index=15&type=chunk) [Second Quarter 2025 Financial Results](index=5&type=section&id=Second%20Quarter%202025%20Financial%20Results) Recursion reported increased Q2 2025 revenue but also significantly higher R&D and G&A expenses, leading to a widened net loss, with cash runway extending into Q4 2027 [Key Financial Metrics Summary](index=5&type=section&id=Key_Financial_Metrics_Summary) Recursion's Q2 2025 revenue increased to **$19.2 million**, up from **$14.4 million** in Q2 2024, while R&D and G&A expenses significantly rose, resulting in a net loss of **$171.9 million** Q2 2025 Key Financial Metrics Comparison (YoY) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (YoY) | | :--------------------------- | :----------------- | :----------------- | :----------- | | Total Revenue | $19.2 | $14.4 | +33.3% | | Research & Development Exp. | $128.6 | $73.9 | +74.0% | | General & Administrative Exp.| $46.7 | $31.8 | +46.9% | | Net Loss | $(171.9) | $(97.5) | -76.3% | - Cash, cash equivalents and restricted cash were **$533.8 million** as of June 30, 2025, compared to **$603.0 million** as of December 31, 2024[15](index=15&type=chunk) - Based on current operating plans, the Company believes that its expected cash runway will extend into the **fourth quarter of 2027**[15](index=15&type=chunk) - Net cash used in operating activities was **$208.4 million** for the six months ended June 30, 2025, compared to **$184.5 million** for the same period in 2024, primarily due to the inclusion of Exscientia's operations[18](index=18&type=chunk) - The Company expects to incur costs totaling **$9.3 million** in 2025 for restructuring activities, of which **$3.9 million** has been paid in Q2 2025[18](index=18&type=chunk) [Consolidated Statements of Operations (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20(unaudited)) The consolidated statements of operations show a significant increase in total revenue for both the three and six months ended June 30, 2025, compared to the prior year, alongside substantially rising operating costs and expenses Consolidated Statements of Operations (Unaudited) - Q2 2025 vs Q2 2024 | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $19,223 | $14,417 | $33,968 | $28,211 | | Total operating costs and expenses| $195,450 | $114,960 | $401,563 | $225,094 | | Loss from operations | $(176,227) | $(100,543) | $(367,595) | $(196,883) | | Net loss | $(171,897) | $(97,540) | $(374,384) | $(188,913) | | Net loss per share (basic & diluted)| $(0.41) | $(0.40) | $(0.91) | $(0.79) | | Weighted-average shares outstanding| 417,361,147 | 242,196,409 | 410,268,199 | 239,107,879 | [Condensed Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) The condensed consolidated balance sheet shows a decrease in total assets from **$1,448.598 million** at December 31, 2024, to **$1,302.355 million** at June 30, 2025, primarily driven by a reduction in cash and cash equivalents Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2025 vs December 31, 2024 | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $525,110 | $594,350 | | Total current assets | $587,160 | $714,269 | | Total assets | $1,302,355 | $1,448,598 | | Total current liabilities | $164,026 | $187,472 | | Total liabilities | $383,209 | $413,816 | | Total stockholders' equity | $919,146 | $1,034,782 | [About Recursion](index=6&type=section&id=About%20Recursion) Recursion is a clinical-stage TechBio company leveraging its OS platform to decode biology and discover new medicines at massive experimental and computational scales [Company Overview](index=6&type=section&id=Company_Overview) Recursion is a clinical-stage TechBio company that decodes biology to improve lives by leveraging its Recursion OS platform, which integrates diverse technologies to generate vast proprietary datasets - Recursion is a clinical stage TechBio company leading the space by decoding biology to radically improve lives[16](index=16&type=chunk) - The Recursion OS platform continuously generates one of the world's largest proprietary biological and chemical datasets, leveraging sophisticated machine-learning algorithms to distill trillions of searchable relationships[16](index=16&type=chunk) - The company operates at massive experimental scale (up to **millions of wet lab experiments weekly**) and massive computational scale (owning and operating one of the most powerful supercomputers in the world)[16](index=16&type=chunk) [Forward-Looking Statements](index=11&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements regarding Recursion's future plans, subject to inherent risks and uncertainties in pharmaceutical R&D and financial outlook [Disclaimer and Risk Factors](index=11&type=section&id=Disclaimer_Risk_Factors) This section contains forward-looking statements regarding Recursion's future plans, including drug discovery and development, clinical trial timelines, partnership milestones, platform enhancements, and financial outlook - Forward-looking statements include those regarding Recursion's ability to discover and develop medicines, timing of data readouts, impact of preclinical data, future as a TechBio leader, and financial position and cash runway[23](index=23&type=chunk) - These statements are subject to known or unknown risks and uncertainties, including challenges inherent in pharmaceutical research and development, financing, regulatory approval, intellectual property protections, and cyberattacks[23](index=23&type=chunk) - Recursion undertakes no obligation to correct or update any such statements, whether as a result of new information, future developments, or otherwise, except to the extent required by applicable law[23](index=23&type=chunk)