Artificial intelligence (AI) has taken over Wall Street. The leaders in this rapidly growing field are attracting significant attention. Many have produced outstanding returns over the past two years. Naturally, most investors want to cash in on this, but the biggest names in the industry tend to trade at steep premiums. It might be worth considering smaller, under-the-radar AI-focused companies that haven't performed well yet but boast significant upside potential. However, it isn't there yet, and in the m ...

Core Viewpoint - Recursion Pharmaceuticals experienced a significant stock decline of 24% following disappointing first-quarter earnings and concerns over federal research funding cuts impacting the biotech industry [1][2][3]. Financial Performance - Recursion reported an earnings-per-share (EPS) loss of $0.50 on sales of $14.75 million, slightly beating Wall Street's expectations but falling short of the forecasted sales of $14.98 million [2]. Development Pipeline - The company announced it would reduce its development pipeline significantly to cut costs, indicating a strategic shift in its research focus [2][4]. Industry Challenges - The Trump administration's proposed cuts to the National Institutes of Health (NIH) and other research funding sources are expected to make capital raising more difficult for biotech firms, as indicated by a survey of industry leaders [3]. Long-term Viability - Recursion is heavily investing in research and development while operating at a loss, suggesting that it will require external funding to sustain its operations and achieve long-term profitability [4]. Investment Outlook - Despite the potential of Recursion's innovative use of AI in drug discovery, the company faces significant uncertainty, making it a suitable investment only for aggressive, risk-tolerant investors [5].

Company Overview - Recursion Pharmaceuticals' shares have experienced a significant decline, losing 10.3% as of 2:50 p.m. ET, with a peak drop of 11.8% earlier in the day [1] - The company is heavily investing in research and development but is currently operating at a loss, indicating a need for outside funding to sustain long-term operations [4] Financial Performance - Recursion recently reported disappointing first-quarter earnings, which contributed to the stock's decline [2] - The company announced plans to reduce its development pipeline, which raises concerns about its long-term viability despite potential short-term cost savings [6] Industry Context - A recent survey indicated that the biotech industry is apprehensive about federal research cuts proposed by President Trump, which could complicate capital raising efforts [2][3] - The cuts target the National Institutes of Health (NIH) and other research organizations, leading to a majority of biotech leaders believing that these changes will hinder their ability to secure funding [3] Future Outlook - Despite the challenges, Recursion's use of AI in its research is seen as promising and could lead to significant breakthroughs in the future [6] - The stock is characterized as suitable for aggressive, risk-tolerant investors, with the potential for long-term payoffs, albeit with no guarantees [6]

Core Viewpoint - Recursion Pharmaceuticals reported a wider-than-expected loss in Q1 2025, leading to a significant decline in its stock price due to disappointing financial results and pipeline setbacks [1][2][5]. Financial Performance - The company reported a loss of 50 cents per share, compared to the Zacks Consensus Estimate of a loss of 44 cents, and a loss of 39 cents per share in the same quarter last year [1]. - Total revenues for the quarter were $14.7 million, a 7% increase year over year, but below the Zacks Consensus Estimate of $20 million [2]. - Research and development (R&D) expenses surged 92% to $129.6 million, driven by agreements for upgrading its therapeutic development platform and a business combination with Exscientia [3]. - General and administrative (G&A) expenses rose 74% to $54.7 million, influenced by the inclusion of G&A expenses from the Exscientia business combination [4]. - The company had cash and equivalents of $509 million as of March 31, 2025, down from $603 million at the end of 2024, which is expected to sustain operations into mid-2027 [5]. Pipeline Developments - Recursion Pharmaceuticals discontinued the development of its lead candidate, REC-994, and REC-2282 due to unfavorable efficacy results from mid-stage studies [7]. - The company also halted the mid-stage study of REC-3964 for treating clostridioides difficile infection, opting to focus on areas with greater unmet needs [8]. - The company is now concentrating on other candidates, including REC-4881, which showed a preliminary median 43% reduction in polyp burden in a phase Ib/II study [9][10]. - REC-1245 is being evaluated in the phase I/II DAHLIA study for biomarker-enriched solid tumors and lymphoma, with data expected in the first half of 2026 [12].

Recursion Pharmaceuticals (RXRX -15.70%) didn't have a fine start to the working week on Monday, at least as far as its stock was concerned. Investors traded out of it following the clinical-stage biotech's first-quarter earnings release and business update, and the share price was down by 15% in mid-session trading. The S&P 500 index was doing comparatively better, with a 0.3% decline. Light revenue and a deepening net lossFor the quarter, Recursion -- which although a clinical-stage company earns some coi ...

Financial Data and Key Metrics Changes - The company ended the quarter with $509 million in cash [67] - Cash burn for Q1 2025 was approximately $118 million, excluding partnership inflows and non-cash effects [68] - The company expects a cash runway extending into mid-2027 [69] Business Line Data and Key Metrics Changes - The company is focusing on five clinical and preclinical programs with a higher probability of success, particularly in oncology and rare diseases [12][13] - The pipeline reflects a strategic application of Recursion OS and AI, emphasizing differentiated medicines [12] Market Data and Key Metrics Changes - The company has generated over $450 million from partnerships, including four collaborations with Sanofi [7][69] - The company is actively pursuing new business development opportunities to match operational capacity with partnerships [71] Company Strategy and Development Direction - The company aims to build a learning system, the Recursion operating system, to improve drug discovery and development [2][6] - The focus is on disciplined capital allocation and prioritizing programs that meet high standards of differentiation [30] - The company is committed to leveraging AI throughout the drug development process [76] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macroeconomic environment and emphasizes disciplined decision-making [6] - The company is optimistic about the potential for significant milestones from existing partnerships in the coming quarters [76] Other Important Information - The company has deprioritized three programs (NF2, CCM, and C. Diff) based on clinical data and strategic considerations [13][22][27] - The company is strategically pausing the LSD1 program to assess opportunities for a more differentiated target product profile [21] Q&A Session Summary Question: What burn rate do you anticipate exiting 2025 or entering 2026 with? - The company has not provided specific guidance but targets a budget of $450 million or less for the year, aiming to extend the runway without impacting execution [78][79] Question: When can we see an option on a molecule candidate from one of your partnerships? - The company has already optioned four programs in collaboration with Sanofi and is optimistic about future options moving into partners' pipelines [82] Question: What new levers in the OS are being used to accelerate partnership programs to commercialization? - Management highlighted three areas: enhanced biological insights, improved chemistry and design modeling, and better understanding of patient populations for differentiated target product profiles [83]

Financial Data and Key Metrics Changes - The company ended the quarter with $509 million in cash [67] - Cash burn for Q1 2025 was approximately $118 million, excluding partnership inflows and non-cash effects [68] - The company expects a cash runway extending into mid-2027 based on current operational adjustments and partnerships [69][70] Business Line Data and Key Metrics Changes - The company is focusing on five clinical and preclinical programs with a higher probability of success, particularly in oncology and rare diseases [12][13] - The pipeline reflects a strategic application of Recursion OS and AI, emphasizing differentiated medicines [12][13] - The company has deprioritized three programs: NF2, CCM, and C. Diff, while placing LSD1 on strategic pause [13][22][27] Market Data and Key Metrics Changes - The company has generated over $450 million from partnerships, including four collaborations with Sanofi [7][70] - The partnership with Roche has led to significant advancements in disease context-specific maps, enhancing discovery speed [63] Company Strategy and Development Direction - The company aims to build a learning system that improves drug discovery and development through its Recursion operating system [2][4] - There is a commitment to disciplined capital allocation and prioritizing programs that meet high standards of differentiation [30][65] - The focus is on leveraging AI throughout the drug development process to enhance efficiency and effectiveness [76] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macroeconomic environment and emphasizes the need for disciplined decision-making [6] - The company is optimistic about the potential for significant milestones from existing partnerships and internal programs [75][76] Other Important Information - The company plans to make all clinical data publicly available in peer-reviewed journals following appropriate review [28] - The integration of Recursion and Exensia has strengthened the company's capabilities and pipeline [4][6] Q&A Session Summary Question: What burn rate do you anticipate exiting 2025 or entering 2026 with? - The company has not provided specific guidance but targets a budget of $450 million or less for the year, aiming to extend the runway without impacting execution [78][79] Question: When can we see an option on a molecule candidate from one of your partnerships? - The company has already optioned four programs with Sanofi and is optimistic about future options and potential later-stage transitions into partners' pipelines [82] Question: What new levers in the OS are being used to accelerate partnership programs to commercialization? - The company is enhancing its understanding of biology and patient populations through multimodal data, improving chemistry and design processes, and modeling drug-like properties earlier in development [83]

Recursion Pharmaceuticals (RXRX) came out with a quarterly loss of $0.50 per share versus the Zacks Consensus Estimate of a loss of $0.44. This compares to loss of $0.39 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -13.64%. A quarter ago, it was expected that this biotechnology company would post a loss of $0.36 per share when it actually produced a loss of $0.53, delivering a surprise of -47.22%.Over the last four quarters ...

Financial Data and Key Metrics Changes - The company ended the quarter with $509 million in cash, with a cash burn of approximately $118 million for Q1 2025, excluding partnership inflows and non-cash effects [67][68][70] - The expected cash runway extends into mid-2027, based on a budget of $450 million or less for the current year [70][72] Business Line Data and Key Metrics Changes - The company is focusing on five clinical and preclinical programs with a higher probability of success, particularly in oncology and rare diseases [12][13] - Three programs (NF2, CCM, and C. Diff) have been deprioritized due to limited clinical activity and lack of differentiation [23][24][28] Market Data and Key Metrics Changes - The company has generated over $450 million from partnerships, including four milestones achieved with Sanofi and a major milestone with Roche [7][69][61] - The unmet need for certain diseases, such as FAP and rare metabolic bone diseases, remains high, driving the focus on differentiated medicines [21][52] Company Strategy and Development Direction - The company aims to build a learning system, the Recursion Operating System, to improve drug discovery and development efficiency [2][6] - There is a commitment to sharpen the R&D portfolio and focus on programs that meet high standards of differentiation and address significant unmet needs [12][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macroeconomic environment and emphasizes disciplined decision-making to ensure long-term mission success [6][30] - The company anticipates meaningful readouts and catalysts across its internal pipeline in 2025 and 2026, with a focus on advancing clinical studies [33][34] Other Important Information - The company is leveraging AI and advanced analytics to enhance drug discovery and development processes [32][60] - The integration of the Recursion and Exensia platforms is expected to yield significant advancements in early-stage discovery programs [4][6] Q&A Session Summary Question: What burn rate do you anticipate exiting 2025 or entering 2026 with? - The company targets a budget of $450 million or less for the current year, with additional details to be provided as the year progresses [76][77] Question: When can we see an option on a molecule candidate from one of your partnerships? - The company has already optioned four programs in collaboration with Sanofi and is optimistic about future options moving into partners' pipelines [81] Question: What new levers in the OS are being used to accelerate partnership programs to commercialization? - The company is utilizing multimodal data to better understand patient populations and enhance the differentiation of target product profiles [82][84]

Clinical Programs and Collaborations - Recursion Pharmaceuticals has over 5 high potential clinical and pre-clinical programs across oncology and rare disease indications, with partnerships generating $130 million in cash inflows to date[126][134] - In the Phase 2 study of REC-4881 for familial adenomatous polyposis, a preliminary median 43% reduction in polyp burden was observed, with 83% of patients showing reductions[133] - The collaboration with Sanofi has resulted in a $7 million milestone payment, with potential for over $300 million in additional milestone payments[134] - The ongoing collaboration with Roche and Genentech has generated five phenomaps from over one trillion iPSC-derived cells, enhancing insights for potential programs[135] - REC-7735, targeting PI3Kα H1047R mutant breast cancer, is expected to have a development candidate nominated in the second half of 2025[133][138] - REC-617 and REC-1245 are in ongoing Phase 1/2 studies, with additional data expected in 2025[138] Financial Performance - The company reported a net loss of $202.5 million for the three months ended March 31, 2025, compared to a net loss of $91.4 million for the same period in 2024, representing an increase of over 100%[2] - Total revenue for the three months ended March 31, 2025, was $14.745 million, a 7% increase from $13.794 million in the prior year[3] - Operating revenue increased by 10% to $14.818 million, driven by strategic partnerships with Sanofi and Merck[4] - Research and development expenses rose by 92% to $129.634 million, primarily due to costs associated with the acquisition of Exscientia and increased personnel costs[5] - General and administrative expenses increased by 74% to $54.650 million, influenced by the inclusion of Exscientia's results and higher salaries[6] - Cash used in operating activities for the three months ended March 31, 2025, was $131.957 million, up from $102.300 million in the prior year[8] - The company incurred a total cost of revenue of $21.829 million, a 96% increase from $11.166 million in the previous year[9] - The accumulated deficit as of March 31, 2025, was $1.6 billion, reflecting significant operating losses since inception[10] Cash Position and Future Financing - As of March 31, 2025, the company had cash and cash equivalents of $500.5 million, sufficient to fund operations for at least the next twelve months[1] - The company anticipates needing additional financing in the future to support operations and potential product commercialization[7] Strategic Focus - The company plans to focus on high-value programs in oncology and rare diseases while discontinuing less promising clinical programs[133] - The integration of Tempus data and HealthVerity's de-identified data aims to enhance clinical trial design and operational workflows[139] - The Recursion OS utilizes approximately 65 petabytes of proprietary data to enhance drug discovery processes[125]