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].

Core Viewpoint - Recursion Pharmaceuticals experienced a significant decline in stock price following its first-quarter earnings release, with a 15% drop in mid-session trading, contrasting with a smaller decline in the S&P 500 index [1]. Financial Performance - For the first quarter, Recursion reported revenue of over $14.7 million, an increase from nearly $13.8 million in the same period of 2024 [3]. - Operating costs nearly doubled, leading to a net loss of more than $202 million ($0.50 per share), compared to a $91 million deficit in the previous year [4]. - Both revenue and net loss figures fell short of analyst expectations, with analysts predicting slightly under $15 million in revenue and a net loss of $0.49 per share [4]. Business Strategy and Technology - Recursion is recognized for its proactive use of artificial intelligence (AI) in drug discovery and development, focusing primarily on cancer treatments and a couple of rare disease programs [5]. - None of the drug development programs have progressed to later stages, raising investor expectations for further advancements [5]. - The application of AI in medicine is still emerging, with the potential to significantly accelerate drug discovery and development processes, although it carries a high degree of risk for investors [6].

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]

Financial Performance - Total revenue for Q1 2025 was $15 million, a 7% increase from $14 million in Q1 2024, primarily due to collaborative agreements with Sanofi, Roche, and Merck KGaA[15] - Total revenue for Q1 2025 was $14,745,000, a 6.9% increase from $13,794,000 in Q1 2024[21] - Operating revenue increased to $14,818,000 in Q1 2025 from $13,491,000 in Q1 2024, reflecting a growth of 9.8%[21] - Net loss for Q1 2025 was $202.5 million, compared to a net loss of $91.4 million in Q1 2024[15] - Net loss for Q1 2025 was $202,487,000, compared to a net loss of $91,373,000 in Q1 2024, representing an increase in loss of 121.5%[21] Research and Development - Research and development expenses rose to $130 million in Q1 2025, up 91% from $68 million in Q1 2024, driven by the agreement with Tempus and the business combination with Exscientia[15] - Research and development expenses surged to $129,634,000 in Q1 2025, up 91.9% from $67,560,000 in Q1 2024[21] - Preliminary data from the REC-4881 study showed a median 43% reduction in polyp burden in familial adenomatous polyposis patients[6] - The collaboration with Roche and Genentech has generated five phenomaps from over one trillion iPSC-derived cells, enhancing the company's AI/ML models[9] Cash and Assets - Cash and cash equivalents were $509 million as of March 31, 2025, down from $603 million at the end of 2024[15] - Total current assets decreased to $584,145,000 as of March 31, 2025, down from $714,269,000 at the end of 2024[23] - The expected cash burn for 2025 is projected to be equal to or less than $450 million, down from approximately $606 million in 2024[15] - Cash burn for Q1 2025 was reported at $118,000,000, a decrease from $606,000,000 in 2024[25] - The company has a projected cash runway into mid-2027 based on its current business plan[15] Equity and Liabilities - Total liabilities decreased to $371,287,000 as of March 31, 2025, compared to $413,816,000 at the end of 2024[23] - Stockholders' equity decreased to $933,947,000 as of March 31, 2025, down from $1,034,782,000 at the end of 2024[23] - The company reported a weighted-average share count of 402,771,972 for Q1 2025, an increase from 236,019,349 in Q1 2024[21] Strategic Focus - Recursion is focusing on a streamlined portfolio of 5+ clinical and preclinical programs in oncology and rare diseases, deprioritizing 3 clinical and 1 preclinical program[5] - The company is focused on leveraging technology-driven approaches to enhance drug discovery and aims to deliver effective therapies in high-need areas[26] - The company achieved a $7 million milestone payment from its collaboration with Sanofi, with potential for over $300 million in additional milestone payments[8]

Core Insights - Recursion reported business updates and financial results for Q1 2025, emphasizing its commitment to advancing medicines in high unmet need areas through a streamlined portfolio strategy [1][3][5] Business Highlights - The company is focusing on high-potential programs to accelerate treatments, leveraging its integrated Recursion OS platform [3][5] - Recursion has deprioritized three clinical programs and one preclinical program after a strategic review, aiming to concentrate resources on programs with the strongest scientific rationale [5][9] - The pipeline includes several candidates in various stages, with REC-4881 showing promising preliminary data in familial adenomatous polyposis [6][8] Financial Results - Total revenue for Q1 2025 was $15 million, a slight increase from $14 million in Q1 2024, primarily due to collaboration agreements [16] - Research and development expenses rose to $130 million in Q1 2025 from $68 million in Q1 2024, driven by agreements with Tempus and the business combination with Exscientia [16] - The net loss for Q1 2025 was $203 million, compared to a net loss of $91.4 million in Q1 2024 [21] Cash Position - As of March 31, 2025, cash and cash equivalents were $509 million, down from $603 million at the end of 2024 [16][24] - The company expects a cash burn of up to $450 million for 2025, with a projected cash runway extending into mid-2027 [21][12] Partnerships and Collaborations - Recursion achieved a milestone in its collaboration with Sanofi, generating $7 million, with potential for over $300 million in additional milestone payments [9] - The partnership with Roche and Genentech continues to yield novel biological insights, with significant data generated from over one trillion iPSC-derived cells [10] Pipeline Updates - The company is advancing a focused set of clinical and preclinical programs in oncology and rare diseases, with several candidates expected to progress through various phases in the coming years [5][8][14] - REC-7735 is targeting PI3Kα H1047R mutant breast cancer, with candidate profiling ongoing and a development candidate expected in 2H25 [8][14]

Group 1 - The core viewpoint is that artificial intelligence (AI) is not a passing trend but is increasingly integrated into various sectors, including healthcare [2] - AI is making significant advancements in healthcare, indicating its growing importance in the industry [2] - The investing group Compounding Healthcare focuses on innovative companies in biotech and life sciences, particularly those developing breakthrough therapies and pharmaceuticals [2] Group 2 - The article emphasizes the potential of AI to transform healthcare, suggesting that it will play a crucial role in future developments [2] - The leader of the investing group has a background in the medical field, which informs their investment strategy in healthcare [2]