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RXRX vs. SDGR: Which AI-Powered Drug Discovery Stock Has More Upside?
RXRXRecursion(RXRX) ZACKS· ZACKS·2025-05-27 15:01

Core Insights - Recursion Pharmaceuticals (RXRX) and Schrodinger (SDGR) are leading the integration of artificial intelligence in drug discovery, aiming to transform the biotech sector by improving efficiency and reducing costs [1][2][3] Company Overview Recursion Pharmaceuticals (RXRX) - RXRX utilizes its AI-driven platform, Recursion OS, in collaboration with NVIDIA to enhance drug discovery processes [5] - The company has faced setbacks, including the discontinuation of its lead candidate REC-994 and REC-2282 due to unfavorable efficacy results [6][8] - RXRX is focusing on developing candidates like REC-4881 for familial adenomatous polyposis, which has shown a preliminary median 43% reduction in polyp burden [8] - The company ended Q1 2025 with a cash balance of 509million,expectedtosustainoperationsintomid2027[9]RXRXhascollaborationagreementswithmajorpharmaceuticalcompanies,generating509 million, expected to sustain operations into mid-2027 [9] - RXRX has collaboration agreements with major pharmaceutical companies, generating 15 million in collaboration revenues in Q1 2025, a slight increase from the previous year [10] Schrodinger (SDGR) - SDGR employs a physics-based computational platform for drug discovery, with its lead candidate SGR-1505 currently in a phase I study for B-cell malignancies [11][13] - The candidate has received FDA's Orphan Drug designation for mantle cell lymphoma [14] - SDGR's second candidate, SGR-2921, is being evaluated for acute myeloid leukemia, with initial results expected in the second half of 2025 [15] - The company generated $59.6 million in total revenues in Q1 2025, a 63% year-over-year increase [17] Financial Performance - RXRX's stock has declined 39.6% year-to-date, while SDGR's stock has increased by 10.9% [25] - RXRX trades at 1.78 times its book value, significantly lower than SDGR's 4.2 times, making RXRX more attractive from a valuation perspective [26][27] - The Zacks Consensus Estimate for RXRX's 2025 revenues implies a 22% year-over-year improvement, while SDGR's estimate suggests a 21% improvement but a widening loss per share [18][21] Market Position and Competitive Landscape - Both companies face competition from other biotech firms and tech-driven drug discovery companies, which may challenge their market differentiation [31] - Despite the competitive landscape, both RXRX and SDGR have the potential to revolutionize drug discovery by delivering cost-effective therapies [32] - RXRX is viewed as a better investment opportunity due to its innovative pipeline, collaboration agreements, and favorable valuation compared to SDGR [34]