Key Points Recursion Pharmaceuticals' recent momentum is hard to explain. The company could soar even more if it makes strong clinical progress. Despite its innovative approach, the biotech looks risky. 10 stocks we like better than Recursion Pharmaceuticals › Many leading companies focused on artificial intelligence (AI) have seen their shares soar as they profit from the tailwind this market is currently experiencing. Perhaps a good way to cash in on this is to invest in smaller, under-the-rada ...

Key Points Recursion Pharmaceuticals uses AI to expedite the laborious process of developing drugs. The company could benefit from industry-wide regulatory changes as well as its own clinical progress. However, Recursion will face significant challenges that could sink its share price. 10 stocks we like better than Recursion Pharmaceuticals › Recursion Pharmaceuticals (NASDAQ: RXRX), a biotech focused on artificial intelligence (AI), became a publicly traded company in 2021 -- a time when AI did n ...

Core Viewpoint - The FDA's decision to phase out animal testing in drug development in favor of AI-based methods presents a significant opportunity for Recursion Pharmaceuticals, a biotech company leveraging AI in its drug development processes [1][5]. Company Overview - Recursion Pharmaceuticals has developed the largest AI supercomputer in the pharmaceutical industry, in collaboration with Nvidia, which aids in predicting the effectiveness of clinical compounds against diseases [2]. - The company's operating system features a library of human genes, allowing for the identification of promising compounds that can advance to clinical trials [2]. Drug Development Efficiency - Recursion claims its AI-driven approach can significantly reduce the time and costs associated with moving drug programs to clinical studies, potentially leading to increased revenue for drugmakers as therapies spend more time on the market before patent expiration [3]. - Lower development costs could result in higher profits and margins for pharmaceutical companies [3]. Network Effect and Licensing - Recursion aims to create a network effect within its operating system by refining it based on the outcomes of clinical trials, which could enhance its predictive capabilities [4]. - The company plans to license its operating system to other pharmaceutical firms, a strategy that could yield higher margins compared to direct drug development [5]. Competitive Landscape - The FDA's shift towards AI in drug development may encourage other companies to invest in their own AI initiatives, potentially increasing competition for Recursion [8]. - Major pharmaceutical companies like Novo Nordisk are already making significant advancements in AI, which could pose challenges for Recursion [8]. Partnerships and Funding - Recursion has established partnerships with several major players in the pharmaceutical industry, including Roche Holding, Bayer, Merck, and Sanofi, which may mitigate funding risks [9]. - Despite these partnerships, the stock remains speculative, as Recursion has yet to bring any drugs to market or advance candidates to phase 3 studies [7][9].