Investors in Recursion (NASDAQ: RXRX) seemed only mildly fazed by Wednesday’s series of company announcements. The artificial intelligence (AI)-based drug developer’s stock barely moved on Wednesday, then dropped on Thursday, after reporting mixed third-quarter results, setting the stage for future pipeline announcements, and announcing a change at the top.
Recursion finished the third quarter with a net loss of $162.253 million, 69% higher than the $95.841 million net loss in Q3 2024, driven by higher R&D and business costs. But the company’s earnings per share (EPS) of negative 36 cents beat analyst consensus forecasts of a slightly worse negative 37 to 38 cents.
Another silver lining, according to analysts, is Recursion’s improving cash and cash equivalents position. Recursion said it rose to a pro forma cash balance of approximately $785 million (an unaudited figure), up 19% from $659.836 million as of September 30 and 32% from $594.35 million at the end of 2024.
The October cash total includes all $387.5 million raised in an “at the market” financing running through Q4 of this year and allows Recursion to extend its financial runway through the end of 2027 from earlier guidance of “into the fourth quarter” of that year.
The extended runway will help Recursion as it prepares to ring in 2026 with a new CEO.
Co-founder Chris Gibson, PhD, the current president and chief executive, will step down for Najat Khan, PhD, who has been chief research and development officer and chief commercial officer, and a member of Recursion’s board, since joining the company from Johnson & Johnson in July 2024. Gibson remains with Recursion as its new board chairman, succeeding Rob Hershberg, MD, PhD, who will become vice chairman and lead independent director.
“I’ve been working with Najat for the past 18 months in an incredible partnership to build our platform, to deliver on our pipeline and our partnerships. Everything that I have seen has convinced me that she is absolutely the right leader to take Recursion through its next chapter,” Gibson told analysts on Recursion’s quarterly earnings call.
“Pivotal chapter”
On the call, Khan added minutes later: “This is a pivotal chapter for Recursion, one that will require bold focus. The boldness will never go away.”
Khan’s key challenge as CEO will be advancing a pipeline of AI-based candidates that Recursion pruned from 11 to seven programs in May, one month before a restructuring that included eliminating 20% of its workforce, about 160 jobs.
“We’ve talked a lot about models, but proprietary high-quality data is critical and a critical moat to what we do,” Khan said. “Building our ClinTech platform—we’re in the clinic—this is going to be a critical part of what we do. And also, sharpening our portfolio, advancing multiple programs internally with our partners.”
“ClinTech” is Recursion’s effort to apply AI beyond drug design and discovery, toward the way it approaches clinical trials, an effort Khan discussed with GEN earlier this year.
Two analysts have advised investors to look to next year for significant pipeline data on Recursion’s lead oncology and rare disease programs, REC-617 and REC-4881, respectively.
That’s because a data update offered Wednesday for REC-617 from its Phase I/II ELUCIDATE trial (NCT05985655) offered little improvement in efficacy from results shared a year ago. That news sent Recursion shares barely dipping 0.8% on Wednesday from an even $5 to $4.96, then slumping 7% on Thursday to $4.62, a price that stayed unchanged at Friday’s close.
One partial response
Across 29 pre-treated patients with advanced solid tumors across six dose levels as of September 29, one showed a confirmed partial response (PR) while five others showed stable disease (SD) after treatment with REC-617, a precision-designed oral CDK7 inhibitor being developed to treat multiple advanced solid tumor indications—compared with December 2024 results from 18 patients also showing one PR but four SD.
Recursion highlighted more positive safety results showing two patients (6.9%) ending REC-617 due to a treatment-related adverse event, plus rates of GI-related toxicities that the company said were consistent with best-in-class potential, such as diarrhea (69%), nausea (41%), and vomiting (28%). In addition to a safety profile it termed “manageable,” Recursion said ELUCIDATE established a maximum tolerated dose at 10 mg once daily.
Inclusion criteria for ELUCIDATE allowed patients with cancers that included:
- Head and neck squamous cell cancer (HNSCC)
- Pancreatic cancer
- Non-small cell lung cancer (NSCLC)
- Breast cancer (hormone receptor-positive [HR+] and Human Epidermal Growth Receptor 2 negative [HER2-] that has progressed to a prior treatment with Cluster of Differentiation 4 [CD4] / Cyclin-Dependent Kinase 6 [CDK6] inhibitor)
- Platinum-resistant high-grade epithelial ovarian, primary peritoneal, or fallopian tube cancers, including high-grade serous ovarian cancer (HGSOC)
Recursion inherited REC-617 (formerly GTAEXS617) when it combined with British AI drug development pioneer Exscientia last year for $630.1 million, a deal value the company disclosed in its Form 10-K annual report for 2024, filed February 28.
Market watchers are awaiting Phase II monotherapy data and especially Phase I combination data for REC-617 in second-line and later (2L+) platinum-resistant ovarian cancer. Among combination regimens being studied are REC-617 plus Avastin® (bevacizumab) marketed by Roche and its Genentech subsidiary, plus paclitaxel or pegylated liposomal doxorubicin (PLD).
Full data from ELUCIDATE is expected to be presented next year at an unspecified medical conference.
“Incremental data for REC-617 (CDK7) will do little to change investor perception on the ‘differentiated asset’ bull [positive-case] thesis with meaningful combination data >1 year away,” Mani Foroohar, MD, a senior research analyst with Leerink Partners focused on genetic medicines, wrote in a research note.
“Key value driver”
Dennis Ding, equity analyst with Jefferies, called the 2L+ ovarian cancer combination study “the key value driver” for REC-617 in a research note. For that study, Ding wrote, success would mean improving on current standard-of-care, which consists of chemotherapy plus bevacizumab, a combo that has generated progression-free survival of ~6.7 months.
By the end of this year, Recursion plans to report Phase II data on its lead rare disease program REC-4881 from its Phase Ib/II TUPELO trial (NCT05552755). REC-4881 is an oral non-ATP-competitive, allosteric small molecule inhibitor of MEK1 and MEK2 is being developed to reduce polyp burden and progression to adenocarcinoma in people living with Familial Adenomatous Polyposis (FAP).
In May, Recursion presented preliminary data from TUPELO showing REC-4881 (4 mg QD) leading to a preliminary median 43% reduction in polyp burden among six patients studied at the week 13 assessment. Five of six patients (83%) experienced reductions in polyp burden ranging from 31% to 82%, though the sixth showed a substantial increase from baseline.
Driving the jump in net loss was a 62% spike in R&D expenses to $121.062 million from $74.6 million a year ago, reflecting higher acquired in process R&D (IPR&D) costs after Recursion bought full rights to REC-102 (formerly REV102), and oral, small molecule ENPP1 inhibitor being developed for the treatment of hypophosphatasia (HPP) from former joint venture partner Rallybio, and acquired Exscientia.
Also contributing to red ink was a 10% jump in general and administrative expenses to $41.628 million from $37.757 million a year ago, again reflecting the Exscientia buyout. In addition, Recursion’s $5.18 million in Q3 revenue was 80% below the $26.082 million reported in the year-ago quarter, reflecting a $30 million milestone payment under its up-to-$12 billion collaboration with Roche and Genentech, launched in 2021.
Roche and its Genentech subsidiary are using Recursion’s namesake Operating System to advance therapies in 40 programs that include “key areas” of neuroscience and an undisclosed oncology indication.
“Google map of the brain”
The latest fruit from that partnership emerged October 29, when Roche and Genentech accepted from Recursion a microglia map—a whole-genome map of specialized microglial immune cells or “Google Map of the Brain”—that the companies plan to use toward discovering neurodegenerative disease targets.
The $30 million microglia map payment will appear in Recursion’s fourth quarter 2025 results.
“These digital maps allow us to move from this empirical sort of one-at-a-time approach into really a search function,” Gibson explained. “Our colleagues at Roche [and] Genentech—our team—can just type in any gene in the microglial map or the iPSC-derived neuronal map, and they can see the relationships across the rest of the genome.”
As CEO, Khan continued, “My focus is going to be translating these platform insights into repeatable clinical proof, whether it’s through our wholly owned programs or with partners scaling the platform that we have, where we have a clear, clear advantage, and building a company that delivers sustainable value.
“The foundation is strong, the vision is clear, the opportunity ahead is extraordinary,” Khan added. “I couldn’t be more excited.”
Leaders and laggards
- Biohaven (NYSE: BHVN) shares plummeted 40% from $13.95 to $8.34 on Wednesday, after the company acknowledged that its new drug application (NDA) for Vyglxia® (troriluzole) to treat spinocerebellar ataxia (SCA) was rebuffed by the FDA via a complete response letter. The FDA cited several issues it had with the company’s three-year real-world evidence-based Study 206-RWE (NCT06529146)—including potential bias, design flaws, lack of pre-specification, and unmeasured confounding factors. Study 206-RWE showed a 50–70% slowing of SCA progression in Vyglxia patients vs. matched untreated external controls; a > 50% reduction in risk of falls in troriluzole-treated subjects vs. placebo as reported in the Phase III Study-206 (NCT03701399); and analyses showing a delay in becoming wheelchair bound or losing the ability to walk, decreased gait impairment, and improvement in overall functioning. Biohaven said it will request a meeting with the FDA, prioritize three late‑stage programs, and reduce annual direct R&D spending by approximately 60%.
- Sarepta Therapeutics (SRPT) shares nosedived nearly 38% from $24.45 to $15.81 in afterhours trading on November 3 after the developer of rare disease genetic therapies acknowledged that its Phase III confirmatory ESSENCE trial (NCT02500381)—assessing its ultra-rare disease phosphorodiamidate morpholino oligomer (PMO) therapies Amondys 45 (casimersen) and Vyondys 53 (golodirsen) in 225 children with Duchenne muscular dystrophy amenable to exon 45 or 53 skipping—did not achieve statistical significance on its primary endpoint, change from baseline in the four-step ascend velocity at week 96. However, Sarepta said it saw “positive and encouraging trends” such as a 30% reduction in disease progression over two years vs. placebo on the four-step ascend velocity in 168 patients whose double-blind period did not overlap with the COVID-19 pandemic (excluding 57 overlapping patients). Sarepta said it intends to schedule a meeting with the FDA to discuss the possibility of converting from accelerated to traditional approval.
