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On Friday, TD Cowen maintained a Hold rating on shares of Recursion Pharmaceuticals (NASDAQ:RXRX), as the stock experiences significant pressure with a 17.35% decline over the past week. According to InvestingPro data, the company’s shares are currently trading near Fair Value, with analysts setting price targets between $6 and $11. Brendan Smith, an analyst at TD Cowen, provided insights on the company’s recent performance and future prospects, particularly highlighting the potential benefits from its ongoing merger with EXAI. Smith pointed out the anticipated cost synergies exceeding $100 million from the merger, with a significant focus on the forthcoming data from key drug trials. These include REC-4881, targeting Familial Adenomatous Polyposis (FAP), and REC-2282, for Neurofibromatosis type 2 (NF2), with results expected in the first half of 2025.
Recursion Pharmaceuticals reported fourth-quarter revenues of $4.5 million, a decrease of 57% year-over-year, falling short of Cowen’s $19 million projection. While the company’s trailing twelve-month revenue stands at $65.18 million with 37.64% growth, InvestingPro analysis reveals concerning gross profit margins of -403.03%. The shortfall was attributed to the timing of projects associated with the company’s collaboration with Roche/Genentech. For deeper insights into Recursion’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. Research and development expenses for the quarter increased by 30% year-over-year to $98 million, reflecting ongoing expansion of the company’s platform and operations. General and administrative expenses rose 61% year-over-year to $77 million, influenced by costs related to the EXAI-RXRX merger, including higher salaries, transaction costs, and expenses for software and leases. Consequently, the total operating expenses for the fiscal year 2024 reached $493 million, surpassing Cowen’s expectation of $426 million.
Despite the higher than anticipated operating expenses, management at Recursion reaffirmed their expectation to realize more than $100 million in run-rate synergies from the EXAI merger over time. Most of these synergies are expected to be captured in 2025. The company maintains a strong liquidity position with a current ratio of 4.35 and more cash than debt on its balance sheet. The company’s technological and platform key performance indicators (KPIs) have shown significant progress, offering fresh insight into the differentiation and advancement of its TechBio capabilities.
The analyst’s comments come as Recursion Pharmaceuticals continues to grow its platform and expand its company. The anticipation of cost synergies from the merger and the upcoming data readouts are critical factors for the company as it moves forward into the first half of 2025.
In other recent news, Recursion Pharmaceuticals reported fourth-quarter results that did not meet analyst expectations. The company posted a loss of $0.53 per share, which was wider than the anticipated loss of $0.41 per share. Revenue for the quarter was $4.55 million, significantly below the consensus estimate of $13.4 million. For the full year 2024, Recursion’s revenue increased to $58.8 million from $44.6 million in 2023, largely due to a $30 million payment from Roche and Genentech. The company also completed the largest TechBio merger in history, enhancing its platform and partnerships.
Recursion highlighted promising early efficacy data for two clinical programs, REC-617 and REC-994, and initiated three new clinical studies. The company ended the year with $603 million in cash and equivalents, up from $401.4 million at the end of 2023, and expects this cash runway to last into 2027. Despite the earnings miss, Recursion emphasized advancements in its AI-powered drug discovery platform.
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