• Revenue: $83 million in 2024 on a pro forma basis.
• Cash Balance: Over $600 million, providing runway into 2027.
• Milestone Payments: $45 million from Sanofi and Roche for achieving technical goals.
• Synergies: Expected up to $100 million in synergies from the merger, with a majority anticipated to be achieved in the current year.

• Warning! GuruFocus has detected 2 Warning Sign with RXRX.

Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Recursion Pharmaceuticals Inc (NASDAQ:RXRX) reported early signals of efficacy in their clinical programs REC 617 and REC 994, with REC 617 showing tumor reduction in a patient for over six months.
• The company launched multiple additional trials, including REC 1,245 and REC 4,881, and initiated IND studies in their IPF program, showcasing a robust pipeline.
• Recursion Pharmaceuticals Inc (NASDAQ:RXRX) achieved significant milestones with partners Roche and Sanofi, generating $45 million in cash payments for technical achievements.
• The company continues to lead in data capabilities, generating over 6.2 million multi-time point bright field images weekly and producing more than 1.6 million transcriptomes since 2023.
• Recursion Pharmaceuticals Inc (NASDAQ:RXRX) has a strong financial position with $600 million in cash, providing a runway into 2027 and achieving expected synergies from their merger.

Negative Points

• The Q4 2024 revenue drop compared to 2023 caused confusion due to the nature of revenue recognition from partnerships, which may not reflect immediate cash inflows.
• The primary endpoint of efficacy for REC 994 was not met, raising questions about the program's advancement and the need for further validation.
• Concerns were raised about the potential inaccuracies in virtual trials, particularly in rare disease spaces where data might be limited.
• The company faces challenges in maintaining a competitive edge as compute costs decrease, questioning the long-term advantage of owning a supercomputer.
• Potential impacts from changes in NIH funding could affect the broader biotech environment, posing risks to future talent and innovation.

Q & A Highlights

Q: How does Recursion Pharmaceuticals view the importance of scale in tech bio, especially with new advances like Deep Seek questioning the need for it? A: Christopher Gibson, CEO, emphasized that biology and chemistry's complexity means scale will continue to be crucial. While Deep Seek has shown efficient model training, the complexity of biology and chemistry interactions necessitates scale to advance neural nets and architectures effectively.

Q: Can you provide insights into Recursion's partnership with Nvidia and the focus areas for foundation model work? A: Christopher Gibson, CEO, highlighted the long-standing collaboration with Nvidia, focusing on deploying various models across supercomputers like Biohive 2. The partnership involves complex model training and atomistic work, with future projects yet to be disclosed.

Q: Given the decreasing costs of compute, how significant is owning a supercomputer for Recursion? A: Christopher Gibson, CEO, stated that both data and compute are essential for advancing medicines. While compute costs are decreasing, the scale at which Recursion operates remains a competitive advantage. The data side, involving complex biological processes, is a significant advantage for Recursion.

Q: Can you explain the Q4 2024 revenue drop compared to 2023? A: Ben Taylor, CFO, explained that Recursion's revenue recognition is not straightforward due to upfront payments from partnerships recognized over time. The company has received $450 million from partnerships, much of which is yet to be recognized as revenue.

Q: What are the expectations for cash burn in 2025, and what should be anticipated in the May 2025 update? A: Ben Taylor, CFO, noted that due to the timing of the transaction, financials reflect legacy Recursion with a stub period for legacy Xentia. The combined cash burn is over $550 million, but the company aims to manage cash burn effectively and will provide more guidance in May.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.