$Recursion Pharmaceuticals(RXRX.US) 

Report Date: December 13, 2025 Time Range: December 6 to December 13, 2025 Report Perspective: As long-term investors, we focus on the company's potential for long-term value creation, including technological innovation, clinical progress, partnerships, and market positioning. Recursion Pharmaceuticals Inc is a clinical-stage biotech company leveraging AI-driven drug discovery, with its Recursion OS platform designed to accelerate drug development in areas such as rare diseases and oncology. The company has a market cap of approximately $1 billion (based on a recent share price of around $4.58), with institutional ownership as high as 89%, reflecting professional investors' confidence in AI's application in biopharma. Despite short-term stock volatility, the clinical validation of the AI platform and partnership milestones could drive long-term value realization.

Internal Developments

Last week, the most notable internal progress was the December 8 announcement of REC-4881 (a MEK1/2 inhibitor) Phase 1b/2 TUPELO trial results for familial adenomatous polyposis (FAP, a rare hereditary colorectal cancer predisposition disorder with no FDA-approved therapies). This marks the first clinical validation of Recursion's AI platform.

• Trial Highlights: After 12 weeks of treatment, 75% of evaluable patients showed reduced polyp burden, with a median reduction of 43%. At 12 weeks post-treatment, 82% maintained durable reductions, with a median reduction of 53%. Compared to natural history data (87% of untreated patients experienced polyp growth), this demonstrates significant clinical benefits, including Spigelman stage improvement in 40% of patients.
• Safety: The drug was well-tolerated, with mostly mild-to-moderate side effects consistent with MEK inhibitors.
• Next Steps: The company plans to discuss registration pathways with the FDA in H1 2026, potentially accelerating approval for ~50,000 FAP patients in the US and five EU countries.
• Leadership Insights: Incoming CEO Najat Khan called this the first clinical proof of the AI platform in rare diseases, highlighting its potential to screen millions of compounds. Former CEO Chris Gibson emphasized AI's role in addressing high-unmet-need diseases. Long-term, this strengthens Recursion's tech moat, with potential expansion to more indications—pending further data and regulatory progress.

Business Performance

• Stock Performance: Shares rose ~7% on December 8 to ~$4.90 post-data but remained volatile, closing at $4.57 on December 12. YTD gains of 17% outperform some biotech peers, though the modest $1B cap reflects cautious optimism about AI drug development.
• Financial Update: No new quarterly report, but strong cash reserves ($785M as of Q3 2025) provide runway through 2027. Long-term investors should monitor burn rates (high R&D spend in Q3), though AI efficiency may lower future costs.
• Other Metrics: Trial data validates the platform and could attract more investment, but no near-term revenue catalysts.

Industry Collaborations

No new partnerships last week, but existing deals (e.g., Roche/Genentech, Sanofi, Bayer, Merck KGaA) remain key. For example, a recent $30M milestone payment from Roche/Genentech supported neuro-mapping. Cumulative upfronts and milestones exceed $500M, with potential future milestones >$10B plus royalties—providing funding and tech synergies but relying on partners for progress.

Market Sentiment

As a B2B biotech, there are no direct consumer reviews, but market feedback is positive:

• X (Twitter): Users praised the trial results as a "game-changer" for AI in rare diseases. Some traders noted volatility (e.g., buying at $4.36) and called RXRX an AI portfolio staple. Noise from unrelated posts exists, but overall sentiment is optimistic about clinical catalysts.
• Media Coverage: Reuters, STAT News highlighted durable efficacy and AI validation. Recursion is seen as a TechBio leader but must deliver beyond hype.

Institutional Views

• Analyst Ratings: Gil Blum (Needham) upgraded to "Buy" post-data. Consensus is "Overweight," with a $6.33 avg target (+38%). Weiss Ratings maintains "Sell (D-)," reflecting divergence.
• Institutional Holdings: 89.06% institutional ownership, with 222 firms buying over 12 months ($500M inflows). E.g., State Street Corp increased holdings by 63.4% in Q3. This shows confidence in the AI platform but warrants caution on cash burn.

Sector Trends

• AI in Biotech: The industry emphasized AI's role in accelerating drug discovery, with Recursion's data reinforcing this trend. Post-Exscientia merger, its platform may benefit from AI advances (e.g., Boltz-2 model). Competition (other AI biotechs) and FDA scrutiny remain key watchpoints.
• Rare Disease Market: FAP affects >50K globally with no approved therapies, offering significant potential. Macro factors (e.g., rates) and policy shifts add volatility.

Long-Term Investor Takeaway

Recursion's AI validation is a critical milestone for unlocking indications and partnership value. Strong cash and institutional support are offset by clinical, burn-rate, and market risks. Monitor FDA discussions in 2026 and further data readouts. If AI proves replicable, upside exists ($6.33 target). Diversify via biotech ETFs to mitigate risk.