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Recursion (RXRX) Stock Surges 191% in 3 Months: Here's Why

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Recursion’s (RXRX - Free Report) shares soared after the company signed two agreements in May to acquire Cyclica and Valence in the artificial intelligence (AI)-enabled drug discovery space. These acquisitions aim to accelerate the development of new technologies to advance drug discovery in the biopharma industry. 

Recursion is a TechBio company that decodes biology and chemistry to industrialize drug discovery platform. Its proprietary biological and chemical dataset is a massive resource that exceeds 23 petabytes and contains more than 3 trillion searchable gene and compound relationships. 

Cyclica and Valence are machine learning (ML)/AI-native digital chemistry companies. Cyclica's advanced digital chemistry tools will help Recursion accelerate the discovery of new chemical substances, thereby optimizing their efficacy while minimizing risks. 

Valence's ML/AI expertise will contribute to cutting-edge applied research in chemistry and biology, enhancing Recursion's work in various fields, including generative molecule designs.

Recursion's shares have rallied 191.5% in the past three months compared with the industry’s 0.1% growth.

Zacks Investment Research
Image Source: Zacks Investment Research

The steep rise in the stock price can also be attributed to RXRX’s recent collaboration with NVIDIA Corporation (NVDA - Free Report) , a renowned technology company specializing in accelerated computing. 

The goal of the collaboration is to commercialize and license AI models through BioNeMo, NVDA's cloud service for generative AI in drug development. By combining RXRX's vast dataset with NVDA's accelerated computing power, the companies intend to create innovative AI models for drug discovery.

The abovementioned partnerships will not only help Recursion in advancing its internal pipeline but also benefit its current and future partners. 

The company’s oncology candidate, REC-994, is being evaluated in the mid-stage SYCAMORE study to treat cerebral cavernous malformation. It completed patient enrollment for the study in June and expects to share top-line data of the same in 2024. 

RXRX’s other pipeline candidates include REC-2282 and REC-4881 for treating neurofibromatosis type II and familial adenomatous polyposis, respectively. The company has several other pre-clinical and clinical-stage candidates that are being developed to target genetically-driven rare diseases and precision oncology. 

Zacks Rank & Stocks to Consider

Recursion currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the overall healthcare sector are Omega Therapeutics (OMGA - Free Report) and Alkermes (ALKS - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here

The Zacks Consensus Estimate for Omega Therapeutics has narrowed from a loss of $2.49 per share to a loss of $2.05 for 2023 and from a loss of $2.57 per share to a loss of $2.01 for 2024 in the past 90 days. Shares of the company have lost 39.3% in the past three months.

OMGA’s earnings beat estimates in two of the trailing four quarters, met the mark in one and missed in another, delivering an average surprise of 8.24%. 

The bottom-line estimate for Alkermes has increased from 7 cents to $1.02 for 2023 and from $1.5 to $2.08 for 2024 in the past 90 days. The company's shares have rallied 9.4% in the past three months.

ALKS’ earnings beat estimates in three of the trailing four quarters and met the mark in one, delivering an average surprise of 90.83%.


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