OS 20 Will Accelerate AI Drug Discovery And Clinical Milestones

Key Takeaways

• Recursion's advanced AI-driven platforms and proprietary models position it for industry-leading speed, scale, and precision in drug discovery, enabling superior margins and accelerated R&D productivity.
  
• Strategic partnerships and innovation cycles establish Recursion as a key player in biopharma pipelines, increasing its attractiveness for major collaborations and potential acquisitions.
  
• Reliance on milestone payments, slow clinical progress, data privacy risks, open-sourced technology, and high expenditures threaten liquidity, competitive edge, and long-term revenue prospects.

Catalysts

Operates as a clinical-stage biotechnology company, engages in the decoding biology and chemistry by integrating technological innovations across biology, chemistry, automation, data science, and engineering to industrialize drug discovery in the United States.

• Analyst consensus sees near-term value from positive clinical data and pipeline expansion, but this may significantly understate Recursion's potential: the company's Recursion OS 2.0, integrating Exscientia's assets, has already enabled a step-function increase in speed, scale, and precision of drug discovery, positioning Recursion to deliver a higher volume of late-stage assets and potentially compound annual revenue growth at rates far above industry benchmarks.
  
• While consensus recognizes partnership synergies, it dramatically underestimates the impact of Recursion's ability to repeatedly achieve partner milestones on challenging, first-in-class targets-indicating not only steady milestone and royalty inflows, but a foundational shift in how big pharma sources pipeline candidates, potentially establishing Recursion as an indispensable node in the evolving biopharma R&D networks and driving sustainable high-margin revenue.
  
• The open-sourcing of Boltz-2 and rapid deployment of proprietary next-generation computational models within Recursion OS have enabled "virtual cell" simulations and high-throughput wet/dry-lab integration, giving Recursion a first-mover advantage as drug discovery shifts toward AI-native platforms-this positions the company to capture growing share of AI-driven therapeutics budgets, leading to higher R&D productivity, reduced costs, and superior net margins.
  
• Recursion's ClinTech platform, with its causal AI and clinical trial simulation, is already demonstrating up to 50% faster trial enrollment and 30% improved patient dosing optimization, heralding a structural acceleration of pipeline progression that could consistently speed time-to-market across numerous assets, unlocking earlier and more frequent revenue realization while compressing SG&A intensity.
  
• The convergence of big data partnerships, automated multimodal data generation, and Recursion's in-house Frontier Research Group fuels a virtuous cycle of innovation that expands the competitive moat-making Recursion both an increasingly attractive acquisition target in an M&A-driven market as well as a likely partner for major precision medicine initiatives, with upside for large, non-dilutive cash infusions and premium valuation multiples.

Recursion Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Recursion Pharmaceuticals compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Recursion Pharmaceuticals's revenue will grow by 84.2% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Recursion Pharmaceuticals will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Recursion Pharmaceuticals's profit margin will increase from -1004.9% to the average US Biotechs industry of 14.2% in 3 years.
• If Recursion Pharmaceuticals's profit margin were to converge on the industry average, you could expect earnings to reach $57.2 million (and earnings per share of $0.11) by about September 2028, up from $-649.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 113.8x on those 2028 earnings, up from -3.2x today. This future PE is greater than the current PE for the US Biotechs industry at 15.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Recursion Pharmaceuticals Future Earnings Per Share Growth

Risks

• Recursion remains heavily dependent on milestone payments and partnership inflows, with its projected cash runway through late 2027 relying on the successful achievement of approximately $100 million in partnership milestones; any delays, failures, or cancellations in partner programs would directly undermine its cash position, increasing the pressure for dilutive financing or spending cuts that would limit research and development activity and negatively impact earnings.
  
• The company has not yet commercialized any drug assets, and the majority of its programs, even including the most advanced oncology and rare disease projects, remain in early to mid-stage trials with pivotal data readouts not expected until late 2025 or beyond; slow progress or setbacks in clinical development would delay revenue generation and lengthen the period of negative net margins.
  
• Recursion's AI-driven drug discovery and ClinTech platforms are reliant on large-scale biological and patient datasets, including data from external partners such as Tempus and Helix, making the company increasingly vulnerable to global regulatory tightening or new data privacy laws, which could restrict data access, delay drug development timelines, and impact future revenue growth.
  
• The open-sourcing of proprietary technologies like Boltz-2 signals Recursion's willingness to commoditize core components of its platform in the face of rapid industry-wide innovation, exacerbating competitive pressures from both established pharmaceutical players and new AI-enabled biotech entrants, which could erode any technology-based competitive advantage and put future partnership or licensing revenues at risk.
  
• Despite efforts to reduce its cash burn, Recursion still anticipates annual expenditures of close to $390 million in 2026, and the ability to maintain sufficient liquidity is highly exposed to the macro backdrop of high interest rates and tighter capital markets, heightening the risk of less favorable, dilutive financing or outright funding shortfalls that would weigh heavily on both net margins and investor returns.

Valuation

• The assumed bullish price target for Recursion Pharmaceuticals is $10.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Recursion Pharmaceuticals's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $3.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $403.8 million, earnings will come to $57.2 million, and it would be trading on a PE ratio of 113.8x, assuming you use a discount rate of 6.8%.
• Given the current share price of $4.7, the bullish analyst price target of $10.0 is 53.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.