Recursion Pharmaceuticals’ stock plunges 7% after shock Q4 loss – What went wrong?

Recursion Pharmaceuticals, a clinical-stage biotechnology company leveraging artificial intelligence for drug discovery, reported a significantly wider loss for the fourth quarter of 2024. The company’s financial results fell short of market expectations, with revenue plunging to $4.55 million from $10.9 million in the same period the previous year. This steep decline in revenue, attributed to the timing of projects under its partnerships with Roche and Genentech, led to a sharp drop in the company’s stock price.

For the quarter ending December 31, Recursion Pharmaceuticals posted a net loss of $178.9 million, or $0.53 per share, a substantial increase from $93 million, or $0.42 per share, in Q4 2023. Analysts had predicted a smaller loss of $124.8 million, or $0.41 per share, highlighting the financial underperformance. Investors reacted swiftly, with the company’s stock declining 7% to $7.12 following the earnings announcement.

Despite the widening losses, Recursion Pharmaceuticals maintained a strong cash position of $603 million, up from $401.4 million at the end of 2023. The company reaffirmed that its cash reserves, combined with anticipated revenue streams from partnerships, are expected to sustain operations into 2027.

What Led to Recursion Pharmaceuticals’ Revenue Decline?

A major contributor to the revenue shortfall was the delayed recognition of milestone-based payments from Roche and Genentech. In the previous year, Recursion Pharmaceuticals recorded higher revenue from collaboration agreements, but project timelines and payment schedules caused fluctuations in financial performance.

While fourth-quarter revenue suffered, Recursion Pharmaceuticals reported full-year revenue of $58.8 million, a notable increase from $44.6 million in 2023. The revenue growth for the year was driven by the $30 million payment received from Roche and Genentech for completing a neuroscience phenomap project. The company also secured $15 million from Sanofi for reaching early milestones in oncology and immunology programs.

How Is Recursion Pharmaceuticals Expanding Its AI Drug Discovery Platform?

Recursion Pharmaceuticals remains at the forefront of AI-driven drug discovery, integrating machine learning, computational biology, and automation to accelerate therapeutic development. In 2024, the company completed its acquisition of Exscientia, a UK-based AI biotech firm, strengthening its Recursion OS platform with advanced AI-powered drug design capabilities.

The Recursion OS platform, now enhanced with Exscientia’s Centaur AI, has been deployed across multiple research programs. The company announced that its AI-driven synthesis planning system demonstrated a 25% improvement in predicting tractability of AI-generated compounds, positioning Recursion Pharmaceuticals as a leader in computational drug discovery.

Additionally, Recursion launched BioHive-2, which it claims is the most powerful supercomputer in the biopharma industry. This system supports advanced AI models such as Phenom-2, MolPhenix, and MolGPS, designed to enhance drug discovery efficiency, molecular property prediction, and biological data analysis.

What Are the Key Clinical Advancements in Recursion Pharmaceuticals’ Pipeline?

Despite financial setbacks, Recursion Pharmaceuticals made significant progress in its clinical pipeline, reporting encouraging preliminary efficacy data for multiple investigational therapies. REC-617, a CDK7 inhibitor developed using AI-driven optimization, showed promising Phase 1/2 trial results, demonstrating a durable partial response in a late-stage metastatic ovarian cancer patient and stable disease in patients with solid tumors. REC-994, an oral superoxide scavenger for cerebral cavernous malformations, met primary endpoints in a Phase 2 study, showing a reduction in lesion volume and trends toward symptom stabilization. These findings were presented at the 2025 International Stroke Conference. REC-1245, REC-4881, and REC-3964 advanced into clinical trials targeting oncology, rare diseases, and infectious diseases, expanding Recursion Pharmaceuticals’ footprint in high-impact therapeutic areas.

How Are Strategic Partnerships Supporting Recursion Pharmaceuticals’ Growth?

Strategic collaborations remain central to Recursion Pharmaceuticals’ business model. The company’s ongoing alliances with Roche, Genentech, Sanofi, Bayer, and Merck KGaA continue to drive AI-enabled drug discovery initiatives.

In 2024, Recursion Pharmaceuticals delivered key milestones for its partners, securing $45 million in cash inflows. Notably, the company developed a neuro-specific CRISPR knockout phenomap in collaboration with Roche and Genentech, leading to the exercise of a $30 million option by its partners. Through its Sanofi partnership, Recursion Pharmaceuticals continues to explore novel oncology and immunology targets, progressing two programs that generated $15 million in milestone payments. The company also completed 25 multimodal oncology data packages under its Bayer collaboration, accelerating drug discovery for cancer treatments.

What Are the Financial Challenges Facing Recursion Pharmaceuticals?

The increased net loss for the quarter was largely driven by higher research and development expenses and rising general administrative costs. R&D spending surged to $98.3 million in Q4 2024, compared to $69.5 million in the prior year. The company cited expansion of its AI-driven drug discovery platform and ongoing clinical trials as key reasons for the increase. General and administrative expenses jumped to $77.2 million, more than doubling from $30.5 million in Q4 2023. Costs associated with the Exscientia acquisition, personnel expansion, and software investments contributed to the spike.

What Is the Future Outlook for Recursion Pharmaceuticals?

Despite near-term financial challenges, Recursion Pharmaceuticals remains optimistic about its long-term potential. The company’s cash runway extending into 2027, coupled with strong AI-driven capabilities, suggests that its investment in AI-powered drug discovery could yield significant commercial success in the future. However, revenue remains heavily reliant on milestone-based payments from partnerships, leading to potential financial volatility. Investors will be watching future revenue recognition, clinical trial advancements, and AI integration progress to gauge Recursion Pharmaceuticals’ ability to transition from a clinical-stage biotech firm to a commercial success.

With a robust AI drug discovery platform, high-profile collaborations, and an expanding clinical pipeline, Recursion Pharmaceuticals is positioned as a key player in the evolving AI-biopharma landscape. The coming quarters will be critical in determining whether the company can successfully translate its AI-driven approach into sustained revenue growth.