Recursion Pharmaceuticals Inc. (Nasdaq: RXRX) and Exscientia plc (Nasdaq: EXAI) have announced a landmark merger, combining their strengths to form a formidable entity in drug discovery and development. This strategic union is set to enhance their technological capabilities and expand their clinical pipeline, paving the way for more effective and affordable medicines.

Key Details of the Merger

The merger agreement, unanimously approved by both companies’ boards, stipulates that Exscientia shareholders will receive 0.7729 shares of Recursion Class A common stock for each ordinary share they hold. This exchange values the merger at approximately $850 million, with Recursion shareholders set to own around 74% of the combined company, and Exscientia shareholders approximately 26%. The transaction is anticipated to close by early 2025, pending regulatory approvals and shareholder votes.

Enhanced Drug Discovery Capabilities

The merger combines Recursion’s extensive data-driven biological exploration with Exscientia’s advanced precision drug design and automated synthesis technologies. Recursion’s platform boasts one of the world’s largest biological and chemical datasets, supported by high-throughput experimental capabilities. Exscientia’s expertise in AI-driven drug design and automated small molecule synthesis will complement this, aiming to accelerate the drug discovery process and enhance the development of new therapies.

Chris Gibson, Ph.D., Co-Founder and CEO of Recursion, will lead the combined company. Gibson emphasised the merger’s potential to drive innovation in biotechnology, stating, “We believe this combination is highly complementary and aligns with our mission to transform drug discovery. Exscientia’s precision tools will greatly augment our existing capabilities, and I am excited to lead the next generation of biotechnology advancements.”

David Hallett, Ph.D., Interim CEO of Recursion and the planned Chief Scientific Officer of the combined entity, highlighted the strategic fit of the two companies’ pipelines. “Integrating Exscientia’s precision oncology pipeline with Recursion’s diverse therapeutic focus will significantly enhance our ability to deliver novel treatments faster,” Hallett noted.

Strategic Partnerships and Financial Projections

The newly formed entity will leverage its expanded platform to advance ongoing collaborations with major biopharma companies, including Roche-Genentech, Sanofi, Bayer, and Merck KGaA. These partnerships are expected to generate up to $200 million in milestone payments over the next two years, with potential total revenue exceeding $20 billion before royalties.

The merger is also projected to yield annual synergies of over $100 million, driven by operational efficiencies and the integration of complementary technologies. The combined company will have an estimated $850 million in cash and cash equivalents, providing a solid financial foundation for future growth.

Governance and Operational Integration

Post-merger, the combined company will retain the name Recursion and continue its headquarters in Salt Lake City, Utah, while maintaining a significant presence in the United Kingdom. Chris Gibson will serve as CEO, and David Hallett will become Chief Scientific Officer. Two current Exscientia directors will join Recursion’s board following the transaction’s closure.

Advisors and Legal Counsel

Allen & Company LLC and Wilson Sonsini Goodrich & Rosati acted as financial and legal advisors to Recursion, respectively. Centerview Partners LLC and A&O Shearman provided similar services to Exscientia.

Industry Impact and Future Outlook

This merger positions the combined company to harness cutting-edge technology and extensive research capabilities to revolutionise drug discovery. By integrating Recursion’s high-throughput biology and chemistry exploration with Exscientia’s precision design and automation, the new entity aims to streamline drug development and bring innovative treatments to market more rapidly and cost-effectively.

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