Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) has made great progress recently in being able to advance its pipeline. That’s because it has advanced two clinical candidates into phase 2 studies. It uses its recursion system to generate biological and chemical relationships for drug discovery. The reason I believe it’s important to look at this biotech going forward is because, in the next year, RXRX expects to report some preliminary data from two of its ongoing mid-stage studies.
Both of these studies will be important for Recursion because it may be able to generate proof of concept in its ability to use its AI-driven drug discovery technology to generate significant drug candidates. Investors won’t have to wait long to see data from either of these phase 2 studies, as data from both will be released in the second half of 2024. Not only are these two catalysts to look forward to, but there are many exciting partnerships that have been created around its OS Recursion technology. In fact, a total of 4 partnerships have been formed, all of which are designed to get their hands on AI-driven technology from Recursion Pharmaceuticals.
Two data readings in 2024 to convey shareholder value
As I noted above, there will be two data readouts to be released by Recursion Pharmaceuticals in 2024. One candidate is known as REC-994, which is advancing into the phase 2 SYCAMORE trial treating patients with cavernous cerebral malformation . The second candidate is known as REC-2282, which is being advanced for the treatment of patients with Neurofibromatosis Type 2. [NF2]. Both of these trial data readings are expected to be released in the second half of 2024 and the following is set to be released for each respectively:
- Phase 2 SYCAMORE – Phase 2 proof-of-concept data in the use of REC-994 for the treatment of cerebral cavernous malformation
- Phase 2/3 POPLAR clinical trial to assess safety, tolerability pharmacokinetics and preliminary efficacy data of REC-2282
Malformation of the cerebral caverns [CCM] occurs when the abnormal blood vessels that cause the blood to clot move slowly. When this happens, it takes the form of a mulberry, which can create problems for a patient in the brain or spinal cord. Especially, when this formation causes a leak. Some symptoms that these CCM patients may experience are as follows:
- Progressive neurological deficits
- Hemorrhagic strokes [blood from artery bleeds into brain].
There are two approaches to the treatment of CCM, and they are microsurgical resection and stereotactic radiosurgery. One problem is that not everyone can have this type of treatment option for beginners. A second problem is that there are major side effects for these two options and there is a chance of rebleeding. The other clinical candidate REC-2282 is being developed to treat patients with neurofibromatosis type 2 [NF2]. What you need to know about Neurofibromatosis Type 2 is that it occurs when a benign tumor grows in a patient’s nervous system. NF2 has two very common tumor types, which are vestibular and meningeal schwannoma. Each one targets a different type of nerve as follows:
- Vestibular schwannomas – benign tumor on the nerve that carries information from the inner ear of a person to the brain [Auditory nerve]
- Meningitis – Tumor covering the brain and spinal cord [central nervous system targeted].
The use of this medication is being explored in the ongoing phase of the POPLAR 2/3 clinical trial. Like the other indication mentioned above, patients with NF2 should undergo surgery to help them. However, surgery may not be an ideal option especially if it causes a number of other problems such as hearing loss and visual problems. I would say that targeting both of these indications is not only ideal to prove that its AI drug discovery technology generates proof of concept, but also because there are no drugs approved for either of these patient groups.
According to 10-Q SEC Filing, Recursion Pharmaceuticals had cash and cash equivalents of $387.3 million as of September 30, 2023. This cash amount does not include the $3 million to be paid by Roche based on its option it received as part of the partnership for the GI-Oncology Program that was done. It has been able to raise money through several financial transactions since its inception.
One of the most recent financial transactions involves a Share Purchase Agreement for a private placement with Nvidia (NVDA). In connection with the Stock Purchase Agreement for a private placement with Nvidia, it sold an aggregate of 7.7 million shares of its Class A common stock at a price of $6.49 per share for net income of about 50 million dollars. In connection with the Open Market Sale Agreement it entered into with Jefferies, it was designed so that Recursion could sell up to $300 million of its Class A common stock from time to time as needed.
The good news is that as of September 30, 2023, she has not sold any shares under this agreement. However, if he needs to raise additional money in the coming months, then this option is available to use if he needs to do so. Recursion Pharmaceuticals believes it has sufficient cash to fund its operations for at least the next 12 months. This will not be enough money to fund itself and as such it will need to raise additional money at least at the beginning of 2024. It can use the Open Market Sales Agreement I mentioned above, or it can generate another instead of the financial transaction.
There are several risks that investors should be aware of before investing in Recursion Pharmaceuticals. of the first danger to be considered would be in relation to the use of REC-994, which is being advanced in phase 2 of the ongoing SYCAMORE trial for the treatment of patients with cerebral cavernous malformation. Proof-of-concept data from this mid-phase study will be published in the second half of 2024. There is no guarantee that such proof-of-concept data will occur when these patients are given REC-994.
of the second risk to be considered would be in relation to the use of REC-2282, which is being advanced in the phase 2/3 POPLAR study for the treatment of patients with Neurofibromatosis Type 2 [NF2]. It is expected that preliminary safety and efficacy data from this mid-phase trial will also be published in the second half of 2024. There is no guarantee that the use of REC-2282 to treat this patient population will be shown to be safe or efficient.
of the third risk the review would then be based on all the partnerships that Recursion Pharmaceuticals has been able to establish with some of the companies as part of a collaboration agreement. Such companies would be Bayer (OTCPK: BAYRY) and Rocha (OTCQX: RHHBY), specifically. This is because many of the possible additional payments it should receive based on its cooperation agreements are conditional on meeting certain milestones. There is no guarantee that such achievements will be achieved nor that any payment will be made.
of the fourth and final danger to consider would be in relation to the financial position in which Recursion Pharmaceuticals is. That’s because, as I said above in the financials section, RXRX believes it has enough cash only to fund its operations for at least the next 12 months. I believe that means it will have to start looking for ways to increase grace at least as early as 2024.
Recursion Pharmaceuticals has made great progress in being able to advance its pipeline. Especially, when you consider that it has several clinical studies underway to test its AI-driven biologics drug development capabilities. As I noted in this article, he has two data readings in 2024, which if positive would provide such a proof of concept for his technology. Many pharmaceutical partners feel that this biotechnology has a good technology to consider. Nvidia made a $50 million equity investment in the startup. Subsequently, Bayer and Roche also made upfront payments along with milestone / tiered royalty payments for advanced AI-driven drugs. I believe there is great value here for shareholders because of the two data readings expected in the second half of 2024.
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