10-K: Recursion Pharmaceuticals 2025 10-K: AI-Native Drug Discovery Advances

Recursion Pharmaceuticals reports significant progress in 2025, achieving its first AI-enabled clinical proof of concept and advancing a diversified pipeline through its integrated AI-native drug discovery and development platform.

Summary

• Achieved first AI-enabled clinical proof of concept in 2025 with REC-4881 in Familial Adenomatous Polyposis (FAP), demonstrating meaningful clinical outcomes.
• REC-4881 showed a median polyp burden reduction of 43% after 12 weeks of treatment (n=12) and 53% at week 25 (off-treatment phase, n=11).
• The company has five clinical programs advancing and a growing discovery pipeline.
• Received over $500 million in upfront and progress-based milestone payments from partners (Roche/Genentech, Sanofi, Bayer, Merck KGaA).
• Sanofi collaboration achieved a fifth milestone in February 2026, generating a $4 million payment.
• Roche and Genentech accepted two neuroscience Phenomaps (Neuron Map in 2024, Microglia Map in 2025), each triggering a $30 million milestone payment.
• The Recursion OS integrates multimodal biological data, AI-powered small molecule synthesis, and AI-enabled clinical development.
• Reduced projected cash burn in 2025 while maintaining investment in high-impact programs.
• Net loss for 2025 was $644.8 million, compared to $463.7 million in 2024 and $328.1 million in 2023.
• Total revenue for 2025 was $74.7 million, up from $58.8 million in 2024.
• Cash, cash equivalents, and restricted cash totaled $753.9 million as of December 31, 2025.
• Issued 7.1 million shares of Class A common stock to Tempus AI, Inc. in November 2025 for a $32.0 million annual license fee.
• Completed an at-the-market (ATM) offering in 2025, selling 99.9 million shares for net proceeds of $491.7 million.
• Acquired Rallybio's interest in RE Ventures I, LLC in July 2025 for $20.2 million, making ENPP1 JV a wholly-owned subsidiary.
• Sold Austrian operations (Exscientia GmbH) in March 2025, obtaining a 49% equity interest in Alpha Biotechnology GmbH and recording a $4.5 million loss on disposal.
• Identified material weaknesses in internal control over financial reporting related to the Exscientia business, which remain unremediated as of December 31, 2025.
• Remediated a previously reported material weakness related to revenue recognition cost estimates as of December 31, 2025.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this filing as mixed. While significant scientific and partnership milestones were achieved, demonstrating platform validation and future potential, the substantial increase in net losses and accumulated deficit, coupled with the ongoing need for capital, presents financial challenges.

Positives

• First AI-enabled clinical proof of concept achieved with REC-4881 in FAP, showing significant polyp burden reduction (median 43% at week 13, 53% at week 25).
• Over $500 million in upfront and progress-based milestone payments received from strategic partnerships to date.
• Successful delivery and acceptance of two neuroscience Phenomaps (Neuron Map and Microglia Map) by Roche and Genentech, triggering $30 million payments each.
• Sanofi collaboration advancing 5+ AI-driven small molecule programs, with a fifth milestone achieved in February 2026 ($4 million payment).
• AI-driven precision design platform (Centaur Chemist) accelerates molecule design, synthesizing ~330 compounds per program in ~17 months (vs. industry average of >2,500 compounds and 42 months).
• ClinTech platform enhances clinical trial design, patient stratification, and execution, leading to 10-40% increase in eligible population and ~1.5X improvement in enrollment rates.
• BioHive-2 supercomputer ranked number 76 globally in 2025, increasing computational capacity by over 4X.
• 91% of technology organization employees actively use AI coding tools, with 35% of code authored by AI, saving an average of 4.3 hours per week per employee.
• Strong cash position of $753.9 million as of December 31, 2025, believed to be sufficient to fund operations for at least the next 12 months.
• Orphan Drug Designation and Fast Track Designation granted to REC-4881 for FAP.

Negatives

• Incurred significant operating losses: $644.8 million in 2025, $463.7 million in 2024, and $328.1 million in 2023.
• Accumulated deficit of $2.1 billion as of December 31, 2025.
• Need to raise substantial additional funding in the future.
• Discontinued clinical programs REC-2282 (NF2), REC-994 (CCM), and REC-3964 (C. difficile) in May 2025 as part of portfolio prioritization.
• Strategic pause on REC-4539 (LSD1i) program in May 2025 due to broader field safety challenges, though it is expected to initiate Phase 1 in 1H 2026.
• Incurred a $4.5 million loss on the disposal of Exscientia GmbH in March 2025.
• Incurred a $5.2 million lease termination fee for Vienna facilities in March 2025.
• Identified material weaknesses in internal control over financial reporting related to the Exscientia business, which remain unremediated as of December 31, 2025.
• Increased cost of revenue by 56.8% in 2025 due to Exscientia acquisition.
• Increased research and development expenses by 51.2% in 2025, partly due to Tempus record purchases ($49.9 million) and acquired IPR&D ($22.8 million).
• Foreign NOL carryforwards of $174.8 million, with $20.6 million expiring starting 2032.
• The company's stock price has been volatile since its IPO.
• Dual-class stock structure limits Class A common stockholders' ability to influence matters.
• Dr. Christopher Gibson (co-founder and former CEO) and his affiliates held approximately 9.6% of voting power, which may increase, allowing significant influence.
• Robert Hershberg, Vice Chair and Lead Independent Director, adopted a Rule 10b5-1 trading arrangement to sell up to 525,000 shares of Class A common stock.

Risks

• Limited operating history and no products approved for commercial sale, making future business prospects difficult to evaluate.
• Anticipate continued significant operating losses and need to raise substantial additional funding, which may cause dilution, restrict operations, or require relinquishing rights.
• May be required to repurchase Class A common stock issued to the Bill & Melinda Gates Foundation if global access commitments agreement with Exscientia is defaulted, impacting liquidity.
• Strategic collaborations may not be successful, altering development and commercialization plans.
• Drug discovery approach is unique and may not lead to successful drug products, including challenges in identifying mechanisms of action.
• Drug candidates are in lengthy and expensive preclinical or clinical development with uncertain outcomes and potential for substantial delays (e.g., patient enrollment difficulties).
• Planned clinical trials may not be successful, receive regulatory approval, or market acceptance.
• Developing drug candidates in combination with other therapies exposes additional risks (e.g., revocation of approval for combination therapies, safety/efficacy issues).
• FDA and foreign regulatory authorities may not accept data from trials conducted outside the U.S.
• Difficulty in establishing precise incidence and prevalence for target patient populations could adversely affect revenue and profitability.
• Resource allocation to specific drug candidates may fail to capitalize on more profitable opportunities.
• Product candidates may cause significant adverse events, toxicities, or undesirable side effects, preventing regulatory approval or market acceptance.
• Return on investments in drug discovery platform enhancements may be lower or slower than expected.
• Information technology systems and infrastructure may fail or experience security breaches, impacting business and operations.
• Interruptions in server systems or cloud-based services, or failure to maintain data security, confidentiality, accessibility, or integrity, could harm the business.
• Use of third-party open-source software (OSS) presents risks, including potential litigation.
• Issues relating to the use of artificial intelligence and machine learning (AI) could adversely affect business (e.g., inaccuracy, bias, IP infringement, privacy issues).
• Even if approved, drug candidates may fail to achieve market acceptance.
• Inability to establish sales and marketing capabilities or partner for commercialization could hinder success.
• Subject to regulatory and operational risks associated with physical and digital infrastructure at internal and external facilities.
• Third-party manufacturers may encounter production or supply chain difficulties.
• Success depends on obtaining and maintaining patents of adequate scope, which is challenging and uncertain.
• Current proprietary position for some drug candidates relies on patents covering components, manufacturing methods, formulations, or methods of use, which may not prevent competitors from using the same drug candidate.
• Inability to protect intellectual property and proprietary rights globally.
• Failure to obtain patent term extension and data exclusivity could harm the business.
• Need to license intellectual property from third parties, which may not be available on commercially reasonable terms.
• Changes in U.S. patent law could diminish patent value.
• Issued patents could be found invalid or unenforceable.
• Anticipated benefits of the Exscientia business combination may vary from expectations, and managing expanded operations poses challenges.
• Exposure to greater foreign currency exchange risk due to international operations.
• Subject to economic, political, regulatory, and other risks associated with international operations (e.g., Brexit impact, trade controls, sanctions).
• Inability to obtain U.S. or foreign regulatory approval, or approval subject to limitations, would impair revenue generation.
• Regulatory authorities may not accept data from trials conducted outside their jurisdiction.
• Ongoing regulatory obligations post-approval, including potential recalls or market withdrawals.
• Regulatory enforcement against promotion of off-label uses.
• Inability to maintain orphan drug designation benefits, including market exclusivity.
• Subject to U.S. and foreign privacy, data protection, and cybersecurity laws with substantial compliance costs and potential liability.
• Regulatory and legislative developments related to AI use could adversely affect the business.
• Third parties performing research, preclinical testing, or clinical trials may not perform satisfactorily or agreements may be terminated.
• Inability to adequately source clinical and commercial supplies, equipment, and API from third-party vendors.
• Adversely affected by natural disasters; business continuity plans and insurance may be inadequate.
• Failure to comply with environmental, health, and safety laws could lead to fines or damages.
• Insurance policies may not cover all risks, leading to significant uninsured liabilities.
• Ability to utilize net operating loss carryforwards and other tax attributes may be limited (e.g., Section 382 ownership changes).
• Changes in tax laws or regulations could adversely affect financial results.
• Incorrect estimates or judgments in critical accounting policies could affect results.
• Product liability lawsuits could incur substantial liabilities and limit commercialization.
• Future success depends on ability to attract, retain, and motivate key personnel.
• Difficulties in managing growth if operations scale rapidly.
• Acquisitions may divert management attention, dilute equity, or disrupt operations.
• Cost reduction plans may not achieve expected benefits or could adversely affect operations.
• Increased labor costs, potential unionization, and labor disruptions.
• Dual-class stock structure affects voting power concentration.
• Principal stockholders and management own significant percentage of stock, exerting influence.
• Stock price may be volatile and fluctuate substantially.
• Sales of substantial number of shares could cause stock price to fall.
• Bylaws designate Delaware Court of Chancery as exclusive forum, limiting stockholder ability to obtain favorable judicial forum.
• Anti-takeover provisions in corporate documents and Delaware law.
• Actual operating results may differ significantly from guidance.
• Failure to maintain proper and effective disclosure controls and internal controls over financial reporting.
• Unfavorable global economic conditions could adversely affect business.
• Risks of litigation in the ordinary course of business.
• If securities analysts do not publish research or publish negative evaluations, stock price could decline.

Future Outlook

Recursion Pharmaceuticals expects to engage with the FDA in the first half of 2026 to define a potential registration path for REC-4881 in FAP and optimize its dosing schedule. The company anticipates reporting early monotherapy safety and PK data for REC-1245 in the first half of 2026, with go/no-go decisions on Phase 1 initiation for REC-7735 and REC-102 expected in the second half of 2026. Further clinical data for REC-4881, early combination safety and PK data for REC-617, and early monotherapy safety and PK data for REC-3565 are projected for the first half of 2027, while early monotherapy safety and PK data for REC-4539 are expected in the second half of 2027. Sanofi programs are also advancing towards potential lead series and development candidate milestones in the next 12-18 months, and the company plans to translate biological insights from Roche and Genentech maps into early-stage programs in 2026 and beyond. Recursion believes its existing cash and cash equivalents will fund operations for at least the next 12 months but anticipates needing to raise additional financing in the future, expecting to incur substantial operating losses for the foreseeable future. The company will continue to invest selectively in platform capabilities to improve success rates and efficiency, and aims to achieve carbon neutrality by 2030.

Management Comments

• "2025 marked an important inflection point for Recursion – the year our AI-native foundation began translating from theoretical advantage into clinical reality."
• "The foundational question is no longer whether AI can play a role in drug discovery and development. We have demonstrated that it can – and we believe the next decade will be defined by how deeply AI is embedded into the fabric of new medicines itself."
• "Quality medicines are the standard by which AI in medicine will ultimately be judged."
• "We are positioning Recursion not only to meet that standard, but to define it."
• "Our strategy is organized around three core pillars, underpinned by exceptional people and a culture grounded in rigor and curiosity."
• "We have achieved over $500 million in upfront and progress-based milestone payments to date."
• "These are not isolated successes; they are signals that our platform is beginning to compound – generating insights, molecules, and proof from a shared technological core."
• "AI must improve outcomes across the full R&D value chain – not just isolated steps."
• "Ambition must be matched with focus to create durable value."
• "Approximately 80% of diseases still lack disease-modifying therapies. The opportunity before us is vast."
• "The credibility of AI in medicine will not be earned through better models alone, but through translation – from data to decisions, from platforms to pipelines, and from science to patients."
• "Our objective is clear: apply AI and science with rigor, focus, and humanity to deliver meaningful medicines."

Industry Context

StockSavvy.ai notes that Recursion Pharmaceuticals is at the forefront of the "TechBio" trend, integrating AI/ML across the entire drug discovery and development value chain, from target identification to clinical execution. This approach aims to transform the traditional high-attrition, V-shaped discovery funnel into a more efficient T-shaped model, a goal increasingly pursued by both specialized TechBio companies and traditional biopharmaceutical giants. The company's collaborations with major pharmaceutical players like Roche, Genentech, and Sanofi validate the growing industry consensus on AI's potential to improve R&D efficiency and decision-making, while also providing crucial funding and external validation for its platform. The focus on generating proprietary, multimodal datasets and purpose-built AI models positions Recursion to compete with other AI-driven drug discovery firms like Relay Therapeutics, Isomorphic Labs, and Schrodinger, as well as large tech companies entering the healthcare space.

Comparison to Industry Standards

• Recursion's AI-driven precision design platform synthesizes approximately 330 compounds per program to achieve an advanced candidate in ~17 months, significantly outperforming the industry average of over 2,500 compounds and 42 months.
• The ClinTech system has shown a 10-40% increase in eligible patient population and ~1.5X improvement in enrollment rates, suggesting a notable advantage over traditional clinical trial design and execution.
• REC-4881 in FAP demonstrated a median polyp burden reduction of 43% at week 13 and 53% at week 25, which compares favorably to celecoxib's 30% reduction in preclinical models and eRapa's 29% median reduction at 12 months in Phase 2 data.
• The company's BioHive-2 supercomputer, ranked 76th globally, provides a significant computational advantage compared to many traditional biopharma companies.
• The company's ability to generate novel biological insights and targets from its Phenomaps, such as the Neuron Map and Microglia Map, addresses a historical challenge in neuroscience drug development where traditional approaches have yielded limited breakthroughs and high failure rates.

Management Changes

Corporate Governance

Legal Proceedings

• A putative class action complaint was filed in April 2024 against Exscientia plc, Andrew Hopkins, Ben R. Taylor, and David Nicholson, alleging materially false and misleading statements regarding Exscientia's business. The case was consolidated, and an amended complaint was filed in November 2024. The motion to dismiss was granted in October 2025, and the amended complaint was dismissed with prejudice in December 2025.
• In June 2023, Industry Office SLC, LLC filed a lawsuit against the Company alleging anticipatory repudiation, breach of contract, and breach of implied covenant of good faith and fair dealing related to a lease agreement. The Company filed counterclaims in September 2023 alleging breach of contract and fraudulent misrepresentation. Discovery is ongoing.

Related Party Transactions

• Issued 7.1 million shares of Class A common stock to Tempus AI, Inc. (formerly Tempus Labs, Inc.) in November 2025 for a $32.0 million annual license fee, as part of the Master Agreement.
• Issued 3.2 million shares to Tempus in December 2023 for a $22.0 million initial license fee.
• Issued 3.5 million shares to Tempus in December 2024 for a $22.0 million annual license fee.
• Robert Hershberg, Vice Chair and Lead Independent Director, adopted a Rule 10b5-1 trading arrangement to sell up to 525,000 shares of Class A common stock.
• Dr. Christopher Gibson, co-founder and Chair of the Board, and his affiliates held approximately 9.6% of the voting power as of December 31, 2025. He also entered into an Advisory Agreement with the Company effective January 1, 2026.

Stakeholder Impact

• Shareholders: Potential for dilution from future capital raises and stock issuances (e.g., ATM offerings, Tempus payments). Volatility in stock price is a risk. Dual-class structure limits Class A voting power.
• Employees: Workforce reduction of approximately 20% in June 2025 as part of a cost reduction plan. Increased labor costs and competition for talent are ongoing concerns.
• Customers/Partners: Continued advancement of partnered programs and achievement of milestones provide value to partners like Sanofi, Roche, and Genentech.
• Patients: Progress in clinical programs (e.g., REC-4881 in FAP) offers hope for new therapies in areas of high unmet medical need.
• Creditors: Operating losses and need for additional funding could impact creditworthiness, though current cash position is strong for the next 12 months.

Next Steps

• Engage with the FDA in 1H 2026 to define a potential registration path for REC-4881.
• Optimize dosing schedule for REC-4881 in the ongoing TUPELO trial and expand to include patients aged 18+.
• Report early monotherapy safety and PK data for REC-1245 (RBM39 degrader) in 1H 2026.
• Make data-driven go/no-go decisions on Phase 1 initiation for REC-7735 (PI3K H1047Ri) and REC-102 (ENPP1i) in 2H 2026.
• Initiate Phase 1 trial (ENLYGHT) for REC-4539 (LSD1i) in 1H 2026.
• Report additional clinical data for REC-4881 in 1H 2027.
• Report early combination safety and PK data for REC-617 (CDK7i) in 1H 2027.
• Report early monotherapy safety and PK data for REC-3565 (MALT1i) in 1H 2027.
• Report early monotherapy safety and PK data for REC-4539 (LSD1i) in 2H 2027.
• Sanofi programs continue advancing towards potential lead series and development candidate designation milestones in the next 12-18 months.
• Translate biological insights from maps delivered to Roche and Genentech to early-stage programs across 2026 and beyond.
• Continue to focus efforts on consolidation for facilities that do not strategically further operations or business needs in 2026.
• Continue to monitor ownership changes for any potential future limitations on tax attributes.
• Continue to assess the impact of adopting ASU No. 2025-10 (Government Grants), ASU No. 2025-07 (Derivatives and Hedging, Revenue from Contracts with Customers), and ASU No. 2025-06 (Internal-use software costs).
• Continue to assess the impact of ASU No. 2024-03 (Disaggregation of Income Statement Expenses).

Key Dates

Recommendation

Recursion Pharmaceuticals demonstrates significant scientific and technological progress, particularly with its AI-native platform yielding a clinical proof of concept and strong partnerships. However, the substantial and increasing net losses, coupled with the ongoing need for significant capital raises and unremediated material weaknesses in internal controls, present considerable financial risks. The long and uncertain path to commercialization for drug candidates, despite promising early data, suggests a "hold" recommendation for seasoned investors, balancing the long-term potential of its innovative platform against current financial challenges and execution risks.

Keywords

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