DEFA14A: Recursion Pharmaceuticals and Exscientia Amend Transaction Agreement, Adding Board Seats

Recursion Pharmaceuticals and Exscientia amend their transaction agreement to include the appointment of Exscientia board members to Recursion's board following the acquisition.

Summary

• Recursion Pharmaceuticals and Exscientia have amended their transaction agreement, initially established on August 8, 2024, to facilitate Recursion's acquisition of Exscientia.
• The amendment, executed on November 5, 2024, stipulates that Recursion will appoint one member from Exscientia's board to its own board upon the deal's completion.
• Recursion will also consider appointing an additional individual to its board, subject to mutual agreement and fiduciary duties.
• The supplemental disclosures provide additional information concerning the transaction, including the amendment to the agreement.
• The exchange ratio remains at 0.7729 shares of Recursion Class A Common Stock for each Exscientia share.
• Lawsuits have been filed by purported stockholders of Recursion alleging false and misleading statements of facts and omissions of material facts.
• The companies have provided supplemental disclosures to the joint proxy statement, dated October 10, 2024, to include this amendment and other details.
• Financial forecasts for both companies, prepared by Exscientia and Recursion, are included in the supplemental disclosures, outlining projected revenues, profits, and cash flows through 2049.
• The forecasts include risk-adjusted and non-risk-adjusted scenarios, with the risk-adjusted forecasts being the basis for financial advisor opinions.
• The transaction is subject to stockholder and shareholder approvals, regulatory approvals, and the sanction of the High Court of Justice of England and Wales.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the amendment itself is a procedural step, the lawsuits introduce a negative element. The financial forecasts are long-term and subject to uncertainty.

Positives

• The amendment facilitates the integration of Exscientia's expertise into Recursion's board.
• The transaction aims to create a stronger combined entity with enhanced capabilities in drug discovery.
• The supplemental disclosures provide additional transparency regarding the transaction.
• The exchange ratio of 0.7729 shares of Recursion Class A Common Stock for each Exscientia share remains unchanged.

Negatives

• Lawsuits have been filed by purported stockholders of Recursion alleging false and misleading statements of facts and omissions of material facts.
• The transaction is subject to various approvals and conditions, creating uncertainty regarding its completion.
• The integration of Exscientia's business with Recursion's business may present challenges.
• The financial forecasts involve numerous assumptions and estimates, which may not materialize.

Risks

• Failure to obtain stockholder or shareholder approvals could terminate the transaction.
• Regulatory hurdles and legal proceedings could delay or prevent the transaction.
• The integration of Exscientia's business may not be successful, leading to a failure to realize the anticipated benefits.
• Economic, market, or business conditions could negatively impact the combined company's operations.
• The financial forecasts are subject to inherent uncertainties and may not be accurate.
• The lawsuits filed by purported stockholders of Recursion could result in injunctions or damages.

Future Outlook

The document includes forward-looking statements regarding the transaction and the future business and financial performance of Recursion and Exscientia, which are subject to various risks and uncertainties.

Management Comments

• Dr. Gibson and Dr. Hopkins discussed, for the first time and on an exploratory basis, a potential combination of Recursion and Exscientia, with Dr. Hopkins expressing preliminary interest in a merger of equals transaction with Recursion.
• It was the consensus of the Recursion Board that Dr. Gibson would continue to serve as chief executive officer of the combined company, and that Recursion should propose that Dr. Hopkins join the Recursion Board as vice chair.

Industry Context

The transaction reflects a trend in the biopharmaceutical industry towards consolidation and strategic partnerships to enhance drug discovery and development capabilities.

Comparison to Industry Standards

• The financial advisors used selected public companies and precedent transactions to assess the value of Exscientia, but noted that no company or transaction is directly comparable.
• Allen & Company selected a range of estimated enterprise values derived from the selected companies of $124 million to $719 million for Exscientia.
• Allen & Company selected a range of estimated transaction values derived from the selected transactions of $458 million to $1.011 billion for Exscientia.
• Centerview reviewed stock price targets for Exscientia Shares in Wall Street research analyst reports publicly available as of August 7, 2024 (consisting of three such price targets), which indicated the latest available low and high stock price targets for Exscientia Shares ranged from $7.00 to $9.00 per share.
• Centerview also reviewed stock price targets for Recursion Shares in Wall Street research analyst reports publicly available as of August 7, 2024 (consisting of seven such price targets), which indicated the latest available low and high stock price targets for Recursion Shares ranged from $8.00 to $17.00 per share.

Legal Proceedings

• A purported stockholder of Recursion filed a complaint in New York state court against Recursion and members of the Recursion Board, captioned Elliot v. Recursion Pharmaceuticals, Inc. et al., Case No. 655585/2024.
• A purported stockholder of Recursion filed a complaint in New York state court against Recursion and members of the Recursion Board, captioned Kent v. Recursion Pharmaceuticals, Inc. et al., Case No. 655606/2024.
• The Complaints assert claims against the Recursion Board under New York law for negligent misrepresentation and concealment and for negligence with respect to allegedly false and misleading statements of facts and omissions of material facts.
• The Complaints seek, among other relief, to enjoin Recursion from proceeding with the Transaction unless and until Recursion cures certain alleged disclosure deficiencies in the joint proxy statement, actual and punitive damages, and an award of attorneys fees and costs.

Stakeholder Impact

• Shareholders of both Recursion and Exscientia will be impacted by the transaction, as they will need to vote on the proposed acquisition.
• Employees of both companies may experience changes as a result of the integration of the two businesses.
• Customers and partners of both companies may benefit from the enhanced capabilities of the combined entity.

Next Steps

• Recursion and Exscientia will seek stockholder and shareholder approvals for the transaction.
• The companies will pursue regulatory approvals and the sanction of the High Court of Justice of England and Wales.
• Recursion will appoint one member from Exscientia's board to its own board upon completion of the deal, with a possible second appointment.
• The companies will work to integrate Exscientia's business with Recursion's business.

Key Dates

Keywords

Recursion Pharmaceuticals, Exscientia, Transaction Agreement, Acquisition, Merger, Board of Directors, Proxy Statement, Amendment, Share Deliverable, Financial Forecasts