DEFM14A: Recursion Pharmaceuticals to Acquire Exscientia in All-Stock Deal

Recursion Pharmaceuticals is set to acquire Exscientia in an all-stock transaction aimed at combining their AI-driven drug discovery platforms.

Summary

• Recursion Pharmaceuticals will acquire Exscientia in an all-stock transaction.
• Exscientia shareholders will receive 0.7729 shares of Recursion Class A Common Stock for each Exscientia share.
• The transaction aims to combine Recursion's scaled biology exploration with Exscientia's precision chemistry design.
• The combined company anticipates approximately 10 clinical readouts in the next 18 months.
• The deal is expected to generate approximately $200 million in milestone payments over the next two years.
• The combined company expects annual run-rate cost synergies of approximately $100 million.
• The combined company will have approximately $850 million in cash and cash equivalents.
• Pre-transaction Recursion stockholders are expected to own approximately 74% of the combined company, while former Exscientia shareholders will own approximately 26%.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the transaction, highlighting potential benefits and synergies. However, it also acknowledges risks and uncertainties, resulting in a moderately positive sentiment score.

Positives

• The transaction combines complementary portfolios of clinical and near-clinical programs.
• The merger creates complementary transformational partnerships with leading large pharma companies.
• The combined company will have complementary full-stack technology-enabled platforms.
• The transaction aims to deliver better novel treatments to patients, faster and at a lower cost.
• The combined company is expected to generate approximately $200 million in milestone payments over the next two years.
• The combined company expects annual run-rate cost synergies of approximately $100 million.
• The combined company will have approximately $850 million in cash and cash equivalents.

Negatives

• The exact equity stakes that pre-Transaction Recursion stockholders and former Exscientia shareholders will hold in Recursion immediately following the completion of the Transaction will depend on the number of fully-diluted Recursion Shares and Exscientia Shares (including any shares underlying equity awards granted following August 7, 2024) issued and outstanding immediately prior to the Effective Time.
• The issuance of Recursion Shares in the Transaction, and the trading of Recursion Shares after completion of the Transaction may cause the market price of Recursion Shares to fall.

Risks

• The completion of the transaction is subject to regulatory approvals and shareholder votes.
• Failure to integrate the businesses successfully could prevent the realization of anticipated benefits.
• The market price of Recursion Shares may be volatile.
• The combined company may face challenges in managing expanded operations.
• The loss of key employees could disrupt the integration and harm the combined business.

Future Outlook

The combined company aims to create a leading, technology-first, end-to-end drug discovery platform, enabling the discovery and translation of higher quality medicines more efficiently and at a higher scale.

Management Comments

• We are excited about the Transaction and look forward to the opportunities it presents for the combined company.

Industry Context

The transaction reflects a growing trend of combining AI and machine learning with drug discovery to accelerate the development of new treatments.

Comparison to Industry Standards

• The document does not provide a direct comparison to industry standards.
• However, it highlights the complementary nature of Recursion's and Exscientia's platforms, suggesting an attempt to create a best-in-class offering.
• The document mentions partnerships with leading large pharma companies, indicating a competitive positioning within the industry.

Management Changes

Stakeholder Impact

• Shareholders of Exscientia will receive Recursion shares, potentially benefiting from the combined company's growth.
• Employees of both companies may experience changes in roles and responsibilities.
• Customers and partners may benefit from the combined company's enhanced capabilities.

Next Steps

• Recursion and Exscientia will seek shareholder approvals for the transaction.
• The Scheme of Arrangement will require sanction by the High Court of Justice of England and Wales.
• The companies will work to obtain necessary regulatory approvals.
• The transaction is expected to close by the fourth quarter of 2024.

Key Dates

Keywords

Recursion Pharmaceuticals, Exscientia, acquisition, merger, drug discovery, AI, share issuance, scheme of arrangement, stockholders, shareholders