Recursion Pharma Gets A Price-Target Cut After Q4 Miss: Retail Bearish Even As Cathie Wood's Ark Buys The Dip

Shares of Nvidia-backed Recursion Pharmaceuticals Inc. (RXRX) ended Friday lower, extending weekly losses past 21% after missing Wall Street estimates on both revenue and profit in its latest quarterly results.

Leerink cut its price target on Recursion to $6 from $7 while maintaining a 'Market Perform' rating, citing concerns over high cash burn and execution risks in deal-making and clinical development over the next year. 

The research firm noted that while the company highlighted promising preclinical data on REC-7735 — a mutant-selective PI3-kinase inhibitor — it remains to be seen how it compares to STX-478, which Eli Lilly acquired from Scorpion Therapeutics.

Recursion's fourth-quarter earnings report showed its loss per share widening to $0.53 from $0.42 a year earlier and revenue dropping to $4.55 million from $10.9 million. Analysts expected a loss of $0.36 per share on revenue of $16.84 million.

Cash & equivalents were at $603 million as of Dec. 31, up from $401.4 million a year earlier, which the company expects to provide a runway through 2027.

Leerink noted that the company plans to moderate spending by spinning off its Austrian operations into a separate entity and subleasing or simplifying its real estate footprint.

CEO Chris Gibson positioned Recursion's $688 million acquisition of Exscientia in 2024 as "a transformative leap" for the TechBio space, aiming to accelerate its AI-driven drug discovery platform, Recursion OS. 

The company has 10 clinical and preclinical programs, including several oncology drugs in Phase 2 trials.

Despite the weak quarter, Cathie Wood's ARK Investment bought about 653,000 Recursion shares on Friday, adding to the 103,000 shares purchased earlier in the week. 

The stock gained momentum last month after SoftBank Group disclosed a 14.67 million share stake in Recursion, valued at over $110 million as of the previous close.

However, retail sentiment remains 'bearish,' with traders on Stocktwits voicing concerns about ongoing losses and valuation.

Shares of Recursion remain up 8% year-to-date but have lost over 44% in the past 12 months.

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