Recursion Pharmaceuticals Before Q4 Earnings: How to Play the Stock

Recursion Pharmaceuticals RXRX is expected to report its fourth-quarter 2024 results soon. The Zacks Consensus Estimate for quarterly revenues in the to-be-reported quarter is pegged at $28.73 billion. The consensus mark for RXRX’s loss per share is pinned at 36 cents.See the Zacks Earnings Calendar to stay ahead of market-making news.In the past 60 days, the Zacks Consensus Estimate for Recursion’s 2024 loss per share has remained constant at $1.57. During the same time frame, the company’s 2025 loss forecast has narrowed from $1.43 to $1.42.  RXRX Estimate MovementImage Source: Zacks Investment ResearchRXRX Earnings Surprise HistoryRXRX’s performance has been mixed over the trailing four quarters, with earnings beating estimates in two quarters and missing the mark on the other two occasions. On average, Recursion registered an earnings surprise of 1.26% in the last four quarters. In the last reported quarter, the company reported a negative surprise of 3.03%.Image Source: Zacks Investment ResearchEarnings Whispers for RXRXOur proven model does not conclusively predict an earnings beat for Recursion this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.Recursion has an Earnings ESP of -0.93% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Shaping RXRX’s Upcoming ResultsIn the absence of a marketed product in the company’s commercial portfolio, Recursion only recognizes collaboration and grant revenues from its partners. Recursion has ongoing collaboration agreements with pharma giants like Roche, Bayer, Merck MRK and Sanofi to develop candidates for several oncology indications with differentiated mechanisms of action. RXRX also collaborated with NVIDIA Corporation, the worldwide leader in visual computing technologies, to build a next-generation platform for the company to develop novel therapies.The company is expected to provide updates regarding the clinical-stage pipeline programs on its fourth-quarter earnings call. RXRX expects several data readouts throughout 2025.Recursion is developing its lead candidate, REC-994, for treating cerebral cavernous malformation, a neurovascular condition that impacts approximately 360,000 symptomatic individuals in the United States and the EU. Last year, the phase II SYCAMORE study evaluating two doses of REC-994 in CCM patients met its primary safety endpoint. Based on the success of the mid-stage study, Recursion plans to meet with the FDA to align on a pathway for further development of REC-994 as a potential treatment of symptomatic CCM in subsequent studies.Other key pipeline candidates in mid-stage development include REC-2282 and REC-4881 for treating neurofibromatosis type II and familial adenomatous polyposis, respectively. Recursion is also developing another investigational mid-stage candidate, REC-3964, to treat clostridioides difficile infection. The company has initiated a phase I/II study to evaluate REC-1245 for the treatment of biomarker-enriched solid tumors and lymphoma. Additionally, Recursion is developing several other candidates like REC-617 (advanced solid tumors), REC-3565 (B-cell malignancies) and REC-4539 (small-cell lung cancer) in separate early-stage studies.Research and development expenses are expected to have increased in the to-be-reported quarter due to increased investments in expanding and upgrading the company’s proprietary candidate development platform, as well as costs associated with funding ongoing clinical activities.General and administrative expenses are also likely to have increased because of higher compensation to employees, along with higher software and lease expenses.RXRX’s Price Performance & Premium ValuationThe stock has rallied 67.9% in the past three months against the industry’s 6.5% decline. RXRX has also outperformed the S&P 500 and the sector in the same period, as seen in the chart below. Recursion is currently trading above both its 50 and 200-day moving averages.RXRX Stock Outperforms the Industry, Sector & the S&P 500Image Source: Zacks Investment ResearchRecursion is trading at a premium to the industry, as seen in the chart below. Going by the price/book value ratio, the company’s shares currently trade at 7.84, which is significantly more than 1.26 for the industry.RXRX Stock ValuationImage Source: Zacks Investment ResearchInvestment ThesisRecursion aims to shift the paradigm of drug discovery and development, which has historically been complex, costly, and prone to failure. Traditional biotech companies rely on a “trial-and-error” approach, leading to significant cash burn during early research and development. The high failure rates and funding challenges often result in financial instability or bankruptcy, hindering progress in the sector.In contrast, Recursion leverages AI-powered models to test clinical compounds against a virtual library of human biology, hoping to identify promising candidates with higher probabilities of success in clinical development. This approach reduces research costs, improves efficiency, and could allow Recursion to deliver breakthrough therapies at lower prices. Additionally, the company can generate incremental revenues by licensing its AI platform to other drug makers, as demonstrated by its collaborations with Bayer and Roche. Even when candidates fail in clinical studies, Recursion could use the resulting data to refine and enhance its AI models, improving accuracy and long-term outcomes.However, being a hybrid company, RXRX operates in a competitive landscape where it faces challenges from a range of companies across the pharmaceutical, biotechnology and technology sectors. Traditional biopharma giants like J&J JNJ, Merck and Pfizer PFE, with significantly greater resources at their disposal, are investing in machine learning and computational tools, sometimes through partnerships and/or acquisitions, to enhance their drug discovery capabilities. On the other hand, RXRX also faces competition from large technology companies like Alphabet, Microsoft, and Amazon, who are equally committed to revolutionizing drug discovery through technology.How to Play RXRX StockRecursion's first-mover advantage in AI-driven drug discovery positions it as a leader in the space, with a strong pipeline focused on Precision Oncology and Rare Diseases. The successful development and approval of its candidates would validate its AI platform and significantly enhance shareholder value.With clinical studies progressing well, existing investors should hold for long-term gains, no matter how the fourth-quarter results pan out. In fact, new investors should look for price dips to add RXRX to their portfolio.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Johnson & Johnson (JNJ): Free Stock Analysis Report Pfizer Inc. (PFE): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis Report Recursion Pharmaceuticals, Inc. (RXRX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks