Shares of Recursion Pharmaceuticals (NASDAQ: RXRX) skyrocketed 78.2% on Wednesday after the company received a significant investment of $50 million from NVIDIA Corporation (NASDAQ: NVDA). The funding aims to support Recursion in its drug development efforts using artificial intelligence (AI).
On Wednesday, RXRX stock reached its highest point since January 2022. In addition, the news also had a positive impact on NVIDIA’s stock, which surged over 3% to $439.02.
Recursion Pharmaceuticals possesses a vast and searchable data set encompassing biology and chemistry. The company’s algorithm has the capability to identify relationships between trillions of genes and compounds without being influenced by human bias. With the support of NVIDIA’s investment, Recursion plans to accelerate the development of an AI system for its data set.
Mani Foroohar, an analyst from SVB Securities, emphasized that while the investment may seem modest in financial terms, it underscores the value of Recursion’s data set. He mentioned that this investment opens up new opportunities for Recursion to monetize its data set, increasing its potential for future growth.
“Strategic implications of this transaction for Recursion remain an open question, in our view, as the role of generative AI in drug discovery continues to evolve,” Foroohar said, “but this announcement increases visibility and appreciation of upside optionality and potential near-term cashflows that could emerge from Recursion’s technology, platform and data.”
Recursion’s ultimate goal is to revolutionize the field of drug discovery by utilizing its extensive data set, which contains 3 trillion searchable relationships between genes and compounds.
As part of the investment, NVIDIA will gain access to Recursion’s database to train the foundational models for its BioNeMo system. BioNeMo, a cloud service for generative AI in drug discovery, was launched by NVIDIA in September of last year. The company intends to license BioNeMo to biopharma firms, thereby facilitating faster drug discovery and development.
SVB’s Foroohar maintained his “market perform” rating for RXRX stock, while Needham analyst Gil Blum has a “buy” rating for Recursion shares. Blum believes that this collaboration solidifies Recursion’s position as a leading AI-driven biotech firm.
“The inclusion of Recursion’s data on BioNeMe has the potential to broadly and relatively easily disseminate the company’s technology across biopharma companies,” he said in his note to clients. “Recursion maintains all (intellectual property) rights to its data, and as such, any third-party development would require licensing.”
Kevin Putnam is a financial journalist and editor based in New York. He specializes in editing news and analysis related to U.S. stock market.
