On Wednesday, KeyBanc Capital Markets maintained its Overweight rating and $12.00 price target for shares of Recursion Pharmaceuticals (NASDAQ:RXRX). The firm's endorsement follows the announcement that the U.S. Food and Drug Administration (FDA) has approved Recursion's investigational new drug (IND) application. This clearance paves the way for a Phase 1/2 clinical trial of REC-1245, aimed at treating biomarker-enriched solid tumors and lymphoma.
Recursion Pharmaceuticals, leveraging its artificial intelligence (AI)-enabled maps of biology, has identified RBM39 as a novel target that shares functional similarities with the challenging CDK12 target. The company has developed REC-1245, a small molecule that selectively targets RBM39, avoiding direct effects on CDK12 or CDK13. This precision was achieved using advanced chemistry tools, allowing REC-1245 to progress from target biology to a preclinical drug candidate in less than 18 months, a timeline considerably faster than the industry average.
The company believes that modulating RBM39 may have therapeutic effects for certain biomarker-enriched solid tumors and lymphoma. Recursion estimates that the initial target population for this therapy could exceed 100,000 patients across the United States and the EU5. REC-1245 is characterized as a potent and selective RBM39 degrader with a potentially unique position in the market.
The upcoming Phase 1/2 clinical trial will assess the safety, tolerability, pharmacokinetics, pharmacodynamics, and the efficacy of REC-1245 as a monotherapy. The trial is scheduled to begin in the fourth quarter of 2024. KeyBanc views this progression to clinical trials as a significant enhancement to Recursion's pipeline, which includes nine clinical readouts anticipated in the next 18 months.
In other recent news, Recursion Pharmaceuticals has gained FDA clearance for its Phase 1/2 clinical trial of REC-1245, a potential treatment for solid tumors and lymphoma. The company has also reported progress in its REC-994 treatment for Cerebral Cavernous Malformations (CCM), with the Phase 2 SYCAMORE trial meeting its primary safety endpoint. However, improvements in patient or physician-reported outcomes were not observed.
Analyst firms such as Needham, Jefferies, KeyBanc, and TD Cowen have provided mixed feedback on Recursion's developments, with some maintaining their ratings while others adjusted their price targets.
In addition to these clinical developments, Recursion announced a $30 million deal with Genentech and plans for a $200 million public offering of Class A common stock. The company has also secured support from Evotec SE for its proposed acquisition of UK-based Exscientia plc. This brings total shareholder support for the transaction to approximately 53%.
Recent changes in leadership have occurred, with Dr. Robert Hershberg appointed as the new Chair of the Board, and Dr. Najat Khan joining as the new Chief R&D Officer and Chief Commercial Officer.
InvestingPro Insights
Recursion Pharmaceuticals' recent FDA approval for its IND application is a significant milestone, but investors should consider the company's financial position as it moves forward with clinical trials. According to InvestingPro data, Recursion has a market capitalization of $1.75 billion, reflecting investor interest in its AI-driven approach to drug discovery.
InvestingPro Tips highlight that Recursion holds more cash than debt on its balance sheet, which could be crucial for funding the upcoming Phase 1/2 clinical trial for REC-1245. However, the company is quickly burning through cash, a common characteristic of biotech firms in the development stage.
The stock's recent performance has been challenging, with InvestingPro data showing a 10.45% decline in the past week and a 15.25% drop over the last month. This volatility may reflect the high-risk, high-reward nature of biotech investments, especially as Recursion advances its pipeline.
Despite these challenges, KeyBanc's Overweight rating and $12 price target suggest potential upside from the current price of $6.17. Investors should note that Recursion is not yet profitable, with a negative P/E ratio of -4.66 for the last twelve months as of Q2 2024. This aligns with the InvestingPro Tip indicating that analysts do not anticipate profitability this year.
For a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide valuable insights into Recursion's financial health and market position as it progresses with its clinical trials.
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