Successfully navigating the stock market requires patience and a long-term perspective. The key is to stick to a consistent plan and contribute regularly to a retirement account, allowing the power of compounding to work its magic over time.
Nevertheless, there is an undeniable attraction to looking for potential multibagger actions. There’s something captivating about companies with disruptive innovations, whose stocks could be poised for rapid growth, and capable of generating life-changing returns for shareholders.
Recursive Pharmaceuticals(NASDAQ:RXRX) is a clinical-stage biotechnology that may have this level of potential. The company leverages artificial intelligence (AI) for drug discovery, promising to revolutionize medicine. Let’s see if buying stocks could possibly help you become a millionaire.
Recursion has quickly established itself as a leader in the field of AI-driven biotechnology. The company’s BioHive-2 supercomputer, powered by Nvidia AI chips are one of the most powerful accelerated computing systems in the world.
Thanks to advanced machine learning Using these techniques, BioHive-2 analyzes large amounts of biological data to identify drug targets, including proteins and genes involved in disease. Recursion’s operating system (OS) evaluates millions of compounds to identify potential drug candidates, while also predicting drug molecule properties and optimal patient populations to improve drug design.
These efforts help accelerate research into treatments for a wide range of conditions, while reducing costs compared to traditional methods.
A major development for Recursion this year was its merger with Exscientia, another biotech company focused on AI-driven drug discovery. Exscientia’s expertise in advanced chemical design methods complements Recursion’s biology-focused approach. This combination created a vertically integrated platform, resulting in a fundamentally stronger company.
Image source: Getty Images.
The good news is that Recursion’s technology has already shown promising results, with a strong pipeline of drug candidates now integrating Exscientia’s existing programs.
One of the most promising prospects is REC-994, which could become the first oral therapy to treat symptomatic cerebral cavernous malformations (CCM), a brain hemorrhage for which no treatment is currently approved.
REC-617 has also shown encouraging results, with a recent interim phase 1 study demonstrating positive patient responses and good tolerability in the treatment of advanced solid tumors. The company believes the drug has “best-in-class” potential, one of many reasons that makes Recursion an attractive opportunity for investors.
Looking ahead to 2025, the market will closely monitor clinical results and regulatory updates as catalysts for Recursion stock:
Source: Recursion Pharmaceuticals.
It seems likely that at least one of Recursion Pharmaceuticals’ candidates could eventually be approved as a novel therapy, transforming the company into a commercially sustainable business over the next decade.
But making a much more optimistic case for the stock, as an investment expected to multiply multiple times, would be a much more difficult proposition. It would likely require Recursion to develop a blockbuster drug capable of generating billions of dollars in sales over several years.
The reality is that Recursion is years away from bringing a drug to market. Currently, the company generates only limited revenue from partnership milestone payments and research grants, while facing significantly higher operating expenses. Wall Street analysts predict continued financial losses for the foreseeable future, with negative earnings per share (EPS) expected to worsen, from a projected loss of $1.54 this year to $1.65 in 2025 .
Metric
2023
2024 (estimate)
2025 (estimate)
Turnover (in millions)
$44.6
$70.0
$76.0
Change in income (YOY)
12%
57%
9%
Earnings per share (EPS)
($1.58)
($1.54)
($1.65)
Change in EPS (YOY)
N / A
N / A
N / A
Data source: Yahoo Finance. YOY = year after year.
While the market may overlook a lack of profitability based on long-term growth prospects, the momentum may keep the stock under pressure. Recursion shares are down about 55% from their 52-week high, and any type of regulatory setback could send the stock lower even further.
Another factor to consider is the highly competitive industry landscape. Large biotechnology and pharmaceutical companies like Merck, AstraZenecaAnd Pfizeramong others, are increasingly using artificial intelligence in their research and development processes. This widespread adoption raises the question of whether Recursion can maintain a technological advantage in the field.
While Recursion Pharmaceuticals offers exciting possibilities, I believe that without better visibility into its product approval process, it is simply too early to buy this stock with conviction. Meanwhile, 2025 will be a crucial year for the company to provide more clarity on its long-term potential. You might want to keep this one on your radar.
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And Victor has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Merck and Pfizer. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
