Recursion and Exscientia, two pioneers in artificial intelligence (AI)-based drug development, have completed a business combination that they vowed will enhance their ability to carry out drug discovery that is both first-in-class and best-in-class.
Under the combination, first announced in August, Exscientia will become a wholly-owned subsidiary of Recursion, creating a trans-Atlantic AI powerhouse with a pipeline of more than 10 clinical and preclinical programs, 10 programs in advanced discovery phases, and more than 10 additional programs partnered with biopharmas.
“That’s quite a lot for a company this size,” Najat Khan, PhD, Recursion’s chief R&D officer and chief commercial officer, told GEN Edge. “We really went through a thoughtful discipline process around portfolio prioritization, strategically. Where do we think we have the highest percentage of opportunities to win? And that’s where some of the decisions have been made.”
The value of the Recursion-Exscientia deal has not been formally disclosed by the companies, though Reuters and CNBC reported the transaction as being $688 million when it was first announced in August. The newly-combined Recursion will be headquartered in Salt Lake City, UT, where Recursion has been based, with primary offices in Toronto, Montreal, Milpitas, New York, London, and Oxford, U.K., where Exscientia has been based.
In announcing the completion of the combination, the combined Recursion revealed a clinical and preclinical pipeline focused on two main therapeutic areas, oncology and rare diseases, and disclosed status updates for the 10 programs.
In oncology, the candidate furthest along in development is REC-617 (formerly GTAEXS617), an Exscientia-developed CDK7 inhibitor being developed to treat advanced solid tumors.
Recursion expects to report initial monotherapy safety and pharmacokinetic and pharmacodynamic (PK/PD) data from the Phase I portion of the Exscientia-initiated Phase I/II ELUCIDATE trial (NCT05985655) on December 9 during the American Association for Cancer Research (AACR) Special Conference, being held in Toronto, and the following day at a webinar.
‘617 headed an Exscientia pipeline that was pruned in December 2023 to four candidates—two preclinical, one clinical but now overseen by Bristol Myers Squibb (BMS)—EXS4318, a potentially first-in-class selective protein kinase C (PKC) theta inhibitor designed by the company that is being developed for immunology and inflammation (I&I) indications. A first-in-human study of ‘4318 was launched in February 2023.
“Master regulator”
“I think that’s going to be an important program going forward,” Khan said. “CDK7 is a master regulator. We’ve seen people have been trying to go after this for some time because it targets both cell cycle progression, but then also transcription. So, if you can do both, that would be useful.”
The rest of the combined company’s oncology pipeline includes:
• REC-1245, a Recursion-developed RBM39 degrader indicated for solid tumors and lymphoma. REC-1245, the first program using the company’s end-to-end AI platform, will see its first patient dosed by year’s end after receiving FDA clearance for its investigational new drug (IND) application The company expects to have Phase I dose-escalation data in the first half of 2026.
• REC-3565, an Exscientia-developed MALT1 inhibitor designed to treat B-cell malignancies, and formerly called EXS73565. The first patient is expected to be dosed with REC-3565 in the first quarter of 2025.
• REC-4539, an Exscientia-developed LSD1 inhibitor in development for small cell lung cancer, formerly called EXS74539. REC-4539 is also expected to see its first patient dosed in Q1 2025.
In rare diseases, the combined company’s lead candidate is REC-994, its treatment for symptomatic cerebral cavernous malformation (CCM) that generated positive topline data in September when it met the safety and tolerability primary endpoint of the Phase II SYCAMORE trial (NCT05085561). Recursion also said that REC-994, a superoxide scavenger, demonstrated “encouraging” trends in objective MRI-based exploratory efficacy measures at the highest dose of 400 mg, specifically reduced lesion volume and hemosiderin ring size in patients vs. placebo.
Recursion expects to share Phase II data for REC-994 in the first half of 2025, through a publication, webinar, or presentation at a medical conference.
By the end of this year, Recursion plans to have nominated a development candidate for its REV102 program, an ENPP1 inhibitor designed to treat hypophosphatasia (HPP) being developed through a joint venture with Rallybio.
In September, researchers from Rallybio and partners presented nonclinical data at the American Society for Bone and Mineral Research (ASBMR) 2024 Annual Meeting showing that ENPP1 inhibition was a potential therapeutic approach for treating HPP.
Oral option
“You might ask, why is that needed? Other than the fact that you don’t want to get four or five injections per week, which is challenging for a lot of patients today. The other reason is of the patient population that has HPP, only about 20% can have access to Strensiq® [(asfotase alfa), the only FDA-approved treatment for the disease, marketed by Alexion-AstraZeneca Rare Disease],” Khan explained. “There are multiple reasons for it, but an oral option would just benefit many other HPP patients. And we’ve been encouraged to date by the preclinical data.”
Also in Recursion’s rare disease pipeline:
• REC-2282, a pan-HDAC inhibitor being developed to treat Neurofibromatosis Type 2. Results from a six-month progression-free survival (PFS6) futility analysis are expected by the first half of 2025.
• REC-4881, a MEK1/2 inhibitor being developed for Familial Adenomatous Polyposis. Recursion also expects to report Phase Ib/II safety and early efficacy data from the TUPELO trial (NCT05552755) in H1 2025.
Until now, REC-4881 was also in development in advanced AXIN1/APC-mutant cancers. That program has been back-burnered or “deprioritized” following a strategic review of the combined companies’ pipelines, with study status to be updated on the ClinicalTrials.gov page of a Phase II trial (NCT06005974).
Beyond rare diseases and oncology, Recursion’s pipeline includes two candidates. One is REC-3964, an oral, non-antibiotic small molecule designed to treat Clostridioides difficile (C. diff) by selectively inhibiting the glucosyltransferase activity of toxin B produced by the bacterium in the gastrointestinal tract.
“There’s significant unmet need that remains in the C. diff space,” Khan said, citing the approximately 175,000 patients reported to have recurrent C. diff in the United States and European Union, of which about 30,000 patients die each year.
“From a platform perspective, we saw a novel insight, a new MOA (method of action) completely in terms of how we can tackle recurrent C. diff through a really potent, orally bioavailable C. diff toxin selective inhibitor,” Khan added. “Given the unmet need that exists, we’re very excited about progressing that program.”
IND-enabling studies are ongoing for Recursion’s other noncancer or rare disease candidate REC-4209, designed to treat idiopathic pulmonary fibrosis (IPF) through an undisclosed target.
Envisioning 100+ candidates
The 30+ programs disclosed Wednesday are potentially building blocks of a pipeline that Recursion co-founder and CEO Chris Gibson, PhD—who retains his position in the combined company—has envisioned growing to as many as 100 candidates in roughly a decade.
“Some of those programs will be fully internally developed. Many will likely be with some of our pharma partners,” Gibson told GEN Edge this past summer. “Beyond the programs that we have internally, there are dozens of programs that we have not talked about yet, that we will begin talking about in the coming quarters and years.”
In addition to Gibson, the combined company’s executive corps will include Exscientia’s interim CEO Dave Hallett, who was named CSO. Hallett became interim CEO in February when Exscientia fired its founder, CEO, and principal executive officer Andrew Hopkins, PhD, and removed him from the company’s board, after concluding that he engaged in relationships with two employees that the company’s board determined “were inappropriate and inconsistent with the company’s standards and values.”
Also appointed to senior positions in the combined company:
• Ben Taylor, Exscientia’s former chief financial and strategy officer, was named CFO of the company and president of Recursion U.K.
• Kristen Rushton, Recursion’s chief business operations officer, was promoted to COO.
• Matthew Kinn, Recursion’s senior vice president, business development and corporate initiatives, was promoted to serve as chief business officer.
• Lina Nilsson, PhD, Recursion’s senior vice president, emerging technologies, was promoted to serve on the executive team as senior vice president, head of platform.
Today, Recursion and Exscientia disclosed that the combined company has received approximately $450 million in upfront and milestone payments from partnerships launched to date, with the potential to receive more than approximately $20 billion in additional milestone payments before royalties.
More than half of that total consists of the up-to-$12 billion partnership launched by Recursion in 2021 with Roche and its Genentech subsidiary. The companies agreed to initiate up to 40 programs in “key areas” of neuroscience and an unspecified oncology indication. Each program could, if successfully developed and commercialized, yield more than $300 million in development, commercialization, and net sales milestones for Recursion, plus tiered royalties on net sales.
Big name partners
In addition to Roche and Genentech, other partners include big-name biopharma companies such as Bayer, BMS, Merck KGaA, and Sanofi.
Sanofi has the potentially second largest collaboration with the combined company, an up-to-$5.2 billion partnership to develop up to 15 novel small molecule candidates across oncology and immunology indications based on Exscientia’s platform. The companies first collaborated in 2016 and expanded their partnership in 2022.
Last year, Bayer joined Recursion to announce their four-year-old collaboration was being refocused toward precision oncology. The companies have agreed to launch up to seven oncology programs, with Bayer agreeing to pay Recursion up to $1.5 billion tied to achieving milestones, plus royalties on net sales. Bayer already shelled out $30 million upfront and made a $50 million equity investment in Recursion.
Also last year, Merck KGaA paid Exscientia $20 million cash upfront to launch a partnership to develop novel small molecule drug candidates across oncology, neuroinflammation, and immunology, with an initial focus on three potential first-in-class or best-in-class targets. Merck KGaA agreed to pay Exscientia up to $674 million in discovery, development, regulatory, and sales-based milestone payments.
BMS continues a partnership launched in 2019 by Exscientia and Celgene, which BMS acquired for $74 billion later that year. Exscientia and BMS expanded the collaboration two years later to I&I as well as oncology candidates. In return, BMS multiplied what it agreed to pay Exscientia to potentially more than $1.3 billion in clinical, regulatory, and commercial payments—including up to $50 million upfront, up to $125 million in “near to mid-term” milestones, and tiered royalties on net sales.
The combined company will carry on the Recursion name and trade its shares publicly on NASDAQ under the ticker symbol RXRX. Exscientia’s American Depositary Shares (ADSs), which have been bought and sold on NASDAQ under the EXAI symbol, will cease trading and be delisted.
Not all of Recursion’s partnerships are with drug developers. Recursion expanded a partnership with Silicon Valley AI chip maker Nvidia that began last year when Nvidia invested $50 million in the Salt Lake City, UT-based AI drug developer. In May, Recursion completed BioHive-2, the fastest supercomputer to be wholly owned and operated by any pharmaceutical company worldwide, using technology developed by Nvidia.
And at a glitzy event in San Francisco in January, Recursion announced it will be the first hosting partner of Nvidia’s to release a potential series of AI foundation models for external use, to be hosted on Nvidia’s BioNeMo
generative AI cloud-based platform designed to enable faster discovery and design of drugs. The series is called “Phenom,” a play on the words “phenomenal” and “phenomics,” the latter being the systematic study of a cell’s phenotype in response to many different chemical or genetic perturbations.
$100M “synergies” include job cuts
The Recursion-Exscientia combo expects to generate annual savings through operational “synergies” of approximately $100 million. Those synergies will include job reductions, Khan acknowledged.
The job cuts will bring the combined company’s workforce down to about 800, from more than 850 as of October, according to a presentation to shareholders that broke down the workforce as more than 500 at Recursion and more than 350 at Exscientia.
“There’s some synergies there from a headcount perspective,” Khan said. “We’re just taking a very disciplined approach to what we need. There’s also other G&A [general and administrative] and other synergies that happen from two companies coming together.”
The Exscientia total is about 28% below the 483 employees the company reported employing as of December 31, 2023, according to its Form 20-F annual report for last year. The Recursion headcount is unchanged from year-end 2023.
The combined company will also begin with about $576.644 million in cash and cash equivalents calculated as of September 30—$427.647 million reported by Recursion and £117.789 million ($148.997 million) from Exscientia, the latter disclosed today in a regulatory filing. That’s 32% below the nearly $845 million reported by the companies at the end of the second quarter, which Recursion ended with $474.341 million while Exscientia reported $370.1 million.
However, Recursion used 19% less net cash year over year—$59.2 million during Q3 of this year, vs. $72.9 million in the year-ago quarter. While Recursion incurred higher operating costs for R&D and general and administrative activities, the company also received from Roche and Genentech a $30 million “acceptance fee” for the completion of a neuroscience “phenomap” or map intended to illustrate the inferred relationships amongst perturbation phenotypes in a given cellular context.
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