Navigating the stock market successfully requires patience and a long-term perspective. The key is to stick to a consistent plan and make regular contributions to a retirement account, allowing the power of compounding to work its magic over time.
However, there is an undeniable attraction in looking for potential a multibag stocks. There is something fascinating about companies with disruptive innovations, whose stocks may be on the cusp of rapid growth and can deliver life-changing returns to shareholders.
Pharmaceutical Recursion(NASDAQ: RXRX) is a clinical stage biotech that could have that level of potential. The company harnesses artificial intelligence (AI) for drug discovery, promising to revolutionize medicine. Let's explore whether buying the stock could eventually help you become a millionaire.
Recursion has quickly established itself as a leader in AI-enabled biotechnology. The company's BioHive-2 supercomputer, which is powered by Nvidia AI chips, is one of the world's most powerful accelerated computing systems.
Through higher machine learning techniques, BioHive-2 analyzes massive amounts of biological data to identify drug targets, including disease-related proteins and genes. The Recursion (OS) operating system evaluates millions of compounds to identify potential drug candidates, while also predicting properties of drug molecules and optimal patient populations to improve drug design.
These efforts allow for accelerated research on treatments across 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-based drug discovery. Exscientia's expertise in advanced methods of chemical design complements Recursion's biology-driven approach. This combination has 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 yielded promising results, with a robust pipeline of drug candidates now incorporating Exscientia's legacy programs.
One of the most promising prospects is REC-994, which could become the first oral therapy for the treatment of symptomatic cerebral cavernous malformation (CCM), a brain hemorrhaging condition that currently has no approved treatments.
REC-617 has also shown encouraging results, with a recent interim phase 1 study showing positive patient responses and good tolerability in the treatment of advanced solid tumors. The company believes this drug has “best-in-class” potential, one of several reasons that make Recursion an interesting opportunity for investors.
Looking ahead to 2025, the market will closely follow clinical readings and regulatory updates as catalysts for Recursion stock:
Source: Recursion Pharmaceuticals.
It's likely that at least one of Recursion Pharmaceuticals' candidates could eventually win approval as a new therapy, transforming the company into a commercially sustainable operation over the next decade.
But making a much more confident case for the stock, as an investment to multiply several times over, would be a much more challenging proposition. Recursion would likely be needed to develop a blockbuster drug capable of generating billions of dollars in sales over several years.
The reality is that Recursion remains years away from bringing a drug to market. Currently, the company generates only limited revenue through partnership milestone payments and research grants, while facing significantly higher operating costs. Wall Street analysts are projecting 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 (Estimated)
2025 (Estimated)
Revenue (in millions)
$44.6
$70.0
$76.0
Revenue change (YOY)
12%
57%
9%
Earnings per share (EPS)
($1.58)
($1.54)
($1.65)
EPS Change (YOY)
N/A
N/A
N/A
Data source: Yahoo Finance. YOY = year over year.
Although the market may overlook a lack of profitability based on longer-term growth prospects, the dynamic may keep the stock under pressure. Shares of Recursion are down about 55% from their 52-week high, and any sort of regulatory setback could send the stock even lower.
Another consideration is the highly competitive landscape of the industry. Big biotech and pharmaceutical companies like it Merck, AstraZenecaa Pfizeramong others, are increasingly using artificial intelligence in their research and development processes. This widespread adoption raises questions about whether Recursion can maintain a technological edge in the field.
While Recursion Pharmaceuticals offers compelling possibilities, I believe that without better visibility into its product approval path, it is too early to buy this stock with conviction. Meanwhile, 2025 will be a crucial year for the company to offer greater clarity on its long-term potential. You might want to keep this one on your radar.
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And Victor does not have a position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Pfizer. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
