Predicted AI Shares to Potentially Surge in 2025
The artificial intelligence (AI) sector has been making waves on Wall Street over the past two years, and it's unclear if this trend will continue till 2025. However, specific AI-focused companies could see their shares surge regardless of the industry's direction.
One such company is Recursion Pharmaceuticals (RXRX -0.98%), an AI-centric biotech company with potential catalysts looming in the near future. Let's examine whether investing in Recursion Pharmaceuticals before 2025 is worth considering.
Some Background on Recursion Pharmaceuticals
Recursion Pharmaceuticals employs AI to expedite the drug discovery and development process. Its virtual lab runs trials to pinpoint potential clinical compounds, fewer of which would typically advance to human trials for traditional drugmakers. Only a small fraction of these trial participants usually ends up receiving regulatory approval.
By enhancing odds in these fronts, Recursion Pharmaceuticals could lead the pack in bringing drugs to market faster and at lower costs compared to competitors.
Recursion Pharmaceuticals' growth credentials are strengthened by its partnership with Nvidia, the hottest AI company on Wall Street. They collaborated to develop the industry's most powerful AI supercomputer, augmenting Recursion Pharmaceuticals' computing power, data, and virtual experiment capacity. Nvidia extended its support by investing equity in the biotech company as well.
Recursion Pharmaceuticals' vision may be shaping up, but the company lacks an approved drug on the market. It could inch closer to that milestone next year.
Upcoming Catalysts
Recursion Pharmaceuticals recently reported promising results from two clinical trials. In September, the company reported that REC-994 met its safety and tolerability primary endpoint in patients with symptomatic cerebral cavernous malformation (CCM), a rare neurological condition. In more challenging situations, CCM may pose life-threatening risks.
More recently (early October), Recursion revealed interim data from a phase 1/2 study for REC-617 in advanced solid tumors. Apart from positive safety data, patients under treatment appear to be responding well, with one patient experiencing a durable (over six months) partial response to the therapy. Currently battling ovarian cancer, this patient had earlier gone through four rounds of therapy, yet continued to progress.
Four other patients reported modest improvements, as per Recursion. While results should be interpreted with caution, they are encouraging. Recursion Pharmaceuticals is scheduled to publish further data from ongoing clinical trials next year. It is testing REC-4881 in familial adenomatous polyposis (a rare condition leading to colorectal cancer) and advanced cancers with AXIN1 or APC protein mutations. The biotech has set a target for releasing data from both trials in 2023.
Recursion Pharmaceuticals could have at least two more data readouts next year, one for REC-3964 as a potential treatment for bacterial infections and REC-1245, another potential cancer therapeutic. Although positive results from a single trial might not be highly impactful, consistent positive results from its pipeline could grab investors' attention, boosting the stock price.
Long-term Perspective
While clinical or regulatory milestones can significantly boost a biotech's stock, Recursion Pharmaceuticals' progress in 2023 won't necessarily justify an investment. The company has not yet begun a phase 3 study, although it should soon. Timelines for market availability remain uncertain.
But Recursion Pharmaceuticals need not worry about funding issues for a while. Milestone-based collaborations with the pharmaceutical giants, Bristol Myers Squibb and Roche, should provide necessary resources.
Recursion Pharmaceuticals ended the third quarter with $427.6 million in cash reserves, an impressive amount for a biotech valued at $2.77 billion. Despite performing well in 2025, the stock remains risky, although less so as it moves its pipeline into late-stage trials. Given the company's unproven record in producing commercial victories, its AI-based platform's true potential remains to be proven next year.
Recursion Pharmaceuticals' strategy holds considerable potential. If its master plan materializes, the stock could see significant upside. However, investing entails significant risks that risk-averse investors may prefer to avoid. Those comfortable with heightened volatility might consider initiating a small position.
Given Recursion Pharmaceuticals' collaboration with pharmaceutical giants Bristol Myers Squibb and Roche, securing necessary resources for its operations, the company's cash reserves of $427.6 million at the end of the third quarter are a testament to its financial stability. With promising results from clinical trials and upcoming data readouts for REC-4881 and REC-1245, the biotech company's AI-based platform has the potential to revolutionize drug discovery, leading to significant stock upside if its strategy is successful. Despite the risks involved, investors comfortable with volatility might consider initiating a small position in Recursion Pharmaceuticals, making it an attractive option for investing in the finance sector, specifically within the AI and biotech industries.
