RXRX

Business Context and Reporting Period

Company: Recursion Pharmaceuticals, Inc. (RXRX)
Filing Type: Form 10-Q (Unaudited)
Period Ended: March 31, 2026
Business Overview: Recursion is a clinical-stage TechBio company utilizing an AI-native platform (Recursion OS) to decode biology and industrialize drug discovery. The company has no approved products and relies on strategic partnerships and equity financing to fund operations.

Key Financial Metrics

Liquidity: As of March 31, 2026, the company held $665.2 million in cash and cash equivalents. Management believes this is sufficient to fund operations for at least the next 12 months.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 56% to $6.5 million, primarily due to a reduction in revenue recognized from the Roche collaboration following the completion of specific project phases in the prior year.
• Expense Reduction: Operating expenses decreased 35% to $135.0 million.
  • R&D Expenses: Dropped 32% to $87.9 million, driven largely by the absence of $27.1 million in Tempus data record purchases that occurred in Q1 2025.
  • G&A Expenses: Dropped 37% to $34.6 million, attributed to headcount reductions and the absence of one-time transaction costs and impairment charges related to the Exscientia acquisition in the prior year.
• Net Loss Improvement: Net loss narrowed by 42% to $117.5 million, reflecting the significant reduction in operating costs.
• Other Income: Other income (loss) improved from a loss of $11.3 million in Q1 2025 to income of $6.4 million in Q1 2026, largely due to the absence of the $4.5 million loss on the disposal of Exscientia GmbH recorded in the prior period.

Guidance, Outlook, and Risks

Management Commentary and Pipeline Updates

• REC-1245 (RBM39): Preliminary Phase 1/2 data shows the drug is well-tolerated with no dose-limiting toxicities observed to date. Dose escalation is ongoing.
• REC-4881 (MEK1/2): Phase 2 data showed a median 43% reduction in polyp burden for Familial Adenomatous Polyposis (FAP). FDA engagement for a registrational study design is expected in H2 2026.
• REC-4539 (LSD1): First patient dosed in April 2026 in the ENLYGHT Phase 1 study.
• Partnerships: Over $500 million in milestone and upfront payments achieved to date. Upcoming milestones include regulatory updates for REC-4881 and additional Phase 1 data for REC-1245 in H2 2026.

Risks and Contingencies

• Capital Requirements: The company has an accumulated deficit of $2.2 billion and expects to incur substantial losses in the future. Additional financing will be required to advance drug candidates.
• Internal Controls: Disclosure controls and procedures were deemed ineffective as of March 31, 2026, due to material weaknesses in internal control over financial reporting related to the acquired Exscientia business. Remediation efforts (new ERP/P2P systems) are underway but not yet concluded.
• Legal Proceedings: Ongoing litigation with a landlord (Industry Office SLC, LLC) regarding lease disputes; no liability recorded as an unfavorable outcome is not currently probable.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $665 million cash balance against the current burn rate of ~$81 million per quarter.
• Internal Control Remediation: Monitor progress on remediating material weaknesses in financial reporting controls, specifically regarding the integration of Exscientia operations.
• Revenue Recognition: Review the timing of milestone payments from Roche, Sanofi, and Merck, as revenue is recognized over time based on costs incurred rather than cash receipt.
• Tempus Agreement: Confirm future data purchase obligations under the Tempus AI agreement, which previously drove significant R&D spend.
• ATM Facility: Note the new $300 million At-The-Market (ATM) sales agreement with TD Cowen entered in February 2026, with no shares sold as of March 31, 2026.