Recursion Pharmaceuticals snagged a $50 million investment from Nvidia on Wednesday to work on drug development using artificial intelligence, and RXRX stock nearly doubled.
On today's stock market, Recursion shares skyrocketed 78.2% and closed at 12.08. Before the stock market opened, RXRX stock had catapulted more than 130%. Nvidia stock rose 3.5% to 439.02.
Recursion has a searchable data set spanning biology and chemistry. The company says its algorithm can identify relationships between trillions of genes and compounds on targets "unconstrained by human bias." With Nvidia's investment, the company plans to accelerate development of an AI system for its data set.
SVB Securities analyst Mani Foroohar says the investment is relatively modest, in financial terms, but demonstrates the value of Recursion's dataset. It also opens up new opportunities for Recursion to monetize its dataset, he said in a note to clients.
"Strategic implications of this transaction for Recursion remain an open question, in our view, as the role of generative AI in drug discovery continues to evolve," Foroohar said, "but this announcement increases visibility and appreciation of upside optionality and potential near-term cashflows that could emerge from Recursion's technology, platform and data."
In morning trades, RXRX stock hit its highest point since January 2022.
RXRX Stock: 3 Trillion Datapoints
Recursion hopes to "industrialize drug discovery" through its massive data set of 3 trillion searchable gene and compound relationships.
In conjunction with the investment, Nvidia will be able to access Recursion's database to train the foundational models behind its BioNeMo system. Nvidia launched BioNeMo, a cloud service for generative AI in drug discovery, last September. Nvidia plans to license BioNeMo to biopharma companies to enable speedier drug discovery and development.
SVB's Foroohar kept his market perform rating on RXRX stock.
But Needham analyst Gil Blum has a buy rating on Recursion shares. He says the collaboration "cements Recursion's leading position as a preeminent AI-driven biotech firm."
"The inclusion of Recursion's data on BioNeMe has the potential to broadly and relatively easily disseminate the company's technology across biopharma companies," he said in his note to clients. "Recursion maintains all (intellectual property) rights to its data, and as such, any third-party development would require licensing."
The move Wednesday morning sent RXRX stock above its 50-day and 200-day moving averages, MarketSmith.com shows. But shares are lowly rated, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
