Recursion Pharma scores multibillion-dollar mega deal with Swiss drug titan

Lawrie Allred, an HTS engineer, hands a cell plate to a
co-worker while seeding cells at Recursion Pharmaceuticals at The
Gateway in Salt Lake City on Oct. 30, 2018.

Lawrie Allred, an HTS engineer, hands a cell plate to a co-worker while seeding cells at Recursion Pharmaceuticals at The Gateway in Salt Lake City on Oct. 30, 2018. (Kristin Murphy, Deseret News)

Estimated read time: 5-6 minutes

SALT LAKE CITY — Biotech startup Recursion Pharmaceuticals on Tuesday announced a mega deal with Swiss drug and diagnostics giant Roche AG, and its U.S. subsidiary Genentech, that could generate billions in new revenues for the Salt Lake City-based company in the coming decade.

The announcement follows news released Monday that Recursion secured an extension of its partnership with another European pharma behemoth, Bayer AG, for work on fibrosis diseases in a deal that could earn a value north of $1 billion.

Both deals bookend a year in which Recursion has been a veritable rocket ship ride, generating over $500 million in an April public stock offering and announcing plans to double its 100,000-square-foot Salt Lake headquarters facility at The Gateway complex in downtown Salt Lake City. The company reports it has also added about 200 employees in the last 12 months, currently has a workforce nearing 400 and has open job listings for 100 positions.

Not bad for a company launched less than a decade ago by two University of Utah Ph.D. students and their professor that, in 2016, employed about a dozen people and was running on a couple million dollars in funding.

One of those doctoral student co-founders (now a full-fledged Ph.D.) and current Recursion CEO Chris Gibson, said the new collaborations fit into a long-running vision for what the founders always believed the company could become.

"We were always looking to build a 21st-century biopharmaceutical company that could go after many different areas of research and development," Gibson said. "The technology we're building is applicable broadly across many areas of biology. And, we've always had in mind a plan to look for partnerships with companies we see as thought leaders."

Under its latest deal, Recursion says it will receive an upfront payment of $150 million and Roche and Genentech may initiate up to 40 programs, each of which, if successfully developed and commercialized, could yield more than $300 million in development as well as tiered royalties on net sales.

Roche's global head of pharma partnering, James Sabry, lauded the Recursion partnership as a first step toward bringing new technology to bear on the pursuit of new drugs to combat disease.

"This collaboration highlights the potential of technology to transform drug discovery and unlock previously unknown insights into complex disease in an unbiased way," Sabry said in a press statement. "We are excited about the opportunity this collaboration offers to help advance the development of medicines at scale."

Since its launch in 2013, Recursion has been focused on innovation aiming to upend the realm of clinical-stage drug research, melding robot-driven automation with digital artificial intelligence to revolutionize how new medications are developed to battle some of the rarest and most challenging of human medical conditions.

Recursion's innovative approach began as the core of doctoral research performed by Gibson and his co-founders. The method relies on automating the once human-intensive process of peering through a microscope to assess if a chemical compound's impact on a diseased cell is having a positive effect or advancing it toward being a healthy cell.

In a 2018 Deseret News profile of the company, President and Chief Operating Officer Tina Larson explained that Recursion has developed a technique to take a sample cell representing a genetic disorder and test it against the effects of hundreds of thousands of chemical compounds in a process that automates the visual evaluations and data gathering to allow for a lot of testing in a very short period of time.

We have so much robotics we can run hundreds of thousands of experiments very quickly in a way that you can't do with traditional biology.

–Tina Larson

"We look at a disease we're interested in against every chemical we can access," Larson said. "We have so much robotics we can run hundreds of thousands of experiments very quickly in a way that you can't do with traditional biology."

The advanced automation identifies "hits" or impacts from particular chemical compounds on diseased cells that show promising results. Once identified, the Recursion team can hone in and pursue furthering the results through modifications to the compound.

Gibson said in a Tuesday Deseret News interview the company now has the capacity to perform some 2 million of these experiments every week. While Recursion is poised to develop multiple new drugs with its collaborators, the company also has four of its own potential pharmaceutical products in or nearing clinical trials, Gibson said.

Gibson said the techniques employed in Recursion's innovations represent a quantum leap in the approach to drug research and development, likening the advancement to how Google maps revolutionized the once tedious task of having to rely on a paper map and careful plotting to determine the best travel route from starting point to destination.

Recursion's machine learning processes and robotic-intensive automation also helps minimize one of the biggest challenges in the realm of drug research and development — human error.

Lux Capital, based in New York City and Menlo Park, California, was an early Recursion investor, participating in a $60 million round of funding for the company in 2017. In the 2018 Deseret News profile, Zavain Dar, a principal with Lux, said a former Stanford graduate school classmate of his put the company on Lux's radar in 2016 and when he looked into it, he was "wildly impressed" with Recursion's approach.

"Their process is exceptionally intelligent," Dar said. "It removes human hubris and bias from the equation ... a factor that's plagued preclinical drug discovery research for decades now."

Recursion is continuing to expand its local and global footprint after outgrowing two facilities at Research Park before taking over the 100,000-square-foot former Dick's Sporting Goods space at the Gateway Center in 2017. Now, it's not only doubling that space at Gateway but working on a new chemistry facility at another building in downtown Salt Lake.

Recursion also operates facilities in Montreal and Toronto, Canada, and Milpitas, California.

Recursion trades on the NASDAQ exchange under the RXRX symbol. At midday on Tuesday, Recursion stock was trading for a little under $21 per share giving the company a market capitalization of just over $3.5 billion.

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