Recurrence drugs (RXRX) received a $50 million investment from Nvidia (NVDA) on Wednesday to work on drug development using artificial intelligence, and RXRX stock nearly doubled.
In afternoon trading on the stock market today, Recursion shares soared 75.8% near 11.90. Before the stock market opened, RXRX stock had soared more than 130%. Nvidia shares rose 2.4% to close at 434.20.
Recursion has a searchable dataset spanning biology and chemistry. The company says its algorithm can identify relationships between trillions of genes and target compounds “unconstrained by human bias.” With Nvidia’s investment, the company plans to accelerate the development of an AI system for the dataset.
SVB Securities analyst Mani Foroohar says the investment is relatively modest in financial terms, but shows the value of Recursion’s dataset. It also opens up new opportunities for Recursion to monetize the dataset, he said in a note to clients.
“The 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,” said Foroohar, “but this announcement increases the visibility and valuation of upside options and potential near-term cash flows that can come from Recursion’s technology, platform and data.”
In morning trade, RXRX stock hit its highest point since January 2022.
RXRX storage: 3 trillion data points
Recursion hopes to “industrialize drug discovery” through its massive dataset of 3 trillion searchable gene and compound relationships.
In connection with the investment, Nvidia will be able to access Recursion’s database to train the basic models behind the 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 faster drug discovery and development.
SVB’s Foroohar maintained his market perform rating on RXRX shares.
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-powered biotech company.”
“The inclusion of Recursion’s data on BioNeMe has the potential to spread the company’s technology broadly and relatively easily across biopharma companies,” he said in his note to clients. “Recursion maintains all (intellectual) rights to its data and as such any third-party development will require licensing.”
The move Wednesday morning sent RXRX stock above its 50-day and 200-day moving averages, MarketSmith.com reports. But shares are undervalued, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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