Recursion (Nasdaq: RXRX) andExscientia plc (Nasdaq: EXAI) today announced the companies have entered into a definitive agreement, combining Recursion, a leading clinical stage technology-enabled biotech company decoding biology to industrialize drug discovery, with Exscientia, a technology-driven clinical stage drug design and development company, committed to creating more effective medicines for patients, faster.
“We believe the proposed combination is deeply complementary and aligned with our missions to industrialize drug discovery to deliver high quality medicines and lower prices for consumers,” said Chris Gibson, Ph.D., Co-Founder and CEO of Recursion as well as the planned CEO of the combined entity. “Exscientia’s precision chemistry tools and capabilities, including its newly commissioned automated small molecule synthesis platform, will augment our tech-enabled biology and chemistry exploration, hit discovery and translational capabilities. I am excited to continue building the best example of the next generation of biotechnology companies. It still feels like we are just getting started.”
“Adding Exscientia’s best-in-class focused precision oncology internal pipeline to Recursion’s first-in-class focused pipeline spanning rare disease, precision oncology and infectious disease is highly complementary as we look to bring treatments to patients faster,” said David Hallett, Ph.D., Interim Chief Executive Officer and planned Chief Scientific Officer of Recursion post-closing of the transaction. “We look forward to bringing our teams together and integrating Recursion's high throughput and target biology capabilities with Exscientia's highly scalable molecular design and automated chemistry synthesis capabilities to truly accelerate the discovery of better drugs for patients.”
Once integrated, the companies believe the extended and evolved Recursion OS will enable the discovery and translation of higher quality medicines more efficiently and at a higher scale with a full-stack technology-enabled small molecule discovery platform. In addition, the combined company expects to read out approximately 10 clinical trials in the next 18 months.
The proposed business combination will also advance significant therapeutic discovery collaborations with some of the most prominent biopharma companies in the world, including Roche-Genentech, Sanofi, Bayer, and Merck KGaA. Moreover, there is the potential for approximately $200 million in milestone payments over the next 2 years from these current partnerships and there is the potential for more than $20 billion in revenue before royalties on net-sales of partnership programs which range from mid single-digit to double-digit royalties over the course of the partnership.
Strategic Rationale
- Pipeline: The combination would create a diverse portfolio of clinical and near-clinical programs (approximately 10 clinical readouts expected in the next 18 months) where most of these programs, if successful, could have annual peak sales opportunities in excess of $1 billion. In addition to Recursion’s internal pipeline, Exscientia has wholly-owned oncology programs associated with targets CDK7 (clinical), LSD1, and MALT1 as well as partnered programs associated with targets PKC-Theta (clinical) and ENPP1. Across the combined pipeline there is no competitive overlap, with Recursion’s pipeline focusing on first-in-class drug candidates within oncology, rare disease, and infectious disease and Exscientia’s focus on best-in-class drug candidates within oncology.
- Partnerships: The proposed business combination would bring together transformational partnerships with leading large pharma companies with a total of 10 programs already optioned across oncology and immunology. In addition to Recursion’s transformational partnerships with Roche-Genentech (neuroscience and a gastrointestinal oncology indication) and Bayer (undruggable oncology), Exscientia has partnerships with Sanofi (immunology and oncology) and Merck KGaA (oncology and immunology). In addition, Exscientia has a partnership with BMS (oncology and immunology) where an optioned program related to PKC-Theta has already shown positive early Phase 1 results. Furthermore, the combined company expects potential additional milestone payments of approximately $200 million over the next 2 years from its current partnerships.
- Platform: The combination will help enable a full-stack technology-enabled platform spanning patient-centric target discovery, structure based drug design including hotspot analysis, quantum mechanics and molecular dynamics modeling, 2D and 3D generative AI design, encode and automate design-make-test-learn cycles with active learning, automated chemical synthesis, predictive ADMET and translation, biomarker selection, clinical development, and more. Furthermore, Exscientia’s automated chemistry design and synthesis capabilities are expected to allow Recursion to more rapidly and effectively run SAR cycles during hit to lead and lead optimization. These capabilities are expected to generate diverse chemistry to experimentally improve our predictive maps of biology and chemistry.
Transaction Details
Under the terms of the transaction agreement, which were unanimously approved by the boards of directors of both companies, Exscientia shareholders will receive 0.7729 shares of Recursion Class A common stock for each Exscientia ordinary share they own, with fractional shares paid in cash. Based on the fixed exchange ratio, Recursion shareholders will own approximately 74% and Exscientia shareholders will own approximately 26% of the combined company, in each case assuming no additional issuance by either company before closing. Major shareholders of each company, including holders of more than 40% of Exscientia shares, have entered into agreements on customary terms and conditions under which they have agreed to vote all their shares in favor of the transaction. There is approximately $850 million in cash and cash equivalents held by both companies at the end of Q2 2024. The combined company is estimated to achieve annual synergies of approximately $100 million with a runway extending into 2027.
The combination is expected to be implemented through a court sanctioned scheme of arrangement under English law and is subject to the satisfaction of customary closing conditions, including the approval of Exscientia shareholders, the approval of Recursion’s stockholders, and the sanction of the High Court of Justice of England and Wales, and the receipt of required regulatory approvals. Subject to the satisfaction or waiver of the closing conditions, the transaction is expected to close by early 2025.
Listing, Governance and Management
The combined company, which will be named Recursion, will continue to be headquartered in Salt Lake City, Utah, and trade on the NASDAQ, while maintaining a significant presence in the U.K. Chris Gibson, Ph.D., Co-Founder & CEO of Recursion, will serve as CEO of the combined company and David Hallett, Ph.D., Interim Chief Executive Officer & Chief Scientific Officer of Exscientia, plans to join the combined company as Chief Scientific Officer. Two existing Exscientia directors will join the Board of Recursion following the closing of the transaction.
Advisors
Allen & Company LLC acted as exclusive financial advisor to Recursion and Wilson Sonsini Goodrich & Rosati acted as legal counsel. Centerview Partners LLC acted as exclusive financial advisor to Exscientia and A&O Shearman acted as legal counsel.
For more information please visit https://www.exscientia.com/ or https://www.recursion.com/