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What changed in RECURSION PHARMACEUTICALS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RECURSION PHARMACEUTICALS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+917 added−872 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in RECURSION PHARMACEUTICALS, INC.'s 2023 10-K

917 paragraphs added · 872 removed · 518 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

307 edited+208 added−288 removed267 unchanged
Biggest changeCompetitors There are currently five active programs in clinical development targeting NF2- driven brain tumors. • Brigatinib, an approved ALK inhibitor for NSCLC from Takeda Pharmaceuticals, is in Phase 2 for NF2 disease meningioma, vestibular schwannoma and ependymoma. • Crizotinib, an ALK/ROS1 inhibitor, is being studied in an investigator sponsored Phase 2 study in progressive vestibular schwannoma in NF2 patients. • Selumetinib, a MEK inhibitor from AstraZeneca, is being studied in a Phase 2 study for NF2 related tumors. • GSK2256098, a FAK inhibitor from GlaxoSmithKline, is being studied in a basket Phase 2 for meningiomas with a variety of targeted therapies and genetic alterations, including NF2 mutation. • IK-930, a TEAD inhibitor from Ikena Oncology, is being studied in a basket Phase 1 for advanced solid tumors driven by hippo signaling, including patients with NF2 mutations.
Biggest changeCompetitors There are currently eight active programs in clinical development targeting NF2- driven brain tumors. • Brigatinib, an approved ALK inhibitor for NSCLC from Takeda Pharmaceuticals, is in Phase 2 for NF2 disease meningioma, vestibular schwannoma, and ependymoma. • Neratinib, an approved HER2 inhibitor for HER2+ breast cancer after trastuzumab-based therapy from Puma Biotechnology, is in Phase 2 for NF2 disease meningioma, vestibular schwannoma, and ependymoma • Crizotinib, an ALK/ROS1 inhibitor, is being studied in an investigator sponsored Phase 2 study in progressive vestibular schwannoma in NF2 patients. • Selumetinib, a MEK inhibitor from AstraZeneca, is being studied in a Phase 2 study for NF2 related tumors. • GSK2256098, a FAK inhibitor from GlaxoSmithKline, is being studied in a basket Phase 2 for meningiomas with a variety of targeted therapies and genetic alterations, including NF2 mutation. • IK-930, a TEAD inhibitor from Ikena Oncology, is being studied in a basket Phase 1 for advanced solid tumors driven by hippo signaling, including patients with NF2 mutations. • VT-3989, a TEAD inhibitor from Vivace Therapeutics, is being studied in a basket Phase 1 for advanced malignant mesothelioma and other tumors with NF2 mutations, including meningiomas. • IAG933, a TEAD inhibitor from Novartis, is being studied in a basket Phase 1 for advanced malignant mesothelioma and other tumors with NF2 mutations, including meningiomas. 49 Table of Contents REC-4881 for Familial Adenomatous Polyposis (FAP) - Phase 1b/2 REC-4881 is an orally bioavailable, non-ATP-competitive, allosteric small molecule inhibitor of MEK1 and MEK2 currently under development to reduce polyp burden and progression to adenocarcinoma in FAP patients.
To achieve this more sustainable model, we believe that in its ideal state, a drug discovery funnel would morph from the being shaped like the letter ‘V’ to being be shaped like the letter ‘T,’ where a broad set of possible therapeutics could be narrowed rapidly to the best candidate, which would advance through subsequent steps of the process quickly and with no attrition.
To achieve this more sustainable model, we believe that in its ideal state, a drug discovery funnel would morph from the being shaped like the letter ‘V’ to being shaped like the letter ‘T,’ where a broad set of possible therapeutics could be narrowed rapidly to the best candidate, which would advance through subsequent steps of the process quickly and with no attrition.
While this library has been constructed to maximize chemical diversity, we have ensured that several analogs of many compound cores are included to help identify emergent SAR for early hits and enable rapid hit expansion into readily available analogs.
While this library has been constructed to maximize chemical diversity, we have ensured that several analogs of many compound cores are included to help identify emergent SAR for early hits and to enable rapid hit expansion into readily available analogs.
FAP is characterized by progressive development of hundreds to thousands of adenomatous polyps in the lower gastrointestinal tract, mainly in the colon and rectum, and is associated with up to a 100% lifetime risk of colorectal cancer before age 40, if left untreated. Standard of care for patients with FAP is colectomy in late teenage years.
FAP is characterized by progressive development of hundreds to thousands of adenomatous polyps in the lower gastrointestinal tract, mainly in the colon and rectum, and is associated with up to a 100% lifetime risk of colorectal cancer before age 40 if left untreated. The standard of care for patients with FAP is colectomy in late teenage years.
For this and other risks related to our proprietary technology, inventions, improvements, platforms and drug candidates, please see the section titled “Risk Factors—Risks Related to Our Intellectual Property.” Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties.
For this and other risks related to our proprietary technology, inventions, improvements, platforms and drug candidates, please see the section titled “Risk Factors—Risks Related to Our Intellectual Property.” Our commercial success will also depend in part on not infringing upon the intellectual property and proprietary rights of third parties.
U.S. Patent-Term Restoration and Marketing Exclusivity Depending upon the timing, duration and specifics of FDA approval of any future drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Patent-Term Restoration and Marketing Exclusivity Depending upon the timing, duration and specifics of FDA approval of any future drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Moreover, the ACA (as defined below) provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; • The federal criminal False Claims Act and Civil Monetary Penalties Laws, and the civil False Claims Act that can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government and/or impose exclusions from federal health care programs and/or penalties for parties who engage in such prohibited conduct; • The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations also impose obligations on covered entities such as health insurance plans, healthcare clearinghouses and certain health care providers and their respective business associates, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the FD&C Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; • The federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to Centers for Medicare & Medicaid Services, or CMS, information regarding certain payments and other transfers of value to physicians and teaching hospitals as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws that require 107 Table of Contents biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and require the registration of their sales representatives, state laws that require biotechnology companies to report information on the pricing of certain drug products and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Moreover, the ACA (as defined below) provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; • The federal criminal False Claims Act and Civil Monetary Penalties Laws, and the civil False Claims Act that can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit individuals or 90 Table of Contents entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government and/or impose exclusions from federal health care programs and/or penalties for parties who engage in such prohibited conduct; • The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations also impose obligations on covered entities such as health insurance plans, healthcare clearinghouses and certain health care providers and their respective business associates, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the FD&C Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; • The federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to Centers for Medicare & Medicaid Services, or CMS, information regarding certain payments and other transfers of value to physicians and teaching hospitals as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws that require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and require the registration of their sales representatives, state laws that require biotechnology companies to report information on the pricing of certain drug products and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The process generally involves the following: completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice, or GLP; • submission to the FDA of an investigational new drug, or IND, application, which must become effective before human clinical trials in the U.S. may begin; • approval by an independent institutional review board, or IRB, or ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practice, or GCP, requirements and other clinical trial-related regulations to establish substantial evidence of the safety and efficacy of the investigational product for each proposed indication; • submission to the FDA of an NDA; • a determination by the FDA within 60 days of its receipt of an NDA to accept the filing for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug will be produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA filing; • payment of user fees for FDA review of the NDA; • FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the United States; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.
The process generally involves the following: completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice, or GLP; • submission to the FDA of an investigational new drug, or IND, application, which must become effective before human clinical trials in the U.S. may begin; • approval by an independent institutional review board, or IRB, or ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practice, or GCP, requirements and other clinical trial-related regulations to establish substantial evidence of the safety and efficacy of the investigational product for each proposed indication; 83 Table of Contents • submission to the FDA of an NDA; • a determination by the FDA within 60 days of its receipt of an NDA to accept the filing for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug will be produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA filing; • payment of user fees for FDA review of the NDA; • FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the United States; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.
Together our team creates an environment where empirical data, statistical rigor and creative thinking is brought to bear on the problems we address. While we are united in a common mission, Decoding Biology to Radically Improve Lives , our greatest strength lies in our differences: expertise, gender, race, disciplines, experience and perspectives.
Together our team creates an environment where empirical data, statistical rigor and creative thinking is brought to bear on the problems we address. While we are united in a common mission, Decoding Biology to Radically Improve Lives , our strength lies in our differences: expertise, gender, race, disciplines, experience and perspectives.
Further, for Recursion, these assets have a variety of additional benefits, including: (i) validation of key elements of the Recursion OS, (ii) growing our expertise in clinical development and (iii) building in-house processes to facilitate smooth interaction with regulatory agencies and advance medicines towards the market.
For Recursion, these assets have a variety of additional benefits, including: (i) validation of key elements of the Recursion OS, (ii) growing our expertise in clinical development and (iii) building in-house processes to facilitate smooth interaction with regulatory agencies and advance medicines towards the market.
Representative companies include Novartis, Janssen (a subsidiary of Johnson & Johnson), Merck and Pfizer. • Large Technology Companies. Large technology companies constantly seek growth opportunities. Technology-enabled drug discovery may represent a compelling opportunity for these companies, some of which have research groups or subsidiaries focused on drug discovery and others of which have signed large technology partnerships with biopharma companies.
Representative companies include Janssen (a subsidiary of Johnson & Johnson), Merck, and Pfizer. • Large Technology Companies. Large technology companies constantly seek growth opportunities. Technology-enabled drug discovery may represent a compelling opportunity for these companies, some of which have research groups or subsidiaries focused on drug discovery and others of which have signed large technology partnerships with biopharma companies.
Part 2 is an optional, double-blind, long-term extension (LTE) study of daily doses of REC-994 (200 mg and 400 mg) for participants completing Part 1 of the study. Currently, there is no development or regulatory precedent or pathway for CCM drug development.
Part 2 is an optional, double-blind, long-term extension (LTE) study of daily doses of REC-994 (200 mg and 400 mg) for participants completing Part 1 of the study. Currently, there is no regulatory precedent or registrational pathway for CCM drug development.
Value Driver 2 - Partnered Programs in Resource Intensive Therapeutic Areas We believe that in its current form, our Recursion OS is already capable of delivering many more therapeutic insights than we would be able to responsibly shepherd alone today.
Value Driver 2 - Partnered Programs in Resource Intensive Therapeutic Areas We believe that in its current form, our Recursion OS is already capable of delivering many more therapeutic insights than we would be able to shepherd alone today.
In addition, in the United States, the term of a U.S. patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process.
In addition, in the United States, the term of a U.S. patent that covers an FDA-approved drug may also be eligible for patent term extension (PTE), which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process.
Furthermore, we may be opportunistic about selling or licensing assets after they achieve key value-inflection milestones so that we can re-invest in our long-term strategy.
We may be opportunistic about selling or licensing assets after they achieve key value-inflection milestones so that we can re-invest in our long-term strategy.
Our proprietary navigation tools enable us to explore our massive biological and chemical datasets to validate more and varied hypotheses rapidly. While this strategy results in an increase in early stage attrition, the system is designed to rapidly prioritize programs with a higher likelihood of downstream success because they have been explored in the context of high-dimensional, systems-biology data.
Our proprietary navigation tools enable us to explore our massive biological, chemical, and patient-centric datasets to validate more and varied hypotheses rapidly. While this strategy results in an increase in early-stage attrition, the system is designed to rapidly prioritize programs with a higher likelihood of downstream success because they have been explored in the context of high-dimensional, systems-biology data.
Barrier resistance is shown on a normalized scale with 0% representing the resistance in the absence of REC-3964, and 100% representing the resistance of healthy monolayers that were not exposed to toxin B. Data are presented as Mean ± SEM, N≥3 independent experiments. Figure 65. C. difficile -infected model hamsters treated with REC-3964 survive longer than vehicle-treated animals.
Barrier resistance is shown on a normalized scale with 0% representing the resistance in the absence of REC-3964, and 100% representing the resistance of healthy monolayers that were not exposed to toxin B. Data are presented as Mean ± SEM, N≥3 independent experiments. Figure 53. C. difficile infected model hamsters treated with REC-3964 survive longer than vehicle treated animals.
In addition to our clinical stage programs, we are actively developing dozens of preclinical and discovery programs. Clinical Programs ▪ REC-994 for the potential treatment of cerebral cavernous malformation, or CCM — a Phase 2, double-blind, placebo-controlled, safety, tolerability and exploratory efficacy study is underway. Orphan Drug Designation has been granted in the US and EU.
In addition to our clinical stage programs, we are actively developing dozens of preclinical and discovery programs. Clinical Programs • REC-994 for the potential treatment of cerebral cavernous malformation, or CCM — SYCAMORE, a Phase 2, randomized, double-blind, placebo-controlled, safety, tolerability and exploratory efficacy study is underway. Orphan Drug Designation has been granted in the US and EU.
These responses led to a significant benefit in PFS (modeled as the time of tumor doubling from baseline), observed specifically in AXIN1 or APC mutant models, providing further evidence of a biomarker driven effect. Figure 62. Tumor growth inhibition and PFS across 29 PDX mouse models. REC-4881 shows enhanced activity in mouse models with AXIN1 or APC mutant tumors.
These responses led to a significant benefit in PFS (modeled as the time of tumor doubling from baseline), observed specifically in AXIN1 or APC mutant models, providing further evidence of a biomarker driven effect. Figure 49. Tumor growth inhibition and PFS across 29 PDX mouse models. REC-4881 shows enhanced activity in mouse models with AXIN1 or APC mutant tumors.
Mice treated with REC-994 demonstrated a statistically significant decrease in the number of small-size lesions, with a trend toward a decrease in the number of mid-size lesions. 14 Clinical We conducted a Phase 1 Single Ascending Dose (SAD) study in 32 healthy human volunteers using active pharmaceutical ingredients with no excipients in a powder-in-bottle (PIB) dosage form.
Mice treated with REC-994 demonstrated a statistically significant decrease in the number of small-size lesions, with a trend toward a decrease in the number of mid-size lesions. 11 Clinical We conducted a Phase 1 Single Ascending Dose (SAD) study in 32 healthy human volunteers using active pharmaceutical ingredients with no excipients in a powder-in-bottle (PIB) dosage form.
As part of that work, we seek not only to radically improve the lives of patients who could benefit from the medicines we help to deliver, but the lives of those who care for those patients, the lives of our employees and their families, as well as the communities in which we operate our company. 3 Adapted from Scannell, J et al (2012).
As part of that work, we seek not only to radically improve the lives of patients who could benefit from the medicines we help to deliver, but the lives of those who care for those patients, the lives of our employees and their families, as well as the communities in which we operate our company. 1 Adapted from Scannell, J et al (2012).
People and Culture Essential to leading and defining TechBio is our growing team of approximately 500 Recursionauts, balanced between life scientists such as chemists and biologists (approximately 40% of employees) and computational and technical experts such as data scientists and software engineers (approximately 35% of employees). This kind of functional balance intentionally stands in contrast to traditional biotechnology companies.
People and Culture Essential to leading and defining TechBio is our team of over 500 Recursionauts, balanced between life scientists such as chemists and biologists (approximately 35% of employees) and computational and technical experts such as data scientists and software engineers (approximately 40% of employees). This kind of functional balance intentionally stands in contrast to traditional biotechnology companies.
In 2022, we greatly expanded our cell culture facility footprint to perform work using human induced pluripotent stem cell (hiPSC) lines. Specifically, we have developed protocols using CRISPR genome editing technologies to generate knock-out or knock-in lines. We have developed protocols to differentiate hiPSC cells into several distinct cell types using 3D and 2D differentiation methods.
In 2022, we greatly expanded our cell culture facility footprint to perform work using human induced pluripotent stem cell (hiPSC) lines. Specifically, we have developed protocols using CRISPR genome editing technologies to generate knock-out or knock-in lines. We have developed protocols to differentiate hiPSCs into several distinct cell types using 3D and 2D differentiation methods.
Our map revealed a strong degree of phenotypic similarity between the gene knockout of AXIN1 and APC , suggesting that this axis of biology is recapitulated in our high dimensional embedding space. • Our Phase 2 program for REC-4881 in FAP was initiated using our brute-force screen approach where we discovered a dose dependent cellular restoration from a modeled disease state (APC gene knockdown by siRNA) to a modeled healthy state (wildtype) in the U2OS cell type.
Our map revealed a strong degree of phenotypic similarity between the gene knockout of AXIN1 and APC , suggesting that this axis of biology is recapitulated in our high dimensional embedding space. • Our Phase 1b/2 program for REC-4881 in FAP was initiated using our brute-force screen approach where we discovered a concentration dependent cellular restoration from a modeled disease state (APC gene knockdown by siRNA) to a modeled healthy state (wildtype) in the U2OS cell type.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may 103 Table of Contents not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care or in instances of drug supply issues.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care or in instances of drug supply issues.
This approach of combining high dimensional, large scale data layers from the Recursion OS, across phenomics and transcriptomics, allows us to increase our confidence around which insights to prioritize for scientist follow-up, while at the same time minimizing cost and human effort. Figure 26.
This approach of combining high dimensional, large scale data layers from the Recursion OS, across phenomics and transcriptomics allows us to increase our confidence around which insights to prioritize for scientist follow-up, while at the same time minimizing cost and human effort.
REC-2282 has been shown to be pharmacologically active in various cancer cell lines and mouse xenograft models. REC-2282 had been shown to inhibit in vitro proliferation of vestibular schwannoma, or VS, and meningioma cells by inducing cell cycle arrest and apoptosis at doses that correlate with AKT inactivation.
REC-2282 has been shown to be pharmacologically active in various human cancer cell lines and human cancer xenograft models. REC-2282 had been shown to inhibit in vitro proliferation of vestibular schwannoma, or VS, and meningioma cells by inducing cell cycle arrest and apoptosis at doses that correlate with AKT inactivation.
Hoffmann-La Roche Ltd, pursuant to which we will construct, using our imaging technology and proprietary machine learning algorithms, unique maps of the inferred relationships amongst perturbation phenotypes in a given cellular context and together with Roche and Genentech will create multi-modal models and maps to further expand and refine such inferred relationships, in both cases with the goal to discover and develop therapeutic small molecule programs in a gastrointestinal cancer indication and in key areas of neuroscience.
Hoffmann-La Roche Ltd, pursuant to which we will construct, using our imaging technology and proprietary machine learning algorithms, unique maps of the inferred relationships amongst perturbation phenotypes in a given cellular context and together with Roche and Genentech will create multimodal models and maps to further expand and refine such inferred relationships, in both cases with the goal to discover and develop therapeutic small molecule programs in a gastrointestinal cancer indication and in key areas of neuroscience.
At the same time, safety and further pharmacokinetic and pharmacodynamic information are collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted. 101 Table of Contents • Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval.
At the same time, safety and further pharmacokinetic and pharmacodynamic information are collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted. • Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval.
This report includes citations to information published by third parties, including academic and industry research, publications, surveys, and studies. While we believe that such information is reliable, we have not separately verified such information, and such information is not a part of, and is not incorporated into, this report. 112 Table of Contents
This report includes citations to information published by third parties, including academic and industry research, publications, surveys, and studies. While we believe that such information is reliable, we have not separately verified such information, and such information is not a part of, and is not incorporated into, this report. 96 Table of Contents
Overall, multiple oral doses of REC-994 were well tolerated in healthy male and female subjects at each dose level administered in this study. There appeared to be no dose-related trends in TEAEs, vital signs, ECGs, pulse oximetry, physical examination findings, or neurological examination findings. Pharmacokinetic results support once-daily oral dosing with the tablet formulation. Table 3.
Overall, multiple oral doses of REC-994 were well tolerated in healthy male and female subjects at each dose level administered in this study. There appeared to be no dose-related trends in TEAEs, vital signs, ECGs, pulse oximetry, physical examination findings, or neurological examination findings. Pharmacokinetic results support once-daily oral dosing with tablet formulation. Table 1.
Additionally, we have curated a selection of approximately 9,000 clinical-stage and preclinical compounds from public forums or filings, covering approximately 1,000 unique mechanisms of action, for which an abundance of existing data and annotations currently exist.
Additionally, we have curated a selection of approximately 10,000 clinical-stage and preclinical compounds from public forums or filings, covering approximately 1,000 unique mechanisms of action, for which an abundance of existing data and annotations currently exist.
A potential mechanism of action of REC-4881 in cells with loss of function mutations in APC . 21 Preclinical We validated the findings from the initial phenotypic screens using tumor cell lines and spheroids grown from human epithelial tumor cells with a mutation in APC .
A potential mechanism of action of REC-4881 in cells with loss of function mutations in APC. 18 Preclinical We validated the findings from the initial phenotypic screens using tumor cell lines and spheroids grown from human epithelial tumor cells with a mutation in APC .
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls; • fines, warning letters, or holds on post-approval clinical studies; • refusal of the FDA to approve pending applications or supplements to approved applications; • suspension or revocation of product approvals; • product seizure or detention; • refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls; 88 Table of Contents • fines, warning letters, or holds on post-approval clinical studies; • refusal of the FDA to approve pending applications or supplements to approved applications; • suspension or revocation of product approvals; • product seizure or detention; • refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Disease Overview Neurofibromatosis type 2 (NF2) is an autosomal dominant, inherited, rare, tumor syndrome that predisposes affected individuals to multiple nervous system tumors, the most common of which are bilateral vestibular schwannomas, intracranial meningiomas, spinal meningiomas and other spine tumors such as ependymomas. Approximately one-half of individuals with NF2 have meningiomas and most of these individuals will have multiple meningiomas.
Disease Overview Neurofibromatosis type 2 (NF2) is an autosomal dominant, inherited, rare, tumor syndrome that predisposes affected individuals to multiple nervous system tumors, the most common of which are bilateral vestibular schwannomas, intracranial meningiomas, spinal meningiomas and other spine tumors such as ependymomas. 44 Table of Contents Approximately one-half of individuals with NF2 have meningiomas and most of these individuals will have multiple meningiomas.
After all 20 adult subjects have completed six months of treatment, an interim analysis will be performed for the purpose of 1) determination of go/no-go criteria for Phase 3 portion of the study, 2) selection of the dose(s) to carry forward, 3) re-estimation of sample size for the planned Phase 3 and 4) agreement from FDA to initiate Phase 3.
After all 20 adult subjects have completed six months of treatment, an interim analysis will be performed for the purpose of 1) determination of go/no-go criteria for Cohort B, or the Phase 3 portion of the study, 2) selection of the dose(s) to carry forward, 3) re-estimation of sample size for the planned Phase 3 and 4) agreement from FDA to initiate the Phase 3.
Industrializing the Drug Discovery Process The traditional drug discovery and development process is characterized by substantial financial risks, with increasing and long-term capital outlays for development programs that often fail to reach patients as marketed products.
How Recursion is Industrializing the Drug Discovery Process The traditional drug discovery and development process is characterized by substantial financial risks, with increasing and long-term capital outlays for development programs that often fail to reach patients as marketed products.
Through intensive internal work, Recursion uses this data and our own algorithms and software to generate and advance our own internal pipeline of medicines (Value Driver 1), as well as in partnership with our collaborators to advance additional discovery programs (Value Driver 2).
Through intensive internal work, Recursion uses this data and our own models, algorithms, and software to advance our own internal pipeline of medicines (Value Driver 1) as well as in partnership with our collaborators to advance additional discovery programs (Value Driver 2).
Such companies apply computational tools to unlock novel insights or accelerate drug discovery and development across different points in the value chain. Representative examples include Relay Therapeutics, Exscientia, Schrodinger, AbCellera and Insitro. • Scalable Platform Companies . Such companies are applying novel scientific approaches or engineering novel therapeutic modalities with the potential to seed large numbers of therapeutic candidates.
Such companies apply computational tools to unlock novel insights or accelerate drug discovery and development across different points in the value chain. Representative examples include Relay Therapeutics, Exscientia, Isomorphic Labs, Schrodinger, and AbCellera. • Scalable Platform Companies . Such companies are applying novel scientific approaches or engineering novel therapeutic modalities with the potential to seed large numbers of therapeutic candidates.
Clinical Trials The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial.
Clinical Trials The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects 84 Table of Contents provide their informed consent for their participation in any clinical trial.
The EU clinical trials legislation currently is undergoing a transition process mainly aimed at harmonizing and streamlining clinical-trial authorization, simplifying adverse-event reporting procedures, improving the supervision of clinical trials and increasing their transparency. Recently enacted Clinical Trials Regulation EU No 536/2014 ensures that the rules for conducting clinical trials in the EU will be identical.
The EU clinical trials legislation currently is undergoing a transition process mainly aimed at harmonizing and streamlining clinical-trial authorization, simplifying adverse-event reporting procedures, improving the supervision of clinical trials and increasing their transparency. Recently enacted Clinical Trials Regulation EU No 536/2014 92 Table of Contents ensures that the rules for conducting clinical trials in the EU will be identical.
As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes extensive testing, control, documentation and other quality assurance and GMP requirements. 106 Table of Contents After a device is placed on the market, it remains subject to significant regulatory requirements.
As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes extensive testing, control, documentation and other quality assurance and GMP requirements. After a device is placed on the market, it remains subject to significant regulatory requirements.
Such companies, while primarily engaged in late-stage clinical development and product commercialization, are increasingly making their own investments in the application of ML and advanced computational tools across the drug discovery and development value 96 Table of Contents chain. Such investments may include partnerships with other biotechnology companies (including Recursion) from which we may benefit.
Such companies, while primarily engaged in late-stage clinical development and product commercialization, are increasingly making their own investments in the application of ML and advanced computational tools across the drug discovery and development value chain. Such investments may include partnerships with other biotechnology companies (including Recursion) from which we may benefit.
For example, some elements of manufacturing processes, proprietary assays, analytics techniques and processes, knowledge gained through clinical experience such as approaches to dosing and administration and management of patients, as well as computational-biological algorithms, and related processes and software, are based on unpatented trade secrets and know-how that are not publicly disclosed.
For example, some elements of manufacturing processes, proprietary assays, 82 Table of Contents analytics techniques and processes, knowledge gained through clinical experience such as approaches to dosing and administration and management of patients, as well as computational-biological algorithms, and related processes and software, are based on unpatented trade secrets and know-how that are not publicly disclosed.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, including damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings, injunctions, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, including damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings, injunctions, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts. 91 Table of Contents U.S.
However, we feel that due to shifts within the biopharma industry there is some potential for this portion of our business model to accrete notable value over the long-term. 30 Table of Contents Value Driver 3 - Proprietary, Fit-for-Purpose Training Data As has been demonstrated in many other industries, a value drive and competitive advantage can be generated from the creation of a proprietary dataset.
However, we feel that due to shifts within the biopharma industry there is some potential for this portion of our business model to accrete notable value over the long-term. 17 Table of Contents Value Driver 3 - Proprietary, Fit-for-Purpose Training Data and Models As has been demonstrated in many other industries, a value driver and competitive advantage can be generated from the creation of a proprietary dataset.
Trademarks As of January 2023, our trademark portfolio comprises more than 70 registered trademarks or active trademark applications worldwide, among which we have issued trademarks in the U.S. for “Recursion” and “Recursion Pharmaceuticals.” Trade Secrets In addition to our reliance on patent protection for our inventions, drug candidates and programs, we also rely on trade secrets, know-how, confidentiality agreements and continuing technological innovation to develop and maintain our competitive position.
Trademarks As of February 2024, our trademark portfolio comprises more than 70 registered trademarks or active trademark applications worldwide, among which we have issued trademarks in the U.S. for “Recursion” and “Recursion Pharmaceuticals.” Trade Secrets In addition to our reliance on patent protection for our inventions, drug candidates and programs, we also rely on trade secrets, know-how, confidentiality agreements and continuing technological innovation to develop and maintain our competitive position.
REC-4881 displays a phenotypic opposite relationship across clinically relevant doses to genetic knockout of AXIN1 and APC in HUVEC. Preclinical On the basis of our inference generation from our Recursion OS, we advanced REC-4881 into two PDX mouse studies, focusing on HCC and Ovarian tumors.
REC-4881 displays a phenotypic opposite relationship across clinically relevant doses to genetic knockout of AXIN1 and APC in HUVEC. 55 Table of Contents Preclinical On the basis of our inference generation from our Recursion OS, we advanced REC-4881 into two PDX mouse studies, focusing on HCC and Ovarian tumors.
Diagnosing the decline in pharmaceutical R&D efficiency. Nat Rev Drug Discov , 11, 191-200. 4 Adapted from Roser, M et al. (2013). Technological Change. OurWorldInData.org . 12 Table of Contents Figure 3: Recursion’s Founding Principles and Values support our ambitious mission. Together, these elements shape Recursion’s culture by guiding our people to high-impact decision-making and behaviors.
Diagnosing the decline in pharmaceutical R&D efficiency. Nat Rev Drug Discov , 11, 191-200. 2 Adapted from Roser, M et al. (2013). Technological Change. OurWorldInData.org . 13 Table of Contents Figure 3: Recursion’s Founding Principles and Values support our ambitious mission. Together, these elements shape Recursion’s culture by guiding our people to high-impact decision-making and behaviors.
We currently generate up to 13.2 million images or 110 terabytes of new data to the Recursion Data Universe per week across up to 2.2 million experiments. Lastly, our phenomics approach builds on the recent explosion of powerful computer vision and ML approaches driven by the technology industry over the last decade.
We currently generate up to 13.2 million images or 110 terabytes of new data per week across up to 2.2 million experiments. Our phenomics approach builds on the recent explosion of powerful computer vision and ML approaches driven by the technology industry over the last decade.
Enrollment criteria includes MRI-confirmed lesion(s), diagnosis of familial or sporadic CCM and having symptoms directly related to CCM. Primary outcome measures are safety and 62 Table of Contents tolerability. Secondary measures are focused on efficacy, including clinician-measured outcomes, imaging of CCM lesions, acute stroke scales and patient reported outcomes.
Enrollment criteria includes MRI-confirmed lesion(s), diagnosis of familial or sporadic CCM, and having symptoms directly related to CCM. Primary outcome measures are safety and tolerability. Secondary measures are focused on efficacy, including clinician-measured outcomes, imaging of CCM lesions, acute stroke scales and patient reported outcomes.
Additionally, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and 111 Table of Contents proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products.
Additionally, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products.
B) REC-2282 rescued the high-dimensional disease phenotype as evidenced with a left shift from the disease to the healthy state. HUVEC, human umbilical vein endothelial cells; NF2, neurofibromatosis type 2; siRNA, small interfering RNA. REC-2282, is an orally bioavailable, CNS-penetrating, pan-histone deacetylase, or HDAC, inhibitor with PI3K/AKT/mTOR pathway modulatory activity.
B) REC-2282 rescued the high-dimensional disease phenotype as evidenced with a left shift from the disease to the healthy state. HUVEC, human umbilical vein endothelial cells; NF2, neurofibromatosis type 2; siRNA, small interfering RNA. 45 Table of Contents REC-2282, is an orally bioavailable, CNS-penetrating, pan-histone deacetylase, or HDAC, inhibitor with PI3K/AKT/mTOR pathway modulatory activity.
We seek people that are a fit for our commitment to industrialization as defined by our Recursion Mindset, which is manifested in our Founding Principles and Values. 90 Table of Contents Culturally, we instill an expectation to be constantly learning and teaching in pursuit of growing ourselves as fast as Recursion.
We seek people that are a fit for our commitment to industrialization as defined by our Recursion Mindset, which is manifested in our Founding Principles and Values. Culturally, we instill an expectation to be constantly learning and teaching in pursuit of growing ourselves as fast as Recursion.
If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.
If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA 86 Table of Contents does not satisfy the criteria for approval.
As such, we have chosen to partner with experienced, top-tier biopharma companies to explore intractable and resource-intensive areas of biology like fibrosis with Bayer and neuroscience with Roche and Genentech.
As such, we have chosen to partner with experienced, top-tier biopharma companies like Bayer, Roche, and Genentech to explore intractable and resource-intensive areas of biology.
If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. The sponsor of the diagnostic device will be required to comply with the IDE regulations for clinical 105 Table of Contents studies involving the investigational diagnostic device.
If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. The sponsor of the diagnostic device will be required to comply with the IDE regulations for clinical studies involving the investigational diagnostic device.
Less than 4% of drug discovery programs that are initiated result in an approved therapeutic, resulting in a risk-adjusted cost of approximately $1.8 to $2.6 billion per new drug launched. 6,7,8,9,10 Despite significant investment and brilliant scientists, these metrics point to the need to evolve a more efficient drug discovery process and explore new tools.
Less than 4% of drug discovery programs that are initiated result in an approved therapeutic, resulting in a risk-adjusted cost of approximately $1.8 to $2.6 billion per new drug launched. 3,4,5,6,7 Despite significant investment and brilliant scientists, these metrics point to the need to evolve a more efficient drug discovery process and explore new tools.
Moreover, our issued patents and those that may issue in the future may not guarantee us the right to practice our technology in relation to the commercialization of our platform’s drug candidates.
Moreover, our issued patents and those that may issue in the future may not guarantee us the right to practice our technology in relation to the commercialization of our drug product candidates.
However, Part D prescription drug formularies must 110 Table of Contents include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee.
However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee.
For every collaboration program that successfully identifies potential therapeutic small molecules or validates a target, Roche will have an option to obtain an exclusive license to develop and commercialize such potential therapeutic small molecules or to exploit such target in the applicable Exclusive Field. Payments if Roche Exercises Option for a Collaboration Program.
For every collaboration program that successfully identifies potential therapeutic small molecules or validates a target, Roche will have an option to obtain an exclusive license to develop and commercialize such potential therapeutic small molecules or to exploit such target in the applicable Exclusive Field.
Eroom’s Law observes that while technology advancements have made many processes faster and less expensive over the years, drug discovery is becoming slower and more expensive. 3,4 Recursion was created to take advantage of the discontinuity between these fields and harness the power of accelerating technological innovations to improve the efficiency of drug discovery and development.
Eroom’s Law observes that while technology advancements have made many processes faster and less expensive over the years, drug discovery is becoming slower and more expensive . 1,2 Recursion was created to take advantage of the discontinuity between these fields and harness the power of accelerating technological innovations to improve the efficiency of drug discovery and development.
Collectively, the components of the Recursion OS can be joined together to identify, validate and advance a broad portfolio of novel therapeutic programs quickly, cost-effectively and with minimal human intervention and bias - industrializing drug discovery.
Collectively, the components of the Recursion OS can be joined together in a modular way to identify, validate and advance a broad portfolio of novel therapeutic programs quickly, cost-effectively and with minimal human intervention and bias - industrializing drug discovery.
Recursion is currently conducting an adaptive, Phase 2/3, randomized, multicenter study to evaluate the efficacy and safety of REC-2282 in patients with progressive NF2 -mutated meningiomas with underlying NF2 disease and sporadic meningiomas with documented NF2 mutations.
Recursion is currently enrolling patients in POPLAR, an adaptive, Phase 2/3, randomized, multicenter study to evaluate the efficacy and safety of REC-2282 in patients with progressive NF2 -mutated meningiomas with underlying NF2 disease and sporadic meningiomas with documented NF2 mutations.
No apparent relationship with the dose of REC-4881 or food conditions was observed. All TEAEs were 71 Table of Contents assessed by the Investigator as being of Grade 1 severity except 1 (blurred vision reported with 4 mg REC-4881/fed).
No apparent relationship with the dose of REC-4881 or food conditions was observed. All TEAEs were assessed by the Investigator as being of Grade 1 severity except 1 (blurred vision reported with 4 mg REC-4881/fed).
Recursion’s goal is to leverage technology to reshape the typical drug discovery funnel towards its ideal state by moving failure as early as possible to rapidly narrowing the funnel into programs with the highest probability of success.
Recursion’s goal is to leverage technology to reshape the typical drug discovery funnel towards its ideal state by moving failure as early as possible to rapidly narrowing the funnel into programs with the highest probability of success. Figure 29. Reshaping the drug discovery funnel.
The planned primary endpoint is Progression-Free Survival (PFS). 19 Adapted from Jacob A, et al. (2012). Triological Society Thesis Preclinical Validation of AR42, a Novel Histone Deacetylase Inhibitor, as Treatment for Vestibular Schwannomas. Laryngoscope, 122(1) , 174-189. 20 Burns SS, et al. (2013).
The planned primary endpoint is Progression-Free Survival (PFS). 16 Adapted from Jacob A, et al. (2012). Triological Society Thesis Preclinical Validation of AR42, a Novel Histone Deacetylase Inhibitor, as Treatment for Vestibular Schwannomas. Laryngoscope, 122(1) , 174-189. 17 Burns SS, et al. (2013).
Preclinical Studies and IND Before testing any drug product candidate in humans, the product candidate must undergo rigorous preclinical testing. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP and ICH 100 Table of Contents regulations for safety/toxicology studies.
Preclinical Studies and IND Before testing any drug product candidate in humans, the product candidate must undergo rigorous preclinical testing. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP and ICH regulations for safety/toxicology studies.
C) REC-2282 also suppressed the growth of Ben-Men-1-LucB tumor xenografts as measured by tumor bioluminescence. 19,20 Clinical Four Investigator-Sponsored Trials (ISTs) of REC-2282 (previously referred to as AR-42) have been completed. In study AR-42-001, REC-2282 was administered as monotherapy.
C) REC-2282 also suppressed the growth of Ben-Men-1-LucB tumor xenografts as measured by tumor bioluminescence. 16,17 Clinical Four Investigator-Sponsored Trials (ISTs) of REC-2282 (previously referred to as AR-42) have been completed. In study AR-42-001, REC-2282 was administered as monotherapy.
There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific drug candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication.
There may be especially significant delays in obtaining coverage and reimbursement for newly 93 Table of Contents approved drugs. Third-party payors may limit coverage to specific drug candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication.
REC-3964 was identified from a lead benzodiazepinedione structural series that confers selective antagonism against the C. difficile toxins’ effects with nanomolar potency on our platform, and dose dependent cellular restoration to a modeled healthy state in human endothelial cells. 75 Table of Contents Figure 63. REC-3964 rescued the phenotype of human epithelial cells treated with C. difficile toxin.
REC-3964 was identified from a lead benzodiazepinedione structural series that confers selective antagonism against the C. difficile toxins’ effects with nanomolar potency on our platform, and dose dependent cellular restoration to a modeled healthy state in human endothelial cells. Figure 51. REC-3964 rescued the phenotype of human epithelial cells treated with C. difficile toxin.
These animal data served as a functional and orthogonal validation of our platform findings. 18 Adapted from Petrilli and Fernández-Valle. (2016). Role of Merlin/NF2 inactivation in tumor biology. Oncogene, 35(5) , 537-48. 66 Table of Contents Figure 55. REC-2282 shrinks vestibular schwannoma xenografts in SCID-ICR mice and prevents growth & regrowth of tumors in the NF2 -deficient meningioma mouse model.
These animal data served as a functional and orthogonal validation of our platform findings. 15 Adapted from Petrilli and Fernández-Valle. (2016). Role of Merlin/NF2 inactivation in tumor biology. Oncogene, 35(5) , 537-48. 47 Table of Contents Figure 42. REC-2282 shrinks vestibular schwannoma xenografts in SCID-ICR mice and prevents growth & regrowth of tumors in the NF2 -deficient meningioma mouse model.
Our Values are the core behaviors that define our Culture and are the simplest definition of how we will achieve our mission. Combined they are the shape of our culture and guide us to reimagine how medicines are made on the path to delivering our mission. 88 Table of Contents Figure 76. Recursion’s Founding Principles.
Our Values are the core behaviors that define our Culture and are the simplest definition of how we will achieve our mission. Combined they are the shape of our culture and guide us to reimagine how medicines are made on the path to delivering our mission. 71 Table of Contents Figure 64. Recursion’s Founding Principles.
If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the 109 Table of Contents assessment, SOPC, labeling or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).
If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SOPC, labeling or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).
The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and by enlarging the population potentially eligible for Medicaid drug benefits.
The ACA also expanded the universe of Medicaid 94 Table of Contents utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and by enlarging the population potentially eligible for Medicaid drug benefits.
Recursion has built a physical library of approximately 1.7 million compounds, including over 1 million new chemical entity (NCE) starting point substances, a large library of known chemical entities which can serve as guideposts, and more than 500 thousand compounds belonging to our collaborators. Further, Recursion has generated a custom whole-genome arrayed CRISPR guide library.
Recursion also has a physical library of over 1.7 million compounds, including over 1 million new chemical entity (NCE) starting point substances, a large library of known chemical entities which can serve as guideposts, and more than 500,000 compounds belonging to our collaborators. Further, Recursion has generated a custom whole-genome arrayed CRISPR guide library.
The putative mechanism of action of REC-994 is through reduction of reactive oxygen species and decreased oxidative stress that leads to stabilization of endothelial barrier function. In addition, REC-994 exhibits anti-inflammatory properties which could be beneficial in reducing disease-associated pathology. 59 Table of Contents Figure 48. REC-994 mechanism of action and proposed potential therapeutic impact.
The putative mechanism of action of REC-994 is through reduction of reactive oxygen species and decreased oxidative stress that leads to stabilization of endothelial barrier function. In addition, REC-994 exhibits anti-inflammatory properties which could be beneficial in reducing disease-associated pathology. Figure 35. REC-994 mechanism of action and proposed potential therapeutic impact.
While our mapping and navigating tools have the plasticity to be applied across therapeutic areas and modalities, our business model is tailored to maximize value and advance programs cost-effectively based on the nature of market and regulatory dynamics associated with our three value drivers (internal pipeline, transformational partnerships and fit-for-purpose proprietary biological and chemical data). 29 Table of Contents Figure 18.
While our mapping and navigating tools have the plasticity to be applied across therapeutic areas and modalities, our business model is tailored to maximize value and advance programs cost-effectively based on the nature of market and regulatory dynamics associated with our three value drivers (internal pipeline, transformational partnerships, and fit-for-purpose proprietary biological, chemical, and patient-centric data). 16 Table of Contents Figure 7.
We believe REC-2282 is well suited for NF2 vs other HDAC inhibitors due to its oral bioavailability and CNS-exposure. 15,16,17 NF2 disease is driven by mutations in the NF2 gene, which encodes an important cell signaling modulator, merlin. Loss of merlin results in activation of multiple signaling pathways converging on PI3K/AKT/mTOR among others and results in enhanced cell proliferation.
We believe REC-2282 is well suited for NF2 vs other HDAC inhibitors due to its oral bioavailability and CNS-exposure. 12,13,14 NF2 disease is driven by mutations in the NF2 gene, which encodes an important cell signaling modulator, merlin. Loss of merlin results in activation of multiple signaling pathways converging on PI3K/AKT/mTOR among others and results in enhanced cell proliferation.
Roche and Recursion may also combine sequencing datasets from Roche with Recursion’s phenomaps and collaborate to generate new algorithms to produce multi-modal maps from which additional collaboration programs may be initiated.
Roche and Recursion may also combine sequencing datasets from Roche with Recursion’s phenomaps and collaborate to generate new algorithms to produce multimodal maps from which additional collaboration programs may be initiated.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeExamples where our intellectual property rights may not further our competitive advantage include but are not limited to the following: • others may be able to duplicate or utilize similar technology in a manner that infringes our patents but is undetectable or done in a jurisdiction where we have not secured, or cannot secure or enforce, patent rights; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Biggest changeExamples where our intellectual property rights may not further our competitive advantage include but are not limited to the following: • others may be able to duplicate or utilize similar technology in a manner that infringes our patents but is undetectable or done in a jurisdiction where we have not secured, or cannot secure or enforce, patent rights; • we, or our licensing partners or collaborators, might not have been the first to make the inventions covered by our owned or licensed current or future patent applications; • we, or our licensing partners or collaborators, might not have been the first to file patent applications covering our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights; • it is possible that our owned or licensed current or future patent applications will not lead to issued patents; • any patent issuing from our owned or licensed current or future patent applications may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties, or may not provide us with any competitive advantages; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents; • we may not develop additional proprietary technologies that are patentable; • the patents or pending or future patent applications of others, if issued, may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
We do not have any committed external source of funds other than amounts payable by Takeda Pharmaceutical Company Limited (Takeda), by Bayer AG (Bayer) under and by Genentech, Inc. and F. Hoffmann-La Roche Ltd (together, Roche Genentech) collaboration agreements.
We do not have any committed external source of funds other than amounts payable by Takeda Pharmaceutical Company Limited (Takeda), by Bayer AG (Bayer) under and by Genentech, Inc. and F. Hoffmann-La Roche Ltd (together, Roche Genentech), under collaboration agreements.
Our ability to receive fees and payments and realize returns from our drug discovery collaborations in a timely manner, or at all, is subject to a number of risks, including but not limited to the following: • our collaborators may incur unanticipated costs or experience delays in completing, or may be unable to complete, the development and commercialization of any drug candidates; • collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as currently expected; • collaborators may decide not to pursue development or commercialization of drug candidates for various reasons, including results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, their desire to develop products that compete directly or indirectly with our drug candidates, or external factors (such as an acquisition or industry slowdown) that divert resources or create competing priorities; • existing collaborators and potential future collaborators may begin to perceive us to be a competitor more generally, particularly as we advance our internal drug discovery programs, and therefore may be unwilling to continue existing collaborations, or enter into new collaborations, with us; • a collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a drug candidate or product; • disagreements with collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of drug candidates, or might result in litigation or arbitration; • collaborators may not properly obtain, maintain, enforce, defend, or protect our intellectual property or proprietary rights, or they may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary rights; • collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; and 124 Table of Contents • drug discovery collaborations may be terminated prior to our receipt of any significant value.
Our ability to receive fees and payments and realize returns from our drug discovery collaborations in a timely manner, or at all, is subject to a number of risks, including but not limited to the following: • our collaborators may incur unanticipated costs or experience delays in completing, or may be unable to complete, the development and commercialization of any drug candidates; 108 Table of Contents • collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as currently expected; • collaborators may decide not to pursue development or commercialization of drug candidates for various reasons, including results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, their desire to develop products that compete directly or indirectly with our drug candidates, or external factors (such as an acquisition or industry slowdown) that divert resources or create competing priorities; • existing collaborators and potential future collaborators may begin to perceive us to be a competitor more generally, particularly as we advance our internal drug discovery programs, and therefore may be unwilling to continue existing collaborations, or enter into new collaborations, with us; • a collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a drug candidate or product; • disagreements with collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of drug candidates, or might result in litigation or arbitration; • collaborators may not properly obtain, maintain, enforce, defend, or protect our intellectual property or proprietary rights, or they may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary rights; • collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; and • drug discovery collaborations may be terminated prior to our receipt of any significant value.
Our current proprietary position for certain drug candidates depends upon our owned or in-licensed patent filings covering components of such drug candidates, manufacturing-related methods, formulations, and/or methods of use, which may not adequately prevent a competitor or other third party from using the same drug candidate for the same or a different use.
Our current proprietary position for certain drug product candidates depends upon our owned or in-licensed patent filings covering components of such drug product candidates, manufacturing-related methods, formulations, and/or methods of use, which may not adequately prevent a competitor or other third party from using the same drug candidate for the same or a different use.
Our drug candidates could be delayed in receiving, or fail to receive, regulatory approval for many reasons, including but not limited to the following: • the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; • we may not be able to enroll a sufficient number of patients in our clinical studies; • we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication or that a related companion diagnostic is suitable to identify appropriate patient populations; • a drug candidate may be only moderately effective or may have undesirable or unintended side effects, toxicities, or other characteristics; • the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; 123 Table of Contents • we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; • the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our drug candidates may not be sufficient or of sufficient quality to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere; • the FDA or comparable foreign regulatory authorities may find deficiencies with, or fail to approve, our manufacturing processes or facilities, or those of third-party manufacturers with which we contract, for clinical and commercial supplies; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change such that our clinical or manufacturing data are insufficient for approval.
Our drug candidates could be delayed in receiving, or fail to receive, regulatory approval for many reasons, including but not limited to the following: • the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; • we may not be able to enroll a sufficient number of patients in our clinical studies; • we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication or that a related companion diagnostic is suitable to identify appropriate patient populations; • a drug candidate may be only moderately effective or may have undesirable or unintended side effects, toxicities, or other characteristics; • the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; • we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; • the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our drug candidates may not be sufficient or of sufficient quality to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere; • the FDA or comparable foreign regulatory authorities may find deficiencies with, or fail to approve, our manufacturing processes or facilities, or those of third-party manufacturers with which we contract, for clinical and commercial supplies; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change such that our clinical or manufacturing data are insufficient for approval.
If we are unable to enforce and protect our intellectual property rights, or if they are circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, it could have an adverse impact on our competitive position, business, financial position, and prospects.
If we are unable to enforce and protect our intellectual property rights or the intellectual property rights of our collaborators, or if they are circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, it could have an adverse impact on our competitive position, business, financial position, and prospects.
The stock price may be influenced by many factors, a number of which are beyond our control, which factors include but are not limited to the following: • the success of competitive products or technologies; • results of clinical trials of our drug candidates or those of our competitors; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents, or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our drug candidates or clinical development programs; • the results of our efforts to discover, develop, acquire, or in-license additional drug candidates or drug products; • actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in the structure of healthcare payment systems; • inflation, general supply chain matters, global political instability, or warfare; • performance of the overall stock market and shares of biotechnology companies in particular, as well as general economic conditions; and • the other factors described in this “Risk Factors” section.
The stock price may be influenced by many factors, a number of which are beyond our control, which factors include but are not limited to the following: • the success of competitive products or technologies; • results of clinical trials of our drug candidates or those of our competitors; 140 Table of Contents • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents, or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our drug candidates or clinical development programs; • the results of our efforts to discover, develop, acquire, or in-license additional drug candidates or drug products; • actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in the structure of healthcare payment systems; • inflation, general supply chain matters, global political instability, or warfare; • performance of the overall stock market and shares of biotechnology companies in particular, as well as general economic conditions; and • the other factors described in this “Risk Factors” section.
Commercialization of our drug candidates depends on a number of factors, including but not limited to our ability to: • successfully complete preclinical studies; • obtain approval of Investigational New Drug (IND) applications by the FDA and similar regulatory approvals outside the U.S., allowing us to commence clinical trials; • successfully enroll subjects in, and complete, clinical trials; • receive regulatory approvals from applicable regulatory authorities; • establish commercial manufacturing capabilities or make arrangements with third-party manufacturers for clinical supply and commercial manufacturing; • obtain patent and trade secret protection or regulatory exclusivity for our drug candidates, and maintain, protect, defend, and enforce such intellectual property rights; • launch commercial sales of our drug products, whether alone or in collaboration with other parties; • obtain and maintain acceptance of our drug products by patients, the medical community, and third-party payors, and effectively compete with other therapies; • obtain and maintain coverage of and adequate reimbursement for our drug products, if and when approved, by medical insurance providers; and • demonstrate a continued acceptable safety profile of drug products following marketing approval.
Commercialization of our drug candidates depends on a number of factors, including but not limited to our ability to: • successfully complete preclinical studies; • obtain approval of Investigational New Drug (IND) applications by the FDA and similar regulatory approvals outside the U.S., allowing us to commence clinical trials; 101 Table of Contents • successfully enroll subjects in, and complete, clinical trials; • receive regulatory approvals from applicable regulatory authorities; • establish commercial manufacturing capabilities or make arrangements with third-party manufacturers for clinical supply and commercial manufacturing; • obtain patent and trade secret protection or regulatory exclusivity for our drug candidates, and maintain, protect, defend, and enforce such intellectual property rights; • launch commercial sales of our drug products, whether alone or in collaboration with other parties; • obtain and maintain acceptance of our drug products by patients, the medical community, and third-party payors, and effectively compete with other therapies; • obtain and maintain coverage of and adequate reimbursement for our drug products, if and when approved, by medical insurance providers; and • demonstrate a continued acceptable safety profile of drug products following marketing approval.
Factors that may inhibit our efforts to commercialize any approved product on our own include but are not limited to the following: 130 Table of Contents • the inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel; • the inability of sales personnel or software tools to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products; • the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors; • the inability to price products at a sufficient price point to enable an adequate and attractive level of profitability; • restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population; • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent commercialization organization.
Factors that may inhibit our efforts to commercialize any approved product on our own include but are not limited to the following: • the inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel; • the inability of sales personnel or software tools to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products; • the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors; • the inability to price products at a sufficient price point to enable an adequate and attractive level of profitability; • restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population; • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent commercialization organization.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing, and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations. We expect to experience significant growth in the number of employees and the scope of our operations.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing, and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations. We expect to experience growth in the number of employees and the scope of our operations.
Our research programs may initially show promise in identifying potential indications and/or drug candidates, yet fail to yield results for clinical development for a number of reasons, including but not limited to the following: • the research methodology used may not be successful in identifying potential indications and/or drug candidates, including as a result of the limited patient sample represented in our databases and the validity of extrapolating based on insights from a particular cellular context that may not apply to other, more relevant cellular contexts; • potential drug candidates may, after further study, be shown to have harmful side effects or other characteristics that indicate they are unlikely to be effective products; or 122 Table of Contents • it may take greater human and financial resources than we can allocate to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs, thereby limiting our ability to develop, diversify, and expand our product portfolio.
Our research programs may initially show promise in identifying potential indications and/or drug candidates, yet fail to yield results for clinical development for a number of reasons, including but not limited to the following: • the research methodology used may not be successful in identifying potential indications and/or drug candidates, including as a result of the limited patient sample represented in our databases and the validity of extrapolating based on insights from a particular cellular context that may not apply to other, more relevant cellular contexts; • potential drug candidates may, after further study, be shown to have harmful side effects or other characteristics that indicate they are unlikely to be effective products; or • it may take greater human and financial resources than we can allocate to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs, thereby limiting our ability to develop, diversify, and expand our product portfolio.
If we are prevented from commercializing our drug candidates or forced to cease some of our business operations, this restriction could materially harm our reputation and have a significant adverse impact on our business, results of operations, and prospects.
If we are prevented from commercializing our drug product candidates or forced to cease some of our business operations, this restriction could materially harm our reputation and have a significant adverse impact on our business, results of operations, and prospects.
These provisions, among other things: • establish a classified board of directors so that not all members of our board are elected at one time; • permit only the board of directors to establish the number of directors and fill vacancies on the board; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit cumulative voting; • authorize our board of directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and • require a super-majority vote of stockholders to amend some provisions described above.
These provisions, among other things: • establish a classified board of directors so that not all members of our board are elected at one time; • permit only the board of directors to establish the number of directors and fill vacancies on the board; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit cumulative voting; • authorize our board of directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and 142 Table of Contents • require a super-majority vote of stockholders to amend some provisions described above.
Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including but not limited to the following: • the number of drug candidates that we pursue and their development requirements; • the scope, progress, results, and costs of our current and future preclinical and clinical trials; • the costs, timing, and outcome of regulatory review of our drug candidates; • if we obtain marketing approval for any current or future drug candidates, expenses related to product sales, marketing, manufacturing, and distribution; • our ability to establish and maintain collaborations, licensing, and other strategic arrangements on favorable terms, and the success of such collaborations, licensing, and strategic arrangements; • the impact of any business interruptions to our operations or to the operations of our manufacturers, suppliers, or other vendors, including the timing and enrollment of participants in our planned clinical trials, resulting from the COVID-19 pandemic, global supply chain issues or other force majeure events; • the extent to which we acquire or invest in businesses, products, and technologies; • the costs of preparing, filing, and prosecuting patent and other applications covering our intellectual property; maintaining, protecting, and enforcing our intellectual property rights; and defending intellectual property-related claims of third parties; • our headcount growth and associated costs as we expand our business operations and our research and development activities, including into new geographies; • the increase in salaries and wages and the extension of benefits required to retain, attract and motivate qualified personnel; • the increases in costs of components necessary for our business; • inflation; • the costs of any commitments to become carbon neutral by 2030 and other environmental, social and governance goals; • the costs of operating as a public company.
Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including but not limited to the following: • the number of drug candidates that we pursue and their development requirements; • the scope, progress, results, and costs of our current and future preclinical and clinical trials; • the costs, timing, and outcome of regulatory review of our drug candidates; • if we obtain marketing approval for any current or future drug candidates, expenses related to product sales, marketing, manufacturing, and distribution; • our ability to establish and maintain collaborations, licensing, and other strategic arrangements on favorable terms, and the success of such collaborations, licensing, and strategic arrangements; • the impact of any business interruptions to our operations or to the operations of our manufacturers, suppliers, or other vendors, including the timing and enrollment of participants in our planned clinical trials, resulting from global supply chain issues or other force majeure events; • the extent to which we acquire or invest in businesses, products, and technologies; • the costs of preparing, filing, and prosecuting patent and other applications covering our intellectual property; maintaining, protecting, and enforcing our intellectual property rights; and defending intellectual property-related claims of third parties; • our headcount growth and associated costs as we expand our business operations and our research and development activities, including into new geographies and through acquisitions; • the increase in salaries and wages and the extension of benefits required to retain, attract and motivate qualified personnel; • the increases in costs of components necessary for our business; • inflation; • the costs of any commitments to become carbon neutral by 2030 and other environmental, social and governance goals; and • the costs of operating as a public company.
Furthermore, if the information technology systems of third parties with whom we do business become subject to disruptions or security breaches, we may have insufficient recourse against them.
Furthermore, if the information technology systems of third parties with whom we do business become subject to disruptions or security breaches or incidents, we may have insufficient recourse against them.
Any failure to comply with regulatory requirements, or any discovery of previously unknown problems with a drug product — including adverse events of unanticipated severity or frequency — or with our third-party manufacturers or manufacturing processes, may result in, among other things: • restrictions on the marketing or manufacturing of the drug product, withdrawal of the product from the market, or voluntary or mandatory product recalls; 142 Table of Contents • clinical trial holds; • fines, warning letters or other regulatory enforcement action; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us; • product seizure or detention, or refusal to permit the import or export of drug products; and • injunctions or the imposition of civil or criminal penalties.
Any failure to comply with regulatory requirements, or any discovery of previously unknown problems with a drug product — including adverse events of unanticipated severity or frequency — or with our third-party manufacturers or manufacturing processes, may result in, among other things: • restrictions on the marketing or manufacturing of the drug product, withdrawal of the product from the market, or voluntary or mandatory product recalls; • clinical trial holds; • fines, warning letters or other regulatory enforcement action; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us; • product seizure or detention, or refusal to permit the import or export of drug products; and • injunctions or the imposition of civil or criminal penalties.
Our ability to become profitable depends upon our ability to generate substantial revenue in an amount necessary to offset our expenses. As of December 31, 2022, we have not generated any revenue from our drug candidates or technologies, other than limited grant revenues, as well as payments under collaboration agreements, including the Roche Genentech Agreement.
Our ability to become profitable depends upon our ability to generate substantial revenue in an amount necessary to offset our expenses. As of December 31, 2023, we have not generated any revenue from our drug candidates or technologies, other than limited grant revenues, as well as payments under collaboration agreements, including the Roche Genentech Agreement.
Intellectual property rights do not necessarily address all potential threats. 138 Table of Contents The degree of future protection afforded by our intellectual property rights, and particularly those arising from patents, is uncertain because these rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
Intellectual property rights do not necessarily address all potential threats. 125 Table of Contents The degree of future protection afforded by our intellectual property rights, and particularly those arising from patents, is uncertain because these rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
The process of finding potential participants may prove more costly than currently expected and our ability to enroll eligible participants may be limited or may result in slower enrollment than we anticipate due to a number of factors, including but not limited to the following: • the severity of the disease under investigation; • the eligibility criteria for the clinical trial in question, such as requirements that participants have specific characteristics or diseases; • the availability of an appropriate genomic screening test; 120 Table of Contents • the perceived risks and benefits of the drug candidate under study; • difficulties in identifying, recruiting, and enrolling a sufficient number of participants to complete our clinical studies; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • the referral practices of physicians; • whether competitors are conducting clinical trials for drug candidates that treat the same indications as ours, and the availability and efficacy of competing therapies; • our ability to monitor participants adequately during and after the trial and to maintain participant informed consent and privacy; • the proximity and availability of clinical trial sites for prospective participants; • pandemics such as the COVID-19 pandemic, natural disasters, global political instability, warfare, or other external events that may limit the availability of participants, principal investigators, study staff, or clinical sites; and • the risk that enrolled participants will not complete a clinical trial.
The process of finding potential participants may prove more costly than currently expected and our ability to enroll eligible participants may be limited or may result in slower enrollment than we anticipate due to a number of factors, including but not limited to the following: • the severity of the disease under investigation; • the eligibility criteria for the clinical trial in question, such as requirements that participants have specific characteristics or diseases; • the availability of an appropriate genomic screening test; • the perceived risks and benefits of the drug candidate under study; • difficulties in identifying, recruiting, and enrolling a sufficient number of participants to complete our clinical studies; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • the referral practices of physicians; • whether competitors are conducting clinical trials for drug candidates that treat the same indications as ours, and the availability and efficacy of competing therapies; • our ability to monitor participants adequately during and after the trial and to maintain participant informed consent and privacy; • the proximity and availability of clinical trial sites for prospective participants; • pandemics or other public health crises such as the COVID-19 pandemic, natural disasters, global political instability, warfare, or other external events that may limit the availability of participants, principal investigators, study staff, or clinical sites; and • the risk that enrolled participants will not complete a clinical trial.
Preclinical and clinical testing is expensive and can take many years, so we will need supplemental funding to complete these undertakings. If our drug candidates are 114 Table of Contents eventually approved by regulators, we will require significant additional funding in order to launch and commercialize our products.
Preclinical and clinical testing is expensive and can take many years, so we will need supplemental funding to complete these undertakings. If our drug candidates are eventually 98 Table of Contents approved by regulators, we will require significant additional funding in order to launch and commercialize our products.
These causes or sources include but are not limited to the following: • service interruptions; • system malfunctions; • computer viruses and other malicious code; • natural disasters; • global political instability; • warfare; • telecommunication and electrical failures; • inadvertent or intentional actions by our employees or third-party providers; and • cyber-attacks by malicious third parties, including the deployment of ransomware and malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information.
These causes or sources include but are not limited to the following: • service interruptions; • system malfunctions; • computer viruses and other malicious code; • natural disasters; • global political instability; 111 Table of Contents • warfare; • telecommunication and electrical failures; • inadvertent or intentional actions by our employees or third-party providers; and • cyber-attacks by malicious third parties, including the deployment of ransomware and malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information.
RISKS RELATING TO EMPLOYEE MATTERS AND MANAGING GROWTH Our future success depends on our ability to retain key executives and experienced scientists, and to attract, retain, and motivate qualified personnel. We are highly dependent on the research and development, clinical, and business development expertise of our executive, management, scientific, technological, and clinical teams.
RISKS RELATED TO EMPLOYEE MATTERS AND MANAGING GROWTH Our future success depends on our ability to retain key executives and experienced scientists, and to attract, retain, and motivate qualified personnel. We are highly dependent on the research and development, clinical, and business development expertise of our executive, management, scientific, technological, and clinical teams.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. As of December 31, 2022, our executive officers, directors, holders of 5% or more of our capital stock, and their respective affiliates, including Dr.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. As of December 31, 2023, our executive officers, directors, holders of 5% or more of our capital stock, and their respective affiliates, including Dr.
For example, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Code Section 174, beginning in 2022.
For example, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Code Section 174, beginning in 2022.
If we are unable to raise additional funds through equity or debt financings, or strategic collaborations or similar arrangements, on a timely basis and satisfactory terms, we may be required to significantly curtail, delay, or discontinue one or more of our research and development programs or the future commercialization of any drug candidate, or we may be unable to expand our operations or otherwise capitalize on our business opportunities as desired.
If we are unable to raise additional funds through equity or debt financings, or strategic collaborations or similar arrangements, on a timely basis and satisfactory terms, we may be required to significantly curtail, delay, or discontinue one or more of our research and development programs or the future commercialization of any drug candidate, or we may be unable to expand our operations or otherwise capitalize on 99 Table of Contents our business opportunities as desired.
RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR CLASS A COMMON STOCK The dual-class structure of our common stock affects the concentration of voting power, which limits our Class A common stockholders’ ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.
RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR CLASS A COMMON STOCK 139 Table of Contents The dual-class structure of our common stock affects the concentration of voting power, which limits our Class A common stockholders’ ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.
Those factors may include, among others, (i) our technologies and capabilities; (ii) our intellectual property position with respect to the subject drug candidate; (iii) the design or results of clinical trials; (iv) the likelihood of approval by the FDA and similar regulatory authorities outside the U.S.; (v) the potential market for the subject drug candidate; (vi) potential competing products; and (vii) industry and market conditions generally.
Those factors may include, among others, (i) our technologies and capabilities; (ii) our intellectual property position with respect to the 100 Table of Contents subject drug candidate; (iii) the design or results of clinical trials; (iv) the likelihood of approval by the FDA and similar regulatory authorities outside the U.S.; (v) the potential market for the subject drug candidate; (vi) potential competing products; and (vii) industry and market conditions generally.
If we fail to obtain and maintain adequate intellectual property protection covering any technology, invention, or improvement that is important to our business, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to prevent third parties from launching generic versions of our products, from using our proprietary technologies, or from marketing products that are very similar or identical to ours.
If we fail to obtain and maintain adequate intellectual property protection covering any technology, invention, or improvement that is important to our business, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to prevent third parties from 121 Table of Contents launching generic versions of our products, from using our proprietary technologies, or from marketing products that are very similar or identical to ours.
We face risks regarding our sourcing of products and quality-testing services, including but not limited to the following: • the inability of suppliers and service providers to grow their capacity to meet demand, whether from us or other drug manufacturers, particularly if the field of technology-enabled drug discovery continues to expand; • termination or non-renewal of supply and service agreements with third parties in a manner or at a time that is costly or damaging to us; • disruptions to the operations of these suppliers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the supplier or service provider or force majeure events, such as the COVID-19 pandemic, global political instability, natural disasters, supply chain issues, or warfare; and • inspections of third-party facilities by regulatory authorities that could have a negative outcome and result in delays in, or termination of, their ability to meet our requirements.
We face risks regarding our sourcing of products and quality-testing services, including but not limited to the following: • the inability of suppliers and service providers to grow their capacity to meet demand, whether from us or other drug manufacturers, particularly if the field of technology-enabled drug discovery continues to expand; • termination or non-renewal of supply and service agreements with third parties in a manner or at a time that is costly or damaging to us; • disruptions to the operations of these suppliers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the supplier or service provider or force majeure events, such as public health crises, global political instability, natural disasters, supply chain issues, or warfare; and • inspections of third-party facilities by regulatory authorities that could have a negative outcome and result in delays in, or termination of, their ability to meet our requirements.
Our ability to enforce our intellectual property rights is subject to litigation risks, including that the opposing party may seek counterclaims against us, as well as uncertainty as to the protection and enforceability of those rights in some countries.
Our ability to enforce our intellectual property rights or the intellectual property rights of our collaborators is subject to litigation risks, including that the opposing party may seek counterclaims against us, as well as uncertainty as to the protection and enforceability of those rights in some countries.
Before we can commercialize any of our drug candidates, we must obtain marketing approval. As of December 31, 2022, all of our drug candidates are in development, and we have not received approval to market any of our drug candidates from regulatory authorities in any jurisdiction.
Before we can commercialize any of our drug candidates, we must obtain marketing approval. As of December 31, 2023, all of our drug candidates are in development, and we have not received approval to market any of our drug candidates from regulatory authorities in any jurisdiction.
If we do not accurately predict and identify our infrastructure requirements and failures and timely enhance our infrastructure, or if our remediation efforts are 127 Table of Contents not successful, it could result in a material disruption of our business operations and development programs, including the loss or unauthorized disclosure of our trade secrets, individuals’ personal information, or other proprietary or sensitive data.
If we do not accurately predict and identify our infrastructure requirements and failures and timely enhance our infrastructure, or if our remediation efforts are not successful, it could result in a material disruption of our business operations and development programs, including the loss or unauthorized disclosure of our trade secrets, individuals’ personal information, or other proprietary or sensitive data.
We have experienced, and may continue to experience, cyber-attacks, security breaches and incidents, and other system failures, although to our knowledge we have not experienced any material interruption or incident as of December 31, 2022.
We have experienced, and may continue to experience, cyber-attacks, security breaches and incidents, and other system failures, although to our knowledge we have not experienced any material interruption or incident as of December 31, 2023.
They may also elect to inspect our platform and facilities and manufacturing and research practices, which may uncover regulatory deficiencies that must be addressed and remedied before research or market authorizations may occur. The process of obtaining regulatory approvals, both in the United States and abroad, is expensive and often takes many years.
They may also elect to inspect our platform and facilities and manufacturing and research practices, which may uncover regulatory deficiencies that must be addressed and remedied before research or market authorizations may occur. 107 Table of Contents The process of obtaining regulatory approvals, both in the United States and abroad, is expensive and often takes many years.
If we do not maintain adequate levels of directors and officers liability insurance, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors and in our executive team. 132 Table of Contents Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
If we do not maintain adequate levels of directors and officers liability insurance, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors and in our executive team. Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
If we fail to comply with applicable laws and regulations or 147 Table of Contents experience a breach of security that results in unauthorized disclosure of personal information – or if a third party with whom we share personal information or who processes such information for us fails to comply with applicable requirements or experiences a security breach – or if any of these is reported or perceived to have occurred, it could lead to government investigations, enforcement actions, and other proceedings, as well as civil claims and litigation against us.
If we fail to comply with applicable laws and regulations or experience a breach of security that results in unauthorized disclosure of personal information – or if a third party with whom we share personal information or who processes such information for us fails to comply with applicable requirements or experiences a security breach or incident– or if any of these is reported or perceived to have occurred, it could lead to government investigations, enforcement actions, and other proceedings, as well as civil claims and litigation against us.
As a result of inflationary pressures and other initiatives, our net losses may increase and we may need to raise capital sooner than otherwise anticipated. Because we employ a large workforce, any salary or wage increase and/or expansion of benefits mandates will have a particularly significant impact on 149 Table of Contents our labor costs.
As a result of inflationary pressures and other initiatives, our net losses may increase and we may need to raise capital sooner than otherwise anticipated. Because we employ a large workforce, any salary or wage increase and/or expansion of benefits mandates will have a particularly significant impact on our labor costs.
These risks may be heightened in connection with the conflict between Russia and Ukraine. The costs to us to investigate and mitigate actual and suspected cybersecurity breaches and incidents could be significant. We may not be able to anticipate all types of security threats and implement preventive measures effective against all such threats.
These risks may be heightened in connection with geopolitical events such as the conflict between Russia and Ukraine. The costs to us to investigate and mitigate actual and suspected cybersecurity breaches and incidents could be significant. We may not be able to anticipate all types of security threats and implement preventive measures effective against all such threats.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY Our success significantly depends on our ability to obtain patents of adequate scope covering our proprietary technology and products. Obtaining and maintaining patent assets is inherently challenging, and our pending and future patent applications may not issue with the scope we need, if at all.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY Our success significantly depends on our ability to obtain and maintain patents of adequate scope covering our proprietary technology and drug candidate products. Obtaining and maintaining patent assets is inherently challenging, and our pending and future patent applications may not issue with the scope we need, if at all.
In addition, we could be required to obtain a license from such third party to continue developing and marketing our drug candidates and technology, which may not be available on commercially reasonable terms or at all, or to cease developing and commercializing the infringing technology or drug candidates altogether.
In addition, we could be required to obtain a license from such third party to continue developing and marketing our drug product candidates or other proprietary technology, which may not be available on commercially reasonable terms or at all, or to cease developing and commercializing the infringing technology or drug product candidates altogether.
Gibson may have the effect of delaying, preventing, or deterring a change in control of our company, could deprive our stockholders of an opportunity to 150 Table of Contents receive a premium for their capital stock as part of a sale in our company, and, thus, may affect the market price of our Class A common stock.
Gibson may have the effect of delaying, preventing, or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale in our company, and, thus, may affect the market price of our Class A common stock.
We do not know whether any of our future clinical trials will begin on time or be completed on schedule, if at all. 119 Table of Contents We may experience delays in completing our preclinical studies and initiating or completing clinical trials, or numerous unforeseen events during, or as a result of, any clinical trials, that could require us to incur additional costs or delay or prevent our ability to receive marketing approval or to commercialize our drug candidates, including but not limited to those related to one or more of the following: • regulators, Institutional Review Boards (IRBs), or ethics committees may not authorize us or our investigators to commence a clinical trial or to conduct a clinical trial at prospective trial sites; • we may have difficulty reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective Contract Research Organizations (CROs), the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • the number of participants required for clinical trials of our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; • we or our third-party contractors may fail to comply with regulatory requirements, fail to meet their contractual obligations to us in a timely manner or at all, deviate from the clinical trial protocol, or drop out of a trial, which may require that we add new clinical trial sites or investigators; • the supply or quality of our drug candidates or the other materials necessary to conduct clinical trials of our drug candidates may be insufficient, delayed, or inadequate; • the occurrence of delays in the manufacturing of our drug candidates; • reports may arise from preclinical or clinical testing of other therapies that raise safety, efficacy, or other concerns about our drug candidates; and • clinical trials may produce inconclusive or negative results about our drug candidates, including determinations that candidates have undesirable side effects or other unexpected characteristics, in which event, we may decide – or our investigators or regulators, IRBs, or ethics committees may require us — to suspend or terminate the trials.
We have experience, and may in the future experience delays in completing our preclinical studies and initiating or completing clinical trials, or numerous unforeseen events during, or as a result of, any clinical trials, that could require us to incur additional costs or delay or prevent our ability to receive marketing approval or to commercialize our drug candidates, including but not limited to those related to one or more of the following: • regulators, Institutional Review Boards (IRBs), or ethics committees may not authorize us or our investigators to commence a clinical trial or to conduct a clinical trial at prospective trial sites; • we may have difficulty reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective Contract Research Organizations (CROs), the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • the number of participants required for clinical trials of our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; • we or our third-party contractors may fail to comply with regulatory requirements, fail to meet their contractual obligations to us in a timely manner or at all, deviate from the clinical trial protocol, or drop out of a trial, which may require that we add new clinical trial sites or investigators; • the supply or quality of our drug candidates or the other materials necessary to conduct clinical trials of our drug candidates may be insufficient, delayed, or inadequate; • the occurrence of delays in the manufacturing of our drug candidates; • reports may arise from preclinical or clinical testing of other therapies that raise safety, efficacy, or other concerns about our drug candidates; and • clinical trials may produce inconclusive, mixed, or negative results about our drug candidates, including determinations that candidates have undesirable side effects or other unexpected characteristics, in which event, we may decide – or our investigators or regulators, IRBs, or ethics committees may require us — to suspend or terminate the trials.
If the breadth or strength of protection provided by our patents and patent applications are threatened, it could also dissuade companies from collaborating with us to license, develop, or 137 Table of Contents commercialize current or future drug candidates.
If the breadth or strength of protection provided by our patents and patent applications are threatened, it could also dissuade companies from collaborating with us to license, develop, or commercialize current or future drug candidates.
RISKS RELATED TO OUR PLATFORM AND DATA We have invested, and expect to continue to invest, in research and development efforts to further enhance our drug discovery platform, which is central to our mission. If the return on these investments is lower or develops more slowly than we expect, our business and operating results may suffer.
RISKS RELATED TO OUR PLATFORM AND DATA 110 Table of Contents We have invested, and expect to continue to invest, in research and development efforts to further enhance our drug discovery platform, which is central to our mission. If the return on these investments is lower or develops more slowly than we expect, our business and operating results may suffer.
We are subject to U.S. and foreign laws regarding privacy, data protection, and data security that could entail substantial compliance costs, while the failure to comply could subject us to significant liability. Privacy, data protection, and data security have become significant issues in the U.S., Europe, and other jurisdictions where we conduct or may in the future conduct our operations.
We are subject to U.S. and foreign laws regarding privacy, data protection, and data security that could entail substantial compliance costs, while the failure to comply could subject us to significant liability. 135 Table of Contents Privacy, data protection, and data security have become significant issues in the U.S., Europe, and other jurisdictions where we conduct or may in the future conduct our operations.
There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time-consuming and could delay any product launch.
There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement 114 Table of Contents specialists is expensive and time-consuming and could delay any product launch.
Climate change may result in more frequent severe weather events, potential changes in precipitation patterns, and 148 Table of Contents extreme variability in weather patterns, which can disrupt our operations as well as those of our vendors, suppliers, and collaborators.
Climate change may result in more frequent severe weather events, potential changes in precipitation patterns, and extreme variability in weather patterns, which can disrupt our operations as well as those of our vendors, suppliers, and collaborators.
Consequently, we and our licensors may have limited remedies in those foreign countries if patents are infringed, or we or our licensors may be compelled to grant a license to a third party, which could materially diminish the value of those patents and could limit our potential 140 Table of Contents revenue opportunities.
Consequently, we and our licensors or collaborators may have limited remedies in those foreign countries if patents are infringed, or we or our licensors may be compelled to grant a license to a third party, which could materially diminish the value of those patents and could limit our potential revenue opportunities.
We had an accumulated deficit of $639.6 million as of December 31, 2022. Substantially all of our operating losses have resulted from costs incurred in connection with research and development efforts, including clinical studies, and from general and administrative costs associated with our operations.
We had an accumulated deficit of $967.6 million as of December 31, 2023. Substantially all of our operating losses have resulted from costs incurred in connection with research and development efforts, including clinical studies, and from general and administrative costs associated with our operations.
Intellectual property litigation or other legal proceedings, with or without merit, is generally expensive and time consuming, potentially distracting to technical and management personnel, and subject to uncertain outcomes. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
Intellectual property litigation or other legal proceedings, with or without merit, is generally expensive and time consuming, potentially distracting to technical and management 127 Table of Contents personnel, and subject to uncertain outcomes. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
Since the ACA was enacted, there continue to be changes to certain aspects of the law by Congress, Executive Order and court decisions . There also have been U.S.
Since the ACA was enacted, there continue to be changes to certain aspects of the law by Congress, Executive Order and court decisions . 134 Table of Contents There also have been U.S.
Gibson exercises or vests in equity awards. If all such equity awards held by Dr. Gibson had been exercised or vested and exchanged for shares of Class B common stock as of December 31, 2022, Dr. Gibson and his affiliates would hold approximately 32.80% of the voting power of our outstanding capital stock. As a result, Dr.
Gibson exercises or vests in equity awards. If all such equity awards held by Dr. Gibson had been exercised or vested and exchanged for shares of Class B common stock as of December 31, 2023, Dr. Gibson and his affiliates would hold approximately 26% of the voting power of our outstanding capital stock. As a result, Dr.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to the following: • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to the following: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe, misappropriate or otherwise violate intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; • our right to transfer or assign the license agreement; and • the priority of invention of patented technology.
Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any 146 Table of Contents drug candidates for which we obtain marketing approval.
Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any drug candidates for which we obtain marketing approval.
Foreign Corrupt Practices Act (FCPA) and U.S. and foreign anti-money laundering, export control, sanctions, and other trade laws and regulations (collectively, Trade Laws). Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem.
Foreign 132 Table of Contents Corrupt Practices Act (FCPA) and U.S. and foreign anti-money laundering, export control, sanctions, and other trade laws and regulations (collectively, Trade Laws). Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem.
The outcome of preclinical development testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.
The outcome of preclinical development testing and early clinical trials may not be predictive of the success of later 103 Table of Contents clinical trials, and interim results of a clinical trial do not necessarily predict final results.
We have limited experience with implementing the systems and controls that are necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies.
We have limited experience with implementing the systems and controls that are necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by 143 Table of Contents the relevant regulatory bodies.
Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall. 151 Table of Contents Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time.
Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall. Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time.
Our current or future collaborators would similarly need to be effective in the above activities as they pertain to the collaborators in order to successfully develop drug candidates. We and they may never succeed in 117 Table of Contents developing and commercializing drug candidates.
Our current or future collaborators would similarly need to be effective in the above activities as they pertain to the collaborators in order to successfully develop drug candidates. We and they may never succeed in developing and commercializing drug candidates.
Our commercial success depends upon our ability, and collaborators’ abilities, to develop, manufacture, market, and sell our drug candidates, and to use our proprietary technologies, without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market, and sell our drug product candidates, and to use our proprietary technologies, without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties.
Though we have been granted priority review designation for one of our drug candidates, such designation may not lead to a faster regulatory review or regulatory approval process, and we might not receive such designation for additional drug candidates in the future.
Though we have been granted priority review designation for certain drug candidates, such designation may not lead to a faster regulatory review or regulatory approval process, and we might not receive such designation for additional drug candidates in the future.
Any of these circumstances could materially and adversely affect our business and results of operations and may cause us to cease operations. 115 Table of Contents Raising additional capital may cause dilution to our stockholders, restrict our operations, require us to relinquish rights to our technologies or drug candidates, and divert management’s attention from our core business.
Any of these circumstances could materially and adversely affect our business and results of operations and may cause us to cease operations. Raising additional capital and issuing additional securities may cause dilution to our stockholders, restrict our operations, require us to relinquish rights to our technologies or drug candidates, and divert management’s attention from our core business.
Receiving priority review from the FDA does not guarantee regulatory 144 Table of Contents approval within the six-month review cycle or at all. We may request priority review for additional drug candidates from time to time.
Receiving priority review from the FDA does not guarantee regulatory approval within the six-month review cycle or at all. We may request priority review for additional drug candidates from time to time.
FDA acceptance of trial data from clinical trials conducted outside the United 121 Table of Contents States requires that all of FDA’s clinical trial requirements be met.
FDA acceptance of trial data from clinical trials conducted outside the United States requires that all of FDA’s clinical trial requirements be met.
From time to time, we may provide guidance in our quarterly earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which would include forward-looking statements, would be based on projections prepared by our management.
Our actual operating results may differ significantly from any guidance that we provide. From time to time, we may provide guidance in our quarterly earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which would include forward-looking statements, would be based on projections prepared by our management.
We have started to conduct additional clinical trials outside the United States in the Netherlands and may in the future choose to conduct additional clinical trials outside the United States in locations that may include Australia, Europe, Asia, or other jurisdictions.
We have conducted clinical trials outside the United States, including in the United Kingdom and the Netherlands, and may in the future choose to conduct additional clinical trials outside the United States in locations that may include Australia, Europe, Asia, or other jurisdictions.
We have from time to time found defects, vulnerabilities, or other errors in our software and hardware that produce the data sets we use to discover new drug candidates, and new errors with our software and hardware may be detected in the future.
Our proprietary software tools, hardware, and data sets are inherently complex. We have from time to time found defects, vulnerabilities, or other errors in our software and hardware that produce the data sets we use to discover new drug candidates, and new errors with our software and hardware may be detected in the future.
If we are unable to conclude that our disclosure controls and internal control over financial reporting are effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC, or other regulatory authorities.
If at any time we are unable to conclude that our disclosure controls and internal control over financial reporting are effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, or if we are unable to remediate any existing weaknesses or deficiencies in a timely manner or at all, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our Class A common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC, or other regulatory authorities.
We have invested, and expect to continue to invest, in research and development efforts that further enhance our platform.
We have invested, and expect to continue to invest, in research and development efforts, acquisitions, and licensing agreements that further enhance our platform.
Disruptions in the financial markets in general, due to the COVID-19 pandemic, U.S. debt ceiling and budget deficit concerns, and other geo-political issues such as the Ukraine/Russia conflict and political and trade uncertainties in the greater China region, may make equity and debt financing more difficult to obtain.
Disruptions in the financial markets in general, due to the COVID-19 or other potential pandemics, U.S. debt ceiling and budget deficit concerns, and other geo-political issues such as the Ukraine/Russia conflict, the Israel-Hamas war, and political and trade uncertainties in the greater China region, may make equity and debt financing more difficult to obtain.
We have several clinical-stage drug candidates focused on rare, monogenic diseases, and we anticipate filing IND applications with the FDA or other regulators for Phase 1 or Phase 2 studies, as applicable, for these drug candidates.
We have several clinical-stage drug candidates and we anticipate filing IND applications with the FDA or other regulators for Phase 1 or Phase 2 studies, as applicable, for these drug candidates.
If we decide or are required to suspend or terminate a clinical trial, we may elect to abandon product development for that program.
If we decide or are 104 Table of Contents required to suspend or terminate a clinical trial, we may elect to abandon product development for that program.
Additionally, operating as a public company has made it more expensive for us to obtain directors and officers liability insurance.
Additionally, operating as a public company has made 116 Table of Contents it more expensive for us to obtain directors and officers liability insurance.
If we fail to comply with our obligations in the agreements under which we collaborate with or license intellectual property rights from third parties, or otherwise experience disruptions to our business relationships with our collaborators or licensors, we could lose rights that are important to our business.
If we fail to comply with our obligations in the agreements under which we collaborate with or license intellectual property rights from third parties, if the licenses are terminated, if a dispute regarding these licenses arises, or we otherwise experience disruptions to our business relationships with our collaborators or licensors, we could lose rights that are important to our business.
Gibson, our CEO and a member of our board of directors, and his affiliates held 377,995 shares of our Class A common stock and all of the issued and outstanding shares of our Class B common stock, representing approximately 31.93% of the voting power of our outstanding capital stock, which voting power may increase over time as Dr.
Gibson, our CEO and a member of our board of directors, and his affiliates held 343,704 shares of our Class A common stock and all of the issued and outstanding shares of our Class B common stock, representing approximately 25% of the voting power of our outstanding capital stock, which voting power may increase over time as Dr.
Some of our intellectual property has been, and in the future may be, discovered through government-funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S. manufacturers.
Some of our intellectual property has been, and in the future may be, discovered through government-funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S. manufacturers. 129 Table of Contents Our intellectual property rights may be subject to a reservation of rights by one or more third parties.
If we seek to enforce our intellectual property rights, we may be subject to findings that our patents should be interpreted narrowly and do not cover the technology at issue, or that our patents are invalid or unenforceable.
If we seek to enforce our patents or the patents of our collaborators, we may be subject to findings that these patents should be interpreted narrowly and do not cover the technology at issue, or that these patents are invalid or unenforceable.
We may seek fast track designation for some of our drug candidates from time to time. If a drug candidate is intended for the treatment of a serious or life-threatening condition and the drug candidate demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for fast track designation.
If a drug candidate is intended for the treatment of a serious or life-threatening condition and the drug candidate demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for fast track designation.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the COVID-19 pandemic, global political instability, supply chain issues, and inflation have caused significant volatility and uncertainty in U.S. and international markets.
GENERAL RISKS Unfavorable global economic conditions could adversely affect our business. Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, global political instability, supply chain issues, and inflation have caused significant volatility and uncertainty in U.S. and international markets.
Any acquisition or strategic partnership may entail numerous risks, including but not limited to the following: • increased operating expenses and cash requirements; • the assumption of indebtedness or contingent liabilities; • the issuance of our equity securities, which would result in dilution to our stockholders’ equity; • difficulties in assimilating operations, intellectual property, products, and drug candidates of an acquired company, and with integrating new personnel; • the diversion of our management’s attention from our existing product programs and initiatives, even if we are unable to complete such proposed transaction; • our ability to retain key employees and maintain key business relationships; • uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or drug candidates and ability to obtain regulatory approvals; and • our inability to generate revenue from acquired intellectual property, technology, and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs. 118 Table of Contents In addition, if we undertake such a transaction, we may assume or incur debt obligations, incur a large one-time expense, or acquire intangible assets, which could result in significant future amortization expenses and adversely impact our results of operations.
Any acquisition or strategic partnership may entail numerous risks, including but not limited to the following: • increased operating expenses and cash requirements; • the assumption of indebtedness or contingent liabilities; • the issuance of our equity securities, which would result in dilution to our stockholders’ equity; • difficulties in assimilating operations, intellectual property, products, and drug candidates of an acquired company, and with integrating new personnel; • the diversion of our management’s attention from our existing product programs and initiatives, even if we are unable to complete such proposed transaction; • our ability to retain key employees and maintain key business relationships; • uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or drug candidates and ability to obtain regulatory approvals; and • our inability to generate revenue from acquired intellectual property, technology, and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have entered into a lease for an additional 103,634 square feet of office, research and laboratory space adjacent to our corporate offices under a lease that expires in May 2032. Certain sections of this space are in use and other sections are currently under construction.
Biggest changeWe have entered into a lease for an additional 103,634 square feet of office, research and laboratory space adjacent to our corporate headquarters under a lease that expires in May 2032. Recursion’s Canadian operations are headquartered at 336 Queen Street West, Toronto CA M5V 2A2, where we lease 28,110 square feet of office space.
Item 2. Properties. Recursion’s corporate offices are located at 41 S Rio Grande Street, Salt Lake City, Utah 84101 where we lease 105,419 square feet of office, research and laboratory space. The laboratories include both traditional and automated laboratories for drug research. The current term of our lease expires in May 2028.
Item 2. Properties. Recursion’s corporate headquarters are located at 41 S Rio Grande Street, Salt Lake City, Utah 84101 where we lease 99,172 square feet of office, dry and wet laboratory space. The laboratories include both traditional and automated laboratories for drug research. The current term of our lease expires in May 2028.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Valence also has a research lounge located in the world renowned artificial intelligence and machine learning hub MILA. This office space hosts academic researchers. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
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We also lease a 24,974 square foot property in Milpitas, California that includes lab and technological services and is used for research, design and development under a lease that expires in May 2028.
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The current term expires in November 2032. In addition to our Canada headquarters in Toronto, we also have two leases in Montreal that house our semi-autonomous artificial intelligence engine, Valence Labs. Valence Labs leases an 8,367 square foot office and dry laboratory space located at 6666 Rue Saint-Urbain, Montreal CA H2S3H1 that expires in March 2029.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAn unfavorable resolution of any such matter could materially affect the Company’s future financial position, results of operations or cash flows.
Biggest changeItem 3. Legal Proceedings. The Company may, from time to time, be involved in various legal proceedings arising in the normal course of business. An unfavorable resolution of any such matter could materially affect the Company’s future financial position, results of operations or cash flows.
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Item 3. Legal Proceedings. The Company is not currently a party to any material litigation or other material legal proceedings. The Company may, from time to time, be involved in various legal proceedings arising in the normal course of business.
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For more information pertaining to legal proceedings, see Part II, Item 8, Note 7, “Commitments and Contingencies,” which is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent sales of unregistered securities (a) Sales of Unregistered Securities Private Placement On October 27, 2022, we issued an aggregate of 15,336,734 shares (the “Shares”) of the Company’s Class A common stock at a purchase price of $9.80 per share in a private placement (the “Private Placement”) to qualified institutional buyers and institutional accredited investors (collectively the “Purchasers”) for an aggregate purchase price of approximately $150.3 million, and after deducting fees and offering costs of $6.6 million, net proceeds were approximately $143.7 million.
Biggest changeNVIDIA Private Placement On July 11, 2023, the Company issued an aggregate of 7.7 million shares (the “NVIDIA Shares”) of the Company’s Class A common stock at a purchase price of $6.49 per share in a private placement to NVIDIA Corporation for net proceeds of approximately $49.9 million (the “NVIDIA Private Placement”).
The actual number of stockholders of our Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. 157 Table of Contents Dividend policy We have never declared or paid any cash dividends on our capital stock.
The actual number of stockholders of our Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. 148 Table of Contents Dividend policy We have never declared or paid any cash dividends on our capital stock.
Stock performance graph The following graph compares the cumulative total returns of Recursion, the Nasdaq Composite Index and the Nasdaq Biotechnology Index from our April 16, 2021 closing stock price (the date on which our common stock first began trading on the Nasdaq Global Select Market) through December 31, 2022.
Stock performance graph The following graph compares the cumulative total returns of Recursion, the Nasdaq Composite Index and the Nasdaq Biotechnology Index from our April 16, 2021 closing stock price (the date on which our common stock first began trading on the Nasdaq Global Select Market) through December 31, 2023.
Stock Option Exercises For the year ended December 31, 2022, we issued 169,950 shares of our Class A common stock to our employees, advisors and consultants upon the exercise of stock options under our Key Personnel Incentive Stock Plans for aggregate consideration of approximately $50 thousand, in reliance on the exemption provided by Rule 701(b)(2) promulgated under the Securities Act, or pursuant to Section 4(a)(2) under the Securities Act, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.
Stock Option Exercises For the year ended December 31, 2023, we issued 242,000 shares of our Class A common stock to our employees, advisors and consultants upon the exercise of stock options under our Key Personnel Incentive Stock Plans for aggregate consideration of approximately $43,000, in reliance on the exemption provided by Rule 701(b)(2) promulgated under the Securities Act, or pursuant to Section 4(a)(2) under the Securities Act, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.
The sale was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. In connection with the Private Placement, the Company and the investors entered into a registration rights agreement, dated October 27, 2022, providing for the registration for resale of the Shares.
The sale was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. In connection with the NVIDIA Private Placement, the Company and NVIDIA Corporation entered into a registration rights agreement, dated July 11, 2023, providing for the registration for resale of the NVIDIA Shares.
Recursion’s Class B common stock is not listed on any stock exchange nor traded on any public market.
Recursion’s Class B and Exchangeable common stock are not listed on any stock exchange nor traded on any public market.
Stockholders There were 27 stockholders of record of Recursion Class A common stock as of January 31, 2023.
Stockholders There were 74 stockholders of record of Recursion Class A common stock as of January 31, 2024.
Securities authorized for issuance under equity compensation plans Information about our equity compensation plans in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference.
Securities authorized for issuance under equity compensation plans Information about our equity compensation plans in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference. Recent sales of unregistered securities (a) Sales of Unregistered Securities Acquisitions In May 2023, the Company entered into an agreement to acquire Cyclica.
A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed pursuant to Rule 424(b) on October 28, 2022, to register the resale of the Shares by the Purchasers. Morgan Stanley & Co.
Pursuant to the terms of the Tempus Agreement, the Company subsequently filed a prospectus supplement to a registration statement (File No. 333-264845) pursuant to Rule 424(b) on December 15, 2023, to register the resale of the Tempus Shares by Tempus.
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LLC acted as the lead placement agent and Berenberg Capital Markets LLC, KeyBanc Capital Markets Inc., and Needham & Company, LLC acted as co-placement agents for the Private Placement.
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The aggregate upfront consideration for the acquisition of Cyclica consisted of 5.8 million shares of Recursion Class A common stock, cash payments, 1.0 million shares issuable upon exercise of stock options held by Cyclica equity award holders and deferred liabilities.
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(b) Use of Proceeds from Public Offering of Class A Common Stock On April 15, 2021, the Registration Statement on Form S-1 (File No. 333-254576) for the initial public offering of our Class A common stock was declared effective by the SEC.
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Approximately 182 thousand of the aforementioned Class A common stock consideration had not yet been issued as of December 31, 2023.
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Shares of our Class A common stock began trading on the Nasdaq Global Select Market on April 16, 2021. The offering closed on April 20, 2021.
Added
A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed pursuant to Rule 424(b) on June 9, 2023, to register the resale of certain of such shares and the issuance of shares issuable upon exercise of certain such stock options.
Removed
We issued 27,878,787 shares of our Class A common stock at a price of $18.00 per share for net proceeds of $462.4 million, after deducting underwriting discounts and commissions of $35.1 million and other offering costs of $4.3 million.
Added
In addition, a registration statement on Form S-8 (File No. 333-272282) was filed on May 30, 2023 to register the issuance of shares issuable upon exercise of certain of such stock options. Also in May 2023, the Company entered into an agreement to acquire Valence.
Removed
We are holding a significant portion of the balance of the net proceeds in cash and cash equivalents including bank deposits held in checking accounts and money market funds.
Added
The aggregate upfront consideration for the acquisition of Valence consisted of 2.2 million shares of Recursion Class A common stock, 4.4 million shares of a subsidiary of Recursion, exchangeable for shares of Recursion’s Class A common stock, 792 thousand shares issuable upon the exercise of stock options held by Valence equity award holders and deferred liabilities.
Removed
There has been no material change in the planned use of proceeds from our IPO from those that were described in the final prospectus filed pursuant to Rule 424(b) under the Securities Act and other periodic reports previously filed with the SEC. 158 Table of Contents (c) Issuer Purchases of Equity Securities None. Item 6. [Reserved] 159 Table of Contents
Added
A registration statement on Form S-3ASR (File No. 333-272281) was subsequently filed on May 30, 2023, to register the resale of certain of such shares and to register the issuance of shares issuable upon exercise of certain of such stock options and of shares issuable upon exchange of exchangeable shares.
Added
In addition, a registration statement on Form S-8 (File No. 333-272027) was filed on May 18, 2023 to register the issuance of shares issuable upon exercise of certain of such stock options.
Added
A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed pursuant to Rule 424(b) on August 8, 2023, to register the resale of the NVIDIA Shares by NVIDIA Corporation. Tempus Private Placement In November 2023, the Company entered into a Master Agreement (the “Tempus Agreement”) with Tempus Labs, Inc.
Added
(“Tempus”) pursuant to which Tempus will provide certain services and deliverables to the Company and/or license certain data to the Company.
Added
Pursuant to the Tempus Agreement, on November 30, 2023, the Company issued to Tempus an aggregate of 3.2 million shares of the Company’s Class A Common Stock, (the “Tempus Shares”), in lieu of a cash payment of $22.0 million for the initial license fee owed to Tempus in exchange for the rights granted to the Company under the Tempus Agreement (the “Tempus Private Placement”).
Added
The sale was made 149 Table of Contents pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Added
(b) Issuer Purchases of Equity Securities None. Item 6. [Reserved] 150 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+40 added−26 removed12 unchanged
Biggest changeResults of Operations The following table summarizes our results of operations: (in thousands, except percentages) Years ended December 31, 2022 compared to 2021 2021 compared to 2020 2022 2021 2020 $ % $ % Revenue Operating revenue $ 39,681 $ 10,000 $ 3,413 $ 29,681 >100% $ 6,587 >100% Grant revenue 162 178 549 (16) (9.0) % (371) (67.4) % Total revenue 39,843 10,178 3,962 29,665 >100% 6,216 >100% Operating costs and expenses Cost of revenue 48,275 — — 48,275 n/m — n/m Research and development 155,696 135,271 63,319 20,425 15.1 % 71,951 >100% General and administrative 81,599 57,682 25,258 23,917 41.5 % 32,423 >100% Total operating costs and expenses 285,570 192,953 88,577 92,617 48.0 % 104,374 >100% Loss from operations (245,727) (182,775) (84,615) (62,952) 34.4 % (98,158) >100% Other income (loss), net 6,251 (3,704) (2,391) 9,955 n/m (1,313) 54.9 % Net loss $ (239,476) $ (186,479) $ (87,006) $ (52,997) 28.4 % $ (99,471) >100% n/m = Not meaningful 165 Table of Contents Summary Our financial performance during the year ended December 31, 2022 compared to 2021 included: (i) a decrease in platform research and development costs due to a reallocation of spending to cost of revenue for our strategic partnerships; (ii) an increase in revenue recognized due to our strategic partnership with Roche; and (iii) the incurrence of cost of revenue due to our strategic partnerships.
Biggest changeResults of Operations The following table summarizes our results of operations: (in thousands, except percentages) Years ended December 31, 2023 compared to 2022 2022 compared to 2021 2023 2022 2021 $ % $ % Revenue Operating revenue $ 43,876 $ 39,681 $ 10,000 $ 4,195 10.6 % $ 29,681 >100% Grant revenue 699 162 178 538 >100% (16) (9.0) % Total revenue 44,575 39,843 10,178 4,733 11.9 % 29,665 >100% Operating costs and expenses Cost of revenue 42,587 48,275 — (5,688) (11.8) % 48,275 n/m Research and development 241,226 155,696 135,271 85,530 54.9 % 20,425 15.1 % General and administrative 110,822 81,599 57,682 29,224 35.8 % 23,917 41.5 % Total operating costs and expenses 394,635 285,570 192,953 109,066 38.2 % 92,617 48.0 % Loss from operations (350,060) (245,727) (182,775) (104,333) 42.5 % (62,952) 34.4 % Other income (loss), net 17,932 6,251 (3,704) 11,681 >100% 9,955 n/m Loss before income tax benefit (332,128) (239,476) (186,479) (92,652) 38.7 % (52,997) 28.4 % Income tax benefit 4,062 — — 4,062 n/m — n/m Net loss $ (328,066) $ (239,476) $ (186,479) $ (88,590) 37.0 % $ (52,997) 28.4 % n/m = Not meaningful 155 Table of Contents Summary Our financial performance during the year ended December 31, 2023 compared to 2022 included an increase in research and development costs due to increased platform costs as we have expanded and upgraded our capabilities, additionally for the year ended December 31, 2022 platform costs decreased due to a reallocation of spending to cost of revenue for our strategic partnerships.
Investing Activities Cash provided by investing activities during the year ended December 31, 2022 was driven by sales and maturities of investments of $230.6 million, partially offset by the purchases of property and equipment of $37.1 million.
Cash provided by investing activities during the year ended December 31, 2022 was driven by sales and maturities of investments of $230.6 million, partially offset by the purchases of property and equipment of $37.1 million.
Research and development expenses consist of costs incurred in performing activities including: • costs to develop and operate our platform; • costs of discovery efforts which may lead to development candidates, including research materials and external research; • costs for clinical development of our investigational products; 164 Table of Contents • costs for materials and supplies associated with the manufacture of active pharmaceutical ingredients, investigational products for preclinical testing and clinical trials; • personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation for employees engaged in research and development functions; • costs associated with operating our digital infrastructure; and • other direct and allocated expenses incurred as a result of research and development activities, including those for facilities, depreciation, amortization and insurance.
Research and development expenses consist of costs incurred in performing activities including: • costs to develop and operate our platform; • costs of discovery efforts which may lead to development candidates, including research materials and external research; • costs for clinical development of our investigational products; • costs for materials and supplies associated with the manufacture of active pharmaceutical ingredients, investigational products for preclinical testing and clinical trials; • personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation for employees engaged in research and development functions; • costs associated with operating our digital infrastructure; and • other direct and allocated expenses incurred as a result of research and development activities, including those for facilities, depreciation, amortization and insurance.
We account for these expenses according to the timing of various aspects of the expenses and determine accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed.
We account for these expenses according to the timing of various aspects of the expenses and determine accrual estimates by taking into account discussions with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed.
In October 2022, we issued 15,336,734 shares of our Class A common stock at a purchase price of $9.80 per share in a private placement (the Private Placement) to qualified institutional buyers and institutional accredited investors (the Purchasers) for net proceeds of $143.7 million, after deducting fees and offering costs of $6.6 million.
In October 2022, we issued 15.3 million shares of our Class A common stock at a purchase price of $9.80 per share in the 2022 private placement to qualified institutional buyers and institutional accredited investors (the Purchasers) for net proceeds of $143.7 million, after deducting fees and offering costs of $6.6 million.
You should review the disclosure under the heading "Risk Factors" in our Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Overview Recursion is a clinical stage TechBio company leading this burgeoning space by decoding biology to industrialize drug discovery.
You should review the disclosure under the heading "Risk Factors" in our Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Overview Recursion is a leading clinical stage TechBio company decoding biology to industrialize drug discovery.
During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time.
During the course of a 160 Table of Contents clinical trial, we adjust our clinical expense recognition if actual results differ from estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time.
The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, expenses and the disclosure of contingent assets and liabilities in our financial statements.
The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and expenses in our financial statements.
An expansive pipeline of internally-developed clinical and preclinical programs focused on genetically-driven rare diseases and oncology with significant unmet need and market opportunities in some cases potentially in excess of $1 billion in annual sales 2.
An expansive pipeline of internally developed clinical and preclinical programs focused on precision oncology and genetically driven rare diseases with significant unmet need and market opportunities that could potentially exceed $1 billion in annual sales in some cases 2.
That cash inflow was offset by cash used for cost of revenue, research and development and general and administrative expenses. Cash used by operating activities during the year ended December 31, 2021 increased compared to the prior year as a result of higher costs incurred for research and development and general and administrative expenses due to the Company’s growth.
Cash used by operating activities during the year ended December 31, 2021 increased compared to the prior year as a result of higher costs incurred for research and development and general and administrative expenses due to the Company’s growth.
Prior to our IPO, we had raised approximately $448.9 million in equity financing from investors in addition to $30.0 million in an upfront payment from our collaboration with Bayer AG (Bayer). In December 2021 , we announced a collaboration with Roche and received an upfront payment of $150.0 million in January 2022 .
Prior to our IPO, we had raised $448.9 million in equity financing from investors in addition to $30.0 million in an upfront payment from our collaboration with Bayer AG (Bayer). In January 2022 , we received an upfront payment of $150.0 million from our collaboration with Roche.
Any advance payments for goods or services to be used or rendered in future research and product development activities pursuant to a contractual arrangement are classified as prepaid expenses until such goods or services are rendered. General and Administrative We expense general and administrative costs as incurred.
Any advance payments for goods or services to be used or rendered in future research and product development activities pursuant to a contractual arrangement are classified as prepaid expenses until such goods or services are rendered.
Such arrangements may provide for various types of payments to us, including upfront fees, funding of research and development services and preclinical and clinical material, technical, development, regulatory and commercial milestone payments, licensing fees, option exercise fees and royalty and milestone payments on product sales.
Such arrangements may provide for various types of payments to us, including upfront fees, technical, development, regulatory and commercial milestone payments, licensing fees, option exercise fees and royalty and milestone payments on product sales.
These payments are often not commensurate with the timing of revenue recognition and therefore result in the deferral of revenue recognition. Our operating revenue has primarily been generated through funded research and development agreements. Revenue for research and development agreements is recognized as the Company satisfies a performance obligation by transferring the promised services to the customer.
Because of these judgments, payments are often not commensurate with the timing of revenue recognition. Our operating revenue has primarily been generated through research and development agreements. Revenue from research and development agreements is recognized as the Company satisfies the performance obligation by transferring the promised services to the customer.
Central to our mission is the Recursion Operating System (OS), a platform built across diverse technologies that enables us to map and navigate trillions of biological and chemical relationships within the Recursion Data Universe, one of the world’s largest proprietary biological and chemical datasets.
Central to our mission is the Recursion Operating System (OS), a platform built across diverse technologies that enables us to map and navigate trillions of biological, chemical and patient-centric relationships across over 50 petabytes of proprietary data.
Financing cash flows also included proceeds from equity incentive plans of $10.7 million. Cash provided by financing activities during the year ended December 31, 2021 primarily included $462.4 million of net proceeds from the IPO. Financing cash flows also included an outflow of $12.7 million for the repayment of long-term debt on the Midcap loan.
Financing cash flows also included proceeds from equity incentive plans of $10.7 million. Cash provided by financing activities during the year ended December 31, 2021 primarily included $462.4 million of net proceeds from the IPO.
For the year ended December 31, 2021, the increase in revenue compared to prior year was due to revenue recognized from our strategic partnership with Bayer, which commenced in August 2020.
For the year ended December 31, 2022 , the increase in revenue compared to prior year was due to revenue recognized from our partnership with Roche, which commenced in January 2022 .
We expect this program to reach IND-enabling studies in 2023. Transformational Collaborations We continue to advance efforts to discover potential new therapeutics with our strategic partners in the areas of fibrotic disease (Bayer) as well as neuroscience and a single indication in gastrointestinal oncology (Roche-Genentech).
Partnerships • Transformational Collaborations: We continue to advance efforts to discover potential new therapeutics with our strategic partners in the areas of undruggable oncology (Bayer) as well as neuroscience and a single indication in gastrointestinal oncology (Roche-Genentech).
We may not be able to raise additional capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition may be adversely affected. Components of Operating Results Revenue Operating revenue is generated through research and development agreements derived from strategic alliances.
We may not be able to raise additional capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition may be adversely affected.
See Note 11, “Common Stock” to the Consolidated Financial Statements for additional details on the Class A common stock issuances. Additionally, as of December 31, 2022, we have received proceeds of $180.0 million from our strategic partnerships. See Note 12, “Collaborative Development Contracts” to the Consolidated Financial Statements for additional details on the collaborations.
Additionally, as of December 31, 2023, we have received proceeds of $183.0 million from our strategic partnerships. See Note 9, “Collaborative Development Contracts” to the Consolidated Financial Statements for additional details on the partnerships.
As of December 31, 2022, the Company had $68.5 million of future lease commitments. See Note 6 “Leases” to the Consolidated Financial Statements for additional detail on future lease commitments.
See Note 2, “Summary of Significant Accounting Policies ” to the Consolidated Financial Statements for additional details . As of December 31, 2023, the Company had $66.2 million of future lease commitments. See Note 5 “Leases” to the Consolidated Financial Statements for additional detail on future lease commitments.
General and Administrative Expense The following table summarizes our general and administrative expense: (in thousands, except percentages) Years ended December 31, 2022 compared to 2021 2021 compared to 2020 2022 2021 2020 $ % $ % Total general and administrative expenses $ 81,599 $ 57,682 $ 25,258 $ 23,917 41.5 % $ 32,423 >100% For the year ended December 31, 2022, the increase in general and administrative expense compared to the prior year was due to the growth in size of the Company’s operations including increased salaries and wages of $14.3 million, a fixed asset write-down of $2.8 million, increased rent expense of $2.4 million and increases in other administrative costs associated with operating a growing company.
For the year ended December 31, 2022, the increase in general and administrative expense compared to prior year was due to the growth in size of the Company’s operations including increased salaries and wages of $14.3 million, a fixed asset write-down of $2.8 million, increased rent expense of $2.4 million and increases in other administrative costs associated with operating a growing company.
In the near-term, there is the potential for option exercises associated with partnership programs, option exercises associated with map building initiatives or data sharing, and additional partnerships in large, intractable areas of biology or technological innovation.
In the near-term, there is the potential for option exercises associated with partnership programs, option exercises associated with map building initiatives or data sharing, and additional partnerships in large, intractable areas of biology or technological innovation. • Enamine: In December 2023, we entered a collaboration with Enamine to generate and design enriched compound libraries for the global drug discovery industry.
General and administrative expenses consist primarily of salaries; employee benefits; stock-based compensation; and outsourced labor for personnel in executive, finance, human resources, legal and other corporate administrative functions. General and administrative expenses also include legal fees for corporate and patent matters; professional fees for accounting, auditing, tax and administrative consulting services, insurance costs, facilities and depreciation expenses.
General and administrative expenses consist primarily of salaries; including employee benefits and stock-based compensation. General and administrative expenses also include facilities, depreciation, information technology, professional fees for auditing and tax, legal fees for corporate and patent matters and insurance costs.
See Note 8, “Notes Payable” to the Consolidated Financial Statements for additional details. 168 Table of Contents Cash Flows The following table is a summary of the Consolidated Statements of Cash Flows: Years ended December 31, (in thousands) 2022 2021 2020 Cash used in operating activities $ (83,524) $ (158,614) $ (45,399) Cash provided by (used in) investing activities 193,249 (271,744) (8,740) Cash provided by financing activities 154,345 458,540 246,135 Operating Activities Cash used by operating activities decreased during the year ended December 31, 2022 compared to the prior year as we received an upfront payment of $150.0 million from our strategic partnership with Roche.
Cash Flows The following table is a summary of the Consolidated Statements of Cash Flows: Years ended December 31, (in thousands) 2023 2022 2021 Cash used in operating activities $ (287,780) $ (83,524) $ (158,614) Cash provided by (used in) investing activities (10,228) 193,249 (271,744) Cash provided by financing activities 140,133 154,345 458,540 Operating Activities Cash used by operating activities increased during the year ended December 31, 2023 as a result of an upfront payment of $150.0 million from our strategic partnership with Roche received during the year ended December 31, 2022.
Based on our current operating plan, we believe that our cash and cash equivalents and will be sufficient to fund our operations for at least the next twelve months. Since inception, we have incurred significant operating losses. Our net losses were $239.5 million, $186.5 million and $87.0 million during the years ended December 31, 2022, 2021 and 2020, respectively.
We had cash and cash equivalents of $391.6 million as of December 31, 2023. Based on our current operating plan, we believe that our cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months. Since inception, we have incurred significant operating losses.
Although we do not expect estimates to be materially different from amounts actually incurred, our understanding of the anticipated status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period. 170 Table of Contents Stock-Based Compensation We measure stock options and other stock-based awards granted to employees, directors and non-employees based on their fair value on the date of grant and recognize the compensation expense over the requisite service period.
Although we do not expect estimates to be materially different from amounts actually incurred, our understanding of the anticipated status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period.
A significant change in these estimates could have a material effect on the timing and amount of revenue recognized in future periods. Accrued Research and Development Expenses As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors, clinical research organizations and consultants.
Accrued Research and Development Expenses As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors and clinical research organizations.
We expect to share top-line data in 2H 2024. • Neurofibromatosis Type 2 (NF2) (REC-2282): Our Phase 2/3 POPLAR clinical trial is a parallel group, two stage, randomized, multicenter study of this drug candidate in approximately 90 participants with progressive NF2-mutated meningiomas. At this time, we continue to actively enroll participants.
We expect to share Phase 2 data in Q3 2024. • Neurofibromatosis Type 2 (NF2) (REC-2282): Our adaptive Phase 2/3 POPLAR clinical trial is a randomized, two part study of REC-2282 in participants with progressive NF2-mutated meningiomas.
Revenue Recognition We have generated revenue from our strategic alliances. Our alliances with strategic collaborators may contain multiple elements, including research and development services, licenses, options to obtain development and commercialization rights, obligations to develop and manufacture preclinical and clinical material and options to obtain additional research and development services, preclinical and clinical material.
Revenue Recognition We have generated revenue from our contracts with partners. Our partnerships often contain multiple components, including research and development services, licenses, options to obtain development and commercialization rights and options to obtain additional research and development services.
As of December 31, 2022, our accumulated deficit was $639.6 million. We anticipate that our expenses and operating losses will remain flat or increase moderately over the near term. We anticipate that we will need to raise additional financing in the future to fund our operations, including the potential commercialization of any approved product candidates.
Our net losses were $328.1 million, $239.5 million and $186.5 million during the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, our accumulated deficit was $967.6 million. We anticipate that we will need to raise additional financing in the future to fund our operations, including the potential commercialization of any approved product candidates.
Transformational partnerships with leading biopharma companies to map and navigate intractable areas of biology, identify novel targets, and develop potential new medicines that are further developed in resource-heavy clinical trials overseen by our partners 3.
Transformational partnerships with leading biopharma and technology companies to map and navigate intractable areas of biology, identify novel targets, and develop potential new medicines by using advanced computational and data resources 3.
We frame this integration of the physical and digital components as iterative loops of atoms and bits. Scaled ‘wet-lab’ biology and chemistry data built in-house (atoms) are organized into virtuous cycles with ‘dry-lab’ computational tools (bits) to rapidly translate in silico hypotheses into validated insights and novel chemistry.
We frame this integration of the physical and digital components as iterative loops, where scaled ‘wet-lab’ biology, chemistry and patient-centric experimental data are organized by ‘dry-lab’ computational tools in order to identify, validate and translate therapeutic insights.
Contractual Obligations The Company’s material cash requirements include the following contractual obligations: As of December 31, 2022, the Company had $633 thousand of debt outstanding. This balance is related to notes payable for tenant improvement allowances. See Note 8, “Notes Payable” to the Consolidated Financial Statements for additional details .
Contractual Obligations The Company’s material cash requirements include the following contractual obligations: As of December 31, 2023, the Company had $1.1 million of debt outstanding. This balance is related to notes payable for tenant improvement allowances and the financing agreement for the supercomputer upgrade project.
Unrestricted cash, cash equivalents and investments totaled $549.9 million and $516.6 million as of December 31, 2022 and 2021, respectively. We have incurred operating losses and experienced negative operating cash flows and we anticipate that the Company will continue to incur losses for at least the foreseeable future.
We have incurred operating losses and experienced negative operating cash flows and we anticipate that the Company will continue to incur losses for at least the foreseeable future. Our net loss was $328.1 million, $239.5 million and $186.5 million during the years ended December 31, 2023, 2022 and 2021, respectively.
See Note 12, “Collaborative Development Contracts” to the Consolidated Financial Statements for additional information on the collaborations. We use the capital we have raised to fund operations and investing activities across platform research operations, drug discovery, clinical development, digital and other infrastructure, creation of our portfolio of intellectual property and administrative support.
We use the capital we have raised to fund operating and investing activities across platform research operations, drug discovery, clinical development, digital and other infrastructure, creation of our portfolio of intellectual property and administrative support. We do not have any products approved for commercial sale and have not generated any revenues from product sales.
We are entitled to receive variable consideration as certain milestones are achieved. The timing of revenue recognition is not directly correlated to the timing of cash receipts. Cost of Revenue Cost of revenue consists of the Company’s costs to provide services for drug discovery required under performance obligations with partnership customers.
In addition, we are entitled to receive variable consideration as certain milestones are achieved. The timing of revenue recognition is not directly correlated to the timing of cash receipts.
On April 20, 2021, we closed our Initial Public Offering (IPO) and issued 27,878,787 shares of Class A common stock at a price of $18.00 per share, raising net proceeds of $462.4 million .
This collaboration is an example of how select data layers can drive value in novel ways. Financing and Operations We were incorporated in November 2013. In April 2021 , we closed our Initial Public Offering (IPO) and issued 27.9 million shares of Class A common stock at a price of $18.00 per share, raising net proceeds of $462.4 million .
We have financed our operations through the private placements of preferred stock and Class A common stock issuances. As of December 31, 2022, we have received net proceeds of $448.9 million from the sale of preferred stock and $606.1 million from Class A common stock issuances.
As of December 31, 2023, we had an accumulated deficit of $967.6 million. 158 Table of Contents We have financed our operations through the private placements of preferred stock and Class A common stock issuances.
We recognize the impact of forfeitures on stock-based compensation expenses as forfeitures occur. We generally apply the straight-line method of expense recognition to awards. The grant date fair value of stock options is estimated using the Black-Scholes option-pricing model, which requires inputs for the expected term, stock price volatility, dividend yield and the risk-free interest rate of the options.
The grant date fair value of stock options is estimated using the Black-Scholes option-pricing model, which requires inputs for the expected term, stock price volatility, dividend yield and the risk-free interest rate of the options. If any assumptions used in the Black-Scholes option-pricing model change significantly, stock-compensation for future awards may differ materially compared with the awards granted previously.
See Note 13, “ Stock-Based Compensation ” to the Consolidated Financial Statements for additional details on the warrants. Liquidity and Capital Resources Sources of Liquidity We have not yet commercialized any products and do not expect to generate revenue from the sales of any product candidates for at least several years.
Liquidity and Capital Resources Sources of Liquidity We have not yet commercialized any products and do not expect to generate revenue from the sales of any product candidates for at least several years. Cash and cash equivalents totaled $391.6 million and $549.9 million as of December 31, 2023 and 2022, respectively.
These commitments primarily related to third-party research services, materials and supplies for research and development activities and capital expenditures. Critical Accounting Estimates and Policies Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Financing cash flows also included an outflow of $12.7 million for the repayment of long-term debt. 159 Table of Contents Critical Accounting Estimates and Policies Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Cost of Revenue The following table summarizes our cost of revenue: (in thousands, except percentages) Years ended December 31, 2022 compared to 2021 2021 compared to 2020 2022 2021 2020 $ % $ % Total cost of revenue $ 48,275 $ — $ — $ 48,275 n/m $ — n/m n/m = Not meaningful For the year ended December 31, 2022, the increase in cost of revenue compared to prior year was due to our strategic partnerships.
Cost of Revenue The following table summarizes our cost of revenue: (in thousands, except percentages) Years ended December 31, 2023 compared to 2022 2022 compared to 2021 2023 2022 2021 $ % $ % Total cost of revenue $ 42,587 $ 48,275 $ — $ (5,688) (11.8) % $ 48,275 n/m n/m = Not meaningful Cost of revenue consists of the Company’s costs to provide services for drug discovery required under performance obligations with partnership customers.
If any assumptions used in the Black-Scholes option-pricing model change significantly, stock-compensation for future awards may differ materially compared with the awards granted previously. Recently Issued and Adopted Accounting Pronouncements See Note 2, “ Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information regarding recently issued and adopted accounting pronouncements.
Recently Issued and Adopted Accounting Pronouncements See Note 2, “ Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information regarding recently issued and adopted accounting pronouncements.
For the years ended December 31, 2021 and 2020, cost of revenue was insignificant and was included within “Research and development” in the Consolidated Statement of Operations. 166 Table of Contents Research and Development The following table summarizes our components of research and development expense: (in thousands, except percentages) Years ended December 31, 2022 compared to 2021 2021 compared to 2020 2022 2021 2020 $ % $ % Research and development expenses Platform $ 41,765 $ 55,959 $ 29,651 $ (14,194) (25.4) % $ 26,308 88.7 % Discovery 52,358 48,984 17,670 3,374 6.9 % 31,314 >100% Clinical 46,820 21,841 10,003 24,979 >100% 11,838 >100% Stock based compensation 10,524 4,979 1,777 5,545 >100% 3,202 >100% Other 4,229 3,508 4,218 721 20.6 % (710) (16.8) % Total research and development expenses $ 155,696 $ 135,271 $ 63,319 $ 20,425 15.1 % $ 71,952 >100% Significant components of research and development expense include the following allocated by development phase: Platform, which refers primarily to expenses related to screening of product candidates through hit identification; Discovery, which refers primarily to expenses related to hit identification through development of candidates; and Clinical, which refers primarily to expenses related to development of candidates and beyond.
Research and Development The following table summarizes our components of research and development expense: (in thousands, except percentages) Years ended December 31, 2023 compared to 2022 2022 compared to 2021 2023 2022 2021 $ % $ % Research and development expenses Platform $ 96,796 $ 41,765 $ 55,959 $ 55,031 >100% $ (14,194) (25.4) % Discovery 62,142 52,358 48,984 9,784 18.7 % 3,374 6.9 % Clinical 57,564 46,820 21,841 10,744 22.9 % 24,979 >100% Stock based compensation 22,761 10,524 4,979 12,237 >100% 5,545 >100% Other 1,963 4,229 3,508 (2,266) (53.6) % 721 20.6 % Total research and development expenses $ 241,226 $ 155,696 $ 135,271 $ 85,530 54.9 % $ 20,425 15.1 % Research and development expenses account for a significant portion of our operating expenses.
We expect to share a Phase 2 interim safety analysis in 2024. • Familial Adenomatous Polyposis (FAP) (REC-4881): Our Phase 2 TUPELO clinical trial is a multicenter, randomized, double-blind, placebo-controlled two-part clinical trial to evaluate efficacy, safety, and pharmacokinetics of this drug candidate in patients with FAP.
We expect to share Phase 2 safety and preliminary efficacy data in Q4 2024. • Familial Adenomatous Polyposis (FAP) (REC-4881): Our Phase 1b/2 TUPELO clinical trial is an open label, multicenter, two part study of REC-4881 in participants with FAP. Part 1 is complete with FPI for Part 2 anticipated in H1 2024.
Revenue The following table summarizes our components of revenue: Years ended December 31, 2022 compared to 2021 2021 compared to 2020 (in thousands, except percentages) 2022 2021 2020 $ % $ % Revenue Operating revenue $ 39,681 $ 10,000 $ 3,413 $ 29,681 >100% $ 6,587 >100% Grant revenue 162 178 549 (16) (9.0) % (371) (67.4) % Total revenue $ 39,843 $ 10,178 $ 3,962 $ 29,665 >100% $ 6,216 >100% For the year ended December 31, 2022, the increase in revenue compared to prior year was due to revenue recognized from our strategic partnership with Roche, which commenced in January 2022 .
Revenue The following table summarizes our components of revenue: Years ended December 31, 2023 compared to 2022 2022 compared to 2021 (in thousands, except percentages) 2023 2022 2021 $ % $ % Revenue Operating revenue $ 43,876 $ 39,681 $ 10,000 $ 4,195 10.6 % $ 29,681 >100% Grant revenue 699 162 178 538 >100% (16) (9.0) % Total revenue $ 44,575 $ 39,843 $ 10,178 $ 4,733 11.9 % $ 29,665 >100% Operating revenue is generated through partnerships in which we perform research and development activities for customers.
Summary of Business Highlights Internal Pipeline • Cerebral Cavernous Malformation (CCM) (REC-994): Our Phase 2 SYCAMORE clinical trial is a double-blind, placebo-controlled safety, tolerability and exploratory efficacy study of this drug candidate in 60 participants with CCM. At this time, we continue to actively enroll participants.
Through its natural language interface and interactive graphics, LOWE can put state-of-the-art AI tools into the hands of every drug discovery scientist. Pipeline • Cerebral Cavernous Malformation (CCM) (REC-994): Our Phase 2 SYCAMORE clinical trial is a randomized, double-blind, placebo-controlled, safety, tolerability and exploratory efficacy study of REC-994 in participants with CCM.
For the year ended December 31, 2021, the increase in general and administrative expense compared to prior year was due to the growth in size of the Company’s operations including increased salaries and wages of $16.4 million, equipment costs, human resources costs, facilities costs and other administrative costs associated with operating a growth-stage company. 167 Table of Contents Other Income (Loss), Net The following table summarizes our components of other income (loss), net: (in thousands, except percentages) Years ended December 31, 2022 compared to 2021 2021 compared to 2020 2022 2021 2020 $ % $ % Interest expense $ (55) $ (2,952) $ (1,360) $ 2,897 (98.1) % $ (1,592) >100% Interest income 6,254 73 336 6,181 >100% (263) (78.3) % Loss on debt extinguishment — (827) (883) 827 (100.0) % 56 (6.3) % Derivative fair value adjustment — — (484) — n/m 484 (100.0) % Other 52 2 — 50 >100% 2 n/m Other income (loss), net $ 6,251 $ (3,704) $ (2,391) $ 9,955 n/m $ (1,313) 54.9 % n/m = Not meaningful For the year ended December 31, 2022, the increase in other income (loss), net compared to the prior year was driven by a decrease in interest expense from the 2021 Midcap loan settlement and an increase in interest income from our investment portfolio .
Other Income (Loss), Net The following table summarizes our components of other income (loss), net: (in thousands, except percentages) Years ended December 31, 2023 compared to 2022 2022 compared to 2021 2023 2022 2021 $ % $ % Interest expense $ (97) $ (55) $ (2,952) $ (43) 78.4 % $ 2,897 (98.1) % Interest income 19,116 6,254 73 12,862 >100% 6,181 >100% Loss on debt extinguishment — — (827) — n/m 827 (100.0) % Other (1,087) 52 2 (1,139) (2174.7) % 51 >100% Other income (loss), net $ 17,932 $ 6,251 $ (3,704) $ 11,680 >100% $ 9,956 n/m n/m = Not meaningful For the year ended December 31, 2023, the increase in other income (loss), net compared to the prior year was driven by an increase in interest income related to earnings on cash and cash equivalents in money market funds .
For the year ended December 31, 2021, the increase in research and development expenses compared to the prior year was due to an increased number of experiments screened on our platform, an increased number of pre-clinical assets being validated and increased clinical costs as studies progressed.
For the year ended December 31, 2023, the increase in research and development expenses compared to the prior year was primarily due to increased platform costs as we have expanded and upgraded our capabilities in platform including our chemical technology, machine learning and transcriptomics platform.
Additionally, our financial results reflected added funding to support our emerging early- and mid-stage pipeline assets. Our financial performance during the year ended December 31, 2021 compared to 2020 included: (i) an increase in revenue recognized due to our strategic partnership with Bayer; and (ii) increased operating costs due to growth in size of the Company’s operations.
Our financial performance during the year ended December 31, 2022 compared to 2021 included: (i) a decrease in platform research and development costs due to a reallocation of spending to cost of revenue for our strategic partnerships; (ii) an increase in revenue recognized due to our partnership with Roche; and (iii) the incurrence of cost of revenue due to our strategic partnerships.
The cash outflows were partially offset by the proceeds from the note receivable. See Note 3, “Acquisitions” to the Consolidated Financial Statements for additional details on the Vium acquisition. Financing Activities Cash provided by financing activities during the year ended December 31, 2022 primarily included $143.7 million of net proceeds from the Private Placement.
Financing Activities Cash provided by financing activities during the year ended December 31, 2023 primarily included proceeds of $128.1 million from common stock issuances. Financing inflows also included proceeds from equity incentive plans of $12.8 million. Cash provided by financing activities during the year ended December 31, 2022 primarily included $143.7 million of net proceeds from the 2022 Private Placement.
In addition to leases that have commenced, the Company has $11.0 million for leases that have been executed but not yet commenced. 169 Table of Contents As of December 31, 2022, the Company had $68.0 million of future purchase obligations, $49.8 million of which are expected to be payable within the next year.
As of December 31, 2023, the Company had $229.3 million of future purchase obligations, $91.3 million of which are expected to be payable within the next year. These commitments primarily related to third-party research services, materials and supplies for research and development activities.
These increases were partially offset by a decrease in platform costs due to a reallocation of spending to cost of revenue for our strategic partnerships.
These increases were partially offset by a decrease in platform costs due to a reallocation of spending to cost of revenue for our strategic partnerships. 157 Table of Contents General and Administrative Expense The following table summarizes our general and administrative expense: (in thousands, except percentages) Years ended December 31, 2023 compared to 2022 2022 compared to 2021 2023 2022 2021 $ % $ % Total general and administrative expenses $ 110,822 $ 81,599 $ 57,682 $ 29,223 35.8 % $ 23,917 41.5 % We expense general and administrative costs as incurred.
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Our focus on mapping and navigating the complexities of biology and chemistry beyond the published literature and in a target-agnostic way differentiates us from other companies in our space and leads us to confront a fundamental cause of failure for the majority of clinical-stage programs - the wrong target is chosen due to an incomplete and reductionist view of biology.
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We believe Recursion’s unbiased, data-driven approach to understanding biology will bring more, new and better medicines at higher scale and lower cost to patients. There are three key value-drivers at Recursion: 1.
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Our balanced team of life scientists and computational and technical experts creates an environment where empirical data, statistical rigor, and creative thinking are brought to bear on our decisions. We leverage our Recursion OS to enable three key value drivers: 1.
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An industry-leading dataset intentionally designed to capitalize on computational tools and accelerate value created through our pipeline, partnerships and technology products We drive value by scaling and leveraging the Recursion OS to generate, aggregate and integrate over 50 petabytes of data spanning large language model derived disease relevance and target-compound relationships, predicted protein-ligand binding interactions for ~36 billion compounds, over 200 million total staining and multi-timepoint live-cell (brightfield) phenomics experiments, over 700 thousand whole transcriptomics experiments, tens of thousands of ADME experiments using our automated DMPK module, InVivomics and multimodal precision oncology patient data.
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Development of one of the largest fit-for-purpose proprietary biological and chemical datasets in the world at a time when advances in AI paired with the right training data are creating disruptive value.
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This dataset has been curated using over 50 human cell types, our cell manufacturing facility which has 152 Table of Contents produced over 1 trillion hiPSC-derived neuronal cells since 2022, our in-house chemical library of over 1.7 million compounds, an in silico library of over 1 trillion small molecules and other capabilities.
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Recursion finished the fourth quarter of 2022 with a portfolio of clinical-stage, preclinical and discovery programs and continued scaling the total number of experiments to over 175 million, size of its proprietary data to over 21 161 Table of Contents petabytes and number of biological and chemical relationships to over 3 trillion.
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We have built proprietary software applications and AI/ML models within the Recursion OS which predict and navigate over 5 trillion biological and chemical relationships.
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Data have been generated by the Recursion OS across 48 human cell types, an in-house chemical library of approximately 1.7 million compounds, and an in silico library of over 1 trillion small molecules, by a team of approximately 500 Recursionauts that is balanced between life scientists and computational and technical experts.
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With our approach and our team of over 500 Recursionauts that is balanced between life scientists and computational and technical experts, we endeavor to turn drug discovery into a search problem, where we map and navigate biology in an unbiased manner in order to translate insights into more, new and better medicines at higher scale and lower cost to patients.
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Recent protocol amendments are aimed at accelerating the quality and pace of the trial. • AXIN1 or APC Mutant Cancers (REC-4881): In October 2022, we announced the nomination of REC-4881 for the potential treatment of AXIN1 or APC mutant cancers with an initial focus on hepatocellular carcinoma and ovarian cancer.
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Summary of Business Highlights Platform • Causal AI Modeling and Additional Datasets: We have been training causal AI models leveraging over 20 petabytes of multimodal precision oncology patient data from Tempus to support the discovery of potential biomarker-enriched therapeutics at scale.
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We expect to initiate a Phase 1b/2 biomarker enriched basket study across select AXIN1 or APC mutant tumors in early 2024. 162 Table of Contents • Clostridioides difficile Colitis (REC-3964): Our Phase 1 clinical trial is a first-in-human protocol evaluating single and multiple doses of REC-3964 in healthy volunteers and will assess the safety, tolerability and pharmacokinetic profile of REC-3964.
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By combining the forward genetics approach of Tempus with the reverse genetics approach at Recursion, we believe we have an opportunity to improve the speed, precision, and scale of therapeutic development in oncology. This work has already resulted in a directed-oncology program against a novel gene/disease relationship in a large oncology indication.
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At this time, we continue to actively enroll participants. We expect to share safety and PK data in 2H 2023. • HR-Proficient Ovarian Cancer: In January 2023, we disclosed that RBM39 (previously identified as Target Gamma) is the novel CDK12-adjacent target identified by the Recursion OS.
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Recursion intends to operate both as a data generator and multimodal data aggregator. In the future, we intend to augment our dataset and hone the Recursion OS with germline genetic data, organoid technologies, and automated nano-synthesis technologies. • LOWE (Large Language Model-Orchestrated Workflow Engine): LOWE is an LLM agent that represents the next evolution of the Recursion OS.
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We believe that modulating RBM39 could lead to a potential treatment of HR-proficient ovarian cancer. We expect this program to reach IND-enabling studies in 2023. • Enhancing Anti-PD-(L)1 Response by Inhibiting Novel Targets (Target Alpha): This program is a potential first-in-class novel chemical entity with a novel polypharmacologic mechanism of action for which we have not yet disclosed the targets.
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LOWE supports drug discovery programs by orchestrating complex wet and dry-lab workflows via natural language prompts. These workflows are the steps and tools available in the Recursion OS, from finding significant relationships across biology, chemistry, and patient-centric data to generating novel compounds and scheduling them for synthesis and experimentation.
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Recursion OS • Cell and Tissue Culturing: In 2022, we industrialized stem cell production and produced over 500 billion hiPSC-derived cells in-house to enable neurology research.
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This trial was fully enrolled in June 2023 with 62 participants and the vast majority of participants who completed 12 months of treatment continue to elect to enter the long-term extension study.
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We believe that this volume of biological material could make Recursion one of the largest producers of neural hiPSC-derived cells in the world and could give Recursion flexibility around its consumables and collaboration activities. • Chemical Technology: We have begun configuring our automated drug metabolism and pharmacokinetics (DMPK) wet-lab module into the Recursion OS.
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Part 1 of the study is ongoing and is exploring two doses of REC-2282 in approximately 23 adults and 9 153 Table of Contents adolescents, with enrollment in adults expected to complete in H1 2024.
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Once fully onboarded, this module will enable scaled, automated processing and evaluation of compounds for plasma protein binding, microsomal stability and cell permeability.
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We expect to share Phase 2 safety and preliminary efficacy data in H1 2025. • AXIN1 or APC Mutant Cancers (REC-4881): Our Phase 2 LILAC clinical trial is an open label, multicenter study of REC-4881 in participants with unresectable, locally advanced or metastatic cancer with AXIN1 or APC mutations.
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With an operational capacity of up to 500 compounds per week, this module lays the foundation for us to generate additional proprietary data moats that enable the training of ML and AI algorithms. • Publicly Available Dataset and Application: In January 2023, Recursion released RxRx3, its largest open-source cellular imaging dataset to date, as well as MolRec™, an interactive application to explore compound and gene relationships.
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This study was initiated at the end of 2023, with FPI anticipated in Q1 2024. We expect to share Phase 2 safety and preliminary efficacy data in H1 2025. • Clostridioides difficile Infection (REC-3964): We conducted a Phase 1 healthy volunteer study to evaluate the safety, tolerability and PK of REC-3964 at increasing oral doses in comparison with placebo.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 10% increase or decrease in current exchange rates would not have had a material effect on our financial results during the years ended December 31, 2022, 2021 and 2020.
Biggest changeA 10% increase or 161 Table of Contents decrease in current exchange rates would not have had a material effect on our financial results during the years ended December 31, 2023, 2022 and 2021. 162 Table of Contents
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in U.S. interest rates. A hypothetical 100 basis point decrease in interest rates as of December 31, 2022 would have an insignificant effect on net loss in the ensuring year.
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in U.S. interest rates. A hypothetical 100 basis point decrease in interest rates as of December 31, 2023 would have an insignificant effect on net loss in the ensuring year.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Interest rate risk We are exposed to market risk related to changes in interest rates of our investment portfolio of cash and cash equivalents. As of December 31, 2022, our cash and cash equivalents consisted of money market funds.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Interest rate risk We are exposed to market risk related to changes in interest rates of our investment portfolio of cash and cash equivalents. As of December 31, 2023, our cash and cash equivalents consisted of money market funds.
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Inflation Risk and Market Volatility In recent months, inflation has continued to increase significantly in the U.S. and overseas resulting in rising costs for transportation, wages, construction and other goods and services. Inflation and supply chain disruptions have increased our overall operating expenses.
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In addition, the capital and credit markets have been experiencing volatility and disruption, which has exerted downward pressure on stock prices and credit capacity.
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There is no assurance that such markets will be a source of future financing for Recursion, nor that other funding sources would be available or sufficient, particularly if current levels of market disruption and volatility continue or worsen.
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Although we do not believe that the above conditions have materially changed our overall financial position, if our costs continue to increase, we may not be able to fully offset those increased costs through reduced spending or additional financing efforts and failure to do so could harm our business, financial condition and results of operations. 171 Table of Contents

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