Recursion and Exscientia, two longtime bellwethers of AI bio, agreed to merge in an all-stock deal valued at an estimated $688 million.
The biotechs’ leaders said they will benefit from combining their pipelines and platforms while also producing annual savings of about $100 million per year. The merger, expected to close in early 2025, is one of the biggest M&A deals for the nascent but fast-evolving AI biotech space. It still requires shareholder approval.
Investors appeared to welcome the move, sending the share prices of Recursion $RXRX and Exscientia $EXAI up 3% and 17%, respectively, on Thursday morning.
Chris GibsonRecursion CEO Chris Gibson led Thursday’s earnings call from Exscientia’s headquarters in Oxford, UK. He was joined by Najat Khan, Recursion’s new chief R&D officer and chief commercial officer, and David Hallett, Exscientia’s interim CEO. Hallett will become Recursion’s chief scientific officer after the merger closes.
“You may see some tired eyes here,” Gibson said. “It’s been quite a couple weeks to get this together, but we’re so excited to be doing it.”
Recursion shareholders will own a majority, or about 74%, of the combined business, which Gibson will lead. Both companies’ shareholders need to approve the proposal, which gives 0.7729 shares of Recursion’s stock per Exscientia share. Along with Hallett becoming Recursion CSO, two Exscientia directors will join Recursion’s board through the merger.
Recursion and Exscientia expect the combined company to report a flurry of early human data in the near future, planning for 10 clinical readouts in the next 18 months. Most of those drugs have blockbuster sales potential, if successful, they added, although none of the programs have advanced to Phase 3 studies.
The deal will also shore up their balance sheets, with the two projecting runway into 2027. In the second quarter, Recursion tallied a $98 million net loss, compared to $77 million a year ago, and ended the second quarter with $474 million in cash and equivalents. The combined business is expected to have $850 million in cash and equivalents.
Gibson pitched the two platforms as having a yin and yang symmetry. He said Exscientia’s chemistry-focused technology has targeted best-in-class drug programs, while Recursion’s biology-based platform has focused on “first-in-disease” opportunities.
“We really are combining these businesses in a way that we think is going to really enable these two upstarts to take on a massive industry to try and bring medicines to patients more quickly and to drive down the price of medicines for patients in the coming decades,” Gibson said on the call.
The deal is also an underwhelming final chapter for Exscientia, which was founded in 2012 by Andrew Hopkins, then a professor of the University of Dundee in Scotland. The company completed one of the largest IPOs for a European biotech by going public in 2021 at a $2.9 billion valuation.
But the first drugs it brought into the clinic, which it touted as the first AI-designed drugs, have since been discontinued or abandoned. Further adding to its troubles, Exscientia’s board fired Hopkins earlier this year, determining he had inappropriate relationships with two employees. Hopkins declined to comment
Despite Thursday’s stock bump, Exscientia’s shares are down about 80% since its public debut.