Recursion Pharmaceuticals (RXRX) risk factors, FY2025 10-K

RISKS RELATED TO OUR LIMITED OPERATING HISTORY, FINANCIAL POSITION, AND NEED FOR ADDITIONAL CAPITAL

1. 01We are a clinical-stage biotechnology company with a limited operating history and no products approved by regulators for commercial sale, which may make it difficult to evaluate our current and future business prospects
2. 02We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future
3. 03need supplemental funding to complete these undertakings. If our drug candidates are eventually approved by regulators, we will require significant additional funding in order to launch and commercialize our products
4. 04Raising 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
5. 05If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our drug candidates, which would materially harm our business
6. 06Our quarterly and annual operating results may fluctuate significantly due to a variety of factors and could fall below our expectations or the expectations of investors or securities analysts, which may cause our stock price to fluctuate or decline
7. 07If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders’ equity, cause us to incur debt or assume contingent liabilities, and subject us to other risks
8. 08Costs of materials necessary for our business increasing more rapidly could increase our net losses

RISKS RELATED TO THE DISCOVERY AND DEVELOPMENT OF DRUG CANDIDATES

1. 09Our approach to drug discovery is unique and may not lead to successful drug products for various reasons, including, but not limited to, challenges identifying mechanisms of action for our candidates
2. 10Our drug candidates are in preclinical or clinical development, which are lengthy and expensive processes with uncertain outcomes and the potential for substantial delays60% rewritten
3. 11If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented
4. 12If individuals are unwilling to participate in or complete our studies for any reason, or we experience other difficulties with enrollment or participation, the timeline for recruiting participants, conducting studies, and obtaining regulatory approval of potential products may be delayed
5. 13We may develop drug candidates for use in combination with other therapies, which exposes us to additional risks
6. 14We conduct clinical trials for our drug candidates outside the United States, and the FDA and similar foreign regulatory authorities may not accept data from such trials
7. 15approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially
8. 16Although we intend to explore other therapeutic opportunities in addition to the drug candidates that we are currently developing, we may fail to identify viable new drug candidates for clinical development for a number of reasons
9. 17Accordingly, there can be no assurance that we will ever be able to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs, which could materially adversely affect our future growth and prospects
10. 18authorities in any jurisdiction. It is possible that our current and future drug candidates will never obtain regulatory and marketing approval
11. 19result in a safety profile that could prevent regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences
12. 20Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data
13. 21If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented
14. 22We may never realize a return on our investment of resources and cash in our drug discovery collaborations
15. 23Furthermore, the amounts we are entitled to receive upon the achievement of such milestones vary depending on regulatory approval and the level of commercial success achieved, if any
16. 24We may never realize a return on our equity investments in our drug discovery collaborators
17. 25We face substantial competition, which may result in others discovering, developing, or commercializing products before, or more successfully than, we do
18. 26We and our collaborators may not achieve projected discovery and development milestones and other anticipated key events in the time frames that we or they announce, which could have an adverse impact on our business and could cause our stock price to decline

RISKS RELATED TO OUR PLATFORM AND DATA

1. 27We 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
2. 28errors is particularly significant when new software or hardware is first introduced or when new versions or enhancements of existing software or hardware are implemented. Errors may also result from the interface of our proprietary software and hardware tools with our data or with third-party systems and data
3. 29Our information technology systems and infrastructure may fail or experience security breaches and incidents that could adversely impact our business and operations and subject us to liability
4. 30Interruptions in the availability of server systems or communications with internet or cloud-based services, or failure to maintain the security, confidentiality, accessibility, or integrity of data stored on such systems, could harm our business
5. 31Our solutions utilize third-party open source software (OSS), which presents risks that could adversely affect our business and subject us to possible litigation
6. 32Issues relating to the use of artificial intelligence and machine learning in our offerings could adversely affect our business and operating results

RISKS RELATED TO OUR OPERATIONS/COMMERCIALIZATION

1. 33Even if any drug candidates we develop receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors, and others in the medical community necessary for commercial success
2. 34If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any drug candidates we may develop, we may not be successful in commercializing those drug candidates, if and when they are approved
3. 35We are subject to regulatory and operational risks associated with the physical and digital infrastructure at both our internal facilities and those of our external service providers
4. 36In the future, we may manufacture drug substances or products at our facilities for preclinical and clinical use, and we may face risks arising from our limited prior manufacturing capability and experience
5. 37provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented
6. 38Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay
7. 39Recursion, or the third parties upon whom we depend, may be adversely affected by natural disasters, and our business continuity plans and insurance coverage may not be adequate
8. 40If we fail to comply with environmental, health and safety, or other laws and regulations, we could become subject to fines, penalties, or personal injury or property damages
9. 41Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities
10. 42Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited
11. 43Changes in tax laws or regulations that are applied adversely to us or disagreements between us and tax authorities regarding the application of existing tax laws or regulations may have a material adverse effect on our business, cash flow, financial condition or results of operations23% rewritten
12. 44If our estimates or judgments relating to our critical accounting policies prove to be incorrect, or financial reporting standards or interpretations change, our results of operations could be adversely affected
13. 45Product liability lawsuits could cause us to incur substantial liabilities and could limit commercialization of any drug candidates that we may develop

RISKS RELATED TO OUR RELIANCE ON THIRD PARTIES

1. 46Third parties that perform some of our research and preclinical testing or conduct our clinical trials may not perform satisfactorily or their agreements may be terminated
2. 47Third parties that manufacture our drug candidates for preclinical development, clinical testing, and future commercialization may not provide sufficient quantities of our drug candidates or products at an acceptable cost, which could delay, impair, or prevent our development or commercialization efforts
3. 48If we are unable to adequately source clinical and commercial supplies, equipment, and active pharmaceutical ingredients (API) from third party vendors as our drug development pipeline matures, our business could be significantly harmed

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

1. 49issued patent claims covering the composition of matter of REC-994, REC-2282, REC-4881, REC-3964, REC-617, REC-1245, REC-3565, REC-102, or REC-4539New
2. 50We may not be able to protect our intellectual property and proprietary rights throughout the world
3. 51If we do not obtain patent term extension and data exclusivity for any drug product candidates we may develop, our business may be materially harmed
4. 52We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms
5. 53If we are not able to obtain a license, or to obtain one on commercially reasonable terms and with sufficient breadth to cover the intended use of third-party intellectual property, our business could be materially harmed
6. 54Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products33% rewritten
7. 55applications and the enforcement or defense of patents issuing from those patent applications, all of which could have a material adverse effect on our business, financial condition, results of operations and prospectsNew
8. 56Issued patents covering our drug product candidates and proprietary technology that we have developed or may develop in the future could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad
9. 57We may be subject to claims challenging the inventorship of our owned or in-licensed patent rights and other intellectual property
10. 58Intellectual property rights do not necessarily address all potential threats
11. 59If we are unable to protect the confidentiality of our trade secrets and know-how, our business and competitive position may be harmed37% rewritten
12. 60We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our drug product candidates
13. 61We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of third parties or are in breach of their non-competition or non-solicitation agreements with third parties
14. 62Litigation to defend against third party claims of intellectual property infringement, misappropriation or other violations against us or our collaborators, or to enforce our intellectual property rights or the intellectual property rights of our collaborators, presents numerous risks22% rewritten
15. 63If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected

RISKS RELATED TO ACQUISITIONS

1. 64The anticipated benefits of the business combination with Exscientia may vary from expectations
2. 65The future results of Recursion will suffer if Recursion does not effectively manage its expanded operations resulting from the business combination with Exscientia
3. 66Business issues currently faced by Recursion or Exscientia may be imputed to the operations of the other
4. 67Recursion is exposed to greater foreign currency exchange risk
5. 68As a company with substantial operations outside of the United States, we are subject to economic, political, regulatory and other risks associated with international operations
6. 69We have in the past and may in the future acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our shareholders and otherwise disrupt our operations and adversely affect our operating results

RISKS RELATED TO GOVERNMENT REGULATION

1. 70We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our product candidates
2. 71The FDA, EMA and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction
3. 72Though we have been granted orphan drug designation for certain of our drug candidates, we may be unsuccessful or unable to maintain the benefits associated with such a designation, including the potential for market exclusivity
4. 73Obtaining and maintaining regulatory approval of our drug candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our drug candidates in other jurisdictions92% rewritten
5. 74Increasing scrutiny and changing expectations from governments, regulators, and third-parties relating to environmental, social and governance (ESG) policies and practices may cause us to incur additional costs, expose us to additional risks or impact our reputationNew
6. 75Failure to comply with anti-bribery and anti-corruption laws and anti-money laundering laws, and similar laws, could subject us to penalties and other adverse consequences
7. 76We are subject to various governmental export controls, trade and economic sanctions, and import laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws26% rewritten
8. 77Though 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
9. 78The FDA, EMA, and other regulatory authorities may implement amended or additional regulations or restrictions on the development and commercialization of our drug candidates
10. 79Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions
11. 80Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight
12. 81The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses55% rewritten
13. 82We are subject to U.S. and foreign laws regarding privacy, data protection, and cybersecurity that could entail substantial compliance costs, while the failure to comply could subject us to significant liability
14. 83Regulatory and legislative developments related to the use of AI could adversely affect our use of such technologies in our products, services, and business
15. 84Our employees, independent contractors, consultants, and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading laws, which could cause significant liability for us and harm our reputation
16. 85Climate change-related risks and uncertainties and legal or regulatory responses to climate change could negatively impact our results of operations, financial condition and/or reputation62% rewritten
17. 86to maintain or resume our operations or achieve any sustainability commitments we make, which would negatively impact our results of operationsNew

RISKS RELATED TO EMPLOYEE MATTERS AND MANAGING GROWTH

1. 87Our future success depends on our ability to retain key executives and experienced scientists or technologists, and to attract, retain, and motivate qualified personnel31% rewritten
2. 88If we achieve success in our clinical trials, we would need to scale our operations to support commercialization, and we may encounter difficulties in managing this growthNew
3. 89We may acquire additional businesses, products, form strategic alliances, or create joint ventures and we may not realize the benefits of such transactionsNew
4. 90We have recently undertaken a cost reduction plan and may do so again in the future. The assumptions underlying these activities may prove to be inaccurate, or we may fail to achieve the expected benefits therefromNew
5. 91Increased labor costs, potential organization of our workforce, employee strikes and other labor-related disruption may adversely affect our operations

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR CLASS A COMMON STOCK

1. 92Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant influence over matters subject to stockholder approval
2. 93The price of our Class A common stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock
3. 94Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. These sales, or the perception in the market that one or more holders of a large number of shares intend to sell their shares, could cause the market price of our Class A common stock to decline
4. 95Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the market prices of our Class A common stock
5. 96Our actual operating results may differ significantly from any guidance that we provide
6. 97Although we are taking steps to improve our internal control over financial reporting and remediate these material weaknesses, we cannot assure you that the measures we have taken to date will be sufficient to avoid potential future material weaknesses

GENERAL RISKS

1. 98Unfavorable global economic conditions could adversely affect our business
2. 99We periodically are, and in the future may be, involved in legal proceedings or claims that arise in the ordinary course of business, such as those regarding commercial or contractual disputes, intellectual property rights, employment matters, product liability, or data privacy64% rewritten
3. 100companies that have experienced volatility in the market price of their stock have been subject to securities class action lawsuits, and we may be the target of such litigation in the futureNew
4. 101If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline