After a year defined by pipeline cuts, the departure of its CEO and layoffs, Exscientia will merge into Recursion, creating one company that has 10 clinical readouts to look forward to over the next 18 months.
“We believe the proposed combination is deeply complementary and aligned with our missions to industrialize drug discovery to deliver high quality medicines and lower prices for consumers,” said Chris Gibson, Ph.D., the CEO of Recursion who will remain in that role in the newly combined entity. The companies announced the deal Thursday morning.
Exscientia will bring its precision chemistry design and small molecule automated synthesis technology into Recursion, which contributes scaled biology exploration and translational capabilities.
The combined entity will have $850 million in cash and about $200 million in expected milestones over the next 24 months, plus a potential $20 billion in royalties on the line later if any drugs from the pipeline are approved. The companies also expect to see $100 million in operational “synergies.”
The deal caps off a tumultuous year for Exscientia, which uses AI to aid drug discovery. The company racked up Big Pharma partnerships in its early years, including GSK, Bristol Myers Squibb and Sanofi. The biotech also jumped on the COVID bandwagon during the pandemic, working on an antiviral with the Gates Foundation.
But, in 2022, Bayer parted ways on a 240 million euro ($243 million) partnership. And, despite adding a collaboration with Merck KGaA in September 2023 that could top $1 billion in potential milestones, Exscientia began paring back its rapidly expanding pipeline a month later.
Then in February, CEO Andrew Hopkins was fired over two personal relationships with employees that the board deemed “inappropriate and inconsistent” with company values.
In May, a quarter of employees were let go as the biotech initiated “efficiency measures” to save cash and preserve the AI-powered pipeline.
Now, Exscientia is set to become a part of Recursion. The companies say the deal will create a portfolio of assets which, “if successful, could have annual peak sales opportunities in excess of $1 billion.” Highlights include Exscientia’s CDK7, LSD1 and MALT1 oncology programs and partnered programs for PKC-Theta and ENPP1.
The companies said there is no competitive overlap across the newly expanded portfolio, as Recursion’s focus is on first-in-class medicines in oncology, rare disease and infectious disease. Exscientia, meanwhile, focuses on best-in-class therapies in oncology.
The new company’s drug discovery efforts should also be complemented by the combined capabilities of each biotech’s technology platforms.
Both companies bring a number of high-profile partnerships along for the ride. The pipeline boasts 10 programs that have been optioned already. Recursion has deals with Roche’s Genentech in neuroscience and gastrointestinal oncology, plus Bayer for undruggable oncology. Exscientia has partnerships with Sanofi and Merck in immunology and cancer.
The BMS partnership has already yielded phase 1 results for the PKC-Theta program as well.
All these programs could produce up to $200 million in milestones over the next two years.
Getting into the deal terms, Exscientia shareholders will receive 0.7729 shares of Recursion class A common stock for each Exscientia ordinary share. At the end of the transaction, Recursion shareholders will own approximately 74% of the combined company, with Exscientia shareholders taking the remaining 26%.
Recursion will continue to be headquartered in Salt Lake City and trade on the Nasdaq. Exscientia’s interim CEO and Chief Scientific Officer David Hallett, Ph.D., will become chief scientific officer of the new company.