Recursion to Report Q2 Earnings: What's in the Cards?

We believe that Recursion RXRX, a TechBio company that decodes biology and chemistry to industrialize drug discovery, is likely to beat expectations when it reports second-quarter 2024 results.

The Zacks Consensus Estimate is pegged at a loss of 35 cents per share. The Zacks Consensus Estimate for second-quarter revenues is pinned at $14.1 million.

Let's see how things might have shaped up for the upcoming quarterly release.

Factors to Consider

In the absence of a marketed product in the company's commercial portfolio, Recursion only recognizes collaboration revenues from its partners.

Recursion has ongoing collaboration agreements with pharma giants like Roche and Bayer to develop candidates for several oncology indications, with differentiated mechanisms of action. RXRX also collaborated with NVIDIA Corporation, the worldwide leader in visual computing technologies, to build a next-generation platform for the company to develop novel therapies.

The company is expected to provide updates regarding the clinical-stage pipeline programs on its second-quarter earnings call. RXRX expects several data readouts throughout 2024 and 2025.

Recursion's oncology candidate, REC-994, is being evaluated in the mid-stage SYCAMORE study to treat cerebral cavernous malformation. It completed patient enrollment for the study last year and expects to share top-line data from the same in September 2024. 

RXRX's other pipeline candidates include REC-2282 and REC-4881 for treating neurofibromatosis type II (NF2) and familial adenomatous polyposis (FAP), respectively. Two doses of REC-2282 are being evaluated in Part 1 of the mid to late-stage POPLAR study for the NF2 indication. Recursion expects to share phase II safety and preliminary efficacy data from the POPLAR study in the fourth quarter of 2024.

An early to mid-stage TUPELO study is evaluating REC-4881 for patients with FAP. The company expects to report phase II safety and preliminary efficacy data in the first half of 2025.

Recursion is also evaluating REC-4881 in a phase II LILAC study for the treatment of patients with unresectable, locally advanced or metastatic cancer with AXIN1 or APC mutations.Top-line data from this additional study of REC-4881 is also expected in the first half of 2025.

Research and development expenses are expected to have increased in the to-be-reported quarter due to increased investments in expanding and upgrading the company's proprietary candidate development platform, as well as costs associated with funding ongoing clinical activities.

General and administrative expenses are also likely to have increased because of higher compensation to employees, along with higher software and depreciation expenses.

Earnings Surprise History

The company beat estimates in two of the trailing four quarters, matched once and missed once, delivering an average earnings surprise of 2.30%. In the last reported quarter, the company came up with an earnings surprise of 9.30%.

Shares of Recursion have plunged 16.9% in the year-to-date period compared with the industry's decline of 1.5%.

Image Source: Zacks Investment Research

Earnings Whispers

Our proven model predicts an earnings beat for Recursion this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That's the case here, as you will see below.

Earnings ESP: Recursion has an Earnings ESP of +15.09% as the Most Accurate Estimate of a loss of 30 cents per share is narrower than the Zacks Consensus Estimate of a loss of 35 cents.

Zacks Rank: RXRX currently carries a Zacks Rank #2.

Other Stocks to Consider

Here are some other stocks worth considering from the overall medical sector, as our model shows that these also have the right combination of elements to beat on earnings this reporting cycle.

Apellis Pharmaceuticals APLS has an Earnings ESP of +26.98% and a Zacks Rank #3 at present.

Shares of Apellis have plunged 34.4% year to date. APLS beat estimates in one of the last four reported quarters, missed twice and met the mark once, delivering an average negative surprise of 6.37%. APLS is scheduled to report second-quarter results on Aug 1, before the opening bell.

BioMarin Pharmaceutical BMRN has an Earnings ESP of +5.06% and a Zacks Rank #3 at present.

Shares of BioMarin have lost 12.8% year to date. BMRN beat estimates in three of the last four quarters and met the mark on the remaining occasion, delivering an average earnings surprise of 11.15%. BMRN is slated to report second-quarter 2024 results on Aug 5, after market close.

Denali Therapeutics DNLI has an Earnings ESP of +14.81% and a Zacks Rank #3 at present.

Denali Therapeutics' shares have gained 13.6% in the year-to-date period. DNLI beat estimates in two of the last four quarters and missed the mark on the other two occasions, delivering an average earnings surprise of 64.51%.

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