This Biotech Stock Could Be the Best Investment of the Decade

Globe and Mail

07-03-2025

It's typically not too difficult to find a company that should perform well for the next couple of years. Two years isn't very long, after all, and the stock market's dynamics tend to dictate performance more.
Identifying a stock that's likely to lead a marketwide charge for a decade is a different story. The organization in question must be able to offer something that's not only marketable for a long while, but also no other outfit can mimic. Such companies are relatively rare.
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There is one such stock to consider buying into sooner rather than later, though. That's a biotech company called Recursion Pharmaceuticals (NASDAQ: RXRX). And you can still plug into the ticker at a nice discount.
What is Recursion Pharmaceuticals?
Never heard of it? It would be a bit surprising if you had. Its market cap is a mere $3 billion, and it only did $58 million worth of business last year. And like many other young players in the biotechnology business, this one's also still booking sizable losses, adding to investors' general disinterest.
What this company lacks in size and profits, though, it more than makes up for in potential.
Just as the "Pharmaceuticals" in its name suggests, Recursion is a drug developer -- chiefly of therapies for more complicated (and expensive) ailments. For instance, its candidate REC-617 is being tested as a treatment for a number of difficult-to-treat solid tumors. REC-994 is being developed as a therapy for a condition called cerebral cavernous malformation, which can cause bleeding in the brain. Although both are in early-stage trials, given the lack of real alternatives, hopes for them and for the company's eight other pipeline candidates are high.
It's not the drugs, however, that make Recursion such a compelling investment prospect. Rather, it's how these drugs were designed. The company is using its own proprietary artificial intelligence (AI) platform -- called Recursion OS -- to predesign and pretest these treatments, to determine the odds of success before committing time and money to a project.
More importantly for interested investors, Recursion is now essentially sharing revenue-bearing access to this powerful software with other drug companies, creating a massive opportunity that's just now beginning to gel.
The industry's ready to embrace such a solution
It's not just an interesting business idea, to be clear. Major pharmaceutical names like Roche Holding, Bayer, Germany's Merck KGaA, Sanofi, and Rallybio are all on board, using Recursion OS to develop some of their next drugs.
And well they should, given the time and cost involved in developing any new pharmaceutical and then getting it approved. Most estimates put the average cost at somewhere between $1 billion and $2 billion per drug, while the typical development time is in the ballpark of a decade. A lot can happen over that much time, and should a new drug fail in the latter stages of its trials, it can be an expensive misstep.
Using a platform like Recursion OS, though, much of the cost-based risk can be sidestepped. The software also means drugmakers don't waste time, preventing competitors from developing an alternative drug in the meantime. And the difference is stark: With Recursion OS, what once required years and millions of dollars to figure out now only takes weeks and thousands of dollars.
Perhaps even more promising is the fact that this biotechnological tool allows the pharmaceutical industry to investigate new research and development ideas that simply weren't possible to explore before.
Industry research outfit Global Market Insights predicts the AI-powered drug discovery business will grow at an annualized pace of nearly 30% through 2032, jibing with a similar outlook from Straits Research. The underlying idea just holds too much promise to not pan out.
Given the power of its proprietary platform and the sheer competitiveness and rising cost of being in the pharmaceutical business, Recursion is positioned to capture more than its fair share of this growth.
Plenty of potential upside to justify the risk and volatility
That's the bullish argument. But if there's so much promise here, why is Recursion Pharmaceuticals' stock stuck near its record low, following a peak reached in mid-2021 soon after it went public?
There's a perfectly good answer: Like so many other technology and biopharma stocks of its ilk and age, Recursion soared on hype before the world was fully ready to embrace its solution. Interest eventually waned -- ironically just shortly before the company became ready, willing, and able to deliver as promised. Analysts expect top-line growth of 75% this year, to be followed by sales growth of more than 37% next year.
That still won't be enough to push the company out of the red, which may not happen for the next few years. A swing to a profit is on the radar within the next 10 years, however, and could be an explosive catalyst for the stock whenever it happens.
Of course, simply making progress toward that finish line is likely to be good for the stock in the meantime, even if there's sure to be plenty of continued volatility between now and then. The analyst community's current consensus one-year price target stands at $8.60 per share, more than 30% above the present price.
Just bear in mind that with this ticker's above-average potential reward, you'll get above-average risk. Manage it accordingly.
Should you invest $1,000 in Recursion Pharmaceuticals right now?
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