This Nvidia-Backed AI Stock Is Shrugging Off Market Pain Thanks to the FDA. Should You Buy Shares Now?
Recursion Pharmaceuticals (RXRX) shares closed up 27% after the Food and Drug Administration (FDA) said it wants to phase out animal testing in drug development.
The U.S. regulatory authority wants to switch to 'more effective, human-relevant methods' instead, including machine learning and artificial intelligence, according to its press release on Friday.
FDA's announcement is driving RXRX higher as it aligns perfectly with Recursion Pharmaceuticals' core business. The biotechnology company specializes in using AI for accelerated drug discovery.
Despite today's surge, however, Recursion Pharmaceuticals stock is down nearly 55% versus its year-to-date high.
Is It Too Late to Invest in Recursion Pharmaceuticals?
FDA's announcement could help Recursion Pharmaceuticals push further to the upside as it has a massive dataset of more than 60 petabytes, which is one of the largest in the biotech space.
Recursion already counts notable names like Roche (RHHBY), Merck (MRK), and Sanofi (SNY) as partners.
And with FDA promoting the use of AI models in drug development, it's reasonable to believe that other drugmakers would want to follow suit, potentially helping RXRX shares extend gains through the remainder of 2025.
In fact, the biotech stock could climb all the way back to $11 by the end of this year, according to Gil Blum – a senior analyst at Needham.
Why Is Needham Bullish on RXRX Shares?
Recursion Pharmaceuticals came in shy of Street estimates in its latest reported quarter in February.
Still, Blum expects RXRX to nearly double from current levels as it has a promising pipeline. It's REC-617, for example, has shown encouraging results in early clinical studies.
Recursion stock will extend gains as the biotechnology company continues to advance its clinical programs and capitalize on strategic partnerships to foster innovation in 2025, he added.
Needham expects Recursion to achieve significant synergies from its $688 million Exscientia deal as well.
What's the Consensus Rating on Recursion Stock?
Other Wall Street analysts are not as bullish on Recursion Pharmaceuticals as Needham, given the consensus rating on RXRX currently sits at 'Hold.'
However, their mean target of $8.50 still represents potential upside of more than 50% from here.
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