AI biotechs Exscientia and Recursion agree $688m merger

In one of the biggest M&A deals involving artificial intelligence-focused drug developers to date, Recursion Pharma has agreed to join with Exscientia in an all-stock transaction valued at $688 million.

Salt Lake City, US-based Recursion will absorb its smaller UK counterpart as a result of the deal, which it said would create a "full-stack technology-enabled small molecule discovery platform" powered by AI and with 10 programmes in clinical testing.

Under the terms of the deal Exscientia shareholders stand to receive 0.7729 Recursion shares for each share they own in the UK firm and – if the deal goes through as planned – will end up owning around 26% of the combined company.

Recursion chief executive Chris Gibson said that combining the two companies' technologies will create a platform that can "meaningfully improve the efficiency of drug discovery in the coming decade" and lead to "the broader availability of high-quality medicines and lower prices for consumers."

In a statement, Recursion said the marriage would combine its "scaled biology exploration and translational capabilities with Exscientia's demonstrated precision chemistry tools and capabilities, including its newly commissioned automated small molecule synthesis platform."

The size of the deal means that, if it is consummated, it will top prior M&A deals involving AI in drug discovery companies. Those include BioNTech's $540 million acquisition of InstaDeep last year, Cadence Designs Systems' $500 million takeover of OpenEye Scientific and Ginkgo Bioworks' purchase of Zymergen for $300 million – both completed in 2022 – and Roivant's $450 million play for Silicon Therapeutics in 2021.

The merger comes after a turbulent period for Oxford-based Exscientia. Last year, the company announced a contraction of its R&D activities to focus on cancer after several years of rapid expansion, and also sacked its founder and CEO, Dr Andrew Hopkins, over what was described as "inappropriate relationships" with two employees.

On the plus side, in between those events, the company secured a $674 million discovery alliance with German group Merck KGaA covering up to three small-molecule projects, with a $20 million upfront payment, and an expansion of an existing alliance with Sanofi that brought in $45 million upfront with up to $300 million in the offing if all goes to plan.

Recursion meanwhile has partnerships in place with Roche/Genentech and Bayer, and the company said that the tally across both companies is worth more than $20 billion, not including royalties on products that may reach the market, with $200 million in milestones possible within the next two years.

The combined pipeline has little overlap – spanning programmes in rare diseases and cancer – and consists of seven clinical-stage candidates from Recursion and three from Exscientia.

The UK firm's lead project is CDK7-targeted GTAEXS617, currently in the phase 1/2 ELUCIDATE trial in advanced solid tumours, while Recursion has four candidates in phase 2 trials including REC-994 for cerebral cavernous malformation, REC-2282 for neurofibromatosis type 2, and REC-4881 for familial adenomatous polyposis.

If the deal proceeds to completion – expected early next year – Gibson will be CEO of the combined company while Exscientia's chief scientific officer (and currently interim CEO) will take on the same role.