Why Recursion Pharmaceuticals Was Bouncing Higher on Tuesday

In an effort to save costs and make its financial resources last longer, Recursion Pharmaceuticals (NASDAQ: RXRX) is slimming down and streamlining. After the biotech updated its strategy to do so on Tuesday, investors became more hopeful on its future, bidding the stock up; it closed 1.6% higher at the end of the day. This rise outpaced that of the S&P 500 (SNPINDEX: ^GSPC), which increased by 0.55%.

Job cuts coming, cash runway extended

Before market open, Recursion disclosed in a tersely worded regulatory filing with the Securities and Exchange Commission (SEC) that it was taking a series of measures to streamline its operations.

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This will consist of a workforce reduction of around 20%, the company wrote. It anticipates booking around $11 million in charges related to this, in costs that include severance payments, benefit payouts, and other items, during the current year. This should comprise the bulk of the total charges incurred by this restructuring effort.

With this, its cash burn should end up at less than $450 million in 2025, and under $390 million in 2026. This could be alleviated by more than $100 million in milestone payments Recursion is eligible to be paid for hitting certain progress markers by the close of 2026.

The company added that it's estimating the level of cash, cash equivalents, and restricted cash will land at over $500 million at the end of its current (second) quarter. This would be down, albeit not by much, from the $509 million at the conclusion of the first quarter.

Still, Recursion said that with the planned streamlining measures in place, its cash runway should last into the fourth quarter of 2027.

Time to talk the talk

While news of job cuts is never pleasant to hear, on the flip side, it's encouraging that Recursion is making a push to extend its life as a business. The proof will be in the doing, of course, but for now, investors seem cautiously optimistic about the company's strategy.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.