Why Recursion Pharmaceuticals Stock Plummeted 24% This Week

Shares of Recursion Pharmaceuticals (NASDAQ: RXRX) fell this week. The stock lost 24% as of market close on Friday. The move comes as the S&P 500 and Nasdaq Composite both slipped slightly.

Recursion revealed disappointing first-quarter earnings on Monday and announced it would pare down its development pipeline. Recursion was also hit by a survey revealing that the biotech industry expects President Donald Trump's federal research cuts will make raising capital more challenging.

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By the numbers

Recursion reported an earnings-per-share (EPS) loss of $0.50 on sales of $14.75 million. While the former ever so slightly beat Wall Street's expectations, the top-line figure was below the forecast of $14.98 million. The company also announced it was ending research on a significant portion of its pipeline in order to cut costs.

President Trump's cuts could make it harder for Recursion to stay afloat

The Trump administration has taken aim at the National Institutes of Health (NIH), which provides research dollars for biomedical research, as well as major research universities and other science organizations. A survey released Tuesday revealed that a majority of biotech leaders polled believed these cuts would make raising capital harder.

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Recursion is still heavily investing in research and development and operates deep in the red. It will likely need outside funding to continue long-term and reach a point where its investments pay off.

Recursion has a long way to go

While Recursion's novel use of AI is promising and could lead to lucrative breakthroughs, there is a lot of uncertainty here. This is definitely a stock for aggressive, risk-tolerant investors. If that's you, Recursion could pay off, but it will take time, and there are no guarantees.

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Johnny Rice 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.