Utah-based Recursion Pharmaceuticals has agreed to buy AI-driven drug discovery firm Exscientia, originally a spinout company from the University of Dundee, in an all-stock deal worth about $688 million.
Exscientia now has offices in Oxford, Dundee, Miami, Vienna and Osaka.
The firm had its initial public offering (IPO) on the Nasdaq in 2021.
Under the terms of the transaction, unanimously approved by the boards of both companies, Exscientia shareholders will receive 0.7729 shares of Recursion Class A common stock for each Exscientia ordinary share they own.
The combined company is expected to achieve annual synergies of $100 million.
In February, Exscientia said in a US regulatory filing that it terminated the employment of former CEO Andrew Hopkins “following an investigation which found that Dr. Hopkins had engaged in relationships with two employees that the board determined were inappropriate and inconsistent with the company’s standards and values.”
Exscientia also said in February its chairman David Nicholson had resigned after it emerged he “had prior knowledge of the existence of the earlier of Dr. Hopkins’ relationships and had addressed the situation directly, and with the involvement of other outside counsel, rather than in consultation with the board.”
The firms said the merger “brings together Recursion’s scaled biology exploration and translational capabilities with Exscientia’s precision chemistry design and small molecule automated synthesis capabilities to create a leading technology-first, end-to-end drug discovery platform.”
They said the deal creates an “industry-leading portfolio of pharma partnerships with the potential for approximately $200 million in milestone payments over the next 24 months, and over $20 billion overall before potential royalties over the course of the partnership.”
And the companies said the merger craetes a “well-capitalized balance sheet with approximately $850 million in cash and cash equivalents between the two companies as of the end of Q2 2024.”
The combined company, which will be named Recursion, will continue to be headquartered in Salt Lake City, Utah, and trade on the Nasdaq, while maintaining a significant presence in the U.K.
Chris Gibson, co-founder and CEO of Recursion, will serve as CEO of the combined company and David Hallett, interim chief executive officer and chief scientific officer of Exscientia, plans to join the combined company as chief scientific officer.
Two existing Exscientia directors will join the board of Recursion following the closing of the transaction.
Gibson said: “We believe the proposed combination is deeply complementary and aligned with our missions to industrialize drug discovery to deliver high quality medicines and lower prices for consumers.
“Exscientia’s precision chemistry tools and capabilities, including its newly commissioned automated small molecule synthesis platform, will augment our tech-enabled biology and chemistry exploration, hit discovery and translational capabilities.
“I am excited to continue building the best example of the next generation of biotechnology companies. It still feels like we are just getting started.”
Hallet said: “Adding Exscientia’s best-in-class focused precision oncology internal pipeline to Recursion’s first-in-class focused pipeline spanning rare disease, precision oncology and infectious disease is highly complementary as we look to bring treatments to patients faster.
“We look forward to bringing our teams together and integrating Recursion’s high throughput and target biology capabilities with Exscientia’s highly scalable molecular design and automated chemistry synthesis capabilities to truly accelerate the discovery of better drugs for patients.”
The merger presss release read: “Once integrated, the companies believe the extended and evolved Recursion OS will enable the discovery and translation of higher quality medicines more efficiently and at a higher scale with a full-stack technology-enabled small molecule discovery platform.
“In addition, the combined company expects to read out approximately 10 clinical trials in the next 18 months.
“The proposed business combination will also advance significant therapeutic discovery collaborations with some of the most prominent biopharma companies in the world, including Roche-Genentech, Sanofi, Bayer, and Merck KGaA.
“Moreover, there is the potential for approximately $200 million in milestone payments over the next 2 years from these current partnerships and there is the potential for more than $20 billion in revenue before royalties on net-sales of partnership programs which range from mid single-digit to double-digit royalties over the course of the partnership.”
Allen & Company LLC acted as exclusive financial advisor to Recursion and Wilson Sonsini Goodrich & Rosati acted as legal counsel. Centerview Partners LLC acted as exclusive financial advisor to Exscientia and A&O Shearman acted as legal counsel.