Volatility Expected for Recursion Pharmaceuticals (RXRX) as Short Interest Peaks and AI Initiatives Progress

Short Interest Peaks Amidst Stock Underperformance

Recursion Pharmaceuticals (RXRX) is currently navigating a period of significant market attention, primarily driven by its exceptionally high short interest. As of September 15, 2025, approximately 39.66% of its shares float were sold short, representing 132.04 million shares. This figure is substantially higher than the industry average for pharmaceutical companies, which stands around 13.05%. The short ratio, or days to cover, is 5.48 days, indicating that it would take nearly a week for short sellers to cover their positions based on average daily trading volume.

This elevated short positioning has materialized against a backdrop of challenging stock performance, with RXRX shares trading just under five dollars and experiencing a 25% decline over the trailing six months. The confluence of high short interest and recent stock depreciation has amplified discussions regarding a potential short squeeze, where aggressive buying could force short sellers to cover their positions, thereby driving the stock price higher. While not all short positions reflect a bearish outlook, the mechanical nature of credit-based short transactions introduces a "tail risk" capable of initiating such upward volatility.

Advancing Drug Discovery with AI Innovation

Beyond market mechanics, Recursion Pharmaceuticals has made notable strides in its core mission: AI-enabled drug discovery. The company recently expanded its artificial intelligence capabilities through the co-development and open-source release of the Boltz-2 biomolecular model with the Massachusetts Institute of Technology (MIT). This collaboration, announced on June 6, 2025, led to a nearly 20% surge in Recursion's stock price following the news.

Boltz-2 is engineered to significantly enhance the accuracy and speed of drug screening processes. It claims to outperform existing models, delivering accuracy comparable to Free-Energy Perturbation (FEP) simulations while operating approximately 1,000 times faster and at a 10,000-fold lower cost. Specifically, Boltz-2 can predict binding affinity in about 18 seconds on a single GPU, a task that traditionally takes between 6 to 24 hours. This efficiency gain is expected to drastically reduce the timeline for drug discovery programs, from an industry average of 42 months to potentially 18 months, and cut down the number of compounds synthesized from thousands to just a few hundred to reach a clinical candidate. The open-source nature of Boltz-2 is intended to foster widespread adoption and further accelerate scientific discovery across the pharmaceutical industry.

Financial Overview and Capital Requirements

Despite the technological advancements and strategic partnerships, Recursion Pharmaceuticals continues to face significant financial hurdles. For the second quarter of 2025, the company reported total revenue of $19.2 million, a 33% increase year-over-year from $14.4 million in Q2 2024. This revenue growth was partly supported by a $7 million milestone payment from its collaboration with Sanofi, contributing to a cumulative $130 million in upfront and milestone payments from this partnership to date.

However, the company's net loss widened to $171.9 million in Q2 2025, compared to a net loss of $97.5 million in the same period last year. Research and development expenses escalated sharply to $128.6 million in Q2 2025, up from $73.9 million in Q2 2024, primarily due to an agreement with Tempus and the business combination with Exscientia in late 2024. Operating cash flow for the six months ended June 30, 2025, showed a net cash outflow of $208.4 million, reflecting substantial investments in R&D, typical for a clinical-stage biotechnology firm.

As of June 30, 2025, Recursion held $533.8 million in cash, cash equivalents, and restricted cash, a decrease from $603.0 million at the end of 2024. The company projects its cash runway to extend into the fourth quarter of 2027. While a recent $12.5 million milestone payment from Rallybio for the advancement of REV102 provides non-dilutive capital, the persistent net losses and high R&D expenditures suggest an ongoing need for capital. Analysts project Recursion's revenue to reach $220.9 million and earnings to be $35.5 million by 2028, requiring aggressive yearly revenue growth and a substantial reversal from current earnings trends.

Analyst Perspectives and Future Implications

Analysts hold varied perspectives on RXRX's valuation, with Simply Wall St estimating a fair value of $6.47, suggesting a potential 32% upside from its September 22, 2025, price. However, broader community estimates for fair value range widely from $1.92 to $6.47 per share, highlighting the uncertainty surrounding the company's long-term prospects.

The strategic value of Recursion's AI platform, particularly with the Boltz-2 model, is widely acknowledged as critical for reducing dependence on external payments and improving future R&D efficiency. However, the high cash burn and unprofitability remain central concerns for investors. The successful advancement of clinical programs and achievement of further partnership milestones, with over $100 million anticipated by the end of 2026, will be crucial catalysts. The company's ability to translate its technological prowess into a sustainable and profitable drug pipeline will ultimately determine its trajectory beyond the immediate volatility induced by short interest dynamics.