Cathie Wood Is Loading Up on This Biotech Stock. Is It a No-Brainer Buy?
Key Points
Cathie Wood's Ark Genomic Revolution ETF has some of its top holdings in innovative health companies like Tempus AI and Twist Bioscience.
Within its top 20 holdings is also Recursion Pharmaceuticals.
Recursion is growing its pipeline of drugs, but it generates limited revenue.
In Cathie Wood's Ark Genomic Revolution ETF (NYSEMKT: ARKG), as of July 10, the three top holdings are Tempus AI, 10x Genomics, and Twist Bioscience. But digging past the top 10 holdings, there's a $1.8 billion biotech company with a growing drug pipeline that's also landed big-name healthcare partnerships.
That company is Recursion Pharmaceuticals (NASDAQ: RXRX), and the Ark Genomic Revolution ETF currently owns over $50 million worth of its stock.
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Utilizing AI in drug discovery
As more companies tap into the power of artificial intelligence (AI) to accelerate drug discovery and uncover novel solutions, Recursion stands out for the massive amount of data it can generate, as well as for its partnerships.
Each week, it uses robotics and computer vision to capture millions of cell experiments, potentially helping to speed up drug development. It currently has seven drugs in various clinical stages in its pipeline, and its candidate REC-4881, designed to treat a rare genetic condition that can lead to cancer, is one of the drugs that's furthest along in trials. REC-4881 has shown positive proof-of-concept data, with additional phase 1b/2 data expected in the first half of 2027.
For its therapeutic partnerships, Recursion is working with some of the largest companies in Europe, including Bayer and Roche Holding. It also has a connection to Nvidia; the two companies worked together, allowing Recursion to process massive amounts of data using a supercomputer.
Should you follow Cathie Wood's lead with Recursion Pharmaceuticals?
Recursion Pharmaceuticals has no drugs on the market yet, and generates only limited revenue through collaboration agreements, so investing in this company is all about its potential. It has a bit of runway before it faces financial pressure; Recursion forecasts it will have enough money to continue operations through early 2028 without needing additional financing.
This is a high-risk, high-reward investment, and the AI drug-discovery space is becoming increasingly competitive. That said, Recursion can stand out if it can turn AI insights into commercialized drugs faster than its competitors. Recursion can fit in a portfolio, but it should be as a speculative position for investors who are comfortable with the risk.
Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 10x Genomics, Nvidia, Tempus AI, and Twist Bioscience. The Motley Fool recommends Roche Holding AG. The Motley Fool has a disclosure policy.