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United States securities and exchange commission logo
February 22, 2021
Christopher Gibson, Ph.D.
Chief Executive Officer
Recursion Pharmaceuticals, Inc.
41 S Rio Grande Street
Salt Lake City, UT 84101
Re: Recursion
Pharmaceuticals, Inc.
Draft Registration
Statement on Form S-1
Submitted January
26, 2021
CIK No. 0001601830
Dear Dr. Gibson:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Overview, page 1
1. We note your disclosure
here and throughout the prospectus that you use your
technology to "rapidly
accelerate" programs, that your strategy is to "rapidly advance"
your Notable Products
through development and potential regulatory submission, that
wet-lab biology and in
silico tools "accelerates" your drug discovery process, that you
"identify low-viability
programs earlier in the research cycle," "spend less per program"
because of your
approach, and "advance programs more quickly from program start to the
clinic" compared to
industry averages, and that you "expect to continue accelerating the
pace of program
additions in the future." Please balance this disclosure and similar
disclosure throughout
the prospectus to clarify that the process of clinical development is
Christopher Gibson, Ph.D.
FirstName LastNameChristopher
Recursion Pharmaceuticals, Inc. Gibson, Ph.D.
Comapany22,
February NameRecursion
2021 Pharmaceuticals, Inc.
February
Page 2 22, 2021 Page 2
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inherently uncertain and that there can be no guarantee that you will
achieve similar
development timelines with your future product candidates. Please also
revise this
disclosure and similar disclosure throughout the prospectus to remove
any implication that
you will be successful in obtaining regulatory approval or
commercializing your product
candidates in a rapid or accelerated manner as such statements are
speculative.
Prospectus Summary, page 1
2. We note the use of the term "rescue" in this section and throughout
the prospectus. To the
extent that you are using this term to imply that the use of your
proprietary technology on
data from previous trials performed by other parties has resolved
issues relating to safety
and/or efficacy and will ultimately lead to the approval of your
product candidates, please
revise your registration statement to eliminate the use of this term.
You may disclose that
administration of a product candidate was well tolerated or resulted
in no serious adverse
events and provide a discussion of prior trial results. However, it is
not appropriate to
imply that the use of your proprietary technology on data from
previous trials performed
by other parties has resolved issues relating to safety and/or
efficacy and will ultimately
lead to the approval of your product candidates. If you choose to say
that the product
candidates were well tolerated in previous clinical trials or that
there were no serious
adverse events or discuss prior clinical results, please clarify that
prior results are not
necessarily predictive of the outcome of future trials. If you are
intending to assign a
different meaning to the term "rescue" than discussed above, please
make that clear
throughout the prospectus.
The Recursion OS, page 5
3. We note your disclosure that your core dataset is based on images of
cells, that you use
cell morphology to understand how a diseased cell responds to drugs
and that your
PhenoMap tooling enables you to explore inferred biological and
chemical relations in
order to "deconvolve" mechanisms of action. We also note that that the
two programs
based on your inferential search approach are in the discovery stage.
Please briefly
indicate how your inferential search programs allow you to
"deconvolve" mechanisms of
action, provide a definition of that term, and discuss any material
efforts you would need
to take in order to further understand the mechanism of action of any
drug candidate
before you would proceed to clinical trials with that candidate. In
this regard, we note
your disclosure on page 177 under "Predicting the Mechanism of Action"
that further
understanding the mechanism by which compounds are operating is
traditionally the
"Achilles heel" of phenotypic drug discovery and your disclosure under
"Orthogonomics"
on page 163 that other data modalities such as transcriptomics and
proteomics can be
highly complementary to phenomics but that both of those approaches
are "orders of
magnitude" more expensive compared to phenomics. Given this
disclosure, please ensure
that your prospectus summary briefly indicates the material challenges
that your
inferential search approach presents to moving drug candidates into
clinical trials,
including any challenges to obtaining IND approval if the mechanism of
action is not
Christopher Gibson, Ph.D.
Recursion Pharmaceuticals, Inc.
February 22, 2021
Page 3
understood, and that your prospectus summary presents balanced
disclosure in this regard.
Brute-Force Search Programs, page 7
4. Please remove the references on page 8 and throughout the prospectus
to the potential for
certain of your lead molecules to be first-in-disease. This disclosure
suggests that
your product candidates will be effective and will be approved before
any other product
candidate for these indications, which is not appropriate given the
current stage of
development. You may state that there are currently no approved
therapies for these
indications, if true.
Our Pipeline, page 7
5. Please revise your pipeline table to include a column for Phase 3.
Please also provide
only one column for the discovery phase. The length of the line within
the discovery
phase will visually demonstrate whether the product candidate is
early-stage or late-stage
in the discovery process, and a textual discussion of the program is a
more appropriate
place to make distinctions regarding different segments within a
particular phase. We
note that you have five programs for which you have yet to select a
compound that will be
the focus of further development. Please explain to us why each of
those programs is
sufficiently material to your business to warrant inclusion in your
pipeline table or revise
your table as appropriate.
Inferential Search Programs, page 9
6. We note that you have included a separate table depicting 25
additional programs. We
also note that your filing only includes a discussion of the two
programs in this table that
are in the preclinical phase, which implies that the other programs
are not sufficiently
material to your operations to warrant discussion. Please delete the
references to these
other programs from the Prospectus Summary.
Our Partnerships, page 10
7. Please remove the references throughout your prospectus to potential
"first-in-class" or
"best-in-class" product candidates as these descriptions imply an
expectation of
regulatory approval and are inappropriate given the length of time and
uncertainty with
respect to securing marketing approval.
Risk Factors, page 22
FirstName LastNameChristopher Gibson, Ph.D.
8. Given the length of your risk factor section, please revise to comply
with Regulation S-K
Comapany
ItemNameRecursion
105 by relocatingPharmaceuticals,
risks that could Inc.
generically apply to any
registrant or offering to
the end of the section
February 22, 2021 Page 3 under the caption "General Risk Factors."
FirstName LastName
Christopher Gibson, Ph.D.
FirstName LastNameChristopher
Recursion Pharmaceuticals, Inc. Gibson, Ph.D.
Comapany22,
February NameRecursion
2021 Pharmaceuticals, Inc.
February
Page 4 22, 2021 Page 4
FirstName LastName
Our amended and restated bylaws that will become effective upon the closing of
this offering,
page 88
9. Please revise this risk factor to disclose that there is also a risk
that your exclusive forum
provision may result in increased costs for investors to bring a
claim.
Use of Proceeds, page 96
10. Please disclose how far you expect the proceeds from the offering to
allow you to proceed
in the development of each of your programs. We note your disclosure
that you intend to
paydown debt with some of the proceeds of this offering. Please
disclose the interest rate
and maturity of such indebtedness. If the indebtedness to be
discharged was incurred
within one year, describe the use of the proceeds of such indebtedness
other than short-
term borrowings used for working capital. See Instruction 4 to Rule
504 of Regulation S-
K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
106
11. Tell us and revise to clarify the extent to which you track your
research and development
expense by program or product candidate. If available, provide a
breakdown of your
research and development expenses by program or product candidate, as
well as a
breakdown of research and development expenses by nature of expense.
Critical Accounting Policies and Use of Estimates
Determination of Fair Value of Common Stock, page 120
12. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the initial public offering and the estimated offering price.
This information will
help facilitate our review of your accounting for equity issuances
including stock
compensation and beneficial conversion features. Please discuss with
the staff how to
submit your response.
Business
FreshCuts, page 157
13. We note your disclosure in Table 3 that FreshCuts exceeds
state-of-the-art vendor library
design algorithms. Please explain what makes the vendor algorithms
"state-of-the-art"
and how you determined that FreshCuts exceeds them. Please also tell
us why you
believe this disclosure is material to an understanding of your
business.
Christopher Gibson, Ph.D.
FirstName LastNameChristopher
Recursion Pharmaceuticals, Inc. Gibson, Ph.D.
Comapany22,
February NameRecursion
2021 Pharmaceuticals, Inc.
February
Page 5 22, 2021 Page 5
FirstName LastName
REC-4881: Familial Adenomatous Polyposis
Clinical, page 189
14. Please provide the basis for your statement that REC-4881 demonstrated
a favorable
ocular safety profile compared to approved drugs in this class.
Patents, page 222
15. Please revise to disclose the material foreign jurisdictions where you
own or license
patents or pending patent applications.
Compound IP, page 223
16. Please revise to disclose the type of patent protection that you have
(composition of
matter, use or process).
Bayer, page 240
17. We note your disclosure that you have not entered into any lead series
or development
candidate license agreements with Bayer yet and that you would receive
an option
exercise fee, with the potential to receive further development and
commercial milestones
of more than $100 million as well as tiered royalties under each such
license agreement.
To the extent that these terms have already been set forth in the
current agreement, please
revise to disclose the amount of the option exercise fee, the maximum
aggregate
development and commercial milestones that you would be eligible to
receive for each
development candidate, the royalty range and the royalty term. Please
also revise to
disclose the termination provisions of the current agreement and when
the term of the
current agreement ends.
Sanofi-Genzyme, page 241
18. Please revise to disclose the payment provisions under the agreement
such as the
aggregate amounts paid or received to date, the termination provisions
and the term of the
agreement. Please also disclose how you would be compensated if
Sanofi-Genzyme
exercises its option to develop any products.
General
19. In the letter from the CEO, we note your statement on page 4 that you
are "leaders in
this space." Please explain to us the basis for this claim; we note
that your most advanced
product candidates have completed Phase 1 clinical trials and that you
have not yet
obtained regulatory approval for a product candidate. Please
substantiate your claims here
that you have "one of the largest proprietary biological datasets on
earth" and "one of the
largest, broadest and deepest pipelines of any technology-enabled drug
discovery
company," and your claims on page 143 that you have "one of the
largest biological and
chemical datasets" and on page 146 that you have curated "one of the
most comprehensive
Christopher Gibson, Ph.D.
Recursion Pharmaceuticals, Inc.
February 22, 2021
Page 6
KCE libraries in the world."
20. A registration statement is not intended to serve as marketing materials.
Therefore, the
prominence of the graphics on certain pages leading up to the letter from
the co-founder
and CEO and in Figures 14-16, 18-23, 31-35 and 75-77 is not appropriate
because the
graphics neither provide nor enhance relevant and meaningful disclosure
that investors
can use to make an informed investment decision. In particular, the
second page of
graphics before the CEO letter repeats information already contained in
the Prospectus
Summary and Business sections. Please remove these graphics accordingly.
21. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Eric Atallah at 202-551-3663 or Kevin Vaugh at
202-551-3494 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Ada Sarmento at 202-551-3798 or Tim Buchmiller at 202-551-3635 with any
other
questions.
Sincerely,
FirstName LastNameChristopher Gibson, Ph.D.
Division of
Corporation Finance
Comapany NameRecursion Pharmaceuticals, Inc.
Office of Life
Sciences
February 22, 2021 Page 6
cc: Philip H. Oettinger, Esq.
FirstName LastName