Nvidia-Backed Recursion Pharma Soars After-Hours As FDA Eyes AI Over Animal Testing For Drugs: Retail Traders Elated

Shares of Recursion Pharmaceuticals Inc. rocketed over 19% in Thursday's after-hours trading, boosting retail investor sentiment, after the U.S. health regulator unveiled plans to modernize drug testing methodologies.

The U.S. Food and Drug Administration said it would begin replacing traditional animal testing for monoclonal antibody therapies and other drugs with more "human-relevant" methods, including artificial intelligence (AI) models.

The initiative aims to improve safety, accelerate approval timelines, reduce R&D costs, and ultimately lower drug prices while reducing animal trials.

New Approach Methodologies (NAMs) listed by the FDA comprise AI-driven toxicity modeling, human cell lines, and organoid-based testing for investigational new drug (IND) applications.

"This initiative marks a paradigm shift in drug evaluation," said FDA Commissioner Martin Makary. 

"By leveraging AI-based computational modeling, human organ model-based lab testing, and real-world human data, we can get safer treatments to patients faster and more reliably...It is a win-win for public health and ethics."

A select group of monoclonal antibody developers will test the non-animal-based strategy under FDA guidance, with a broader rollout to follow.

On Stocktwits, sentiment for Recursion Pharma jumped into 'extremely bullish' levels late Thursday, accompanied by a 258% surge in 24-hour message volume.

One optimist hoped the stock would open at $20 on Friday, implying a nearly four-fold jump from the last close.

"I have no idea how much of the animal testing could be replaced with the AI modeling, but this sounds big," wrote another user.

Recursion is a clinical-stage biotech firm using AI, machine learning, and automation to accelerate drug discovery. Its pipeline includes six programs, with some oncology drugs in Phase 2 trials. 

The company's stock has garnered significant attention over the past year, primarily because of Nvidia's backing. The AI chipmaker recently disclosed it held over 7.7 million Recursion shares.

In February, Japan's SoftBank Group said it had a 14.67 million-share stake in Recursion, worth more than $66 million as of the last close.

However, Recursion's fourth-quarter earnings report last month revealed widening losses and declining revenue, leading one analyst to cut their price target due to concerns about high cash burn and execution risks in deal-making and clinical development.

Recursion Pharma's stock has lost over 34% this year.

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