Recursion Pharmaceuticals (RXRX Quick QuoteRXRX - Free Report) and Relay Therapeutics (RLAY Quick QuoteRLAY - Free Report) are pioneering the use of artificial intelligence (AI) in drug discovery for various indications across different disease areas. They leverage machine learning and computational platforms to accelerate the development of novel therapeutics, positioning themselves at the forefront of the AI-driven biotech sector.

Both RXRX and RLAY have the potential to shift the paradigm of drug discovery and development, which has historically been complex, costly and prone to failure. Traditional biotech companies rely on a “trial-and-error” approach, leading to significant cash burn during early research and development. The high failure rates and funding challenges often result in financial instability or bankruptcy, hindering progress in the sector.

In contrast, AI-powered models can help identify promising candidates with higher probabilities of success in clinical development. This approach can reduce research costs, improve efficiency and allow the company to deliver cheaper breakthrough therapies.

Additionally, the companies generate incremental revenues by licensing their AI platforms to other drug makers. Even when candidates fail in clinical studies, Recursion Pharmaceuticals and Relay Therapeutics can use the resulting data to refine and enhance their AI models, improving accuracy and long-term outcomes.

The Case for RXRX Stock

Recursion Pharmaceuticals uses its AI-driven drug discovery platform, Recursion OS, developed in collaboration with NVIDIA Corporation, to test clinical compounds against a virtual library of human biology.

The stock faced a massive setback earlier this year after it discontinued the development of three key drug candidates — REC-994, REC-2282 and REC-3964 — as part of its broader strategic pipeline reprioritization. These candidates were being developed for cerebral cavernous malformation, neurofibromatosis type II and Clostridioides difficile infection, respectively. The removal of these candidates narrowed Recursion Pharmaceuticals’ clinical pipeline.

Following the terminations, Recursion Pharmaceuticals shifted focus to more promising candidates, notably REC-4881, which showed a median 43% reduction in polyp burden in early data from a phase II study. Additional candidates, including REC-1245, REC-617 and REC-3565, are being developed across various cancer indications to diversify and strengthen the pipeline, with key readouts expected in 2025 and 2026.

The company has been making efforts to expand its clinical pipeline to offset earlier losses. Recursion Pharmaceuticals has acquired Rallybio’s full stake in their joint venture for developing REV102 and a backup molecule for hypophosphatasia (HPP). This move enables Recursion to independently accelerate what could become the first oral, disease-modifying treatment for HPP, a rare genetic disorder with limited options.

REV102, an ENPP1 inhibitor with promising preclinical data, is expected to enter phase I studies by late 2026. The drug’s oral formulation offers significant advantages over existing therapies, aligning with Recursion Pharmaceuticals’ broader strategy to pioneer AI-enabled solutions for underserved conditions.

The company ended first-quarter 2025 with a cash balance of $509 million, which is expected to fuel operations into mid-2027 based on its current business plan.

Additionally, RXRX has ongoing collaboration agreements with pharma giants like Roche (RHHBY Quick QuoteRHHBY - Free Report) , Bayer, Merck and Sanofi (SNY Quick QuoteSNY - Free Report) to develop candidates for several oncology indications with differentiated mechanisms of action. The company recently received $7 million in collaboration revenues from Sanofi, after reaching a discovery milestone. Recursion Pharmaceuticals recognized collaboration revenues of $15 million in the first quarter of 2025, up slightly from the year-ago quarter.

The Case for RLAY Stock

Relay Therapeutics leverages its proprietary Dynamo platform, which combines advanced computational and experimental techniques to address protein targets that have historically been considered difficult or underserved. The company initially plans on applying this platform to accelerate the discovery of small-molecule therapies in targeted oncology and genetic diseases.

Relay Therapeutics, however, has a much narrower pipeline compared to Recursion Pharmaceuticals. In the first quarter of 2025, RLAY employed several cost-cutting measures, including shifting focus to the highest value areas, which scaled down research costs by 80% and slashed the workforce by approximately 70 people. The company ended first-quarter 2025 with a cash balance of $710.3 million, which is expected to fuel operations into 2029 based on its current business plan.

Following the pipeline reprioritization, Relay Therapeutics is gearing up to initiate a phase III study of its lead candidate, RLY-2608, in combination with AstraZeneca’s Faslodex (fulvestrant) for metastatic breast cancer. An early-stage study evaluating the candidate for a second indication, vascular malformations, is also currently underway.

As part of its broader cost-reduction strategy, Relay Therapeutics entered an exclusive licensing agreement with Elevar Therapeutics in 2024, granting Elevar global rights to develop and commercialize lirafugratinib (RLY-4008) — an oral FGFR2 inhibitor. Under the agreement, Elevar assumes full responsibility for the drug’s development and commercialization in FGFR2-driven cholangiocarcinoma and other FGFR2-altered solid tumors. While the deal streamlines Relay's pipeline, it positions the company to receive milestone-based payments and tiered royalties, providing a potential boost to its financial stability.

However, Relay Therapeutics suffered a major setback in early 2025 when Roche unexpectedly terminated its partnership without cause. The termination eliminates the possibility of future milestone or collaboration payments from Roche, depriving RLAY of a key revenue stream at a time when it lacks a marketed product and continues to operate as a high-cost, clinical-stage company.

Relay Therapeutics recognized collaboration revenues of $7.7 million in the first quarter of 2025, down 23% from the year-ago quarter.

How Do Estimates Compare for RXRX & RLAY?

The Zacks Consensus Estimate for Recursion Pharmaceuticals’ 2025 revenues and loss per share implies year-over-year improvements of 16% and 20%, respectively. The loss per share estimate for 2025 has widened from $1.34 to $1.35 over the past 60 days, while that for 2026 has narrowed from $1.17 to $1.10 over the same timeframe.

RXRX’s Estimate Movement

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Relay Therapeutics’ 2025 revenues and loss per share implies year-over-year improvements of 91% and 21%, respectively. The loss per share estimate for 2025 has widened from $1.85 to $1.86 over the past 60 days, while that for 2026 has widened from $1.80 to $1.83 over the same timeframe.

RLAY’s Estimate Movement

Image Source: Zacks Investment Research

Price Performances & Valuations of RXRX & RLAY

Year to date, Recursion Pharmaceuticals’ stock has lost 7.4%, whereas Relay Therapeutics’ stock has moved down 10.7%. The industry has declined 2% in the same time frame.

RXRX & RLAY’s Price Chart

Image Source: Zacks Investment Research

Both RXRX and RLAY are priced lower than the industry from a valuation standpoint. RXRX is more expensive than RLAY, going by the price/book-value ratio. Recursion Pharmaceuticals’ shares currently trade at 2.73 times its book value, much higher than 0.88 times for Relay Therapeutics.

Both RXRX and RLAY are trading significantly below their respective five-year means of 3.55 and 1.95. This makes RLAY more attractive to investors from a valuation standpoint.

RXRX & RLAY’s Valuation Chart

Image Source: Zacks Investment Research

RXRX vs. RLAY: Which is a Better Pick?

Recursion Pharmaceuticals and Relay Therapeutics face intense competition from other biotech firms, tech-driven drug discovery companies and pharmaceutical giants, all leveraging computational tools and scalable platforms. Rivalry from companies like Schrodinger, Isomorphic Labs and even tech giants like Alphabet and Microsoft can challenge their ability to differentiate themselves and sustain their competitive edge. Investors are also apprehensive of the pipeline potential as the investigational candidates of both companies are still in the clinical stages of development and far from commercialization.

Despite the challenges, both these Zacks Rank #3 (Hold) stocks have the potential to revolutionize the drug discovery process by delivering breakthrough therapies at lower costs than traditional drug/biotech companies. Their in-house clinical pipeline, as well as ongoing collaboration agreements, have the potential to drive significant growth for the companies in the future, which will boost shareholder wealth.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, investors should approach Relay Therapeutics with caution, as the company’s pipeline is currently heavily reliant on the success of a single investigational candidate, RLY-2608, which is being evaluated for just two indications. A setback in this program can leave the company with no clinical-stage assets, effectively reverting it to a preclinical-stage operation. Additionally, the company has only one standing partnership agreement, restricting its ability to generate revenues through licensing or milestone payments.

Based on these facts, Recursion Pharmaceuticals, with its innovative pipeline of candidates and encouraging collaboration agreements, is a far better bargain for investors looking to invest in precision biotech stocks with higher growth potential despite its higher valuation compared with RLAY. RXRX is thus the winner.