Why doesn't RXRX focus on 'selling shovels'

This is a very sharp and almost the most frequently asked question by investors to Recursion's management:
"Your platform is so strong, why not follow Schrödinger (SDGR), Exscientia (pre-acquisition), and BenevolentAI to become a pure TechBio platform company that 'sells shovels'? Just collect upfront + milestone + single-digit royalties, without bearing the sky-high clinical risks yourself—wouldn't that be easier and command a higher valuation?"

Management (Chris Gibson, Najat Khan) and major shareholders (Baillie Gifford, ARK, etc.) have been repeatedly asked this question over the past three years. Their answers have been highly consistent and increasingly clear. Below, we lay out the official response, the real logic, and a cold-blooded comparison of pros and cons for you.

1. Management's Official Answer (Almost Every Earnings Call)

"We believe the ultimate way to validate the value of Recursion OS is to complete, commercialize, and monetize the drugs ourselves. Only when we personally deliver an AI-discovered, blockbuster, approved drug will the entire industry regard Recursion as the 'next Amgen or Vertex,' rather than just another tool company. Only then can we achieve a true $100 billion valuation."

2. The Real Core Logic (Translating the Official Talk into Plain Language)

Real Reason	Specific Explanation
The ceiling for a pure 'shovel-selling' model is too low	Historically, the most successful AI/physics platform company, Schrödinger, will only generate $280 million in revenue by 2025, with a valuation of $8-9 billion. Recursion's current market cap (~$2 billion) is already 1/4 of Schrödinger's, but it burns 5x more cash. If it continues on the pure platform path, its valuation will likely never reach $20 billion.
Big pharma is unwilling to hand over its best targets and most profitable indications to external platforms	Most of the collaboration projects Roche, Bayer, and Sanofi give to Recursion are 'tough nuts' they've been stuck on internally for a decade (e.g., neurodegeneration, fibrosis). The real moneymakers—oncology, autoimmune, weight-loss drugs, ADC targets—are always kept in-house or given only to the most trusted internal teams. The result: platform companies always get slow milestones and low royalties (usually 1-3%).
Only by successfully developing a drug can the platform command a sky-high price	Imagine: If REC-994 (cerebrovascular malformation) or REC-2282 (neurofibromatosis) launches in 2027 with peak annual sales of $2-3 billion and a 60% net margin, Recursion's market cap could easily hit $50-80 billion. At that point, licensing the platform to others could fetch 8-12% royalties, not the current 1-3%. This is the logic of 'fire a shot to make noise, then sell the gun.'
The brutal reality of capital markets	From 2021-2023, pure platform companies (SDGR, EXAI, REVB, etc.) saw their stocks halved, while companies with in-house pipelines in late Phase II or Phase III (SANA, CRSP, BEAM, ATEC, etc.)—even pre-commercial—commanded much higher valuations. Wall Street only pays a premium for stories that 'could birth the next blockbuster drug,' not for 'helping others do the work.'

3. Cold-Blooded Comparison of the Two Models (2025 Data)

Metric	Pure 'Shovel-Selling' Path (Like Schrödinger)	Recursion's Current 'Platform + In-House' Dual Path
2025 Revenue	$250-300M	$60-70M (currently far below SDGR)
2025 R&D Burn	≈$220M	$480-520M (2.3x higher)
Current Market Cap	$8-9B	$1.8-2.2B
All-Time High Market Cap	$15B (2021)	$8B (2021)
Theoretical Cap (Market Consensus)	$15-20B (already peaked)	$50-150B (if 1-2 drugs launch)
3-Year Stock Performance	-70%	-90%
Worst-Case Next 3 Years	Market cap halves to $4B, still survives comfortably	Stock drops another 70-80%, dilutive financing, limps to 2028
Best-Case Next 3 Years	Market cap rebounds to $12B, slow volatility	One drug succeeds, 10-30x, $50B+ market cap

4. Conclusion: They Don't 'Not Want' to Sell Shovels—They Just Can't Sell Them for a Good Price

Recursion's management knows very well:

In the short term, pure shovel-selling is indeed safer, with better cash flow and less stock volatility.
But in the long term, if just one drug in their in-house pipeline succeeds, they can sell the entire company for 10x the valuation of a pure platform company.

So they'd rather bet everything (burning $500M a year, watching their stock halve repeatedly, enduring dilution) to stubbornly pursue the hardest, most expensive, but highest-upside path of in-house drug development.

For investors, this is a stark either-or choice:

Do you want to buy a 'high-probability, slow 2-3x grower' like Schrödinger?
Or a '90% chance of further crashes or even zero, but 10% chance of 20-50x' like Recursion?

Recursion has chosen the latter—and has stuck to it since 2019, with no turning back.
Now, the only question left is: Of these five Phase II/III readouts in 2026-2028, how many bullets will they land.

$Recursion Pharmaceuticals(RXRX.US)