Why Recursion Pharmaceuticals Stock Got Mashed on Monday

Key Points

• The company isn't the only developer of a drug for FAP, a rare genetic disease.

• A rival just reported that its own FAP treatment is advancing to late-stage testing.

• 10 stocks we like better than Recursion Pharmaceuticals ›

Clinical-stage biotech Recursion Pharmaceuticals' (NASDAQ: RXRX) stock took it on the chin in the first trading day of the week. Monday saw investors back out of the company's shares, leaving them with an almost 3% decline at market close. The benchmark S&P 500 (SNPINDEX: ^GSPC) did notably better, ticking up slightly on the day.

A rival reports a major step forward

This was largely due to news from a rival clincal-stage biotech. Late on Friday, U.K.-based Biodexa announced it had launched a phase 3 clinical trial of its eRapa, an investigational drug that targets familial adenomatous polyposis (FAP). This is a rare genetic disease which, when left untreated, typically leads to colorectal cancer.

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Biodexa has been granted Fast Track status for investigating the drug from the U.S. Food and Drug Administration (FDA). This followed a phase 2 clinical trial in which the drug met its primary endpoints.

The advancement of eRapa puts it ahead of Recursion's REC-4881, which is also aimed at treating FAP. The company completed a phase 1b/2 study of the drug earlier this year. Like Biodexa's drug, REC-4881 did well in that stage of testing.

The best should win

As any seasoned biotech investor would attest, it's the final results and approval process of a drug that ultimately count. Given that, it's hardly encouraging that Biodexa has taken a big step forward ahead of Recursion in the development of its FAP medication. The latter company's investors will be hoping that REC-4881 ultimately proves to be the more efficacious drug for the disorder.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.