Recursion Pharmaceuticals, a biotech firm which uses artificial intelligence to discover new drug candidates, has agreed to buy smaller rival Exscientia for $688 million in an all-stock deal, according to a statement.

The deal, which is expected to be announced as early as Thursday morning, comes as major drugmakers double down on AI to boost drug development, find patients for clinical trials quickly or reduce the number of people needed to test medicines, both accelerating drug development and potentially saving millions of dollars.

Human studies are the most expensive and time-consuming part of drug development as it can take several years to recruit patients and trial new medicines in a process that can cost more than a billion dollars to get a newly discovered drug over the finishing line.

"Recursion and Exscientia coming together is extraordinarily complementary in terms of using end-to-end in discovery from biology to all the way through chemistry. It enables you to make medicines better and faster and that's what we're trying to do," said Najat Khan, chief R&D officer at Recursion.

Founded in 2013, Recursion is a phase 2 clinical-stage firm, which has a pipeline of treatments for rare diseases and some forms of cancers. It became a publicly-listed company in 2021 and has partnerships with large pharmaceutical companies including Roche AG and Bayer.

Earlier this year, it launched an Nvidia-powered supercomputer called BioHive-2, which helps accelerate the process of drug discovery. Nvidia is also an investor in Recursion.

UK-headquartered Exscientia also operates an AI-powered drug discovery platform and is developing a pipeline of treatments for immunology and oncology.

Acquiring Exscientia would boost Recursion's pipeline of drugs in development and give it access to partnerships with large pharma players like Sanofi and Merck KGaA.

As part of the deal, Exscientia shareholders will receive 0.7729 Recursion shares for each Exscientia share they hold. The deal, which is expected to close in early 2025, would provide the combined entity with about $850 million of cash that would help fund its operations for the next three years.

Salt Lake City-based Recursion is expected to report its quarterly earnings later on Thursday.

Allen & Co., Wilson Sonsini Goodrich & Rosati, and Clifford Chance advised Recursion on the deal, while Centerview Partners and A&O Shearman advised Exscientia.

(Reporting by Anirban Sen in New York; Editing by Kirsten Donovan)