SDGR Schrodinger Inc

Second Quarter Total Revenue of $47.3 Million, Software Revenue of $35.4 Million

Launches Major Initiative to Expand Application of Computational Tools for Predictive Toxicology

Initial Clinical Data Expected for SGR-1505 in 1H25, SGR-2921 and SGR-3515 Data in 2H25

Schr�dinger, Inc. (Nasdaq: SDGR), whose physics-based computational platform is transforming the way therapeutics and materials are discovered, today announced financial results for the second quarter of 2024.

“We are very pleased with our results for the second quarter. We delivered 21% software revenue growth, and we see many opportunities for customers to increase their scale of adoption of our technology. Our recently announced predictive toxicology initiative reflects our commitment to investing in the science underlying our platform to drive future growth,” said Ramy Farid, Ph.D., chief executive officer of Schr�dinger. “Recent clinical and corporate milestones at co-founded companies further validate our platform and underscore the strength of our business model. Our proprietary therapeutics pipeline also continues to progress, and we look forward to sharing the initial Phase 1 data from each of our three lead programs next year, starting with SGR-1505 in the first half of 2025.”

Second Quarter 2024 Financial Results

• Total revenue for the second quarter was $47.3 million, compared to $35.2 million in the second quarter of 2023.
• Software revenue for the second quarter increased 21% to $35.4 million, compared to $29.4 million in the second quarter of 2023. The increase reflects increased contribution from new and existing customers purchasing hosted licenses as well as the renewal of several multi-year deals.
• Drug discovery revenue was $11.9 million for the second quarter, compared to $5.8 million in the second quarter of 2023. The increase was primarily due to the recognition of milestone revenue associated with the progression of ongoing collaboration programs.
• Software gross margin increased to 80% for the second quarter, compared to 77% in the second quarter of 2023, primarily due to increased revenue in the period.
• Operating expenses were $84.1 million for the second quarter, compared to $74.9 million for the second quarter of 2023. The increase was primarily due to higher R&D expenses.
• Other expense, which includes changes in fair value of equity investments and interest income, was $1.2 million for the second quarter, compared to other income of $45.0 million for the second quarter of 2023, reflecting the difference in mark to market value of the company’s equity investments.
• Net loss for the second quarter was $54.0 million, compared to net income of $4.3 million in the second quarter of 2023.
• At June 30, 2024, Schr�dinger had cash, cash equivalents, restricted cash and marketable securities of approximately $381.5 million, compared to approximately $468.8 million at December 31, 2023.

 

 

Three Months Ended

June 30,

 

 

2024

 

 

 

2023

 

 

% Change

 

(in millions)

 

 

Total revenue

$

47.3

 

 

$

35.2

 

 

35

%

Software revenue

 

35.4

 

 

 

29.4

 

 

21

%

Drug discovery revenue

 

11.9

 

 

 

5.8

 

 

104

%

Software gross margin

 

80

%

 

 

77

%

 

 

Operating expenses

$

84.1

 

 

$

74.9

 

 

12

%

Other (expense) income

$

(1.2

)

 

$

45.0

 

 

—

 

Net (loss) income

$

(54.0

)

 

$

4.3

 

 

—

 

 

For the three and six months ended June 30, 2024, Schr�dinger reported non-GAAP net losses of $48.1 million and $110.5 million, respectively, compared to non-GAAP net losses of $56.8 million and $84.4 million for the three and six months ended June 30, 2023. A reconciliation of non-GAAP net loss to GAAP net (loss) income can be found in “Non-GAAP Information” and financial tables below.

2024 Financial Outlook

Today Schr�dinger updated its 2024 full-year guidance for software gross margin and operating expense growth and maintained its other financial guidance. The company’s financial expectations for the fiscal year ending December 31, 2024, are as follows:

• Software revenue growth is expected to range from 6% to 13%.
• Drug discovery revenue is expected to range from $30 million to $35 million.
• Software gross margin is now expected to be slightly lower than 2023 and in the range of 2022 based on the effect of the research grant from the Bill & Melinda Gates Foundation.
• Operating expense growth in 2024 is now expected to range from 8% to 10%.
• Cash used for operating activities in 2024 is expected to be above cash used for operating activities in 2023.

For the third quarter of 2024, software revenue is expected to range from $32 million to $34 million.

Recent Highlights

Platform

• In July, Schr�dinger launched an initiative to expand its computational platform to predict toxicity associated with binding to off-targets. The goal of this initiative is to develop a computational solution to improve the properties of drug development candidates and reduce the risk of development failure. The project will be funded initially by a $10 million grant from the Bill & Melinda Gates Foundation and will leverage NVIDIA’s AI technology.

• In June, Schr�dinger and AstraZeneca scientists published a method yielding more accurate predictions of experimental free energies for optimizing protein-protein interactions, which is central to biologics design. The case studies demonstrate how FEP+ calculations can be applied to real-world protein therapeutic design projects, potentially increasing throughput and lowering discovery costs.

Proprietary Pipeline

• The company is advancing the Phase 1 dose-escalation study of SGR-1505, its MALT1 inhibitor, in patients with relapsed/refractory B-cell malignancies, and enrollment is ongoing in the U.S. and Europe. The company expects to report initial clinical data from this study in the first half of 2025.

• Schr�dinger announced today that the FDA has granted SGR-2921, the company’s investigational CDC7 inhibitor, FDA Fast Track Designation for the treatment of relapsed/refractory acute myeloid leukemia. The Phase 1 study of SGR-2921 in patients with acute myeloid leukemia or myelodysplastic syndrome continues to enroll patients in the U.S. and EU. The company expects to report initial clinical data from this study in the second half of 2025.

• Today, Schr�dinger announced the initiation of dosing in a Phase 1 clinical study of SGR-3515, an investigational Wee1/Myt1 inhibitor in patients with advanced solid tumors. The dose-escalation study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, preliminary anti-tumor activity, and a recommended Phase 2 dose of SGR-3515. The company expects to report initial clinical data from this study in the second half of 2025.

Collaborators, Partners, and Co-Founded Companies

• In July, Morphic Holding, Inc., a company that Schr�dinger co-founded, announced its planned acquisition by Lilly for $57 per share, or approximately $3.2 billion. Schr�dinger currently owns 834,968 shares of Morphic and is entitled to low single-digit royalties on its clinical development programs, including MORF-057.

• Development programs at other companies co-founded by Schr�dinger continued to progress. In May, Ajax Therapeutics, Inc. completed a Series C financing and received Investigational New Drug clearance for AJ1-11095, a type II JAK2 inhibitor. In June, Structure Therapeutics presented obesity and diabetes data from its Phase 1b/2a study of GSBR-1290, a GLP-1 receptor agonist, at the Annual Meeting of the American Diabetes Association.

Webcast and Conference Call Information

Schr�dinger will host a conference call to discuss its second quarter 2024 financial results on Wednesday, July 31, 2024, at 4:30 p.m. ET. The live webcast can be accessed under “Events & Presentations” in the investors section of Schr�dinger’s website, https://ir.schrodinger.com/events-and-presentations/default.aspx. To participate in the live call, please register for the call here. It is recommended that participants register at least 15 minutes in advance of the call. Once registered, participants will receive the dial-in information. The archived webcast will be available on Schr�dinger’s website for approximately 90 days following the event.

Non-GAAP Information

Included in this press release is certain financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The company presents non-GAAP net income (loss) and non-GAAP net income (loss) per share, which exclude gains and losses on equity investments, changes in fair value of equity investments, and income tax benefits and expenses. Adjusting net income to exclude the impact of these items results in a financial presentation for the company without the impact of our equity investments and tax benefits and expenses. Management believes non-GAAP net income (loss) and non-GAAP net income (loss) per share are useful measures for investors, taken in conjunction with the company’s GAAP financial statements because they provide greater period-over-period comparability with respect to the company’s operating performance, by excluding non-cash mark-to-market and other valuation adjustments for the company’s equity investments, non-recurring cash distributions from the company’s equity investments and the tax impact of these distributions that are not reflective of the ongoing operating performance of the business. However, the non-GAAP measures should be considered only in addition to, not as a substitute for or as superior to, net income (loss) and net income (loss) per share or other financial measures prepared in accordance with GAAP.

Other companies in Schr�dinger’s industry may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share differently than we do, limiting their usefulness as comparative measures. For a reconciliation of non-GAAP net income (loss) and non-GAAP net income (loss) per share to GAAP net income (loss) and GAAP net income (loss) per share, respectively, please refer to the tables at the end of this press release.

About Schr�dinger

Schr�dinger is transforming the way therapeutics and materials are discovered. Schr�dinger has pioneered a physics-based computational platform that enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at lower cost compared to traditional methods. The software platform is licensed by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. Schr�dinger’s multidisciplinary drug discovery team also leverages the software platform to advance a portfolio of collaborative and proprietary programs to address unmet medical needs.

Founded in 1990, Schr�dinger has approximately 850 employees and is engaged with customers and collaborators in more than 70 countries. To learn more, visit www.schrodinger.com, follow us on LinkedIn and Instagram, or visit our blog, Extrapolations.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 including, but not limited to those statements regarding Schr�dinger’s expectations about the speed and capacity of its computational platform, its financial outlook for the fiscal year ending December 31, 2024 and second quarter ending June 30, 2024, its plans to continue to invest in research and its strategic plans to accelerate the growth of its software licensing business and advance its collaborative and proprietary drug discovery programs, the long-term potential of its business, its ability to improve and advance the science underlying its platform, the initiation, timing, progress, and results of its proprietary drug discovery programs and product candidates and the drug discovery programs and product candidates of its collaborators, the clinical potential and favorable properties of its CDC7, MALT1, and Wee1/Myt1 inhibitors, including SGR-1505, SGR-2921, and SGR-3515, the clinical potential and favorable properties of its collaborators’ product candidates, the expected timeline for submitting investigational new drug applications, its initiative to expand its computational platform to predict toxicity associated with binding to off-targets, as well as expectations related to the use of its cash, cash equivalents and marketable securities. Statements including words such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and statements in the future tense are forward-looking statements. These forward-looking statements reflect Schr�dinger’s current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the company and on assumptions the company has made. Actual results may differ materially from those described in these forward-looking statements and are subject to a variety of assumptions, uncertainties, risks and important factors that are beyond Schr�dinger’s control, including the demand for its software platform, its ability to further develop its computational platform, its reliance upon third-party providers of cloud-based infrastructure to host its software solutions, factors adversely affecting the life sciences industry, fluctuations in the value of the U.S. dollar and foreign currencies, its reliance upon its third-party drug discovery collaborators, the uncertainties inherent in drug development and commercialization, such as the conduct of research activities and the timing of and its ability to initiate and complete preclinical studies and clinical trials, whether results from preclinical studies will be predictive of the results of later preclinical studies and clinical trials, uncertainties associated with the regulatory review of IND submissions, clinical trials and applications for marketing approvals, the ability to retain and hire key personnel and other risks detailed under the caption “Risk Factors” and elsewhere in the company’s Securities and Exchange Commission filings and reports, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the Securities and Exchange Commission on July 31, 2024, as well as future filings and reports by the company. Any forward-looking statements contained in this press release speak only as of the date hereof. Except as required by law, Schr�dinger undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events, changes in expectations or otherwise.

 

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except for share and per share amounts)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

Software products and services

$

35,404

 

 

$

29,352

 

 

$

68,819

 

 

$

61,565

 

Drug discovery

 

11,930

 

 

 

5,837

 

 

 

15,113

 

 

 

38,406

 

Total revenues

 

47,334

 

 

 

35,189

 

 

 

83,932

 

 

 

99,971

 

Cost of revenues:

 

 

 

 

 

 

 

Software products and services

 

7,167

 

 

 

6,695

 

 

 

15,143

 

 

 

13,810

 

Drug discovery

 

8,832

 

 

 

14,684

 

 

 

18,564

 

 

 

26,658

 

Total cost of revenues

 

15,999

 

 

 

21,379

 

 

 

33,707

 

 

 

40,468

 

Gross profit

 

31,335

 

 

 

13,810

 

 

 

50,225

 

 

 

59,503

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

50,835

 

 

 

42,705

 

 

 

101,446

 

 

 

83,446

 

Sales and marketing

 

9,693

 

 

 

9,022

 

 

 

19,864

 

 

 

18,167

 

General and administrative

 

23,536

 

 

 

23,216

 

 

 

49,077

 

 

 

49,524

 

Total operating expenses

 

84,064

 

 

 

74,943

 

 

 

170,387

 

 

 

151,137

 

Loss from operations

 

(52,729

)

 

 

(61,133

)

 

 

(120,162

)

 

 

(91,634

)

Other (expense) income

 

 

 

 

 

 

 

Gain on equity investments

 

—

 

 

 

—

 

 

 

—

 

 

 

147,322

 

Change in fair value

 

(5,833

)

 

 

40,654

 

 

 

2,304

 

 

 

76,391

 

Other income

 

4,598

 

 

 

4,326

 

 

 

9,626

 

 

 

7,263

 

Total other (expense) income

 

(1,235

)

 

 

44,980

 

 

 

11,930

 

 

 

230,976

 

(Loss) income before income taxes

 

(53,964

)

 

 

(16,153

)

 

 

(108,232

)

 

 

139,342

 

Income tax expense (benefit)

 

83

 

 

 

(20,431

)

 

 

539

 

 

 

5,928

 

Net (loss) income

$

(54,047

)

 

$

4,278

 

 

$

(108,771

)

 

$

133,414

 

Net (loss) income per share of common and limited common stockholders, basic:

$

(0.74

)

 

$

0.06

 

 

$

(1.50

)

 

$

1.86

 

Weighted average shares used to compute net (loss) income per share of common and limited common stockholders, basic:

 

72,711,685

 

 

 

71,642,722

 

 

 

72,501,409

 

 

 

71,555,395

 

Net (loss) income per share of common and limited common stockholders, diluted:

$

(0.74

)

 

$

0.06

 

 

$

(1.50

)

 

$

1.79

 

Weighted average shares used to compute net (loss) income per share of common and limited common stockholders, diluted:

 

72,711,685

 

 

 

75,064,323

 

 

 

72,501,409

 

 

 

74,499,672

 

 

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except for share and per share amounts)

 

Assets

June 30, 2024

 

December 31, 2023

Current assets:

 

 

 

Cash and cash equivalents

$

108,109

 

 

$

155,315

 

Restricted cash

 

4,227

 

 

 

5,751

 

Marketable securities

 

269,180

 

 

 

307,688

 

Accounts receivable, net of allowance for doubtful accounts of $150 and $220

 

11,849

 

 

 

65,992

 

Unbilled and other receivables, net for allowance for unbilled receivables of $130 and $100

 

40,321

 

 

 

23,124

 

Prepaid expenses

 

15,493

 

 

 

9,926

 

Total current assets

 

449,179

 

 

 

567,796

 

Property and equipment, net

 

25,723

 

 

 

23,325

 

Equity investments

 

88,555

 

 

 

83,251

 

Goodwill

 

4,791

 

 

 

4,791

 

Right of use assets - operating leases

 

116,525

 

 

 

117,778

 

Other assets

 

3,598

 

 

 

6,014

 

Total assets

$

688,371

 

 

$

802,955

 

Liabilities and Stockholders' Equity:

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

8,116

 

 

$

16,815

 

Accrued payroll, taxes, and benefits

 

24,320

 

 

 

31,763

 

Deferred revenue

 

40,799

 

 

 

56,231

 

Lease liabilities - operating leases

 

16,801

 

 

 

16,868

 

Other accrued liabilities

 

9,723

 

 

 

11,996

 

Total current liabilities

 

99,759

 

 

 

133,673

 

Deferred revenue, long-term

 

7,080

 

 

 

9,043

 

Lease liabilities - operating leases, long-term

 

107,128

 

 

 

111,014

 

Other liabilities, long-term

 

424

 

 

 

667

 

Total liabilities

 

214,391

 

 

 

254,397

 

Stockholders' equity:

 

 

 

Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

—

 

 

 

—

 

Common stock, $0.01 par value. Authorized 500,000,000 shares; 63,621,165 and 62,977,316 shares issued and outstanding at June 30, 2024 and December 31, 2023 , respectively

 

636

 

 

 

630

 

Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

92

 

 

 

92

 

Additional paid-in capital

 

920,621

 

 

 

885,973

 

Accumulated deficit

 

(447,189

)

 

 

(338,418

)

Accumulated other comprehensive (loss) income

 

(180

)

 

 

281

 

Total stockholders' equity

 

473,980

 

 

 

548,558

 

Total liabilities and stockholders' equity

$

688,371

 

 

$

802,955

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

Net (loss) income

$

(108,771

)

 

$

133,414

 

Adjustments to reconcile net (loss) income to net cash used in operating activities:

 

 

 

Gain on equity investments

 

—

 

 

 

(147,322

)

Fair value adjustments

 

(2,304

)

 

 

(76,391

)

Depreciation and amortization

 

2,837

 

 

 

2,925

 

Stock-based compensation

 

25,026

 

 

 

22,653

 

Noncash investment accretion

 

(4,706

)

 

 

(2,858

)

Loss on disposal of property and equipment

 

7

 

 

 

63

 

Decrease (increase) in assets:

 

 

 

Accounts receivable, net

 

54,143

 

 

 

46,301

 

Unbilled and other receivables

 

(17,197

)

 

 

(1,448

)

Reduction in the carrying amount of right of use assets - operating leases

 

4,205

 

 

 

3,720

 

Prepaid expenses and other assets

 

(6,118

)

 

 

(11,408

)

(Decrease) increase in liabilities:

 

 

 

Accounts payable

 

(8,941

)

 

 

192

 

Income taxes payable

 

—

 

 

 

4,779

 

Accrued payroll, taxes, and benefits

 

(7,443

)

 

 

(3,554

)

Deferred revenue

 

(17,395

)

 

 

(21,235

)

Lease liabilities - operating leases

 

(3,953

)

 

 

(1,584

)

Other accrued liabilities

 

(2,389

)

 

 

2,216

 

Net cash used in operating activities

 

(92,999

)

 

 

(49,537

)

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(5,096

)

 

 

(6,007

)

Purchases of equity investments

 

(3,000

)

 

 

(4,125

)

Distribution from equity investment

 

—

 

 

 

147,117

 

Purchases of marketable securities

 

(153,513

)

 

 

(125,714

)

Proceeds from maturity of marketable securities

 

196,266

 

 

 

228,174

 

Net cash provided by investing activities

 

34,657

 

 

 

239,445

 

Cash flows from financing activities:

 

 

 

Issuances of common stock upon stock option exercises

 

950

 

 

 

5,565

 

Principal payments on finance leases

 

(29

)

 

 

—

 

Payment of offering costs

 

—

 

 

 

(174

)

Issuance of common stock upon ATM offering, net

 

8,691

 

 

 

—

 

Net cash provided by financing activities

 

9,612

 

 

 

5,391

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(48,730

)

 

 

195,299

 

Cash and cash equivalents and restricted cash, beginning of period

 

161,066

 

 

 

95,717

 

Cash and cash equivalents and restricted cash, end of period

$

112,336

 

 

$

291,016

 

 

 

 

 

Supplemental disclosure of cash flow and noncash information

 

 

 

Cash paid for income taxes

$

439

 

 

$

918

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

Accrued offering costs

 

—

 

 

 

199

 

Purchases of property and equipment in accounts payable

 

435

 

 

 

2,935

 

Purchases of property and equipment in accrued liabilities

 

331

 

 

 

30

 

Acquisition of right of use assets - operating leases, contingency resolution

 

2,848

 

 

 

514

 

Acquisition of right of use assets in exchange for lease liabilities - operating leases

 

—

 

 

 

6,333

 

 

Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

 

 

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

(in thousands, except per share data)

Net (loss) income (GAAP)

$

(54,047

)

 

$

4,278

 

 

$

(108,771

)

 

$

133,414

 

Income tax expense (benefit)

 

83

 

 

 

(20,431

)

 

 

539

 

 

 

5,928

 

Gain on equity investment

 

—

 

 

 

—

 

 

 

—

 

 

 

(147,322

)

Change in fair value

 

5,833

 

 

 

(40,654

)

 

 

(2,304

)

 

 

(76,391

)

Non-GAAP net loss

$

(48,131

)

 

$

(56,807

)

 

$

(110,536

)

 

$

(84,371

)

Non-GAAP net loss per share of common and limited common stockholders, basic and diluted:

$

(0.66

)

 

$

(0.79

)

 

$

(1.52

)

 

$

(1.18

)

Weighted average shares used to compute net loss per share of common and limited common stockholders, basic and diluted:

 

72,711,685

 

 

 

71,642,722

 

 

 

72,501,409

 

 

 

71,555,395

 

 

 

 

 

 

 

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731471319/en/

Matthew Luchini (Investors) Schr�dinger, Inc. matthew.luchini@schrodinger.com 917-719-0636

Allie Nicodemo (Media) Schr�dinger, Inc. allie.nicodemo@schrodinger.com 617-356-2325