Delivers Third Quarter Total Revenue of $42.6 Million; Maintains Full-Year 2023 Revenue Guidance

Continued Progress for SGR-1505, Healthy Volunteer Data Expected in Fourth Quarter of 2023

Phase 1 Study Initiated for SGR-2921; Discloses PRMT5-MTA Discovery Program

BMS Returns Two Programs From Collaboration

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 quarter ended on September 30, 2023.

“Schrodinger had an excellent third quarter marked by strong revenue growth and significant pipeline progress. More of our software customers are increasing the scale of their use of our technology, and we remain very confident about the outlook for the full year,” said Ramy Farid, Ph.D., chief executive officer of Schr�dinger. “We initiated our Phase 1 clinical study of SGR-2921 and our Phase 1 study of SGR-1505 in healthy volunteers is nearing completion. We look forward to sharing more details about our proprietary programs later this year.”

Today, Schrodinger announced that the rights to two related oncology discovery programs would revert to the company, after Bristol Myers Squibb elected not to proceed with further development of these programs for strategic reasons.

Third Quarter 2023 GAAP Financial Results

  • Total revenue for the third quarter was $42.6 million compared to $37.0 million in the third quarter of 2022.
  • Software revenue for the third quarter was $28.9 million compared to $24.7 million in the third quarter of 2022.
  • Drug discovery revenue was $13.7 million for the third quarter compared to $12.3 million in the third quarter of 2022.
  • Software gross margin was 76% for the third quarter compared to 72% in the third quarter of 2022.
  • Operating expenses were $79.8 million for the third quarter compared to $63.4 million for the third quarter of 2022.
  • Other expense for the third quarter was $8.7 million compared to other income of $6.5 million in the third quarter of 2022, driven by changes in the fair value of equity investments and interest income.
  • Net loss for the third quarter was $62.0 million, compared to $39.9 million in the third quarter of 2022.
  • At September 30, 2023, Schr�dinger had cash, cash equivalents, restricted cash and marketable securities of approximately $503 million, compared to approximately $456 million at December 31, 2022.

 

Three Months Ended

September 30,

 

2023

 

2022

 

% Change

 

(in millions)

 

 

Total revenue

$

42.6

 

 

$

37.0

 

 

15.1

%

Software revenue

 

28.9

 

 

 

24.7

 

 

17.0

%

Drug discovery revenue

 

13.7

 

 

 

12.3

 

 

11.4

%

Software gross margin

 

76

%

 

 

72

%

 

 

Operating expenses

$

79.8

 

 

$

63.4

 

 

25.9

%

Other (expense) income

$

(8.7

)

 

$

6.5

 

 

N/M

 

Net loss

$

(62.0

)

 

$

(39.9

)

 

N/M

 

For the three and nine months ended September 30, 2023, Schr�dinger reported net losses of $62.0 million and net income of $71.4 million, respectively, compared to net losses of $39.9 million and $122.0 million for the three and nine months ended September 30, 2022, respectively.

For the three and nine months ended September 30, 2023, Schr�dinger reported non-GAAP net losses of $50.4 million and $134.8 million, respectively, compared to non-GAAP net losses of $44.9 million and $117.0 million for the three and nine months ended September 30, 2022, respectively. See “Non-GAAP Information” below and the table at the end of this press release for a reconciliation of non-GAAP net income (loss) to GAAP net income (loss).

2023 Financial Outlook

Schr�dinger today updated its financial guidance for 2023. The company’s financial expectations for the fiscal year ending December 31, 2023 are as follows:

  • Software revenue growth is expected to be in the range of 15 percent to 18 percent.
  • Drug discovery revenue is expected to range from $50 million to $70 million.
  • Software gross margin is expected to be similar to software gross margin for the full year 2022.
  • Operating expense growth in 2023 is expected to be significantly lower than operating expense growth in 2022.
  • Cash used for operating activities is now expected to be higher in 2023 than 2022, based on the mix of revenue, the timing and size of milestones and expectations for new business development activity this year.

Recent Company Highlights

Wholly-Owned Pipeline

  • Schr�dinger continues to advance SGR-1505, its investigational MALT1 inhibitor. The Phase 1 dose-escalation study in healthy volunteers is nearing completion, and the company expects to report data from the study in the fourth quarter of 2023. Enrollment in the Phase 1 dose-escalation study in relapsed or refractory B-cell malignancy patients is ongoing in the U.S. and EU. The U.S. Food and Drug Administration recently granted Orphan Drug Designation to SGR-1505 for potential treatment in mantle cell lymphoma.
  • Today Schr�dinger announced the initiation of the Phase 1 clinical study of SGR-2921, an investigational CDC7 inhibitor, in patients with acute myeloid leukemia or myelodysplastic syndrome. The study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and determine the recommended dose. SGR-2921 has exhibited anti-tumor activity as a monotherapy and in combination with standard of care agents in multiple preclinical tumor models.
  • Schr�dinger continues to advance SGR-3515, an inhibitor of Wee1 and Myt1. Concurrent loss of function of Wee1 and Myt1 confers selective vulnerability in cancer cells, a mechanism referred to as synthetic lethality. IND-enabling activities are ongoing to support an IND submission for SGR-3515 in the first half of 2024.
  • Today Schr�dinger announced that one of its previously undisclosed discovery programs is PRMT5-MTA (protein arginine methyltransferase 5/methylthioadenosine). PRMT5 has been shown to be a synthetic lethal target for MTAP-deleted cancers with potential roles in the treatment of both hematologic and solid tumors. The company expects to provide more details about its PRMT5-MTA program and other early-stage programs at its Pipeline Day on December 14, 2023.

Schr�dinger Collaborators

  • In October, Schr�dinger collaborator Morphic Holdings presented additional Phase 2a data from the EMERALD-1 trial of MORF-057, an oral ɑ4ꞵ7 inhibitor in development for ulcerative colitis and Crohn’s disease at United European Gastroenterology (UEG) week.
  • In September, Structure Therapeutics presented positive results from the Phase Ib multiple ascending dose study of GSBR-1290, an oral GLP-1R, in healthy overweight or obese individuals.
  • In September, Schr�dinger and the Bill & Melinda Gates Foundation renewed their agreement to invest in the discovery and development of novel non-hormonal contraceptive agents for global health.

Platform

  • During the third quarter, Schr�dinger and Gates Ventures LLC extended their agreement to develop and apply simulation methods to improve battery performance for a second three-year period. The new research agreement includes total consideration of $6M and runs through August 2026.
  • Schr�dinger announced quarterly software release 2023-3, which incorporated a number of important updates, including a major enhancement to the company’s Induced Fit Docking (IFD) technology for optimization of certain key ADMET properties, the first full release of technology that can be used to optimize antibody affinity as a function of pH, and technology to more accurately predict small molecule pKa values, a key intrinsic molecular property.
  • In August, Schr�dinger scientists published the results of a novel automated workflow, FEP Protocol Builder (FEP-PB), which uses active-learning to automate development of accurate FEP+ protocols, increasing the number of targets amenable to the technology.

Third Quarter 2023 Webcast and Conference Call Information

Schr�dinger will host a conference call to discuss its third quarter 2023 financial results on Wednesday, November 1, 2023, at 4:30 p.m. ET. The live webcast can be accessed under “News & Events” in the investors section of Schr�dinger’s website, https://ir.schrodinger.com/news-and-events/event-calendar. The archived webcast will be available on Schr�dinger’s website for approximately 90 days following the event.

Schr�dinger Pipeline Day Webcast Information

Schr�dinger will host its Pipeline Day in New York City on Thursday, December 14, 2023, beginning at 10:00 a.m. ET. Pipeline Day will be a hybrid event, with limited in-person attendance available to members of the investment community, and a simultaneous webcast will be available for individual investors and other interested parties who wish to join virtually. The live presentation can be accessed in the “Investors” section of Schr�dinger’s website and will be archived for approximately 90 days. To participate in the live webcast, please register for the event here. It is recommended that participants register at least 15 minutes in advance of 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, 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 800 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, 2023, 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, 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, and the ability to retain and hire key personnel on its business 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 fiscal quarter ended September 30, 2023, filed with the Securities and Exchange Commission on November 1, 2023, 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 September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

Software products and services

$

28,904

 

 

$

24,667

 

 

$

90,469

 

 

$

87,759

 

Drug discovery

 

13,665

 

 

 

12,313

 

 

 

52,071

 

 

 

36,353

 

Total revenues

 

42,569

 

 

 

36,980

 

 

 

142,540

 

 

 

124,112

 

Cost of revenues:

 

 

 

 

 

 

 

Software products and services

 

7,034

 

 

 

6,866

 

 

 

20,844

 

 

 

21,478

 

Drug discovery

 

11,896

 

 

 

12,913

 

 

 

38,554

 

 

 

40,316

 

Total cost of revenues

 

18,930

 

 

 

19,779

 

 

 

59,398

 

 

 

61,794

 

Gross profit

 

23,639

 

 

 

17,201

 

 

 

83,142

 

 

 

62,318

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

46,833

 

 

 

32,885

 

 

 

130,279

 

 

 

91,830

 

Sales and marketing

 

9,109

 

 

 

7,161

 

 

 

27,276

 

 

 

21,260

 

General and administrative

 

23,890

 

 

 

23,318

 

 

 

73,414

 

 

 

67,507

 

Total operating expenses

 

79,832

 

 

 

63,364

 

 

 

230,969

 

 

 

180,597

 

Loss from operations

 

(56,193

)

 

 

(46,163

)

 

 

(147,827

)

 

 

(118,279

)

Other (expense) income

 

 

 

 

 

 

 

(Loss) gain on equity investments

 

 

 

 

(3

)

 

 

147,322

 

 

 

11,825

 

Change in fair value

 

(14,522

)

 

 

5,273

 

 

 

61,869

 

 

 

(16,591

)

Other income

 

5,804

 

 

 

1,234

 

 

 

13,067

 

 

 

1,265

 

Total other (expense) income

 

(8,718

)

 

 

6,504

 

 

 

222,258

 

 

 

(3,501

)

(Loss) income before income taxes

 

(64,911

)

 

 

(39,659

)

 

 

74,431

 

 

 

(121,780

)

Income tax (benefit) expense

 

(2,887

)

 

 

194

 

 

 

3,041

 

 

 

199

 

Net (loss) income

$

(62,024

)

 

$

(39,853

)

 

$

71,390

 

 

$

(121,979

)

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

$

(0.86

)

 

$

(0.56

)

 

$

1.00

 

 

$

(1.71

)

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

 

71,924,451

 

 

 

71,207,992

 

 

 

71,679,765

 

 

 

71,140,682

 

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

$

(0.86

)

 

$

(0.56

)

 

$

0.95

 

 

$

(1.71

)

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

 

71,924,451

 

 

 

71,207,992

 

 

 

74,966,791

 

 

 

71,140,682

 

 

Condensed Consolidated Balance Sheets (Unaudited)

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

 

Assets

September 30, 2023

 

December 31, 2022

Current assets:

 

 

 

Cash and cash equivalents

$

249,378

 

 

$

90,474

 

Restricted cash

 

6,230

 

 

 

5,243

 

Marketable securities

 

246,905

 

 

 

360,613

 

Accounts receivable, net of allowance for doubtful accounts of $150 and $125

 

19,884

 

 

 

55,953

 

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

 

12,253

 

 

 

13,137

 

Prepaid expenses

 

13,111

 

 

 

8,569

 

Total current assets

 

547,761

 

 

 

533,989

 

Property and equipment, net

 

22,498

 

 

 

14,244

 

Equity investments

 

91,863

 

 

 

25,683

 

Goodwill

 

4,791

 

 

 

4,791

 

Intangible assets, net

 

 

 

 

587

 

Right of use assets - operating leases

 

119,822

 

 

 

105,982

 

Other assets

 

7,413

 

 

 

3,311

 

Total assets

$

794,148

 

 

$

688,587

 

Liabilities and Stockholders' Equity:

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

10,318

 

 

$

9,470

 

Income taxes payable

 

1,084

 

 

 

355

 

Accrued payroll, taxes, and benefits

 

25,508

 

 

 

24,882

 

Deferred revenue

 

43,313

 

 

 

57,931

 

Lease liabilities - operating leases

 

16,279

 

 

 

11,006

 

Other accrued liabilities

 

8,536

 

 

 

5,166

 

Total current liabilities

 

105,038

 

 

 

108,810

 

Deferred revenue, long-term

 

12,102

 

 

 

25,598

 

Lease liabilities - operating leases, long-term

 

112,720

 

 

 

105,485

 

Other liabilities, long-term

 

707

 

 

 

800

 

Total liabilities

 

230,567

 

 

 

240,693

 

Stockholders' equity:

 

 

 

Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

Common stock, $0.01 par value. Authorized 500,000,000 shares; 62,823,295 and 62,163,739 shares issued and outstanding at September 30, 2023 and December 31, 2022 , respectively

 

628

 

 

 

622

 

Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

92

 

 

 

92

 

Additional paid-in capital

 

871,100

 

 

 

828,700

 

Accumulated deficit

 

(307,748

)

 

 

(379,138

)

Accumulated other comprehensive loss

 

(491

)

 

 

(2,382

)

Total stockholders' equity

 

563,581

 

 

 

447,894

 

Total liabilities and stockholders' equity

$

794,148

 

 

$

688,587

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Nine Months Ended September 30,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net income (loss)

$

71,390

 

 

$

(121,979

)

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

 

 

 

Gain on equity investments

 

(147,322

)

 

 

(11,825

)

Fair value adjustments

 

(61,869

)

 

 

16,591

 

Depreciation and amortization

 

4,198

 

 

 

3,202

 

Stock-based compensation

 

35,307

 

 

 

29,425

 

Noncash investment (accretion) amortization

 

(4,962

)

 

 

2,102

 

Loss on disposal of property and equipment

 

140

 

 

 

14

 

Decrease (increase) in assets, net of acquisition:

 

 

 

Accounts receivable, net

 

36,069

 

 

 

8,673

 

Unbilled and other receivables

 

884

 

 

 

(3,272

)

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

 

5,722

 

 

 

4,812

 

Prepaid expenses and other assets

 

(13,048

)

 

 

(6,837

)

Increase (decrease) in liabilities, net of acquisition:

 

 

 

Accounts payable

 

742

 

 

 

1,959

 

Income taxes payable

 

729

 

 

 

638

 

Accrued payroll, taxes, and benefits

 

626

 

 

 

499

 

Deferred revenue

 

(28,114

)

 

 

(19,535

)

Lease liabilities - operating leases

 

(2,577

)

 

 

920

 

Other accrued liabilities

 

2,607

 

 

 

(128

)

Net cash used in operating activities

 

(99,478

)

 

 

(94,741

)

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(10,924

)

 

 

(6,668

)

Purchases of equity investments

 

(4,125

)

 

 

(600

)

Distribution from equity investment

 

147,136

 

 

 

11,825

 

Acquisition, net of acquired cash

 

 

 

 

(6,427

)

Purchases of marketable securities

 

(224,513

)

 

 

(203,375

)

Proceeds from maturity of marketable securities

 

345,074

 

 

 

283,711

 

Net cash provided by investing activities

 

252,648

 

 

 

78,466

 

Cash flows from financing activities:

 

 

 

Issuances of common stock upon stock option exercises

 

7,099

 

 

 

1,628

 

Principal payments on finance leases

 

(5

)

 

 

 

Payment of offering costs

 

(373

)

 

 

 

Net cash provided by financing activities

 

6,721

 

 

 

1,628

 

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

 

159,891

 

 

 

(14,647

)

Cash and cash equivalents and restricted cash, beginning of period

 

95,717

 

 

 

123,267

 

Cash and cash equivalents and restricted cash, end of period

$

255,608

 

 

$

108,620

 

 

 

 

 

Supplemental disclosure of cash flow and noncash information

 

 

 

Cash paid for income taxes

$

2,194

 

 

$

462

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

Purchases of property and equipment in accounts payable

 

274

 

 

 

198

 

Purchases of property and equipment in accrued liabilities

 

685

 

 

 

109

 

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

 

514

 

 

 

1,513

 

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

 

15,085

 

 

 

14,767

 

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

 

279

 

 

 

 

 

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

 

 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

 

2023

 

2022

 

2023

 

2022

 

(in thousands, except per share data)

Net (loss) income (GAAP)

$

(62,024

)

 

$

(39,853

)

 

$

71,390

 

 

$

(121,979

)

Income tax (benefit) expense

 

(2,887

)

 

 

194

 

 

 

3,041

 

 

 

199

 

Loss (gain) on equity investments

 

 

 

 

3

 

 

 

(147,322

)

 

 

(11,825

)

Change in fair value

 

14,522

 

 

 

(5,273

)

 

 

(61,869

)

 

 

16,591

 

Non-GAAP net loss

$

(50,389

)

 

$

(44,929

)

 

$

(134,760

)

 

$

(117,014

)

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

$

(0.70

)

 

$

(0.63

)

 

$

(1.88

)

 

$

(1.64

)

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

 

71,924,451

 

 

 

71,207,992

 

 

 

71,679,765

 

 

 

71,140,682

 

 

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

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