Schrödinger Reports First Quarter 2021 Financial Results and Provides Company Update

Rhea-AI Summary

Schrödinger, Inc. (Nasdaq: SDGR) reported first-quarter 2021 financial results, noting a 23% increase in revenue to $32.1 million compared to Q1 2020. Software revenue grew 11%, while drug discovery revenue surged from $2.4 million to $5.8 million. Gross profit rose to $16.2 million despite a decline in software gross margin to 78%. Operating expenses increased significantly to $40.1 million. The company continues to advance its internal drug discovery pipeline and has expanded its collaboration with AstraZeneca. For 2021, Schrödinger expects total revenue between $124 million and $142 million.

Positive

• 23% revenue growth in Q1 2021 to $32.1 million.
• Drug discovery revenue increased from $2.4 million to $5.8 million.
• Expanded collaboration with AstraZeneca to accelerate drug discovery.

Negative

• Operating expenses rose sharply to $40.1 million.
• Software gross margin declined to 78% from 83% in Q1 2020.
• Expected operating expense growth to exceed 42% in 2021.

Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, today announced financial results for the quarter ended March 31, 2021, and provided an update on the company.

“We had strong execution across multiple facets of our business during the quarter,” stated Ramy Farid, Ph.D., chief executive officer at Schrödinger. “We are continuing to advance our internal drug discovery pipeline and recently selected a development candidate for our MALT1 inhibitor program. Progress on our internal programs, coupled with our collaborators’ successes with molecules we’ve helped discover, are powerful examples that our platform and approach generates high-quality development candidates. We look forward to seeing the full impact of our technology as pharmaceutical, biotechnology and materials companies adopt our platform on a larger scale.”

Today the company announced an expanded collaboration with AstraZeneca to deploy Schrödinger’s computational platform to help accelerate drug discovery. The collaboration is an expansion of the agreement announced in September 2019, which was a pilot project across an initial small number of programs. Under the expanded agreement, AstraZeneca will fully deploy Schrödinger’s platform across all its structurally-enabled small molecule discovery programs.

First Quarter 2021 Financial Results

• Revenue was $32.1 million for the first quarter of 2021, a 23 percent increase compared to the first quarter of 2020.
• Software revenue was $26.3 million for the first quarter of 2021, an 11 percent increase compared to the first quarter of 2020.
• Drug discovery revenue was $5.8 million for the first quarter of 2021, compared to $2.4 million in the first quarter of 2020.
• Gross profit was $16.2 million in the first quarter of 2021, up three percent over the first quarter in 2020. Software gross margin was 78 percent in the first quarter of 2021, compared to 83 percent for the same period in the prior year.
• Operating expenses for the first quarter of 2021 were $40.1 million, compared to $27.4 million in the first quarter of 2020.
• Other income, which included losses on equity investments, changes in fair value of such investments and interest income, was $23.5 million in the first quarter of 2021 compared to a loss of $2.4 million for the first quarter of 2020. Other income for the first quarter of 2021 included a $24.8 million non-cash gain from the change in fair value of Schrödinger’s equity stake in Morphic Therapeutic. Additionally, in the first quarter of 2021, Schrödinger sold its equity stake in Relay Therapeutics, Inc. for cash proceeds of $15.7 million, which resulted in a non-cash loss of $1.8 million as a result of the fair value based on the share price of the Relay Therapeutics common stock at the sales date.
• Net loss, after adjusting for non-controlling interests, was $0.0 million for the first quarter of 2021, compared to a net loss of $13.8 million in the first quarter of 2020.

Recent Business Highlights

Continued revenue growth and strategic execution

• Reported 23 percent total revenue growth in the first quarter of 2021, driven by significant increase in drug discovery revenue in addition to continued uptake of Schrödinger’s core technologies including FEP+ and its enterprise solution, LiveDesign, as well as growth in new customers.
• Ended the first quarter of 2021 with cash, cash equivalents, restricted cash and marketable securities of $649.0 million, compared to $643.2 million as of December 31, 2020.

Progressed internal pipeline

• Selected a development candidate for the company’s MALT1 inhibitor program. Targeting MALT1 is emerging as a potential therapeutic strategy to treat certain relapsed or resistant B-cell lymphomas and chronic lymphocytic leukemia.
• Continued to advance multiple programs toward IND-enabling studies; subject to completion of the preclinical data packages, the company expects to submit up to three IND applications in 2022, with the first submission to the FDA expected in the first half of next year.
• Presented preclinical data on the company’s CDC7 inhibitor program at the American Association for Cancer Research (AACR) Annual Virtual Meeting. The data showed that Schrödinger’s picomolar CDC7 inhibitors were highly selective and inhibited tumor cell growth alone and in combination with several approved and investigational cancer treatments.
• Advanced discovery efforts to allow addition of new programs to the company’s internal pipeline in 2021.

Continued investment in Schrödinger’s computational platform

• Formed a strategic partnership with NVIDIA to further optimize Schrödinger’s software platform for the NVIDIA DGX SuperPOD^TM, an enterprise system that can be scaled to enable any organization to reach supercomputing speed and power. Optimizing Schrödinger’s platform for the NVIDIA GPU framework is designed to give customers access to an all-in-one supercomputing solution for in silico drug and materials discovery.
• Further expanded the domain of applicability for Schrödinger’s software platform. Recently published research provided rationale for applying Schrödinger’s free energy calculation technology, FEP+, to ion channels using structures generated by cryo-electron microscopy (cryo-EM). The company’s scientists also published research describing a highly accurate method to predict the binding modes of small molecule inhibitors binding to protein targets with flexible binding sites, which have historically been challenging targets for structure-based drug design. Additionally, Schrödinger scientists co-authored a white paper describing how recent advances in protein production and cryo-EM can rapidly facilitate the structural enablement of drug targets.

Full-Year 2021 Financial Outlook

As of May 11, 2021, Schrödinger continues to expect total revenue to range from $124 million to $142 million, with software revenue expected to range from $102 million to $110 million and drug discovery revenue expected to range from $22 million to $32 million for the fiscal year ending December 31, 2021. Additional details are as follows:

• Software revenue growth is expected to be higher in the second half of the year with the majority of second half growth in the fourth quarter of 2021.
• Drug discovery revenue is expected to be highly variable quarter to quarter based on the timing of potential milestones related to collaborative agreements.
• Schrödinger continues to aggressively fund R&D to advance its technology and drug discovery pipeline. The company expects operating expense growth to be higher than the 42% annual growth rate reported in 2020 and expects software gross margin to be lower than the 81% reported in 2020.

Webcast and Conference Call Information

Schrödinger will host a conference call to discuss its first quarter financial results on Tuesday, May 11, 2021, at 8:30 a.m. ET. The conference call can be accessed live by dialing (833) 727-9520 (domestic) or +1 (830) 213-7697 (international) and referring to conference ID 3297222. The webcast can also be accessed under “News & Events” in the investors section of Schrödinger’s website, https://ir.schrodinger.com/news-and-events/event-calendar. The archived webcast will be available on Schrödinger’s website following the event.

About Schrödinger

Schrödinger is transforming the way therapeutics and materials are discovered. Schrödinger has pioneered a physics-based software 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 used by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. Schrödinger’s multidisciplinary drug discovery team also leverages the software platform to advance collaborative programs and its own pipeline of novel therapeutics to address unmet medical needs.

Founded in 1990, Schrödinger has over 450 employees and is engaged with customers and collaborators in more than 70 countries. To learn more visit www.schrodinger.com and follow us on LinkedIn and Twitter.

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 regarding Schrödinger’s expectations about the speed and capacity of its computational platform, the company’s financial outlook for the fiscal year ending December 31, 2021, the company’s plans to continue to invest in research and its strategic plans to accelerate the growth of its software business and advance its collaborative and internal drug discovery programs, the company’s ability to improve and advance the science underlying its platform, including through the use of new technologies, the potential expansion of the domain of applicability of the company’s platform, the company’s ability to recognize potential benefits from its strategic partnerships, the clinical potential and favorable properties of the company’s CDC7, MALT1, and Wee1 inhibitors, as well as the potential for its inhibitor programs to be used in combination with existing therapies, the timing of potential IND applications for its internal drug discovery programs, the ability to realize potential milestones, royalties or other payments under its collaborations, as well as the company’s expectations related to the use of its cash, cash equivalents and marketable securities. Statements including words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “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 Schrödinger’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 factors that are beyond Schrödinger’s control, including the demand for its software solutions, the ability to further develop its computational platform, the reliance upon third-party providers of cloud-based infrastructure to host its software solutions, the 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 clinical trials and applications for marketing approvals, the ability to retain and hire key personnel and the direct and indirect impacts of the ongoing COVID-19 pandemic 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 quarter ended March 31, 2021, filed with the Securities and Exchange Commission on May 11, 2021, as well as future filings and reports by Schrödinger. Any forward-looking statements contained in this press release speak only as of the date hereof. Except as required by law, the company 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 March 31,
		2021				2020
Revenues:
Software products and services		$	26,340			$	23,812
Drug discovery			5,787				2,362
Total revenues			32,127				26,174
Cost of revenues:
Software products and services			5,906				4,001
Drug discovery			10,057				6,548
Total cost of revenues			15,963				10,549
Gross profit			16,164				15,625
Operating expenses:
Research and development			21,448				13,700
Sales and marketing			5,239				4,789
General and administrative			13,389				8,936
Total operating expenses			40,076				27,425
Loss from operations			(23,912	)			(11,800	)
Other (expense) income:
Loss on equity investments			(1,781	)			—
Change in fair value			24,824				(3,079	)
Interest income			420				699
Total other income (expense)			23,463				(2,380	)
Loss before income taxes			(449	)			(14,180	)
Income tax expense			74				91
Net loss			(523	)			(14,271	)
Net loss attributable to noncontrolling interest			(494	)			(445	)
Net loss attributable to Schrödinger common and limited common stockholders		$	(29	)		$	(13,826	)
Net loss per share attributable to Schrödinger common and limited common stockholders, basic and diluted:		$	—			$	(0.34	)
Weighted average shares used to compute net loss per share attributable to Schrödinger common and limited common stockholders, basic and diluted:			70,071,625				40,666,970

Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except for share and per share amounts)
Assets		March 31, 2021				December 31, 2020
Current assets:
Cash and cash equivalents		$	133,122			$	202,296
Restricted cash			500				500
Marketable securities			515,372				440,395
Accounts receivable, net of allowance for doubtful accounts of $60 and $60			11,270				31,423
Unbilled and other receivables, net for allowance for unbilled receivables of $20 and $0			7,020				3,955
Prepaid expenses			7,954				4,409
Total current assets			675,238				682,978
Property and equipment, net			4,799				5,140
Equity investments			52,931				45,664
Right of use assets			8,865				10,129
Other assets			2,356				2,352
Total assets		$	744,189			$	746,263
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	7,220			$	8,398
Accrued payroll, taxes, and benefits			10,345				12,000
Deferred revenue			40,759				45,403
Lease liabilities			3,576				4,543
Other accrued liabilities			5,721				2,861
Total current liabilities			67,621				73,205
Deferred revenue, long-term			37,356				41,164
Lease liabilities, long-term			6,836				7,221
Other liabilities, long-term			600				654
Total liabilities			112,413				122,244
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively			—				—
Common stock, $0.01 par value. Authorized 500,000,000 shares; 61,300,675 and 60,713,534 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively			613				607
Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively			92				92
Additional paid-in capital

FAQ

What were Schrödinger's Q1 2021 earnings results for SDGR?

Schrödinger reported a revenue of $32.1 million for Q1 2021, a 23% increase compared to Q1 2020.

What is Schrödinger's financial outlook for 2021?

For 2021, Schrödinger expects total revenue to range from $124 million to $142 million.

What growth was reported in drug discovery revenue for SDGR in Q1 2021?

Drug discovery revenue increased significantly from $2.4 million in Q1 2020 to $5.8 million.

How did Schrödinger's operating expenses change in Q1 2021?

Operating expenses rose sharply to $40.1 million in Q1 2021, compared to $27.4 million in Q1 2020.