Schrödinger Reports First Quarter 2024 Financial Results
Schrödinger, Inc. (Nasdaq: SDGR) reported first-quarter 2024 financial results with total revenue of $36.6 million and software revenue of $33.4 million. The company announced FDA clearance of an IND application for SGR-3515, a Wee1/Myt1 Inhibitor. SGR-1505 and SGR-2921 Phase 1 data readouts are expected in late 2024 or 2025. Despite a decrease in total revenue from the first quarter of 2023, Schrödinger remains optimistic about the growing interest in computational drug discovery and revenue growth opportunities.
Schrödinger reported FDA clearance of an IND application for SGR-3515, a Wee1/Myt1 Inhibitor, and expects to initiate a Phase 1 clinical study soon.
The company's proprietary pipeline remains strong, with SGR-1505 and SGR-2921 Phase 1 clinical studies on track for late 2024 or 2025 data readouts.
Schrödinger launched LiveDesign Biologics, expanding its platform's capabilities for drug discovery teams, and presented the discovery of SGR-1505 at the American Chemical Society Spring 2024 Meeting.
Total revenue decreased from the first quarter of 2023 due to the absence of a large collaboration milestone payment that positively impacted revenue in the prior year.
Drug discovery revenue significantly declined from the first quarter of 2023, affecting the company's overall financial performance.
Operating expenses and net loss increased compared to the same period in 2023, presenting financial challenges for Schrödinger in the first quarter of 2024.
Insights
The reported first quarter revenue decline from $64.8 million to $36.6 million year-over-year is significant, particularly noteworthy is the drop in drug discovery revenue by 90%. This decrease appears to stem from the absence of a large collaboration milestone payment that boosted the previous year's figures. Observing the software revenue growth of 3.7% suggests a steady, albeit slow, adoption of Schrödinger's computational platform in the market.
Looking at the gross margin, the slight decrease in software gross margin from 78% to 76% could hint at scaling challenges, potentially from the increased technology expenses required to support growing operations. The operating expenses rise by roughly 13%, predominantly due to R&D, aligns with the company's strategic focus on innovation but does raise concerns about the sustainability of expense growth if not matched by significant revenue increases.
The sharp swing to a net loss of $54.7 million, compared to a net profit of $129.1 million in the prior year, largely reflects the volatile nature of biotech investments and the impact of significant one-time gains, as seen with the Nimbus distribution in 2023.
For investors, the key takeaway would be the importance of evaluating Schrödinger's future revenue streams and their ability to manage operating costs while continuing to invest in R&D. The provided financial outlook indicates moderate software revenue growth and a projected increase in drug discovery revenue, suggesting optimism for the remaining fiscal year.
The FDA clearance of the IND for SGR-3515 demonstrates Schrödinger's progress in their proprietary pipeline, signifying an advancement into clinical stages which is a critical step in drug development. Phase 1 clinical studies bear significant R&D costs, thus explaining the increased operating expenses reported. The potential success of the Wee1/Myt1 inhibitor, alongside the MALT1 inhibitor and CDC7 inhibitor, could attract partnership opportunities and future investments. However, it is essential to note that drug development carries high risks, with many candidates failing to make it past clinical trials.
The reversion of rights for the SOS1 inhibitor from Bristol Myers Squibb back to Schrödinger might be perceived with caution, as portfolio prioritization by BMS may suggest less confidence in the compound's prospects. Nonetheless, it could provide Schrödinger with an opportunity to pursue development with another partner or independently.
Their commitment to submitting at least one IND in 2025, potentially exposes investors to continued high R&D costs against the backdrop of an uncertain revenue stream from these efforts. The sector's investors often rely on tangible milestones like IND approvals or phase completions, which are indicative of a company's progress. Still, the long-term nature and inherent unpredictability of biotech R&D must always be factored into investment decisions.
The launch of LiveDesign Biologics could potentially strengthen Schrödinger’s position in the computational drug discovery market by facilitating integrated and centralized access to tools and data for drug discovery teams. This move aligns with the ongoing digitization and adoption of cloud-based solutions in R&D-intensive industries.
Moreover, the application of Schrödinger’s computational platform to predict drug activity and toxicity risks prior to animal or human studies is a noteworthy development. This advancement could lead to more efficient R&D processes and potentially lower the high attrition rates in drug development.
The constant evolution of computational tools and the anticipated growth in their application underscores the potential for Schrödinger to expand its customer base. An investor would be prudent to monitor the adoption rate of these new tools and the impact they have on the company's software revenue and broader market penetration.
First Quarter Total Revenue of
Announces FDA Clearance of Investigational New Drug Application for SGR-3515, a Novel Wee1/Myt1 Inhibitor
SGR-1505 and SGR-2921 on Track for Initial Phase 1 Data Readouts in Late 2024 or 2025
“Over the past year, we have witnessed unprecedented interest in computational drug discovery, and we are excited by the growing appreciation for using computation to drive pharmaceutical innovation. We are excited about the opportunities we have to increase customer adoption of our platform this year and drive revenue growth going forward,” said Ramy Farid, Ph.D., chief executive officer of Schrödinger. “We are also pleased with the continued progress of our proprietary pipeline. Today we reported FDA clearance of our IND application for SGR-3515, our novel Wee1/Myt1 inhibitor, and expect to initiate a Phase 1 clinical study in patients with solid tumors this year. Our Phase 1 clinical studies of SGR-1505 and SGR-2921 remain on track, and we look forward to reporting data from these two trials in late 2024 or 2025.”
First Quarter 2024 Financial Results
-
Total revenue for the first quarter was
$36.6 million $64.8 million -
Software revenue for the first quarter increased
3.7% to$33.4 million $32.2 million -
Drug discovery revenue was
$3.2 million $32.6 million -
Software gross margin decreased to
76% for the first quarter, compared to78% in the first quarter of 2023, largely due to higher technology expenses. -
Operating expenses were
$86.3 million $76.2 million -
Other income, which includes changes in fair value of equity investments and interest income/expense, was
$13.2 million $186.0 million $147.3 million -
Net loss for the first quarter was
$54.7 million $129.1 million $62.4 million $27.6 million -
At March 31, 2024, Schrödinger had cash, cash equivalents, restricted cash and marketable securities of approximately
$435.7 million $468.8 million
|
Three Months Ended |
|||||||||
March 31, |
||||||||||
|
2024 |
|
2023 |
|
% Change |
|||||
|
(in millions) |
|
|
|||||||
Total revenue |
$ |
36.6 |
|
|
$ |
64.8 |
|
|
(44)% |
|
Software revenue |
|
33.4 |
|
|
|
32.2 |
|
|
|
|
Drug discovery revenue |
|
3.2 |
|
|
|
32.6 |
|
|
(90)% |
|
Software gross margin |
|
76 |
% |
|
|
78 |
% |
|
|
|
Operating expenses |
$ |
86.3 |
|
|
$ |
76.2 |
|
|
|
|
Other income |
$ |
13.2 |
|
|
$ |
186.0 |
|
|
— |
|
Net (loss) income |
$ |
(54.7 |
) |
|
$ |
129.1 |
|
|
— |
|
2024 Financial Outlook
As of May 1, 2024, Schrödinger maintained its financial guidance for the fiscal year ending December 31, 2024:
-
Software revenue growth is expected to range from
6% to13% . -
Drug discovery revenue is expected to range from
$30 million $35 million - Software gross margin is expected to be similar to software gross margin for the full year 2023.
-
Operating expense growth in 2024 is expected to range from
8% to12% . - Cash used for operating activities in 2024 is expected to be above cash used for operating activities in 2023.
For the second quarter of 2024, software revenue is expected to range from
Key Highlights
Platform
- In March, Schrödinger launched LiveDesign Biologics, an enterprise cloud-based, informatics solution that allows drug discovery teams designing biologics to centralize access to computational modeling tools and data in a single interface. LiveDesign Biologics builds on Schrödinger’s existing LiveDesign offering, which is primarily focused on integrating tools and data for the design of small molecules.
- In March, Schrödinger presented the discovery of SGR-1505, its MALT1 inhibitor, during the First Time Disclosure Session at the American Chemical Society Spring 2024 Meeting. The presentation provided an overview of how Schrödinger leveraged its computational platform at scale to discover SGR-1505. Schrödinger’s platform enabled vast exploration of chemical space, evaluating 8.2 billion compounds, allowing Schrödinger to synthesize only 78 of the most promising molecules in the lead series, and identify SGR-1505 in approximately 10 months.
- Schrödinger is accelerating the validation of computational predictive models of off-target drug activity. There is an emerging requirement for such models to predict drug toxicity risks before animal or human studies are initiated. Schrödinger is exploring the deployment of its core technologies and capabilities, at scale, to provide computational solutions to meet these requirements. The company’s recent advances characterizing the structure of key proteins such as hERG (recently published in Cell) and cytochrome P450 enzymes are examples of these efforts.
Proprietary Pipeline
-
Today, Schrödinger also announced that the
U.S. Food and Drug Administration (FDA) cleared the investigational new drug (IND) application for SGR-3515, its Wee1/Myt1 inhibitor. Schrödinger expects to initiate a Phase 1 dose-escalation trial of SGR-3515 in patients with solid tumors in the third quarter of 2024.
-
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 EU. The company expects to report initial data from this study in late 2024 or 2025.
-
Schrödinger also continues to advance its Phase 1 study of SGR-2921, its CDC7 inhibitor, in patients with acute myeloid leukemia (AML) or myelodysplastic syndrome. Patient enrollment is ongoing in the
U.S. , and the company expects to report initial data from the study in late 2024 or 2025.
- Today Schrödinger announced that the rights to the SOS1 inhibitor discovered and developed as part of the collaboration with Bristol Myers Squibb have reverted to Schrödinger based on portfolio prioritization decisions at BMS. In 2023, Schrödinger completed and delivered a development candidate, and BMS had been conducting IND-enabling studies.
- Schrödinger is progressing its discovery pipeline, including programs targeting EGFRC797S, PRMT5-MTA and NLRP3. The company continues to anticipate submitting at least one IND in 2025.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its first quarter 2024 financial results on Wednesday, May 1, 2024, at 4:30 p.m. ET. The live webcast can be accessed under “News & Events” in the investors section of Schrödinger’s website, https://ir.schrodinger.com/events-and-presentations/event-details/2024/Schrdinger-First-Quarter-2024-Financial-Results-Conference-Call/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 Schrödinger’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
Other companies in Schrödinger’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 Schrödinger
Schrödinger is transforming the way therapeutics and materials are discovered. Schrödinger 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. Schrödinger’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, Schrödinger 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 Schrödinger’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 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, 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 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 important factors that are beyond Schrödinger’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
Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except for share and per share amounts) |
|||||||
|
Three Months Ended March 31, |
||||||
|
2024 |
|
2023 |
||||
Revenues: |
|
|
|
||||
Software products and services |
$ |
33,415 |
|
|
$ |
32,213 |
|
Drug discovery |
|
3,183 |
|
|
|
32,569 |
|
Total revenues |
|
36,598 |
|
|
|
64,782 |
|
Cost of revenues: |
|
|
|
||||
Software products and services |
|
7,976 |
|
|
|
7,115 |
|
Drug discovery |
|
9,732 |
|
|
|
11,974 |
|
Total cost of revenues |
|
17,708 |
|
|
|
19,089 |
|
Gross profit |
|
18,890 |
|
|
|
45,693 |
|
Operating expenses: |
|
|
|
||||
Research and development |
|
50,611 |
|
|
|
40,741 |
|
Sales and marketing |
|
10,171 |
|
|
|
9,145 |
|
General and administrative |
|
25,541 |
|
|
|
26,308 |
|
Total operating expenses |
|
86,323 |
|
|
|
76,194 |
|
Loss from operations |
|
(67,433 |
) |
|
|
(30,501 |
) |
Other income: |
|
|
|
||||
Gain on equity investments |
|
— |
|
|
|
147,322 |
|
Change in fair value |
|
8,137 |
|
|
|
35,737 |
|
Other income |
|
5,028 |
|
|
|
2,937 |
|
Total other income |
|
13,165 |
|
|
|
185,996 |
|
(Loss) income before income taxes |
|
(54,268 |
) |
|
|
155,495 |
|
Income tax expense |
|
456 |
|
|
|
26,359 |
|
Net (loss) income |
$ |
(54,724 |
) |
|
$ |
129,136 |
|
Net (loss) income per share of common and limited common stockholders, basic: |
$ |
(0.76 |
) |
|
$ |
1.81 |
|
Weighted average shares used to compute net (loss) income per share of common and limited common stockholders, basic: |
|
72,291,134 |
|
|
|
71,467,097 |
|
Net (loss) income per share of common and limited common stockholders, diluted: |
$ |
(0.76 |
) |
|
$ |
1.75 |
|
Weighted average shares used to compute net (loss) income per share of common and limited common stockholders, diluted: |
|
72,291,134 |
|
|
|
73,818,611 |
|
Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except for share and per share amounts) |
|||||||
Assets |
March 31, 2024 |
|
December 31, 2023 |
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
130,236 |
|
|
$ |
155,315 |
|
Restricted cash |
|
4,638 |
|
|
|
5,751 |
|
Marketable securities |
|
300,843 |
|
|
|
307,688 |
|
Accounts receivable, net of allowance for doubtful accounts of |
|
19,839 |
|
|
|
65,992 |
|
Unbilled and other receivables, net for allowance for unbilled receivables of |
|
25,781 |
|
|
|
23,124 |
|
Prepaid expenses |
|
12,349 |
|
|
|
9,926 |
|
Total current assets |
|
493,686 |
|
|
|
567,796 |
|
Property and equipment, net |
|
26,133 |
|
|
|
23,325 |
|
Equity investments |
|
91,387 |
|
|
|
83,251 |
|
Goodwill |
|
4,791 |
|
|
|
4,791 |
|
Right of use assets - operating leases |
|
118,578 |
|
|
|
117,778 |
|
Other assets |
|
3,187 |
|
|
|
6,014 |
|
Total assets |
$ |
737,762 |
|
|
$ |
802,955 |
|
Liabilities and Stockholders' Equity: |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
|
9,974 |
|
|
$ |
16,815 |
|
Accrued payroll, taxes, and benefits |
|
19,549 |
|
|
|
31,763 |
|
Deferred revenue |
|
49,497 |
|
|
|
56,231 |
|
Lease liabilities - operating leases |
|
16,927 |
|
|
|
16,868 |
|
Other accrued liabilities |
|
10,560 |
|
|
|
11,996 |
|
Total current liabilities |
|
106,507 |
|
|
|
133,673 |
|
Deferred revenue, long-term |
|
8,016 |
|
|
|
9,043 |
|
Lease liabilities - operating leases, long-term |
|
108,988 |
|
|
|
111,014 |
|
Other liabilities, long-term |
|
545 |
|
|
|
667 |
|
Total liabilities |
|
224,056 |
|
|
|
254,397 |
|
Stockholders' equity: |
|
|
|
||||
Preferred stock, |
|
— |
|
|
|
— |
|
Common stock, |
|
635 |
|
|
|
630 |
|
Limited common stock, |
|
92 |
|
|
|
92 |
|
Additional paid-in capital |
|
906,193 |
|
|
|
885,973 |
|
Accumulated deficit |
|
(393,142 |
) |
|
|
(338,418 |
) |
Accumulated other comprehensive (loss) income |
|
(72 |
) |
|
|
281 |
|
Total stockholders' equity |
|
513,706 |
|
|
|
548,558 |
|
Total liabilities and stockholders' equity |
$ |
737,762 |
|
|
$ |
802,955 |
|
Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) |
|||||||
|
Three Months Ended March 31, |
||||||
|
2024 |
|
2023 |
||||
Cash flows from operating activities: |
|
|
|
||||
Net (loss) income |
$ |
(54,724 |
) |
|
$ |
129,136 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
||||
Gain on equity investments |
|
— |
|
|
|
(147,322 |
) |
Fair value adjustments |
|
(8,137 |
) |
|
|
(35,737 |
) |
Depreciation and amortization |
|
1,436 |
|
|
|
1,760 |
|
Stock-based compensation |
|
12,218 |
|
|
|
10,880 |
|
Noncash investment accretion |
|
(2,683 |
) |
|
|
(964 |
) |
Decrease (increase) in assets: |
|
|
|
||||
Accounts receivable, net |
|
46,153 |
|
|
|
9,262 |
|
Unbilled and other receivables |
|
(2,657 |
) |
|
|
(336 |
) |
Reduction in the carrying amount of right of use assets - operating leases |
|
2,152 |
|
|
|
— |
|
Prepaid expenses and other assets |
|
(2,559 |
) |
|
|
(5,750 |
) |
(Decrease) increase in liabilities: |
|
|
|
||||
Accounts payable |
|
(7,150 |
) |
|
|
2,468 |
|
Income taxes payable |
|
— |
|
|
|
25,963 |
|
Accrued payroll, taxes, and benefits |
|
(12,214 |
) |
|
|
(11,730 |
) |
Deferred revenue |
|
(7,761 |
) |
|
|
(11,603 |
) |
Lease liabilities - operating leases |
|
(1,967 |
) |
|
|
(623 |
) |
Other accrued liabilities |
|
(1,383 |
) |
|
|
3,502 |
|
Net cash used in operating activities |
|
(39,276 |
) |
|
|
(31,094 |
) |
Cash flows from investing activities: |
|
|
|
||||
Purchases of property and equipment |
|
(4,095 |
) |
|
|
(3,580 |
) |
Purchases of equity investments |
|
— |
|
|
|
(4,125 |
) |
Distribution from equity investment |
|
— |
|
|
|
111,329 |
|
Purchases of marketable securities |
|
(37,126 |
) |
|
|
(58,823 |
) |
Proceeds from maturity of marketable securities |
|
46,300 |
|
|
|
127,401 |
|
Net cash provided by investing activities |
|
5,079 |
|
|
|
172,202 |
|
Cash flows from financing activities: |
|
|
|
||||
Issuances of common stock upon stock option exercises |
|
392 |
|
|
|
867 |
|
Principal payments on finance leases |
|
(14 |
) |
|
|
— |
|
Issuance of common stock upon ATM offering, net |
|
7,627 |
|
|
|
— |
|
Net cash provided by financing activities |
|
8,005 |
|
|
|
867 |
|
Net (decrease) increase in cash and cash equivalents and restricted cash |
|
(26,192 |
) |
|
|
141,975 |
|
Cash and cash equivalents and restricted cash, beginning of period |
|
161,066 |
|
|
|
95,717 |
|
Cash and cash equivalents and restricted cash, end of period |
$ |
134,874 |
|
|
$ |
237,692 |
|
|
|
|
|
||||
Supplemental disclosure of cash flow and noncash information |
|
|
|
||||
Cash paid for income taxes |
$ |
180 |
|
|
$ |
86 |
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
||||
Purchases of property and equipment in accounts payable |
|
501 |
|
|
|
218 |
|
Purchases of property and equipment in accrued liabilities |
|
282 |
|
|
|
86 |
|
Acquisition of right of use assets - operating leases, contingency resolution |
|
2,848 |
|
|
|
1,820 |
|
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) |
|||||||
|
Three Months Ended |
||||||
March 31, |
|||||||
|
2024 |
|
2023 |
||||
|
(in thousands, except per share data) |
||||||
Net (loss) income (GAAP) |
$ |
(54,724 |
) |
|
$ |
129,136 |
|
Income tax expense |
|
456 |
|
|
|
26,359 |
|
Gain on equity investment |
|
— |
|
|
|
(147,322 |
) |
Change in fair value |
|
(8,137 |
) |
|
|
(35,737 |
) |
Non-GAAP net loss |
$ |
(62,405 |
) |
|
$ |
(27,564 |
) |
Non-GAAP net loss per share of common and limited common stockholders, basic and diluted: |
$ |
(0.86 |
) |
|
$ |
(0.39 |
) |
Weighted average shares used to compute net loss per share of common and limited common stockholders, basic and diluted: |
|
72,291,134 |
|
|
|
71,467,097 |
|
|
|
|
|
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240501730541/en/
Matthew Luchini (Investors)
Schrödinger, Inc.
matthew.luchini@schrodinger.com
917-719-0636
Allie Nicodemo (Media)
Schrödinger, Inc.
allie.nicodemo@schrodinger.com
617-356-2325
Source: Schrödinger
FAQ
What was Schrödinger's total revenue for the first quarter of 2024?
Schrödinger's total revenue for the first quarter of 2024 was $36.6 million.
What is the stock symbol for Schrödinger?
The stock symbol for Schrödinger is SDGR.
What is the expected range for software revenue growth in 2024 according to Schrödinger's financial outlook?
According to Schrödinger's financial outlook, software revenue growth in 2024 is expected to range from 6% to 13%.
When can we expect data readouts for SGR-1505 and SGR-2921 Phase 1 clinical trials?
Data readouts for SGR-1505 and SGR-2921 Phase 1 clinical trials are expected in late 2024 or 2025.
