Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, today announced financial results for the third quarter ended September 30, 2020.
“We are executing on our strategic plan across every area of our business,” said Schrödinger CEO Ramy Farid, Ph.D. “We’re excited about the strong growth we’ve seen in our software business and the rapid progress of our internal and collaborative programs to discover and develop therapeutics.”
Third Quarter Financial Results
Revenue was $25.8 million for the third quarter of 2020, an increase of 29% compared to the third quarter of 2019.
Software revenue was $22.9 million for the third quarter of 2020, an increase of 42% over the third quarter in 2019. Drug discovery revenue was $2.9 million for the third quarter of 2020, a decline of 24% versus the third quarter of 2019.
Gross profit reached $15.3 million in the third quarter of 2020, an increase of 43% over the third quarter in 2019. Software gross margin was 81% in the third quarter, unchanged versus the third quarter of 2019.
Operating expenses for the third quarter of 2020 were $30.7 million, an increase of 40% over the third quarter of 2019.
Other income, which includes gains on equity investments and changes in fair value of such investments, was $18.7 million in the third quarter of 2020 versus a loss of $0.9 million in the third quarter of 2019. Other income for the third quarter of 2020 included an $18.0 million non-cash gain from our equity in Relay Therapeutics which completed its IPO in July 2020.
Net income, after adjusting for non-controlling interests, was $3.9 million for the third quarter of 2020, compared to a net loss of $11.5 million in the third quarter of 2019.
Schrödinger ended the third quarter of 2020 with cash, cash equivalents, restricted cash and marketable securities of $599.5 million, an increase of $315.0 million from the end of the second quarter of 2020, primarily as a result of net proceeds of $325.6 million from the equity financing in the third quarter.
“In the third quarter, we continued the excellent momentum across our business established in the first half of 2020,” said Schrödinger CFO Joel Lebowitz. “With our strong balance sheet and growing revenue, we believe we are well-positioned to continue to invest in R&D and execute on all elements of our strategy.”
Third Quarter Business Update
Driving growth in our Software business
- 42% revenue growth in the third quarter of 2020, driven by growth in both Life Sciences and Materials Science revenue
Increased Financial resources
- Raised $325.6 million of net proceeds from an equity follow-on offering
- Ending cash, cash equivalents, restricted cash and marketable securities for the third quarter were $599.5 million
Advancing internal discovery programs and pipeline progress
- Expect to initiate IND enabling studies in 2021 on most advanced internal programs
- Presenting data on our MALT 1 inhibitor program at the American Society of Hematology (ASH) Annual Meeting & Exposition; progressing research in single agent and combination studies targeting B-cell lymphomas
Advancing the underlying science of our platform and methods
-
Several scientific publications describing and validating our differentiated computational platform
- Improved methods for accurately modeling the relative binding free energies of metalloenzyme inhibitors
- Improved approaches to optimize binding selectivity
- Validation and extension of our technologies to more comprehensively support macrocycle design and optimization
“We are very pleased with the significant progress we have made this year on our software business, our drug discovery collaborations and our internal pipeline,” said Dr. Farid. “Our ongoing commitment to advance the science underlying our industry-leading physics-based computational platform to achieve new breakthroughs will drive our continued success.”
Business Impact of COVID-19 Pandemic
While we did not see material impacts to our business from the COVID-19 pandemic during the first nine months of 2020, we have identified certain market risks that, if they materialize, could affect the growth of our software business and the timing of our drug discovery revenues for at least the remainder of 2020. Some of our software customers may experience increasing budgetary pressures, which may cause them to delay or reduce purchases. In addition, our sales force has limited in-person interactions, and their ability to attend industry conferences and events that promote and expand knowledge of our company and platform has been hampered. Relative to our drug discovery programs, certain programs, particularly ones that are in clinical studies or preparing to enter clinical studies, could be delayed which could result in delays in achieving milestones and related revenue. While there remains uncertainty about the extent of the effect of the COVID-19 pandemic, we do not envision a long-term impact from the COVID-19 pandemic on our ability to execute on our long-term strategy.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its third quarter financial results on Thursday, November 12, 2020 at 8:30 AM Eastern Time. The conference call can be accessed live over the phone by dialing (833) 727-9520 (domestic) or +1 (830) 213-7697 (international) and refer to conference ID 8486343. The webcast can 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 its software platform to advance collaborative programs and its own pipeline of novel therapeutics to address unmet medical needs.
Founded in 1990, Schrödinger has over 400 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 our expectations about the speed and capacity of our computational platform, our plans to continue to invest in research and our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery programs, our ability to improve and advance the science underlying our platform, including through these use of new technologies, the timing of potential IND-enabling studies for our internal drug discovery programs, our expectations related to the use of our cash, cash equivalents, and marketable securities as well as our expectations related to the COVID-19 pandemic’s impact on our business. 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 our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have 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 our control, including the demand for our software solutions, our ability to further develop our computational platform, our reliance upon third-party providers of cloud-based infrastructure to host our software solutions, our reliance upon our third-party drug discovery collaborators, the ability to retain and hire key personnel and the direct and indirect impacts of the ongoing COVID-19 pandemic on our business and other risks detailed under the caption "Risk Factors" and elsewhere in our Securities and Exchange Commission filings and reports, including our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 filed with the Securities and Exchange Commission on November 12, 2020, as well as future filings and reports by us. Any forward-looking statements contained in this press release speak only as of the date hereof. Except as required by law, we undertake 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
| Nine Months Ended
| |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues: | ||||||||||||||||
| Software products and services | $ | 22,861 | $ | 16,118 | $ | 67,573 | $ | 49,205 | ||||||||
| Drug discovery | 2,936 | 3,842 | 7,490 | 10,506 | ||||||||||||
| Total revenues | 25,797 | 19,960 | 75,063 | 59,711 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Software products and services | 4,334 | 3,097 | 12,197 | 9,901 | ||||||||||||
| Drug discovery | 6,191 | 6,152 | 18,386 | 16,244 | ||||||||||||
| Total cost of revenues | 10,525 | 9,249 | 30,583 | 26,145 | ||||||||||||
| Gross profit | 15,272 | 10,711 | 44,480 | 33,566 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 17,019 | 10,353 | 47,376 | 28,322 | ||||||||||||
| Sales and marketing | 3,969 | 5,185 | 13,120 | 15,621 | ||||||||||||
| General and administrative | 9,729 | 6,465 | 28,316 | 20,491 | ||||||||||||
| Total operating expenses | 30,717 | 22,003 | 88,812 | 64,434 | ||||||||||||
| Loss from operations | (15,445 | ) | (11,292 | ) | (44,332 | ) | (30,868 | ) | ||||||||
| Other income: | ||||||||||||||||
| Gain on equity investments | — | — | 4,156 | — | ||||||||||||
| Change in fair value | 18,233 | (1,427 | ) | 23,513 | 10,607 | |||||||||||
| Interest income | 463 | 501 | 1,732 | 1,463 | ||||||||||||
| Total other income (loss) | 18,696 | (926 | ) | 29,401 | 12,070 | |||||||||||
| Income (loss) before income taxes | 3,251 | (12,218 | ) | (14,931 | ) | (18,798 | ) | |||||||||
| Income tax (benefit) expense | (35 | ) | (257 | ) | 120 | (262 | ) | |||||||||
| Net income (loss) | 3,286 | (11,961 | ) | (15,051 | ) | (18,536 | ) | |||||||||
| Net loss attributable to noncontrolling interest | (566 | ) | (453 | ) | (1,727 | ) | (734 | ) | ||||||||
| Net income (loss) attributable to Schrödinger common and limited common stockholders | $ | 3,852 | $ | (11,508 | ) | $ | (13,324 | ) | $ | (17,802 | ) | |||||
| Net income (loss) per share attributable to Schrödinger common and limited common stockholders, basic: | $ | 0.06 | $ | (0.26 | ) | $ | (0.23 | ) | $ | (0.40 | ) | |||||
| Weighted average shares used to compute net income (loss) per share attributable to Schrödinger common and limited common stockholders, basic: | 66,339,570 | 44,879,188 | 56,802,567 | 44,623,383 | ||||||||||||
| Net income (loss) per share attributable to Schrödinger common and limited common stockholders, diluted: | $ | 0.05 | $ | (0.26 | ) | $ | (0.23 | ) | $ | (0.40 | ) | |||||
| Weighted average shares used to compute net income (loss) per share attributable to Schrödinger common and limited common stockholders, diluted: | 72,693,173 | 44,879,188 | 56,802,567 | 44,623,383 | ||||||||||||
| Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except for share and per share amounts) | ||||||||
| Assets | September 30, 2020 | December 31, 2019 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 210,490 | $ | 25,986 | ||||
| Restricted cash | 500 | 500 | ||||||
| Marketable securities | 388,494 | 59,844 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $50 and $50 | 12,290 | 18,676 | ||||||
| Unbilled and other receivables | 4,891 | 7,062 | ||||||
| Prepaid expenses | 4,449 | 6,468 | ||||||
| Total current assets | 621,114 | 118,536 | ||||||
| Property and equipment, net | 5,296 | 6,268 | ||||||
| Equity investments | 40,914 | 15,366 | ||||||
| Right of use assets | 10,583 | 12,762 | ||||||
| Other assets | 2,209 | 2,338 | ||||||
| Total assets | $ | 680,116 | $ | 155,270 | ||||
| Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 4,812 | $ | 3,524 | ||||
| Accrued payroll, taxes, and benefits | 7,702 | 7,034 | ||||||
| Deferred revenue | 19,067 | 25,054 | ||||||
| Lease liabilities | 5,491 | 5,584 | ||||||
| Other accrued liabilities | 2,204 | 3,824 | ||||||
| Total current liabilities | 39,276 | 45,020 | ||||||
| Deferred revenue, long-term | 2,592 | 2,205 | ||||||
| Lease liabilities, long-term | 6,762 | 8,888 | ||||||
| Other liabilities, long-term | 600 | 900 | ||||||
| Total liabilities | 49,230 | 57,013 | ||||||
| Commitments and contingencies | ||||||||
| Convertible preferred stock: | ||||||||
| Series E convertible preferred stock, $0.01 par value. Authorized zero and 77,150,132 shares; zero and 73,795,777 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | — | 109,270 | ||||||
| Series D convertible preferred stock, $0.01 par value. Authorized zero and 39,540,611 shares; zero and 39,540,611 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | — | 22,000 | ||||||
| Series C convertible preferred stock, $0.01 par value. Authorized zero and 47,242,235 shares; zero and 47,242,235 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | — | 19,844 | ||||||
| Series B convertible preferred stock, $0.01 par value. Authorized zero and 29,468,101 shares; zero and 29,468,101 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | — | 9,840 | ||||||
| Series A convertible preferred stock, $0.01 par value. Authorized zero and 134,704,785 shares; zero and 134,704,785 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | — | 30,626 | ||||||
| Total convertible preferred stock | — | 191,580 | ||||||
| Stockholders' equity (deficit): | ||||||||
| Common stock, $0.01 par value. Authorized 500,000,000 and 425,000,000 shares; 56,298,216 and 6,121,821 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 563 | 61 | ||||||
| Limited common stock, $0.01 par value. Authorized 100,000,000 and 146,199,885 shares; 13,164,193 and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 132 | — | ||||||
| Additional paid-in capital | 748,123 | 11,655 | ||||||
| Accumulated deficit | (118,420 | ) | (105,096 | ) | ||||
| Accumulated other comprehensive income | 480 | 16 | ||||||
| Total stockholders’ equity (deficit) of Schrödinger stockholders | 630,878 | (93,364 | ) | |||||
| Noncontrolling interest | 8 | 41 | ||||||
| Total stockholders’ equity (deficit) | 630,886 | (93,323 | ) | |||||
| Total liabilities, convertible preferred stock, and stockholders’ equity (deficit) | $ | 680,116 | $ | 155,270 | ||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) | ||||||||
Nine Months Ended
| ||||||||
2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (15,051 | ) | $ | (18,536 | ) | ||
| Adjustments to reconcile net loss to net cash used in | ||||||||
| operating activities: | ||||||||
| Gain on equity investments | (4,156 | ) | — | |||||
| Noncash revenue from equity investments | (342 | ) | (139 | ) | ||||
| Fair value adjustments | (23,513 | ) | (10,607 | ) | ||||
| Depreciation | 2,648 | 2,732 | ||||||
| Stock-based compensation | 7,542 | 1,612 | ||||||
| Noncash research and development expenses | 1,694 | 680 | ||||||
| Noncash investment accretion | 359 | (277 | ) | |||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable, net | 6,386 | 1,760 | ||||||
| Unbilled and other receivables | 2,580 | 2,719 | ||||||
| Reduction in the carrying amount of right of use assets | 3,957 | 3,045 | ||||||
| Prepaid expenses and other assets | 290 | 658 | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | 1,254 | 3,324 | ||||||
| Accrued payroll, taxes, and benefits | 668 | 896 | ||||||
| Deferred revenue | (5,258 | ) | (1,461 | ) | ||||
| Lease liabilities | (3,997 | ) | (2,961 | ) | ||||
| Other accrued liabilities | (1,922 | ) | 1,761 | |||||
| Net cash used in operating activities | (26,861 | ) | (14,794 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (1,652 | ) | (1,679 | ) | ||||
| Purchases of equity investments | (2,869 | ) | — | |||||
| Distribution from equity investment | 4,582 | — | ||||||
| Purchases of marketable securities | (446,816 | ) | (96,278 | ) | ||||
| Proceeds from sale and maturity of marketable securities | 118,272 | 37,725 | ||||||
| Net cash used in investing activities | (328,483 | ) | (60,232 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuances of common stock upon initial public offering, net | 211,491 | — | ||||||
| Issuances of common stock upon follow-on public offering, net | 325,610 | — | ||||||
| Issuances of Series E preferred stock, net | — | 29,893 | ||||||
| Issuances of common stock upon stock option exercise | 2,747 | 425 | ||||||
| Contribution by noncontrolling interest | — | 100 | ||||||
| Payment of deferred offering costs | — | (19 | ) | |||||
| Net cash provided by financing activities | 539,848 | 30,399 | ||||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 184,504 | (44,627 | ) | |||||
| Cash and cash equivalents and restricted cash, beginning of period | 26,486 | 77,716 | ||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 210,990 | $ | 33,089 | ||||
| Supplemental disclosure of cash flow and noncash information | ||||||||
| Cash paid for income taxes | $ | 225 | $ | 91 | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Accrued deferred offering costs | 10 | 928 | ||||||
| Purchases of property and equipment | 24 | — | ||||||
| Acquisitions of right of use assets in exchange for lease obligations | 1,778 | 464 | ||||||
| Right of use assets recognized on adoption | — | 16,475 | ||||||
| Reclass of deferred financing costs to additional paid in capital | 1,858 | — | ||||||
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Ten Bridge Communications
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