Schrödinger, Inc. Reports Third Quarter 2020 Financial Results and Business Update

Nov. 12, 2020 12:00 UTC

 

Total revenue of $25.8 million, up 29% year-over-year;

Software revenue of $22.9 million, up 42% year-over-year

Raised $325.6 million net proceeds in equity financing

Presenting data on our MALT 1 inhibitor program at the American Society of Hematology (ASH) Annual Meeting & Exposition

Conference call today, Thursday, Nov. 12, 2020 at 8:30 a.m. ET

 

NEW YORK--(BUSINESS WIRE)-- 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/newsand-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
September 30,

 

Nine Months Ended
September 30,

   

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
September 30,

   

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

 

 

 

 

 

Contacts

Media Contact:
Stephanie Simon
Ten Bridge Communications
stephanie@tenbridgecommunications.com
617-581-9333

Investor Contact:
Christina Tartaglia
Stern IR, Inc.
christina.tartaglia@sternir.com
212-362-1200

 
 

Source: Schrödinger, Inc.

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