Business Wire | Aug 12, 2021 07:01AM EDT

Schrdinger Reports Second Quarter 2021 Financial Results and Provides Company Update

Aug. 12, 2021

NEW YORK--(BUSINESS WIRE)--Aug. 12, 2021--Schrdinger, 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 June 30, 2021, and provided an update on the company.

"The second quarter was highly productive for Schrdinger. We continued to make progress on our key strategic priorities, including our investments to advance our internal drug discovery pipeline and drive adoption of our software," stated Ramy Farid, Ph.D., chief executive officer at Schrdinger. "We announced a collaboration on a new program with Zai Lab, which expands our pipeline and provides the option to co-develop and co-commercialize in collaboration with an established commercial leader in oncology. We look forward to sharing additional updates on our progress throughout the year, and remain committed to making strategic investments in our business to drive long-term growth of the company."

Recent Business Highlights

Continued pipeline progress

* During the second quarter, Schrdinger continued to advance its MALT1, CDC7 and Wee1 preclinical development programs. The company has initiated IND-enabling studies for its MALT1 program, and CDC7 and Wee1 continue to advance 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. Schrdinger expects to present preclinical data from at least one of its internal programs in the second half of 2021. * The company continued to advance discovery efforts to allow the addition of new programs to the company's internal pipeline in 2021.

Collaborations highlight continued strategic execution

* In August, Schrdinger and Zai Lab Limited announced a global discovery, development and commercialization collaboration focused on a novel DNA damage response program in oncology. The research program will be conducted jointly by the Schrdinger and Zai Lab scientific teams. Following the selection of a development candidate, Zai Lab will assume primary responsibility for global development, manufacturing and commercialization. Schrdinger has the option to equally fund clinical development in the U.S. with Zai Lab, as well as the option to co-commercialize in the U.S. The companies will share research expenses for the program, and Zai Lab will make an upfront payment to Schrdinger to help fund Schrdinger's share of research costs. If Schrdinger elects to co-fund clinical development of a product candidate under the collaboration, it will be entitled to 50 percent of any profits from the commercialization of such product candidate in the U.S. Schrdinger will also be eligible to receive up to approximately $338 million in preclinical, development, regulatory and sales-based milestone payments. Additionally, Schrdinger is entitled to receive royalties on net sales outside the U.S. * In June, Schrdinger's partner, Ajax Therapeutics, completed a $40 million financing to support the advancement of Ajax's lead drug development programs targeting hematologic malignancies. Through the companies' collaboration, Schrdinger and Ajax scientists are working together to design and optimize molecules targeting cytokine signaling pathways.

Continued commitment to education and publication

* In August, Schrdinger hosted its first annual Educator's Day, which brought together K-12 and university educators from across the globe to discuss the growing role of computational tools in the classroom. The company also announced "Teaching with Schrdinger," a new initiative to develop curricula for academic institutions to teach students about chemical interactions, drug design and materials research using Schrdinger software. * During the second quarter, Schrdinger scientists authored multiple publications in peer-reviewed journals, independently and with customers, supporting application of the company's platform to advance both drug discovery and materials science. Materials science advancements included research with the Edwards Air Force Base to develop molecular dynamics simulations to aid in the development of next-generation aerospace materials, as well as research with Panasonic Corp. to identify new molecules that can improve the efficiency of printed electronics.

Second Quarter 2021 Financial Results

* Revenue was $29.8 million for the second quarter of 2021, a 29 percent increase compared to the second quarter of 2020. * Software revenue was $24.1 million for the second quarter of 2021, a 15 percent increase compared to the second quarter of 2020. * Drug discovery revenue was $5.7 million for the second quarter of 2021, compared to $2.2 million in the second quarter of 2020. Discovery revenue in the second quarter of 2021 included $3.3 million in revenue from our collaboration with Bristol Myers Squibb. Discovery revenue in the second quarter of 2021 also included a payment from a collaborator for the acquisition of intellectual property from Schrdinger related to a drug discovery program following the achievement of a lead optimization milestone. * Gross profit was $12.0 million in the second quarter of 2021, compared to $13.6 million in the second quarter in 2020. Software gross margin was 77 percent in the second quarter of 2021, compared to 82 percent for the same period in the prior year, reflecting planned investment to drive and support large-scale adoption of Schrdinger's platform. * Operating expenses for the second quarter of 2021 were $42.3 million, compared to $30.7 million in the second quarter of 2020, driven by expenses required to scale the company's business and advance its internal drug discovery programs. * Other expense, which included gains and losses on equity investments, changes in fair value of equity investments and interest income, was $4.6 million in the second quarter of 2021 compared to income of $13.1 million for the second quarter of 2020 due to adjustments to the fair value of the company's equity investments. * Net loss, after adjusting for non-controlling interest, was $34.6 million for the second quarter of 2021, compared to a net loss of $3.4 million in the second quarter of 2020, driven by adjustments to the fair value of the company's equity investments as well as planned investments to advance the company's growth strategy. * Cash, cash equivalents, restricted cash and marketable securities as of June 30, 2021 were $616.6 million, compared to $649.0 million as of March 31, 2021.

Full-Year 2021 Financial Outlook

As of August 12, 2021, Schrdinger 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:

* Schrdinger expects the majority of anticipated second half software revenue growth to occur in the fourth quarter of 2021. * Drug discovery revenue can be highly variable quarter to quarter based on the timing of potential milestones related to collaborative agreements. * Schrdinger continues to aggressively fund R&D to advance its technology and drug discovery pipeline. The company continues to expect operating expense growth to be higher than the 42 percent annual growth rate reported in 2020 and expects software gross margin to be lower than the 81 percent reported in 2020.

Webcast and Conference Call Information

Schrdinger will host a conference call to discuss its second quarter financial results on Thursday, August 12, 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 5365647 The webcast can also be accessed under "News & Events" in the investors section of Schrdinger's website, https://ir.schrodinger.com/news-and-events/event-calendar. The archived webcast will be available on Schrdinger's website for approximately 90 days following the event.

About Schrdinger

Schrdinger is transforming the way therapeutics and materials are discovered. Schrdinger 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. Schrdinger'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, Schrdinger has over 500 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 Schrdinger'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, 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 Schrdinger'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 Schrdinger'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 June 30, 2021, filed with the Securities and Exchange Commission on August 12, 2021, as well as future filings and reports by Schrdinger. 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 June 30, Six Months Ended June 30,

2021 2020 2021 2020

Revenues:

Softwareproducts and $ 24,052 $ 20,900 $ 50,392 $ 44,712 services

Drug discovery 5,732 2,192 11,519 4,554

Total revenues 29,784 23,092 61,911 49,266

Cost of revenues:

Softwareproducts and 5,641 3,862 11,547 7,863 services

Drug discovery 12,163 5,647 22,220 12,195

Total cost of 17,804 9,509 33,767 20,058 revenues

Gross profit 11,980 13,583 28,144 29,208

Operating expenses:

Research and 21,092 16,657 42,540 30,357 development

Sales and 5,380 4,362 10,619 9,151 marketing

General and 15,850 9,651 29,239 18,587 administrative

Totaloperating 42,322 30,670 82,398 58,095 expenses

Loss from (30,342 ) (17,087 ) (54,254 ) (28,887 )operations

Other(expense) income:

Gain (loss) onequity - 4,156 (1,781 ) 4,156 investments

Change in fair (4,918 ) 8,359 19,906 5,280 value

Interest 357 570 777 1,269 income

Total other(expense) (4,561 ) 13,085 18,902 10,705 income

Loss before (34,903 ) (4,002 ) (35,352 ) (18,182 )income taxes

Income tax 67 64 141 155 expense

Net loss (34,970 ) (4,066 ) (35,493 ) (18,337 )

Net lossattributableto (326 ) (716 ) (820 ) (1,161 )noncontrollinginterest

Net lossattributableto Schr?dinger $ (34,644 ) $ (3,350 ) $ (34,673 ) $ (17,176 )common andlimited commonstockholders

Net loss pershareattributableto Schr?dingercommon and $ (0.49 ) $ (0.05 ) $ (0.49 ) $ (0.33 )limited commonstockholders,basicand diluted:

Weightedaverage sharesused tocompute netlossper share attributable 70,582,062 63,296,366 70,328,254 51,981,647to Schr?dinger common andlimited commonstockholders,basic anddiluted:

Condensed Consolidated Balance Sheets (Unaudited)

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

Assets

June 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

117,699

$

202,296

Restricted cash

3,000

500

Marketable securities

495,892

440,395

Accounts receivable, net of allowance for doubtful accounts of $110 and $60

21,359

31,423

Unbilled and other receivables, net for allowance for unbilled receivables of $20 and $0

4,545

3,955

Prepaid expenses

7,293

4,409

Total current assets

649,788

682,978

Property and equipment, net

6,985

5,140

Equity investments

49,713

45,664

Right of use assets

7,466

10,129

Other assets

3,382

2,352

Total assets

$

717,334

$

746,263

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

5,960

$

8,398

Accrued payroll, taxes, and benefits

10,540

12,000

Deferred revenue

44,069

45,403

Lease liabilities

2,520

4,543

Other accrued liabilities

7,289

2,861

Total current liabilities

70,378

73,205

Deferred revenue, long-term

34,457

41,164

Lease liabilities, long-term

6,428

7,221

Other liabilities, long-term

300

654

Total liabilities

111,563

122,244

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

-

-

Common stock, $0.01 par value. Authorized 500,000,000 shares; 61,553,610 and 60,713,534 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

616

607

Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

92

92

Additional paid-in capital

769,199

752,558

Accumulated deficit

(164,232

)

(129,559

)

Accumulated other comprehensive income

76

317

Total stockholders' equity of Schr?dinger stockholders

605,751

624,015

Noncontrolling interest

20

4

Total stockholders' equity

605,771

624,019

Total liabilities and stockholders' equity

$

717,334

$

746,263

Condensed Consolidated Balance Sheets (Unaudited)

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



Assets June 30, December 2021 31, 2020

Current assets:

Cash and cash equivalents $ 117,699 $ 202,296

Restricted cash 3,000 500

Marketable securities 495,892 440,395

Accounts receivable, net of allowance for doubtful 21,359 31,423 accounts of $110 and $60

Unbilled and other receivables, net for allowance 4,545 3,955 for unbilled receivables of $20 and $0

Prepaid expenses 7,293 4,409

Total current assets 649,788 682,978

Property and equipment, net 6,985 5,140

Equity investments 49,713 45,664

Right of use assets 7,466 10,129

Other assets 3,382 2,352

Total assets $ 717,334 $ 746,263

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 5,960 $ 8,398

Accrued payroll, taxes, and benefits 10,540 12,000

Deferred revenue 44,069 45,403

Lease liabilities 2,520 4,543

Other accrued liabilities 7,289 2,861

Total current liabilities 70,378 73,205

Deferred revenue, long-term 34,457 41,164

Lease liabilities, long-term 6,428 7,221

Other liabilities, long-term 300 654

Total liabilities 111,563 122,244

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value. Authorized10,000,000 shares; zero shares issued and - - outstanding at June 30, 2021 and December 31,2020, respectively

Common stock, $0.01 par value. Authorized500,000,000 shares; 61,553,610 and 60,713,534 616 607 shares issued and outstanding at June 30, 2021 andDecember 31, 2020, respectively

Limited common stock, $0.01 par value. Authorized100,000,000 shares; 9,164,193 shares 92 92 issued and outstanding at June 30, 2021 andDecember 31, 2020, respectively

Additional paid-in capital 769,199 752,558

Accumulated deficit (164,232 ) (129,559 )

Accumulated other comprehensive income 76 317

Total stockholders' equity of Schr?dinger 605,751 624,015 stockholders

Noncontrolling interest 20 4

Total stockholders' equity 605,771 624,019

Total liabilities and stockholders' equity $ 717,334 $ 746,263

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Six Months Ended June 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(35,493

)

$

(18,337

)

Adjustments to reconcile net loss to net cash used in

operating activities:

Loss (gain) on equity investments

1,781

(4,156

)

Noncash revenue from equity investments

(11

)

(169

)

Fair value adjustments

(19,906

)

(5,280

)

Depreciation

1,614

1,758

Stock-based compensation

11,382

4,504

Noncash research and development expenses

811

1,147

Noncash investment accretion

2,343

(205

)

Loss on disposal of property and equipment

19

-

Decrease (increase) in assets:

Accounts receivable, net

10,064

4,827

Unbilled and other receivables

(925

)

4,126

Reduction in the carrying amount of right of use assets

2,663

2,622

Prepaid expenses and other assets

(3,914

)

(447

)

Increase (decrease) in liabilities:

Accounts payable

(2,489

)

1,999

Accrued payroll, taxes, and benefits

(1,460

)

(1,277

)

Deferred revenue

(8,030

)

(1,973

)

Lease liabilities

(2,816

)

(2,634

)

Other accrued liabilities

4,074

(1,334

)

Net cash used in operating activities

(40,293

)

(14,829

)

Cash flows from investing activities:

Purchases of property and equipment

(3,427

)

(1,327

)

Purchases of equity investments

(1,700

)

(2,869

)

Distribution from equity investment

375

4,582

Proceeds from sale of equity investments

15,735

-

Purchases of marketable securities

(222,725

)

(177,694

)

Proceeds from maturity of marketable securities

164,645

64,808

Net cash used in investing activities

(47,097

)

(112,500

)

Cash flows from financing activities:

Issuances of common stock upon initial public offering, net

-

211,491

Issuances of common stock upon stock option exercises

5,268

232

Contribution by noncontrolling interest

25

-

Net cash provided by financing activities

5,293

211,723

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

(82,097

)

84,394

Cash and cash equivalents and restricted cash, beginning of period

202,796

26,486

Cash and cash equivalents and restricted cash, end of period

$

120,699

$

110,880

Supplemental disclosure of cash flow and noncash information

Cash paid for income taxes

$

224

$

149

Supplemental disclosure of non-cash investing and financing activities

Purchases of property and equipment

51

-

Acquisitions of right of use assets in exchange for lease obligations

-

1,778

Reclassification of deferred financing costs to additional paid in capital

-

1,858

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CONTACT: Investor Relations Contact: Jaren Irene Madden Schrdinger, Inc. jaren.madden@schrodinger.com 617-286-6264 Media Contact: Tracy Lessor Schrdinger, Inc. tracy.lessor@schrodinger.com 617-519-9827