Business Wire | Nov 10, 2021 04:01PM EST

Schrdinger Reports Third Quarter 2021 Financial Results and Provides Company Update

Nov. 10, 2021

NEW YORK--(BUSINESS WIRE)--Nov. 10, 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 third quarter ended September 30, 2021, and provided an update on the company.

"We are very pleased with the progress we have made across the business so far this year. The level of engagement with senior R&D leaders across pharma and the growth we are seeing in new software customers suggests a shift in the drug discovery paradigm and a push to incorporate advanced computational approaches into projects at all stages," stated Ramy Farid, Ph.D., chief executive officer at Schrdinger. "As we approach year-end, we are continuing to focus on key strategic priorities, including advancing our internal pipeline. We are on track to submit an IND to the FDA for our MALT1 inhibitor program in the first half of next year, and we look forward to presenting additional preclinical data for this program at the American Society of Hematology Annual Meeting next month. We also recently selected a development candidate and initiated IND-enabling studies for our CDC7 inhibitor program, and we added a new oncology target, our fifth internal program, to our pipeline."

Recent Business HighlightsCollaborations Highlight Opportunities and Progress Across the Business

* Entered collaboration with Centessa Pharmaceuticals Subsidiary, Orexia Therapeutics, focused on novel orexin receptor agonists: In October, Schrdinger and Centesa Pharmaceuticals Subsidiary, Orexia Therapeutics, announced a collaboration focused on the discovery of novel therapeutics targeting the orexin-2 receptor, which is known to play a role in a broad spectrum of sleep disorders, including narcolepsy. The collaboration provides Orexia with substantial access to Schrdinger's entire computational platform as well as Schrdinger's extensive expertise in ultra-large-scale deployment of its technology. Under the terms of the agreement, Orexia is responsible for preclinical research activities, clinical development and commercialization of future product candidates discovered under the collaboration. Schrdinger received an upfront software access payment and may become eligible to receive certain preclinical, development, regulatory and commercial milestone payments, as well as low single digit royalties on global net sales.

* Formed strategic collaboration with MD Anderson to accelerate development of WEE1 program: In October, Schrdinger and The University of Texas MD Anderson Cancer Center announced a two-year strategic research collaboration focused on accelerating and optimizing the development of Schrdinger's WEE1 inhibitor program. The goal of the collaboration is to accelerate and optimize the clinical development path for Schrdinger's WEE1 program through molecular biomarker-driven tumor type prioritization and patient stratification and to validate biomarkers to predict response or resistance to a WEE1 inhibitor. The joint team will seek to prioritize clinical studies of a WEE1 inhibitor as a single agent in selected cancer indications and in combinations for defined clinical subpopulations.

* Completion of $100 million financing by strategic partner ShouTi: In October, Schrdinger's partner, ShoutTi Inc., announced a $100 million series B financing to advance the company's discovery platform, leveraging Schrdinger's computational platform and expertise, and ShouTi's structural biology and drug discovery expertise to design orally available medicines with properties that aim to overcome current limitations of biologic and peptide drugs. Schrdinger is a co-founder of ShouTi, which is advancing a pipeline focused on chronic diseases with high medical need, including cardiovascular, metabolic and pulmonary conditions.

* Provided update on collaboration with Bristol Myers Squibb: Schrdinger today announced that the companies have prioritized an undisclosed precision oncology target that will replace HIF-2 alpha. Additionally, Schrdinger and Bristol Myers Squibb recently expanded their collaboration with a new agreement to discover, develop and commercialize bifunctional degraders.

Internal Programs Expanding and Advancing

* New preclinical data from multiple MALT1 inhibitors to be presented at ASH: Last week, Schrdinger announced that new preclinical data from its MALT1 program will be presented at the ASH 2021 Annual Meeting, which is being held December 11 - 14 virtually and in person in Atlanta, GA. The poster presentation, "Characterization of Potent Paracaspase MALT1 Inhibitors for Hematological Malignancies" (Abstract #1187), is scheduled to take place on Saturday, December 11, from 5:30 p.m. - 7:30 p.m. ET. MALT1 is considered a potential therapeutic target for several non-Hodgkin's B-cell lymphomas as well as chronic lymphocytic leukemia. Schrdinger expects to submit an investigational new drug (IND) application to the U.S. Food and Drug Administration for its MALT1 program in the first half of 2022.

* Development candidate selected for CDC7 program: Schrdinger today announced that it selected a development candidate and has initiated IND-enabling studies for its CDC7 inhibitor program. CDC7 is thought to be linked to cancer cells' proliferative capacity and ability to bypass normal DNA damage responses. Targeting proteins that play important roles in DNA replication and replication stress, such as CDC7, is gaining momentum as a therapeutic approach for cancer.

* Internal pipeline expanded to five programs: Schrdinger continued to advance its discovery efforts and today announced that the company further expanded its internal pipeline with the addition of a fifth program, which is an undisclosed oncology target.

Third Quarter 2021 Financial Results

* Total revenue was $29.9 million for the third quarter of 2021, a 16 percent increase compared to the third quarter of 2020. * Software revenue was $24.3 million for the third quarter of 2021, compared to $22.9 million for the third quarter of 2020. The six percent growth observed year-over-year was primarily due to increased sales from existing customers and the addition of new customers, partially offset by multi-year contracts that were executed in the third quarter of 2020, as well as the completion of a research project that was active in the third quarter of 2020. * Drug discovery revenue was $5.6 million for the third quarter of 2021, compared to $2.9 million in the third quarter of 2020. Third quarter 2021 drug discovery revenue included the recognition of $4.4 million of revenue from the company's collaboration with Bristol Myers Squibb. * Gross profit was $11.1 million in the third quarter of 2021, compared to $15.3 million in the third quarter in 2020. Software gross margin was 73 percent in the third quarter of 2021, compared to 81 percent for the same period in the prior year, reflecting planned investments to drive and support large-scale adoption of Schrdinger's platform as well as increased royalty expenses in the quarter. * Operating expenses for the third quarter of 2021 were $45.8 million, compared to $30.7 million in the third quarter of 2020, driven by expenses required to scale the company's business, advance its internal drug discovery programs and continue to build a public company infrastructure. * Other expense, which included changes in fair value of equity investments and interest income, was $0.3 million in the third quarter of 2021 compared to income of $18.7 million for the third 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 $35.0 million for the third quarter of 2021, compared to net income of $3.9 million for the third 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 September 30, 2021, were $600.2 million, compared to $616.6 million as of June 30, 2021.

Full-Year 2021 Financial Outlook

As of November 10, 2021, Schrdinger expects total revenue to range from $124 million to $134 million for the fiscal year ending December 31, 2021. The company is maintaining its full-year software revenue expectation of $102 million to $110 million. The company is adjusting its full-year drug discovery revenue expectation to a range of $22 million to $24 million, updated from a previous expectation of $22 million to $32 million, primarily due to the timing of anticipated milestones from collaborators.

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 third quarter financial results on Wednesday, November 10, 2021, at 4:30 p.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 2484045. 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 potential to accelerate and optimize the company's WEE1 program through its research collaboration with MD Anderson, the clinical potential and favorable properties of the company's CDC7, MALT1 and WEE1 inhibitors, the timing of potential IND submissions for its internal drug discovery programs, the ability to realize potential milestones, royalties or other payments under its collaborations, including with BMS and Orexia Therapeutics, 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 and research 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 IND submissions, 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 September 30, 2021, filed with the Securities and Exchange Commission on November 10, 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 Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenues:

Softwareproducts and $ 24,280 $ 22,861 $ 74,672 $ 67,573 services

Drug discovery 5,570 2,936 17,089 7,490

Total revenues 29,850 25,797 91,761 75,063

Cost of revenues:

Softwareproducts and 6,611 4,334 18,158 12,197 services

Drug discovery 12,124 6,191 34,344 18,386

Total cost of 18,735 10,525 52,502 30,583 revenues

Gross profit 11,115 15,272 39,259 44,480

Operating expenses:

Research and 23,219 17,019 65,759 47,376 development

Sales and 5,556 3,969 16,175 13,120 marketing

General and 17,014 9,729 46,253 28,316 administrative

Totaloperating 45,789 30,717 128,187 88,812 expenses

Loss from (34,674 ) (15,445 ) (88,928 ) (44,332 )operations

Other(expense) income:

(Loss) gain onequity - - (1,781 ) 4,156 investments

Change in fair (627 ) 18,233 19,279 23,513 value

Interest 286 463 1,063 1,732 income

Total other(expense) (341 ) 18,696 18,561 29,401 income

(Loss) incomebefore income (35,015 ) 3,251 (70,367 ) (14,931 )taxes

Income tax(benefit) (4 ) (35 ) 137 120 expense

Net (loss) (35,011 ) 3,286 (70,504 ) (15,051 )income

Net lossattributableto (4 ) (566 ) (824 ) (1,727 )noncontrollinginterest

Net (loss)incomeattributableto Schr?dinger $ (35,007 ) $ 3,852 $ (69,680 ) $ (13,324 )common and

limited commonstockholders

Net (loss)income pershareattributableto Schr?dinger $ (0.49 ) $ 0.06 $ (0.99 ) $ (0.23 )

common andlimited commonstockholders,basic:

Weightedaverage sharesused tocompute net(loss) income

per share 70,784,184 66,339,570 70,481,901 56,802,567 attributableto Schr?dingercommon and

limited commonstockholders,basic:



Net (loss)income pershareattributableto Schr?dinger $ (0.49 ) $ 0.05 $ (0.99 ) $ (0.23 )

common andlimited commonstockholders,diluted:

Weightedaverage sharesused tocompute net(loss) income per share 70,784,184 72,693,173 70,481,901 56,802,567attributable to Schr?dingercommon and

limited commonstockholders,diluted:

Condensed Consolidated Balance Sheets (Unaudited)

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

Assets

September 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

160,879

$

202,296

Restricted cash

3,000

500

Marketable securities

436,307

440,395

Accounts receivable, net of allowance for doubtful accounts of $108 and $60

11,352

31,423

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

4,978

3,955

Prepaid expenses

5,509

4,409

Total current assets

622,025

682,978

Property and equipment, net

9,074

5,140

Equity investments

51,087

45,664

Right of use assets

76,459

10,129

Other assets

3,972

2,352

Total assets

$

762,617

$

746,263

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

8,228

$

8,398

Accrued payroll, taxes, and benefits

14,010

12,000

Deferred revenue

43,874

45,403

Lease liabilities

1,978

4,543

Other accrued liabilities

4,826

2,861

Total current liabilities

72,916

73,205

Deferred revenue, long-term

32,444

41,164

Lease liabilities, long-term

77,135

7,221

Other liabilities, long-term

300

654

Total liabilities

182,795

122,244

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and

outstanding at September 30, 2021 and December 31, 2020, respectively

-

-

Common stock, $0.01 par value. Authorized 500,000,000 shares; 61,703,441 and 60,713,534

shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

617

607

Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares

issued and outstanding at September 30, 2021 and December 31, 2020, respectively

92

92

Additional paid-in capital

778,292

752,558

Accumulated deficit

(199,239

)

(129,559

)

Accumulated other comprehensive income

44

317

Total stockholders' equity of Schr?dinger stockholders

579,806

624,015

Noncontrolling interest

16

4

Total stockholders' equity

579,822

624,019

Total liabilities and stockholders' equity

$

762,617

$

746,263

Condensed Consolidated Balance Sheets (Unaudited)

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



Assets September December 30, 2021 31, 2020

Current assets:

Cash and cash equivalents $ 160,879 $ 202,296

Restricted cash 3,000 500

Marketable securities 436,307 440,395

Accounts receivable, net of allowance for 11,352 31,423 doubtful accounts of $108 and $60

Unbilled and other receivables, net for allowance 4,978 3,955 for unbilled receivables of $20 and $0

Prepaid expenses 5,509 4,409

Total current assets 622,025 682,978

Property and equipment, net 9,074 5,140

Equity investments 51,087 45,664

Right of use assets 76,459 10,129

Other assets 3,972 2,352

Total assets $ 762,617 $ 746,263

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 8,228 $ 8,398

Accrued payroll, taxes, and benefits 14,010 12,000

Deferred revenue 43,874 45,403

Lease liabilities 1,978 4,543

Other accrued liabilities 4,826 2,861

Total current liabilities 72,916 73,205

Deferred revenue, long-term 32,444 41,164

Lease liabilities, long-term 77,135 7,221

Other liabilities, long-term 300 654

Total liabilities 182,795 122,244

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value. Authorized10,000,000 shares; zero shares issued and - - outstanding at September 30, 2021 and December31, 2020, respectively

Common stock, $0.01 par value. Authorized500,000,000 shares; 61,703,441 and 60,713,534 617 607 shares issued and outstanding at September 30,2021 and December 31, 2020, respectively

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

Additional paid-in capital 778,292 752,558

Accumulated deficit (199,239 ) (129,559 )

Accumulated other comprehensive income 44 317

Total stockholders' equity of Schr?dinger 579,806 624,015 stockholders

Noncontrolling interest 16 4

Total stockholders' equity 579,822 624,019

Total liabilities and stockholders' equity $ 762,617 $ 746,263

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(70,504

)

$

(15,051

)

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

(59

)

(342

)

Fair value adjustments

(19,279

)

(23,513

)

Depreciation

2,195

2,648

Stock-based compensation

19,034

7,542

Noncash research and development expenses

811

1,694

Noncash investment accretion

4,736

359

Loss on disposal of property and equipment

140

-

Decrease (increase) in assets:

Accounts receivable, net

20,071

6,386

Unbilled and other receivables

(1,358

)

2,580

Reduction in the carrying amount of right of use assets

4,724

3,957

Prepaid expenses and other assets

(2,720

)

290

(Decrease) increase in liabilities:

Accounts payable

(229

)

1,254

Accrued payroll, taxes, and benefits

2,010

668

Deferred revenue

(10,190

)

(5,258

)

Lease liabilities

(3,705

)

(3,997

)

Other accrued liabilities

1,611

(1,922

)

Net cash used in operating activities

(50,931

)

(26,861

)

Cash flows from investing activities:

Purchases of property and equipment

(6,210

)

(1,652

)

Purchases of equity investments

(3,700

)

(2,869

)

Distribution from equity investment

375

4,582

Proceeds from sale of equity investments

15,735

-

Purchases of marketable securities

(340,509

)

(446,816

)

Proceeds from maturity of marketable securities

339,588

118,272

Net cash provided by (used in) investing activities

5,279

(328,483

)

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 common stock upon stock option exercises

6,710

2,747

Contribution by noncontrolling interest

25

-

Net cash provided by financing activities

6,735

539,848

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

(38,917

)

184,504

Cash and cash equivalents and restricted cash, beginning of period

202,796

26,486

Cash and cash equivalents and restricted cash, end of period

$

163,879

$

210,990

Supplemental disclosure of cash flow and noncash information

Cash paid for income taxes

$

236

$

225

Supplemental disclosure of non-cash investing and financing activities

Accrued deferred offering costs

-

10

Purchases of property and equipment in accounts payable

59

24

Acquisitions of right of use assets in exchange for lease obligations

71,054

1,778

Reclassification of deferred financing costs to additional paid in capital

-

1,858

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CONTACT: Investor Relations: Jaren Irene Madden Schrdinger, Inc. jaren.madden@schrodinger.com 617-286-6264

CONTACT: Media: Tracy Lessor Schrdinger, Inc. tracy.lessor@schrodinger.com 617-519-9827