Financial Performance - The company reported revenue of $54.3 million for the three months ended September 30, 2025, representing a year-over-year increase of 54% from $35.3 million in the same period of 2024[187]. - The net loss for the three months ended September 30, 2025, was $32.8 million, compared to a net loss of $38.1 million for the same period in 2024[187]. - Total revenues rose by 54% to $54,324,000 for the three months ended September 30, 2025, compared to $35,290,000 in 2024[217]. - The company reported a net loss of $135.8 million for the nine months ended September 30, 2025, compared to a net loss of $146.9 million in the same period of 2024[268][269]. Revenue Breakdown - Software products and services revenue increased by 28% to $40,858,000 for the three months ended September 30, 2025, compared to $31,884,000 in 2024[217]. - Drug discovery revenue surged by 295% to $13,466,000 for the three months ended September 30, 2025, compared to $3,406,000 in 2024[217]. - Drug discovery revenue for the nine months ended September 30, 2025, increased by 107% to $38,416,000 compared to $18,519,000 in 2024[217]. - Software revenue from on-premise software grew by 30% to $15,928,000 for the three months ended September 30, 2025, compared to $12,250,000 in 2024[219]. - Hosted software revenue increased by 31% to $11,585,000 for the three months ended September 30, 2025, compared to $8,814,000 in 2024[221]. - Drug discovery services revenue surged by 362% to $13,008,000 for the three months ended September 30, 2025, compared to $2,813,000 in 2024[225]. Expenses and Cost Management - Research and development expenses decreased by 16% to $42,757,000 for the three months ended September 30, 2025, compared to $50,977,000 in 2024[217]. - Total operating expenses decreased by 14% to $73,986,000 for the three months ended September 30, 2025, compared to $86,150,000 in 2024[217]. - Sales and marketing expenses decreased by $825,000 (8%) for the three months ended September 30, 2025, primarily due to a $400,000 reduction in personnel-related expenses[240]. - General and administrative expenses decreased by $3.1 million (13%) for the three months ended September 30, 2025, mainly due to a $2.3 million decrease in personnel-related expenses[242]. - The restructuring implemented in May 2025 is expected to reduce operating expenses by approximately $30 million on an annualized basis[190]. Cash Flow and Financing - As of September 30, 2025, the company had cash, cash equivalents, restricted cash, and marketable securities totaling $401.0 million[258]. - The accumulated deficit as of September 30, 2025, was $661.3 million, reflecting a history of significant operating losses[254]. - The company plans to utilize existing cash and marketable securities primarily to fund software and drug discovery activities[260]. - The company may seek additional equity or debt financing if required, but there is uncertainty regarding the ability to raise such financing on acceptable terms[261]. - For the nine months ended September 30, 2025, the company generated approximately $30.0 million in cash from operating activities, a significant improvement compared to a cash usage of $126.3 million in the same period of 2024[268][269]. Collaborations and Milestones - The company received $147.2 million in cash distributions from Nimbus Therapeutics in connection with Takeda's acquisition of Nimbus Lakshmi, Inc.[178]. - The company is eligible to receive up to $482.0 million in total milestone payments from its collaboration with Bristol-Myers Squibb, with $32.0 million recognized as of September 30, 2025[183]. - The collaboration with Novartis includes an initial upfront fee of $150.0 million and potential total milestone payments of up to $2.272 billion[185]. Clinical Development - The company plans to present additional clinical data from the ongoing Phase 1 clinical trial of SGR-1505 at the American Society of Hematology Annual Meeting in December 2025[171]. - The FDA granted orphan drug designation to SGR-1505 for the potential treatment of mantle cell lymphoma and Waldenström macroglobulinemia[173]. - The company anticipates reporting initial data from the Phase 1 clinical trial of SGR-3515 in the first half of 2026[174]. Market Risks and Obligations - The change in fair value of equity investments showed a decrease of $15.8 million for the three months ended September 30, 2025, compared to a gain of $25.5 million in the same period in 2024[246]. - Other income decreased by $1.1 million (23%) for the three months ended September 30, 2025, attributed to unfavorable currency fluctuations and decreased interest income[248]. - The company has no material non-cancelable obligations under agreements with CRO vendors and other service providers[266]. - There have been no material changes in reported market risks or risk management policies since the last annual report[274].

Financial Performance - Total revenue for Q3 2025 increased 54% to $54.3 million, compared to $35.3 million in Q3 2024[4] - Software revenue for Q3 2025 grew 28% to $40.9 million, up from $31.9 million in Q3 2024[4] - Drug discovery revenue surged 295% to $13.5 million in Q3 2025, compared to $3.4 million in Q3 2024[4] - Net loss for Q3 2025 was $32.8 million, an improvement from a net loss of $38.1 million in Q3 2024[4] - Gross profit for Q3 2025 was $28,039 million, compared to $17,728 million in Q3 2024, reflecting a gross margin improvement[22] - Net loss narrowed to $32,795 million in Q3 2025 from $38,136 million in Q3 2024, indicating improved financial performance[22] - Non-GAAP net loss for Q3 2025 was $42,324 million, compared to $63,685 million in Q3 2024, showing a significant reduction in losses[28] Operating Expenses - Operating expenses decreased by 14% to $74.0 million in Q3 2025, down from $86.2 million in Q3 2024[4] - Operating expenses decreased to $73,986 million in Q3 2025 from $86,150 million in Q3 2024, a reduction of 14%[22] Cash and Assets - Cash, cash equivalents, restricted cash, and marketable securities totaled $401.0 million at the end of Q3 2025, compared to $367.5 million at the end of 2024[4] - Cash and cash equivalents increased to $172,120 million as of September 30, 2025, up from $147,326 million at the end of 2024[24] - Total assets decreased to $653,660 million from $823,226 million at the end of 2024, primarily due to changes in current assets[24] - Total liabilities reduced to $332,308 million from $401,781 million at the end of 2024, reflecting improved financial health[24] Revenue Guidance - Updated software revenue growth guidance for 2025 is now expected to be between 8% and 13%, down from the previous range of 10% to 15%[7] - Drug discovery revenue guidance for 2025 is now projected to be between $49 million and $52 million, up from the prior expectation of $45 million to $50 million[7] Clinical Developments - The FDA granted SGR-1505 Orphan Drug Designation for the treatment of Waldenström macroglobulinemia in October 2025[6] - Schrödinger is progressing the Phase 1 clinical study of SGR-3515, with initial clinical data expected in the first half of 2026[7]

Company Overview - Schrodinger, Inc. (SDGR) shares increased by 13.8% to close at $21.98, with trading volume significantly higher than usual, contrasting with a 0.7% loss over the past four weeks [1] - The company is expected to report a quarterly loss of $0.72 per share, reflecting a year-over-year decline of 38.5%, while revenues are projected to be $52.68 million, marking a 49.3% increase from the previous year [3] Financial Performance - In the last reported quarter, Schrodinger experienced a 16% year-over-year growth in revenue, driven by increased software and drug discovery revenue [2] - The consensus EPS estimate for the upcoming quarter has remained unchanged over the last 30 days, indicating stability in earnings expectations [4] Market Position - Schrodinger holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook in the market [4] - The company is part of the Zacks Medical Info Systems industry, which includes Fulgent Genetics, Inc. (FLGT), another stock in the same sector that closed 5.1% higher at $23.84 [4]

Core Viewpoint - Schrodinger, Inc. (SDGR) shows potential for significant upside, with a mean price target of $27.3 indicating a 40.4% increase from its current price of $19.44 [1] Price Targets and Analyst Consensus - The average of 10 short-term price targets ranges from a low of $19.00 to a high of $33.00, with a standard deviation of $5.01, indicating variability in analyst estimates [2] - The lowest estimate suggests a decline of 2.3%, while the highest points to a 69.8% upside [2] - A low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement [9] Earnings Estimates and Analyst Optimism - Analysts are optimistic about SDGR's earnings prospects, as indicated by a positive trend in earnings estimate revisions [4][11] - The Zacks Consensus Estimate for the current year has increased by 8% over the past month, with two estimates rising and no negative revisions [12] - SDGR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - While price targets are commonly referenced, they can mislead investors, as empirical research shows they rarely indicate actual stock price movements [7][10] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [8]

Group 1 - Morgan Stanley's Global Healthcare Conference features key executives from Schrödinger, including CEO Ramy Farid, CFO Richie Jain, and President Karen Akinsanya [2] - Sean Laaman, Head of U.S. Mid-Cap Biotech Equity Research, is leading the session [1] Group 2 - The conference aims to provide insights into the healthcare sector and facilitate discussions on investment opportunities [1] - Important disclosures related to the research are available on Morgan Stanley's website [1]

Summary of Schrödinger FY Conference Call - September 08, 2025 Company Overview - **Company**: Schrödinger (NasdaqGS:SDGR) - **Industry**: Biotechnology, specifically focused on drug discovery and development using computational methods and AI Key Points and Arguments Competitive Position and R&D Strategy - **China's Biotech Innovation**: Schrödinger acknowledges the rise of biotech innovation in China and sees it as a factor influencing their competitive position and R&D strategy. The company believes its technology allows for the discovery of novel and differentiated molecules, which is attractive to customers and partners [3][4] AI and Machine Learning Integration - **AI Utilization**: Schrödinger emphasizes that AI and machine learning are only as effective as the training data. The company is leveraging first-principles physics to generate large training sets, which enhances the effectiveness of machine learning in drug discovery [5][6][7] - **Data Generation**: The company can generate the equivalent of 10 years' worth of experimental data in one day, significantly speeding up the drug discovery process [7] Regulatory Environment - **FDA's Influence**: The FDA's push for computational tools to reduce animal testing is seen as beneficial for Schrödinger, particularly through their predictive toxicology initiative funded by the Gates Foundation [11][12] Drug Development and Pipeline - **MORT1 Inhibitor**: The company is excited about the safety profile of their MORT1 inhibitor, which has shown no dose-limiting toxicity in trials. This new mechanism could provide a well-tolerated option in the B-cell malignancy treatment landscape [27][28] - **Combination Studies**: There is a focus on exploring combination studies with existing therapies like BTK inhibitors to maximize the potential of MORT1 [47] Financial Management and Growth Strategy - **Operating Expenses**: Schrödinger has reduced operating expenses by $30 million, which is expected to positively impact financials. The company is not currently scaling clinical development but is focusing on strategic partnerships [72][73] - **Software Revenue Growth**: The company anticipates growth in software revenue driven by increased adoption among pharmaceutical companies, with a focus on expanding usage among existing customers [76][77] Partnerships and Collaborations - **Biopharma Collaborations**: Schrödinger has a history of successful partnerships, with several compounds having reached the market. The company is looking to expand collaborations to enhance its drug discovery capabilities [51][52] - **Ajax Collaboration**: The collaboration with Ajax has been expanded to include additional targets, which may lead to long-term revenue opportunities [71] Long-term Vision - **Profitability and Innovation**: Schrödinger aims to balance profitability with continued investment in platform innovation, asserting that they are leaders in the field of computational drug discovery [82][83] Other Important Content - **Feedback on Predictive Tox**: The company is in the early stages of receiving feedback from beta testers of their predictive toxicology tool, which is expected to improve through iterative feedback [21][22] - **Data Ownership**: Schrödinger maintains ownership of improvements to their platform, even when collaborating with partners, ensuring that advancements benefit the company [58][60] This summary encapsulates the key insights from the conference call, highlighting Schrödinger's strategic focus, technological advancements, and financial management as it navigates the biotechnology landscape.

Group 1: Earnings Performance - Schrodinger, Inc. reported a quarterly loss of $0.59 per share, better than the Zacks Consensus Estimate of a loss of $0.83, representing an earnings surprise of +28.92% [1] - The company posted revenues of $54.76 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.08%, compared to year-ago revenues of $47.33 million [2] - Over the last four quarters, Schrodinger has surpassed consensus EPS estimates just once, but has topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Schrodinger shares have increased by approximately 1.8% since the beginning of the year, while the S&P 500 has gained 7.1% [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at -$0.77 for the coming quarter and -$2.54 for the current fiscal year [4][7] - The estimate revisions trend for Schrodinger was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 3: Industry Context - The Medical Info Systems industry, to which Schrodinger belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, Veeva Systems, is expected to report quarterly earnings of $1.90 per share, reflecting a year-over-year change of +17.3%, with revenues projected at $767.61 million, up 13.5% from the previous year [9]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $54.8 million, a 16% increase from Q2 2024 [6][10] - Software revenue reached $40.5 million, reflecting a 15% year-over-year growth [6][11] - Drug Discovery revenue was $14.2 million, marking a 19% increase compared to Q2 2024 [12] - Software gross margin decreased to 68% from 80% in 2024 due to changes in revenue mix and investments in predictive toxicology [12] - Net loss for the quarter was $43 million, or $0.59 per share, compared to a net loss of $54 million, or $0.74 per share in Q2 2024 [14] Business Line Data and Key Metrics Changes - Software revenue growth was primarily driven by higher revenue from hosted contracts and contributions from the Gates Foundation grant [11] - Drug Discovery revenue growth was attributed to the recognition of a $150 million upfront payment from the Novartis collaboration [12] Market Data and Key Metrics Changes - The macroeconomic environment remains uncertain, but demand for the software platform is strong due to the industry's need for validated computational approaches [7] - The biotech segment has faced challenges, while discussions with pharmaceutical customers remain constructive [38] Company Strategy and Development Direction - The company aims to accelerate the growth of its software business and advance its drug discovery programs [4] - There is a focus on integrating predictive methods into all stages of molecular discovery [7] - The company is exploring strategic opportunities for its proprietary drug SGR1505 to maximize its potential [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining full-year software revenue growth guidance despite macroeconomic challenges [7] - The company expects to report initial Phase I data from two clinical programs in Q4 2025 [23] - Discussions with customers about renewals and scale-ups are encouraging, particularly for the fourth quarter [14] Other Important Information - The company has a strong cash position with $462 million in cash and equivalents as of June 30 [14] - Operating expenses are expected to be lower in 2025 compared to 2024 due to a $30 million expense reduction initiative [15] Q&A Session Summary Question: How has the tone of customer conversations changed regarding investments in the platform? - Management noted that discussions are positive, with clear demand for advanced predictive technologies despite macroeconomic concerns [27] Question: Why decide to out-license the product at this stage of development? - The company believes that SGR1505 is best developed in partnership with a company that has expertise in hematology, which can accelerate the program [32] Question: What is the demand setup for the back half of the year? - Demand remains strong, with good conversations about renewals and potential scale-ups, particularly in the pharmaceutical sector [38] Question: Can you provide details on the adoption of the predictive toxicology feature? - There is significant excitement and demand for the predictive toxicology technology, with ongoing beta testing [44] Question: What is the timeline for feedback on the beta version of the predictive toxicology solution? - Feedback will be collected as beta testing progresses, but a specific timeline for rollout is not yet established [51] Question: What is the rationale behind the recent headcount reductions? - The reductions were part of a broader cost management strategy and did not impact strategic initiatives [61] Question: What data can be expected in Q4 for SGR2921 and SGR3515? - Initial data will include safety, PKPD, and preliminary clinical activity, with updates planned for the end of the year [71] Question: How might the expanded collaboration with Ajax impact future milestones? - The collaboration will contribute to discovery revenue, with potential for future milestones and royalties [74]

Financial Performance - Total revenue for Q2 fiscal 2025 was $54.8 million, a 16% increase year-over-year, driven by growth in both software and drug discovery segments [6][23][28] - Software revenue reached $40.5 million, up 15% year-over-year, supported by growth in hosted contracts and contributions from a Gates Foundation grant [3][28] - Drug discovery revenue was $14.2 million, reflecting a 19% year-over-year growth, attributed to the recognition of a $150 million upfront payment from Novartis [3][29] Profitability and Expenses - Software gross margin decreased to 68% from 80% in the same quarter of 2024, due to a shift in revenue mix and investments in predictive toxicology [4][30] - R&D expenses were $43.1 million, a decrease of over 15% from the prior year, driven by cost reductions and a shift in expenses to collaborations [5][31] - Total operating expenses were $79 million, down 6% year-over-year, primarily due to lower R&D spending [5][32] Net Loss and Cash Position - The net loss for Q2 fiscal 2025 was $43 million, or 59¢ per share, compared to a net loss of $54 million, or 74¢ per share, in Q2 fiscal 2024 [6][32] - The company had $462 million in cash and equivalents as of June 30, 2025, indicating a strong liquidity position [6][32] Guidance and Outlook - The company maintains its full-year guidance for software revenue growth of 10%-15% and drug discovery revenue expected to be between $45 million and $50 million [6][33] - Software revenue for Q3 fiscal 2025 is anticipated to be between $36 million and $40 million [7][33] Clinical Development and Pipeline - Initial Phase I results for SGR1505, a proprietary MALT1 inhibitor, showed a well-tolerated profile with promising signals in chronic lymphocytic leukemia and Waldenstrom's macroglobulinemia patients [7][36] - The company is exploring strategic opportunities for SGR1505 to advance its development through partnerships [8][38] - Additional Phase I data for SGR2921 and SGR3515 is expected to be reported in the fourth quarter of 2025 [8][39] Strategic Collaborations and Innovations - The company expanded partnerships with Eli Lilly, Novartis, Ajax Therapeutics, and the Novo Nordisk Foundation Centre, enhancing its collaborative portfolio [10][40] - A beta version of a predictive toxicology module was launched, generating excitement among users and collaborators [9][25] - The company reported a 100% retention rate with customers generating over half a million dollars in revenue [10][75]

Financial Performance - Total revenue reached $54.8 million, a 16% increase compared to the second quarter of 2024[10] - Software revenue grew by 15% to $40.5 million[10] - Drug discovery revenue increased by 19% to $14.2 million[10] - Cash and marketable securities increased by 21% to $462.3 million as of June 30, 2025[28] - Deferred revenue surged by 289% to $186.5 million[28] Guidance and Outlook - The company maintains its software growth and drug discovery revenue guidance[10] - Operating expenses are expected to be lower than in 2024[10] - Third-quarter software revenue is projected to be between $36 million and $40 million[10] - The company anticipates software revenue to increase by 10%–15% in 2025[31] - Drug discovery revenue is projected to be between $45 million and $50 million in 2025[31] Pipeline and Development - Initial Phase 1 data for SGR-1505 was presented in June, with strategic opportunities for clinical development being explored[11] - Initial Phase 1 data for SGR-2921 and SGR-3515 are expected in the fourth quarter of 2025[11]