PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of Schrödinger, Inc.'s financial performance and condition [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024%20(Unaudited)) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Assets/Liabilities/Equity | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :------------------ | | **Total Assets** | $688,244 | $823,226 | | Cash and cash equivalents | $219,901 | $147,326 | | Marketable securities | $230,284 | $204,798 | | Accounts receivable, net | $10,073 | $235,692 | | **Total Liabilities** | $345,372 | $401,781 | | Deferred revenue | $94,543 | $111,944 | | **Total Stockholders' Equity** | $342,872 | $421,445 | - Total assets decreased from **$823.2 million** at December 31, 2024, to **$688.2 million** at June 30, 2025. A significant decrease was observed in accounts receivable, net, from **$235.7 million** to **$10.1 million**[22](index=22&type=chunk) - Cash and cash equivalents increased from **$147.3 million** to **$219.9 million**, while marketable securities also increased from **$204.8 million** to **$230.3 million**[22](index=22&type=chunk) [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) This section details the company's revenues, expenses, and net loss over specific three and six-month periods Condensed Consolidated Statements of Operations (in thousands) | Metric (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Total revenues | $54,759 | $47,334 | $7,425 | 16% | | Total cost of revenues | $28,601 | $15,999 | $12,602 | 79% | | Gross profit | $26,158 | $31,335 | $(5,177) | (17)% | | Total operating expenses | $79,061 | $84,064 | $(5,003) | (6)% | | Loss from operations | $(52,903) | $(52,729) | $(174) | —% | | Total other income (expense) | $10,017 | $(1,235) | $11,252 | N/M | | Net loss | $(43,173) | $(54,047) | $10,874 | N/M | | Net loss per share (basic & diluted) | $(0.59) | $(0.74) | $0.15 | N/M | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :--------- | :--------- | :--------- | :--------- | | Total revenues | $114,310 | $83,932 | $30,378 | 36% | | Total cost of revenues | $57,028 | $33,707 | $23,321 | 69% | | Gross profit | $57,282 | $50,225 | $7,057 | 14% | | Total operating expenses | $161,074 | $170,387 | $(9,313) | (5)% | | Loss from operations | $(103,792) | $(120,162) | $16,370 | (14)% | | Total other income (expense) | $1,126 | $11,930 | $(10,804) | N/M | | Net loss | $(102,981) | $(108,771) | $5,790 | N/M | | Net loss per share (basic & diluted) | $(1.41) | $(1.50) | $0.09 | N/M | - For the three months ended June 30, 2025, total revenues increased by **16%** to **$54.8 million**, but gross profit decreased by **17%** due to a significant increase in cost of revenues (**79%**). Net loss improved from **$(54.0) million** to **$(43.2) million**, driven by a positive swing in other income[24](index=24&type=chunk) - For the six months ended June 30, 2025, total revenues increased by **36%** to **$114.3 million**, and gross profit increased by **14%** to **$57.3 million**. Net loss improved from **$(108.8) million** to **$(103.0) million**, despite a decrease in total other income[24](index=24&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) This section presents the net loss adjusted for other comprehensive income or loss, primarily unrealized gains or losses on marketable securities Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric (3 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :-------- | :-------- | | Net loss | $(43,173) | $(54,047) | | Unrealized loss on marketable securities | $(119) | $(108) | | Comprehensive loss | $(43,292) | $(54,155) | | Metric (6 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :--------- | :--------- | | Net loss | $(102,981) | $(108,771) | | Unrealized loss on marketable securities | $(249) | $(461) | | Comprehensive loss | $(103,230) | $(109,232) | - The comprehensive loss for the three months ended June 30, 2025, was **$(43.3) million**, an improvement from **$(54.2) million** in the prior year, primarily due to a reduced net loss[27](index=27&type=chunk) - For the six months ended June 30, 2025, comprehensive loss was **$(103.2) million**, also an improvement from **$(109.2) million** in the prior year, reflecting a lower net loss[27](index=27&type=chunk) [Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Item | Balance at Dec 31, 2024 | Q1 2025 Changes | Q2 2025 Changes | Balance at Jun 30, 2025 | | :------------------------------------ | :---------------------- | :-------------- | :-------------- | :---------------------- | | Common stock | $637 | $1 | $2 | $644 | | Limited common stock | $92 | $0 | $0 | $92 | | Additional paid-in capital | $946,037 | $11,992 | $12,658 | $970,687 |\ | Accumulated deficit | $(525,541) | $(59,808) | $(43,173) | $(628,522) | | Accumulated other comprehensive (loss) income | $220 | $(130) | $(119) | $(29) | | **Total Stockholders' Equity** | **$421,445** | **$373,504** | **$342,872** | **$342,872** | - Total stockholders' equity decreased from **$421.4 million** at December 31, 2024, to **$342.9 million** at June 30, 2025, primarily due to accumulated net losses[30](index=30&type=chunk) - Additional paid-in capital increased by **$24.6 million** during the six months ended June 30, 2025, mainly from stock-based compensation and stock option exercises[30](index=30&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(Unaudited)) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :-------- | :-------- | | Net cash provided by (used in) operating activities | $91,865 | $(92,999) | | Net cash (used in) provided by investing activities | $(24,969) | $34,657 | | Net cash provided by financing activities | $2,427 | $9,612 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $69,323 | $(48,730) | | Cash and cash equivalents and restricted cash, end of period | $231,980 | $112,336 | - Operating activities generated **$91.9 million** in cash for the six months ended June 30, 2025, a significant improvement from using **$93.0 million** in the same period of 2024, primarily due to cash collections from the Novartis collaboration[33](index=33&type=chunk)[261](index=261&type=chunk) - Investing activities used **$25.0 million** in cash in 2025, mainly for marketable securities purchases, compared to providing **$34.7 million** in 2024[33](index=33&type=chunk)[263](index=263&type=chunk) - Financing activities provided **$2.4 million** in cash in 2025, primarily from stock option exercises, a decrease from **$9.6 million** in 2024 which included proceeds from an ATM offering[33](index=33&type=chunk)[265](index=265&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [(1) Description of Business](index=12&type=section&id=(1)%20Description%20of%20Business) This section describes Schrödinger, Inc.'s business model, focusing on its computational platform for drug discovery and materials applications - Schrödinger, Inc. utilizes a physics-based computational platform for rapid and cost-effective discovery of novel molecules in drug development and materials applications. The company licenses its software platform to biopharmaceutical and industrial companies, academic institutions, and government laboratories, and also applies it to advance proprietary and collaborative drug discovery programs[35](index=35&type=chunk) [(2) Significant Accounting Policies](index=12&type=section&id=(2)%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and estimates used in preparing the financial statements, including new accounting standards and consolidation policies - The company's financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information, including normal recurring adjustments. Significant estimates are made for revenue allocation and progress on collaboration agreements[38](index=38&type=chunk)[39](index=39&type=chunk) - New accounting standards ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) are not yet adopted. ASU 2023-09 is expected to impact disclosures only, while ASU 2024-03's impact is still being evaluated[36](index=36&type=chunk)[37](index=37&type=chunk) - The company consolidates wholly-owned subsidiaries and uses the equity method for investments with significant influence. Equity investments without significant influence or readily determinable fair value are accounted for at cost less impairment[40](index=40&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) - Customer concentration risk exists, with one customer accounting for **19%** of total accounts receivable at June 30, 2025 (down from **68%** at Dec 31, 2024) and **16%** of total revenue for the three months ended June 30, 2025[44](index=44&type=chunk)[45](index=45&type=chunk) [(3) Revenue Recognition](index=14&type=section&id=(3)%20Revenue%20Recognition) This section details the company's revenue recognition policies across software products, services, and drug discovery collaborations, including timing and specific agreements - Revenue is recognized when control of products or services is transferred to customers. The timing of recognition varies, with software products and services recognized both at a point in time and over time, and drug discovery revenue also split between point in time and over time recognition[54](index=54&type=chunk)[55](index=55&type=chunk) Revenue Recognition Patterns (Percentage of Total Revenue) | Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Software products & services – point in time | 29.4% | 40.1% | 36.5% | 44.1% | | Software products & services – over time | 44.6% | 34.7% | 41.6% | 37.9% | | Drug Discovery – point in time | 5.5% | 19.3% | 3.7% | 10.9% | | Drug Discovery – over time | 20.5% | 5.9% | 18.2% | 7.1% | - Software revenue sources include on-premise licenses (upfront recognition), hosted subscriptions (ratable recognition), software maintenance (ratable), professional services (as consumed), and software contributions (as conditions met or annually when invoiced)[57](index=57&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) - Drug discovery revenue comes from services (over time, based on progress) and milestones (recognized when probable of achievement). Contribution revenue is recognized on a cost reimbursement basis[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk) - The collaboration with Novartis Pharma AG, initiated in November 2024, includes an upfront payment of **$150.0 million** and potential milestones up to **$2.272 billion**. Revenue recognized from this agreement was **$7.6 million** for Q2 2025 and **$13.3 million** for H1 2025[84](index=84&type=chunk)[86](index=86&type=chunk)[90](index=90&type=chunk) [(4) Fair Value Measurements](index=20&type=section&id=(4)%20Fair%20Value%20Measurements) This section explains how financial assets are measured at fair value, categorizing them by input levels and detailing changes in equity investments - Financial assets are measured at fair value using Level 1 (quoted prices in active markets) and Level 2 (observable inputs) categories. No Level 3 (unobservable inputs) assets were reported[103](index=103&type=chunk) Assets Measured at Fair Value (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents and restricted cash | $231,980 | $162,657 | | Marketable securities | $230,284 | $204,798 | | Equity investments | $27,685 | $36,202 | | **Total** | **$489,949** | **$403,657** | - Unrealized gains and losses from equity investments are classified within the change in fair value of equity investments in the statements of operations[104](index=104&type=chunk) [(5) Commitments and Contingencies](index=21&type=section&id=(5)%20Commitments%20and%20Contingencies) This section outlines the company's contractual obligations, including lease liabilities, and confirms the absence of material legal proceedings - The company has operating leases for office space and a finance lease for equipment, expiring through 2037. The remaining weighted average lease term for operating and finance leases was **11 years** as of June 30, 2025[106](index=106&type=chunk)[108](index=108&type=chunk) Maturities of Operating and Finance Lease Liabilities (in thousands) | Year ending December 31: | Amount | | :----------------------- | :-------- | | Remainder of 2025 | $9,153 | | 2026 | $17,305 | | 2027 | $16,111 | | 2028 | $14,991 | | 2029 | $14,522 | | Thereafter | $97,509 | | **Total future minimum lease payments** | **$169,591** | | Less: imputed interest | $(55,138) | | **Present value of future minimum lease payments** | **$114,453** | | Less: current portion of lease payments | $16,963 | | **Lease liabilities, long-term** | **$97,490** | - The company is not currently subject to any material legal proceedings[110](index=110&type=chunk) [(6) Income Taxes](index=22&type=section&id=(6)%20Income%20Taxes) This section details the company's income tax expense, valuation allowances, unrecognized tax benefits, and the impact of recent tax legislation Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :---------------------- | :--- | :--- | | Three Months Ended June 30 | $287 | $83 | | Six Months Ended June 30 | $315 | $539 | - Income tax expense for both periods is primarily due to obligations in certain states and foreign jurisdictions, as the company maintains a full valuation allowance against U.S. net deferred tax assets[112](index=112&type=chunk)[113](index=113&type=chunk)[245](index=245&type=chunk) - The company had **$4.3 million** in unrecognized tax benefits as of June 30, 2025, and does not expect a significant change in the next **12 months**[113](index=113&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) is being evaluated for its impact, but no material change to the effective income tax rate or net deferred federal income tax assets is anticipated due to the full valuation allowance[116](index=116&type=chunk) [(7) Stockholders' Equity](index=23&type=section&id=(7)%20Stockholders'%20Equity) This section provides information on the company's common stock, limited common stock, preferred stock, and at-the-market offering program - As of June 30, 2025, the company had **64,420,899** shares of common stock and **9,164,193** shares of limited common stock outstanding. Common stock holders have one vote per share, while limited common stock holders cannot vote in director elections or removals[22](index=22&type=chunk)[117](index=117&type=chunk)[120](index=120&type=chunk) - The company has an at-the-market (ATM) offering program allowing sale of up to **$250.0 million** in common stock. As of June 30, 2025, **$241.1 million** remained available under the ATM[119](index=119&type=chunk)[250](index=250&type=chunk) - **10,000,000** shares of undesignated preferred stock are authorized, with rights and preferences to be determined by the board[122](index=122&type=chunk) [(8) Stock-Based Compensation](index=24&type=section&id=(8)%20Stock-Based%20Compensation) This section details the company's stock incentive plans, stock-based compensation expense, and unrecognized compensation costs for equity awards - The company has multiple stock incentive plans (2010, 2020, 2021, 2022 Plans) for various equity awards. As of June 30, 2025, **4,242,514** shares were available for grant[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of sales | $1,421 | $1,360 | $2,823 | $2,495 | | Research and development | $3,339 | $4,228 | $6,846 | $8,294 | | Sales and marketing | $968 | $968 | $1,889 | $1,942 | | General and administrative | $4,899 | $6,252 | $10,643 | $12,295 | | **Total** | **$10,627** | **$12,808** | **$22,201** | **$25,026** | - Unrecognized compensation cost for RSUs was **$50.7 million** (expected over **3.03 years**) and for stock options was **$37.0 million** (expected over **2.39 years**) as of June 30, 2025[131](index=131&type=chunk)[143](index=143&type=chunk) [(9) Net Loss per Share Attributable to Common and Limited Common Stockholders](index=27&type=section&id=(9)%20Net%20Loss%20per%20Share%20Attributable%20to%20Common%20and%20Limited%20Common%20Stockholders) This section presents the calculation of basic and diluted net loss per share, noting the anti-dilutive effect of potential securities Net Loss per Share (in thousands, except per share data) | Metric (3 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :-------- | :-------- | | Net loss | $(43,173) | $(54,047) | | Weighted average shares | 73,427,635 | 72,711,685 | | Net loss per share (basic & diluted) | $(0.59) | $(0.74) | | Metric (6 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :--------- | :--------- | | Net loss | $(102,981) | $(108,771) | | Weighted average shares | 73,243,797 | 72,501,409 | | Net loss per share (basic & diluted) | $(1.41) | $(1.50) | - Basic and diluted net loss per share are identical due to the company being in a net loss position, making all potentially dilutive securities anti-dilutive[144](index=144&type=chunk) - Potentially dilutive securities not included in calculations totaled **15,050,432** shares for the three and six months ended June 30, 2025[144](index=144&type=chunk) [(10) Equity Investments](index=27&type=section&id=(10)%20Equity%20Investments) This section details the carrying values and fair value changes of the company's equity investments in various biopharmaceutical companies - The carrying value of the Nimbus investment remained at **$2.4 million** as of June 30, 2025, and December 31, 2024, after the company lost significant influence in 2023[146](index=146&type=chunk) - The company disposed of its equity stake in Morphic Holding, Inc. for **$47.6 million** in August 2024. For the three and six months ended June 30, 2024, Morphic investment resulted in a mark-to-market loss of **$944 thousand** and a gain of **$4.3 million**, respectively[147](index=147&type=chunk)[148](index=148&type=chunk)[178](index=178&type=chunk) - The carrying value of the Ajax Therapeutics, Inc. investment was **$4.5 million** as of June 30, 2025, and December 31, 2024[151](index=151&type=chunk) - The investment in Structure Therapeutics Inc. is accounted for at fair value. It resulted in a mark-to-market gain of **$4.6 million** for Q2 2025 and a loss of **$8.5 million** for H1 2025[153](index=153&type=chunk) [(11) Related Party Transactions](index=28&type=section&id=(11)%20Related%20Party%20Transactions) This section outlines transactions with related parties, including consulting fees and significant contributions from the Bill & Melinda Gates Foundation Related Party Transactions (in thousands) | Transaction Type | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Consulting fees to board member | $109 | $105 | $218 | $210 | | Bill & Melinda Gates Foundation (licenses/services) | $11 | $63 | $20 | $70 | | Bill & Melinda Gates Foundation (drug discovery contribution) | $212 | $424 | $711 | $914 | | Bill & Melinda Gates Foundation (software contribution) | $4,513 | $0 | $8,357 | $0 | - Software contribution revenue from the Bill & Melinda Gates Foundation significantly increased in 2025 due to new agreements for expanding the computational platform to predict toxicity[157](index=157&type=chunk) - No revenue was recognized from the Gates Ventures, LLC agreement during the three and six months ended June 30, 2025 and 2024[159](index=159&type=chunk) [(12) Segment Reporting](index=29&type=section&id=(12)%20Segment%20Reporting) This section provides financial information for the company's two reportable segments: Software and Drug Discovery, along with geographic revenue breakdown - The company operates in two reportable segments: Software (licensing software for molecular discovery) and Drug Discovery (building a portfolio of drug programs)[160](index=160&type=chunk) Segment Financial Information (in thousands) | Metric (3 Months Ended June 30) | Software | Drug Discovery | Total Segment | | :------------------------------ | :-------- | :------------- | :------------ | | Revenues | $40,544 | $14,215 | $54,759 | | Cost of revenues | $13,029 | $15,572 | $28,601 | | Gross profit | $27,515 | $(1,357) | $26,158 | | Metric (6 Months Ended June 30) | Software | Drug Discovery | Total Segment | | :------------------------------ | :-------- | :------------- | :------------ | | Revenues | $89,360 | $24,950 | $114,310 | | Cost of revenues | $26,551 | $30,477 | $57,028 | | Gross profit | $62,809 | $(5,527) | $57,282 | - The Drug Discovery segment reported a gross loss of **$(1.4) million** for Q2 2025 and **$(5.5) million** for H1 2025, indicating higher costs than revenues in this segment[164](index=164&type=chunk) Revenues by Geographic Area (in thousands) | Geographic Area | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $34,050 | $30,699 | $63,713 | $53,996 | | EMEA | $13,563 | $8,709 | $36,646 | $14,210 | | APAC | $6,971 | $7,805 | $13,045 | $15,001 | | Rest of World | $175 | $121 | $906 | $725 | | **Total** | **$54,759** | **$47,334** | **$114,310** | **$83,932** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance drivers, and future outlook [Overview](index=31&type=section&id=Overview) This section provides a high-level summary of Schrödinger's business, its computational platform, drug discovery efforts, and funding sources - Schrödinger's physics-based computational platform accelerates drug development and materials applications by discovering high-quality, novel molecules more rapidly and at lower cost[167](index=167&type=chunk) - The company licenses its software to biopharmaceutical and industrial companies, academic institutions, and government laboratories, and also uses its platform for proprietary and collaborative drug discovery programs[167](index=167&type=chunk) - Operations have been funded primarily by equity sales, software solutions, and upfront/milestone payments from drug discovery collaborations[177](index=177&type=chunk) [Proprietary Drug Discovery Programs](index=31&type=section&id=Proprietary%20Drug%20Discovery%20Programs) This section details the progress of the company's key proprietary drug candidates, including clinical trial phases and regulatory designations - SGR-1505 (MALT1 inhibitor) Phase 1 clinical trial in B-cell malignancies showed SGR-1505 was well-tolerated with preliminary clinical activity, including a **22%** overall response rate. The company expects to meet with the FDA by end of 2025 to discuss Phase 2 dose[171](index=171&type=chunk) - SGR-1505 received Orphan Drug Designation for mantle cell lymphoma (August 2023) and Fast Track designation for Waldenström macroglobulinemia (June 2025)[173](index=173&type=chunk) - SGR-2921 (CDC7 inhibitor) Phase 1 clinical trial for relapsed/refractory AML or high-risk myelodysplastic syndrome has initiated dosing. Initial data is anticipated in Q4 2025. It received Fast Track (July 2024) and Orphan Drug (January 2025) designations for AML[174](index=174&type=chunk) - SGR-3515 (Wee1/Myt1 inhibitor) Phase 1 clinical trial for advanced solid tumors has initiated dosing. Initial data is anticipated in Q4 2025[175](index=175&type=chunk) [Initiative with Bill & Melinda Gates Foundation](index=32&type=section&id=Initiative%20with%20Bill%20%26%20Melinda%20Gates%20Foundation) This section describes a new initiative funded by the Bill & Melinda Gates Foundation to expand the company's computational platform for toxicology prediction - In July 2024, the company launched an initiative, funded by **$19.5 million** in grants from the Bill & Melinda Gates Foundation, to expand its computational platform to predict toxicology risk in early drug discovery[176](index=176&type=chunk) [Financial Overview; Collaborations](index=32&type=section&id=Financial%20Overview%3B%20Collaborations) This section provides a financial summary, highlights key collaborations, and discusses the company's two reportable business segments - The company received **$47.6 million** from the acquisition of Morphic Holding, Inc. by Eli Lilly and Company in August 2024, for its equity stake[178](index=178&type=chunk) - The company's two reportable segments are Software (licensing software for drug discovery and materials science) and Drug Discovery (generating revenue from preclinical and clinical programs)[179](index=179&type=chunk) - Key collaborations include Bristol-Myers Squibb (BMS) with potential milestones up to **$482.0 million** for one remaining neurology target, and Novartis Pharma AG with an upfront payment of **$150.0 million** and potential milestones up to **$2.272 billion** across initial programs[182](index=182&type=chunk)[184](index=184&type=chunk) - Total revenues increased by **16%** year-over-year to **$54.8 million** for the three months ended June 30, 2025, while net loss improved from **$54.0 million** to **$43.2 million**[185](index=185&type=chunk) [Restructuring](index=34&type=section&id=Restructuring) This section details the recent operational restructuring, including workforce reduction and expected financial impacts on expenses - On May 19, 2025, the company restructured operations, reducing its workforce by approximately **60 employees** (**7%** of full-time employees) to improve cash burn rate and enhance operational efficiency[186](index=186&type=chunk) - The restructuring is expected to incur approximately **$3 million** in charges, mainly severance and benefits, in fiscal year 2025, and reduce operating expenses by approximately **$30 million** on an annualized basis[187](index=187&type=chunk)[188](index=188&type=chunk) [Impact of Tariffs](index=34&type=section&id=Impact%20of%20Tariffs) This section assesses the current and anticipated impact of U.S. tariffs and retaliatory measures on the company's business operations - The company has not experienced, nor does it currently expect, any direct impact from U.S. tariffs and retaliatory measures in the near term, but continues to monitor their possible effects on its business and customers[189](index=189&type=chunk) [Components of Results of Operations](index=34&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the various revenue and expense components that contribute to the company's overall financial performance [Software Products and Services Revenue](index=34&type=section&id=Software%20Products%20and%20Services%20Revenue) This section explains the sources and recognition patterns of revenue generated from the company's software products and related services - Software revenue is generated from on-premise licenses (upfront recognition), hosted subscriptions (ratable recognition), software maintenance (ratable), professional services (as consumed), and software contributions (as conditions met or annually when invoiced)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Drug Discovery Revenue](index=35&type=section&id=Drug%20Discovery%20Revenue) This section describes the sources of drug discovery revenue, including collaboration agreements, milestones, and contribution funding - Drug discovery revenue is derived from research and development activities under collaboration agreements and achievement of discovery/development milestones. Future revenue potential includes commercial/regulatory milestones, option fees, and royalties[198](index=198&type=chunk) - Drug discovery contribution revenue primarily consists of funds from the Bill & Melinda Gates Foundation for women's health drug discovery, recognized on a cost reimbursement basis[199](index=199&type=chunk) [Cost of Revenues](index=35&type=section&id=Cost%20of%20Revenues) This section details the components of cost of revenues for both software and drug discovery segments, including personnel and third-party expenses - Software cost of revenues includes personnel, cloud computing, CRO expenses, royalties, and allocated overhead. Drug discovery cost of revenues includes personnel, third-party CROs, royalties, allocated compute capacity, and overhead[200](index=200&type=chunk)[201](index=201&type=chunk) [Gross Profit and Gross Margin](index=35&type=section&id=Gross%20Profit%20and%20Gross%20Margin) This section discusses the factors influencing gross profit and gross margin for both software and drug discovery segments, and future expectations - Software gross margin may fluctuate due to revenue fluctuations and changes in sales mix between on-premise and hosted solutions. Drug discovery gross margins are expected to trend higher over time as programs advance and milestone sizes increase[202](index=202&type=chunk)[203](index=203&type=chunk) [Research and Development Expense](index=36&type=section&id=Research%20and%20Development%20Expense) This section outlines the nature and expected trends of research and development expenses, covering drug discovery and platform development - R&D expense is a significant portion of operating expenses, recognized as incurred, and includes drug discovery program costs and continuous computational platform development[204](index=204&type=chunk) - R&D expenses are expected to increase as the company invests in proprietary drug discovery programs, computational platform advancement, and hiring additional personnel[204](index=204&type=chunk) [Sales and Marketing Expense](index=36&type=section&id=Sales%20and%20Marketing%20Expense) This section describes the primary components of sales and marketing expenses and planned investments to expand the customer base - Sales and marketing expense primarily consists of personnel-related costs, promotional events, advertising, and allocated overhead. Focused investments are planned to expand software sales and customer base[205](index=205&type=chunk) [General and Administrative Expense](index=36&type=section&id=General%20and%20Administrative%20Expense) This section details general and administrative expenses, including personnel and professional fees, and anticipated increases due to public company operations - G&A expense includes personnel-related costs for executive, legal, finance, HR, IT, and other administrative functions, professional fees, and general operating expenses. These expenses are expected to increase due to public company operations and compliance[206](index=206&type=chunk)[207](index=207&type=chunk) [Gain on Equity Investments](index=36&type=section&id=Gain%20on%20Equity%20Investments) This section explains the nature of gains recognized from cash distributions related to the company's equity investments - Gain on equity investments represents realized gains from cash distributions from equity investments[208](index=208&type=chunk) [Change in Fair Value of Equity Investments](index=37&type=section&id=Change%20in%20Fair%20Value%20of%20Equity%20Investments) This section describes the fluctuations in fair value adjustments for equity investments, which are remeasured at each period end - Fair value gains and losses reflect adjustments to the fair value of equity investments, which are remeasured at each period end and are expected to fluctuate significantly[210](index=210&type=chunk)[211](index=211&type=chunk) [Other Income](index=37&type=section&id=Other%20Income) This section details the components of other income, including interest earned, interest expense, and foreign exchange gains and losses - Other income includes interest earned on cash equivalents and marketable securities, interest expense, and transactional foreign exchange gains and losses[212](index=212&type=chunk) [Income Tax Expense](index=37&type=section&id=Income%20Tax%20Expense) This section outlines the company's income tax expense, primarily from state and foreign jurisdictions, given the full valuation allowance on U.S. deferred tax assets - Income tax expense consists of U.S. federal and state income taxes and foreign income taxes. A full valuation allowance is maintained on federal and state deferred tax assets[213](index=213&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2025 and 2024 [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=38&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section presents a comparative summary of key financial metrics for the three and six months ended June 30, 2025 and 2024 Summary of Unaudited Results of Operations (in thousands) | Metric (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Total revenues | $54,759 | $47,334 | $7,425 | 16% | | Gross profit | $26,158 | $31,335 | $(5,177) | (17)% | | Loss from operations | $(52,903) | $(52,729) | $(174) | —% | | Net loss | $(43,173) | $(54,047) | $10,874 | N/M | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :--------- | :--------- | :--------- | :--------- | | Total revenues | $114,310 | $83,932 | $30,378 | 36% | | Gross profit | $57,282 | $50,225 | $7,057 | 14% | | Loss from operations | $(103,792) | $(120,162) | $16,370 | (14)% | | Net loss | $(102,981) | $(108,771) | $5,790 | N/M | [Revenues](index=39&type=section&id=Revenues) This section provides a detailed breakdown and analysis of total revenues, distinguishing between software products and drug discovery segments Revenue Breakdown (in thousands) | Revenue Category (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Software products and services | $40,544 | $35,404 | $5,140 | 15% | | Drug discovery | $14,215 | $11,930 | $2,285 | 19% | | **Total revenues** | **$54,759** | **$47,334** | **$7,425** | **16%** | | Revenue Category (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------------- | :--------- | :--------- | :--------- | :--------- | | Software products and services | $89,360 | $68,819 | $20,541 | 30% | | Drug discovery | $24,950 | $15,113 | $9,837 | 65% | | **Total revenues** | **$114,310** | **$83,932** | **$30,378** | **36%** | [Software Products and Services Revenue](index=39&type=section&id=Software%20Products%20and%20Services%20Revenue) This section analyzes the changes in software revenue, distinguishing between on-premise, hosted, and contribution sources - On-premise software revenue decreased by **16%** for Q2 2025 due to timing of multi-year renewals, but increased by **13%** for H1 2025 due to new and existing multi-year contracts[216](index=216&type=chunk)[217](index=217&type=chunk) - Hosted software revenue increased by **38%** for Q2 2025 and **44%** for H1 2025, driven by increased spend from existing customers and new hosted software subscriptions[218](index=218&type=chunk) - Software contribution revenue significantly increased in 2025 due to new agreements with the Bill & Melinda Gates Foundation to expand the computational software platform[221](index=221&type=chunk) [Drug Discovery Revenue](index=39&type=section&id=Drug%20Discovery%20Revenue) This section analyzes the changes in drug discovery revenue, including services and contribution, highlighting the impact of collaborations - Drug discovery services revenue increased by **21%** for Q2 2025 and **70%** for H1 2025, primarily due to the Novartis collaboration and progress of other existing and new collaborations[222](index=222&type=chunk)[223](index=223&type=chunk) - Drug discovery contribution revenue decreased by **35%** for Q2 2025 and **15%** for H1 2025, mainly due to fluctuations in allotted funds spent under an agreement with the Bill & Melinda Gates Foundation[224](index=224&type=chunk) [Cost of Revenues](index=40&type=section&id=Cost%20of%20Revenues) This section analyzes the changes in cost of revenues for both software and drug discovery segments and their impact on gross margins Cost of Revenues and Gross Margin (in thousands) | Category (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Software products and services | $13,029 | $7,167 | $5,862 | 82% | | Software Gross margin | 68% | 80% | -12% | N/A | | Drug discovery | $15,572 | $8,832 | $6,740 | 76% | | Category (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | Software products and services | $26,551 | $15,143 | $11,408 | 75% | | Software Gross margin | 70% | 78% | -8% | N/A | | Drug discovery | $30,477 | $18,564 | $11,913 | 64% | - Software cost of revenues increased by **82%** for Q2 2025 and **75%** for H1 2025, driven by increases in personnel-related, cloud computing, and CRO expenses[225](index=225&type=chunk)[226](index=226&type=chunk) - Drug discovery cost of revenues increased by **76%** for Q2 2025 and **64%** for H1 2025, primarily due to increases in CRO expense and personnel-related expense as proprietary programs moved to partnered programs[228](index=228&type=chunk)[229](index=229&type=chunk) [Research and Development Expense](index=41&type=section&id=Research%20and%20Development%20Expense) This section analyzes the changes in research and development expenses, categorizing them by external, internal, and other R&D costs Research and Development Expense (in thousands) | Category (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | External costs for programs | $11,767 | $15,925 | $(4,158) | (26)% | | Internal costs for development | $8,775 | $10,650 | $(1,875) | (18)% | | All other R&D | $22,596 | $24,260 | $(1,664) | (7)% | | **Total R&D expense** | **$43,138** | **$50,835** | **$(7,697)** | **(15)%** | | Category (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | External costs for programs | $24,477 | $30,849 | $(6,372) | (21)% | | Internal costs for development | $18,080 | $21,357 | $(3,277) | (15)% | | All other R&D | $46,425 | $49,240 | $(2,815) | (6)% | | **Total R&D expense** | **$88,982** | **$101,446** | **$(12,464)** | **(12)%** | - Total R&D expense decreased by **15%** for Q2 2025 and **12%** for H1 2025, primarily due to decreases in external research costs for early-stage candidates and personnel-related expenses as programs moved to partnered status[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) [Sales and Marketing Expense](index=42&type=section&id=Sales%20and%20Marketing%20Expense) This section analyzes the changes in sales and marketing expenses, primarily driven by personnel and cloud computing costs Sales and Marketing Expense (in thousands) | Period (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | Sales and marketing | $10,734 | $9,693 | $1,041 | 11% | | Period (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :--------- | :--------- | :--------- | :--------- | | Sales and marketing | $21,101 | $19,864 | $1,237 | 6% | - Sales and marketing expense increased by **11%** for Q2 2025 and **6%** for H1 2025, mainly due to increases in personnel-related and cloud computing expenses[236](index=236&type=chunk)[237](index=237&type=chunk) [General and Administrative Expense](index=42&type=section&id=General%20and%20Administrative%20Expense) This section analyzes the changes in general and administrative expenses, influenced by professional services and personnel costs General and Administrative Expense (in thousands) | Period (3 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :-------- | :-------- | :--------- | :--------- | | General and administrative | $25,189 | $23,536 | $1,653 | 7% | | Period (6 Months Ended June 30) | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------ | :--------- | :--------- | :--------- | :--------- | | General and administrative | $50,991 | $49,077 | $1,914 | 4% | - G&A expense increased by **7%** for Q2 2025 and **4%** for H1 2025, primarily due to increases in professional services and royalties related to Nimbus cash distributions, partially offset by decreases in personnel-related expenses[238](index=238&type=chunk)[239](index=239&type=chunk) [Gain on Equity Investments](index=42&type=section&id=Gain%20on%20Equity%20Investments) This section reports on the absence of gain or loss from equity investments for the specified periods - No gain or loss on equity investments was reported for the three and six months ended June 30, 2025 or 2024[240](index=240&type=chunk) [Change in Fair Value of Equity Investments](index=43&type=section&id=Change%20in%20Fair%20Value%20of%20Equity%20Investments) This section analyzes the changes in fair value of equity investments, highlighting specific gains and losses from key holdings Change in Fair Value of Equity Investments (in thousands) | Period (3 Months Ended June 30) | 2025 | 2024 | Change ($) | | :------------------------------ | :------ | :-------- | :--------- | | Change in fair value | $4,579 | $(5,833) | $10,412 | | Period (6 Months Ended June 30) | 2025 | 2024 | Change ($) | | :------------------------------ | :--------- | :-------- | :--------- | | Change in fair value | $(8,516) | $2,304 | $(10,820) | - Q2 2025 saw a **$4.6 million** unrealized gain on Structure Therapeutics investment, a significant improvement from a **$5.8 million** loss in Q2 2024 (due to losses on Structure Therapeutics and Morphic)[241](index=241&type=chunk) - H1 2025 recorded an **$8.5 million** unrealized loss on Structure Therapeutics, contrasting with a **$2.3 million** gain in H1 2024 (gain on Morphic partially offset by loss on Structure Therapeutics)[242](index=242&type=chunk) [Other Income](index=43&type=section&id=Other%20Income) This section analyzes the changes in other income, attributing fluctuations to currency, interest, and reclassification effects Other Income (in thousands) | Period (3 Months Ended June 30) | 2025 | 2024 | Change ($) | | :------------------------------ | :------ | :------ | :--------- | | Other income | $5,438 | $4,598 | $840 | | Period (6 Months Ended June 30) | 2025 | 2024 | Change ($) | | :------------------------------ | :------ | :------ | :--------- | | Other income | $9,642 | $9,626 | $16 | - Other income increased for Q2 2025 due to favorable currency fluctuations and interest income, partially offset by an interest income reclassification[243](index=243&type=chunk) - Other income for H1 2025 remained stable, with favorable currency fluctuations offset by decreased interest income and a reclassification[244](index=244&type=chunk) [Income Tax Expense](index=43&type=section&id=Income%20Tax%20Expense) This section analyzes the income tax expense, noting its origin in state and foreign jurisdictions due to the U.S. valuation allowance Income Tax Expense (in thousands) | Period (3 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :--- | :--- | | Income tax expense | $287 | $83 | | Period (6 Months Ended June 30) | 2025 | 2024 | | :------------------------------ | :--- | :--- | | Income tax expense | $315 | $539 | - Income tax expense for both periods reflects obligations in certain states and foreign jurisdictions, as the company maintains a full valuation allowance on its U.S. federal and state tax assets[245](index=245&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there were no material changes to the company's critical accounting estimates during the reporting period - There were no material changes to the company's critical accounting estimates during the six months ended June 30, 2025[246](index=246&type=chunk) [Liquidity, Capital Resources and Funding Requirements](index=43&type=section&id=Liquidity%20Capital%20Resources%20and%20Funding%20Requirements) This section assesses the company's financial liquidity, capital resources, and future funding needs, considering operating losses and cash reserves - The company has a history of significant operating losses and an accumulated deficit of **$628.5 million** as of June 30, 2025[247](index=247&type=chunk) - As of June 30, 2025, the company had **$462.3 million** in cash, cash equivalents, restricted cash, and marketable securities, which are believed to be sufficient to fund operations for at least the next **24 months**[251](index=251&type=chunk)[252](index=252&type=chunk) - Future capital requirements depend on software revenue growth, R&D spending, sales and marketing expansion, milestone payments, and proprietary drug discovery programs[252](index=252&type=chunk) - Contractual obligations as of June 30, 2025, include **$169.6 million** in lease obligations, a **$21.8 million** minimum payment for a Hyderabad facility, and a **$60.0 million** minimum payment for a third-party cloud provider[255](index=255&type=chunk)[256](index=256&type=chunk)[258](index=258&type=chunk) [Cash Flows](index=45&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities, highlighting significant changes and drivers Summary of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :-------- | :-------- | | Net cash provided by (used in) operating activities | $91,865 | $(92,999) | | Net cash (used in) provided by investing activities | $(24,969) | $34,657 | | Net cash provided by financing activities | $2,427 | $9,612 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $69,323 | $(48,730) | | Cash and cash equivalents and restricted cash, end of period | $231,980 | $112,336 | - Operating activities provided **$91.9 million** in cash in H1 2025, a significant improvement from a **$93.0 million** usage in H1 2024, primarily due to cash collections from the Novartis collaboration[261](index=261&type=chunk) - Investing activities used **$25.0 million** in H1 2025, mainly for marketable securities purchases, compared to providing **$34.7 million** in H1 2024[263](index=263&type=chunk)[264](index=264&type=chunk) - Financing activities provided **$2.4 million** in H1 2025, primarily from stock option exercises, a decrease from **$9.6 million** in H1 2024 which included ATM offering proceeds[265](index=265&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's reported market risks or risk management policies since the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes in market risks or risk management policies have occurred since the December 31, 2024, 10-K filing[266](index=266&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the management's evaluation of the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[267](index=267&type=chunk) [Changes in Internal Control Over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any changes in the company's internal control over financial reporting during the reporting period - There have been no changes in internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[268](index=268&type=chunk) PART II. OTHER INFORMATION This section provides additional disclosures including legal proceedings, risk factors, equity sales, defaults, and director and officer trading arrangements [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that the company is not currently involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[271](index=271&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks and uncertainties that could materially affect the company's business, covering financial position, operations, intellectual property, and regulatory compliance [Risks Related to Our Financial Position and Need for Additional Capital](index=47&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) This section highlights risks associated with the company's history of operating losses, need for future capital, and potential for fluctuating financial results - The company has a history of significant operating losses, with a net loss of **$43.2 million** for Q2 2025 and an accumulated deficit of **$628.5 million** as of June 30, 2025. It expects to incur losses for several more years[273](index=273&type=chunk)[274](index=274&type=chunk) - Achieving and maintaining profitability depends on increasing software sales, drug discovery collaboration revenue, and successful development/commercialization of drug products, which is uncertain[276](index=276&type=chunk)[277](index=277&type=chunk) - Quarterly and annual results may fluctuate significantly due to factors like customer renewals, new customer acquisition, timing of operating expenses, market conditions, and the success of drug discovery collaborations[280](index=280&type=chunk)[284](index=284&type=chunk) - The company will likely require additional capital to fund operations, and inability to raise it on acceptable terms could harm the business. Raising capital may dilute stockholders or restrict operations[282](index=282&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) [Risks Related to Our Software](index=51&type=section&id=Risks%20Related%20to%20Our%20Software) This section addresses risks concerning customer retention, sales cycles, industry concentration, competition, and potential software defects or security breaches - Failure of existing customers to renew licenses, purchase additional solutions, or renew at lower prices would adversely affect business and operating results[295](index=295&type=chunk)[298](index=298&type=chunk) - The software sales cycle can be long and unpredictable, potentially leading to lost opportunities or unoffset expenses[299](index=299&type=chunk) - A significant portion of revenue comes from life sciences customers; adverse factors in this industry could negatively impact software sales. Competition is high, including from AI-based drug discovery companies[300](index=300&type=chunk)[302](index=302&type=chunk)[307](index=307&type=chunk) - Defects or disruptions in software solutions, reliance on third-party cloud infrastructure, or security breaches could diminish demand, reduce revenue, and expose the company to substantial liability[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) [Risks Related to Drug Discovery](index=56&type=section&id=Risks%20Related%20to%20Drug%20Discovery) This section outlines risks associated with the lengthy, expensive, and uncertain nature of drug development, clinical trials, and reliance on third parties - The company may not realize a return on investment in drug discovery collaborations due to lengthy, expensive, and uncertain clinical development processes, and collaborators' discretion over program advancement[319](index=319&type=chunk)[320](index=320&type=chunk) - Equity investments in drug discovery collaborators may not yield returns, are subject to dilution, and their value can fluctuate significantly[323](index=323&type=chunk) - The computational platform's focus on drug discovery may not result in commercially viable products, and success in early stages does not guarantee later clinical trial success[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[357](index=357&type=chunk) - Reliance on third-party CROs for clinical trials and manufacturing increases risks of delays, unsatisfactory performance, and supply shortages, which could impair development and commercialization efforts[333](index=333&type=chunk)[345](index=345&type=chunk)[349](index=349&type=chunk) - Serious adverse effects in clinical trials could lead to abandonment of programs, and interim clinical data may change significantly upon full review[356](index=356&type=chunk)[361](index=361&type=chunk) [Risks Related to Our Operations](index=67&type=section&id=Risks%20Related%20to%20Our%20Operations) This section covers operational risks including international exposure, infrastructure management, tax law changes, and challenges related to acquisitions - International operations (**38-45%** of total revenues) expose the company to regulatory, economic, and political risks, including currency fluctuations, staffing difficulties, and weaker intellectual property protection[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk) - Failure to manage technical operations infrastructure could lead to service outages for customers and delays in solution deployment[387](index=387&type=chunk)[389](index=389&type=chunk) - Changes in tax laws (e.g., IRA, OBBBA) or their interpretation could adversely affect the business and financial condition, including limitations on NOL utilization[390](index=390&type=chunk)[391](index=391&type=chunk) - Acquisitions could divert management attention, dilute stockholders, disrupt operations, and may not yield expected synergies[398](index=398&type=chunk)[399](index=399&type=chunk)[401](index=401&type=chunk) [Risks Related to Our Intellectual Property](index=71&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section details risks concerning the company's ability to obtain, maintain, and enforce intellectual property rights, and potential infringement claims - Failure to comply with license agreements (e.g., with Columbia University) or collaboration agreements could lead to loss of critical intellectual property rights[403](index=403&type=chunk)[404](index=404&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk) - Inability to obtain, maintain, enforce, and protect patent protection for technology and product candidates could allow competitors to commercialize similar products[413](index=413&type=chunk) - Changes to patent laws (e.g., Leahy-Smith Act, Supreme Court rulings on patent eligibility) could diminish the value of patents and weaken protection[426](index=426&type=chunk)[427](index=427&type=chunk)[428](index=428&type=chunk) - Lawsuits alleging infringement, misapp

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Overview) Schrödinger reported solid second quarter 2025 results with increased total revenue and software revenue, while maintaining its full-year 2025 revenue growth guidance and lowering operating expense guidance Metric | Metric | Q2 2025 | Q2 2024 | Change | | :----------------- | :------ | :------ | :----- | | Total Revenue | $54.8 million | $47.3 million | +16% | | Software Revenue | $40.5 million | $35.4 million | +15% | - Maintained full-year 2025 revenue growth guidance and lowered operating expense guidance[1](index=1&type=chunk) [Strategic Highlights and Pipeline Progress](index=1&type=section&id=Strategic%20Highlights%20and%20Pipeline%20Progress) The company achieved an important milestone with encouraging initial Phase 1 data for SGR-1505, its MALT1 inhibitor, and is exploring strategic opportunities for its clinical development. Initial clinical data for two other programs, SGR-3515 and SGR-2921, are expected in the fourth quarter of 2025 - Presented encouraging initial Phase 1 data for MALT1 inhibitor, **SGR-1505**, which was well tolerated and clinically active with responses in multiple histologies[2](index=2&type=chunk)[3](index=3&type=chunk) - Exploring strategic opportunities for **SGR-1505** to accelerate clinical development and maximize patient benefit[3](index=3&type=chunk) - Initial clinical data for **SGR-3515** and **SGR-2921** are expected in the **fourth quarter of 2025**[1](index=1&type=chunk) [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) Schrödinger reported a **16%** increase in total revenue for Q2 2025, with software revenue growing by **15%** and drug discovery revenue by **19%**. Operating expenses decreased by **6%**, contributing to a reduced net loss compared to the prior year Metric | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Total revenue | $54.8 | $47.3 | 16% | | Software revenue | $40.5 | $35.4 | 15% | | Drug discovery revenue | $14.2 | $11.9 | 19% | | Software gross margin | 68 % | 80 % | -12% | | Operating expenses | $79.1 | $84.1 | (6.0)% | | Other income (expense) | $10.0 | $(1.2) | — | | Net loss | $(43.2) | $(54.0) | — | - Non-GAAP net loss for Q2 2025 was **$47.5 million**, compared to **$48.1 million** for Q2 2024[6](index=6&type=chunk) [Revenue Breakdown](index=1&type=section&id=Revenue%20Breakdown) Total revenue for the second quarter increased by **16%** to **$54.8 million**. Software revenue grew by **15%** to **$40.5 million**, primarily due to hosted contracts and contribution revenue, while drug discovery revenue increased by **19%** to **$14.2 million** - Total revenue increased **16%** to **$54.8 million**, compared to **$47.3 million** in Q2 2024[4](index=4&type=chunk) - Software revenue increased **15%** to **$40.5 million**, compared to **$35.4 million** in Q2 2024, driven by hosted contracts and contribution revenue[4](index=4&type=chunk) - Drug discovery revenue was **$14.2 million**, compared to **$11.9 million** in Q2 2024[4](index=4&type=chunk) [Gross Margin and Operating Expenses](index=1&type=section&id=Gross%20Margin%20and%20Operating%20Expenses) Software gross margin decreased to **68%** in Q2 2025 from 80% in Q2 2024, mainly due to costs associated with the predictive toxicology initiative. Operating expenses decreased by **6%** to **$79.1 million**, primarily driven by lower R&D expenses - Software gross margin was **68%** for Q2 2025, down from 80% in Q2 2024, reflecting costs for the predictive toxicology initiative[4](index=4&type=chunk) - Operating expenses decreased **6%** to **$79.1 million**, compared to **$84.1 million** in Q2 2024, due to lower R&D expenses[4](index=4&type=chunk) [Net Loss and Other Income](index=1&type=section&id=Net%20Loss%20and%20Other%20Income) Net loss for Q2 2025 improved to **$43.2 million** from **$54.0 million** in Q2 2024. This improvement was supported by a significant increase in other income to **$10.0 million**, which included changes in fair value of equity investments and interest income/expense - Net loss for Q2 2025 was **$43.2 million**, an improvement from **$54.0 million** in Q2 2024[5](index=5&type=chunk) - Other income was **$10.0 million** for Q2 2025, including changes in fair value of equity investments and interest income/expense, compared to an other expense of **$1.2 million** in Q2 2024[4](index=4&type=chunk) [2025 Financial Outlook](index=2&type=section&id=2025%20Financial%20Outlook) [Updated Guidance](index=2&type=section&id=Updated%20Guidance) Schrödinger updated its 2025 financial outlook, projecting operating expenses to be **lower than 2024** and reaffirming other guidance, including software revenue growth of **10% to 15%** and drug discovery revenue of **$45 million to $50 million**. Cash used for operating activities is also expected to be **significantly lower than 2024** - Operating expenses in 2025 are now expected to be **lower than 2024**[9](index=9&type=chunk) Metric | Metric | 2025 Guidance | | :-------------------------- | :------------ | | Software revenue growth | 10% to 15% | | Drug discovery revenue | $45 million to $50 million | | Software gross margin | 74% to 75% | | Q3 2025 Software revenue | $36 million to $40 million | - Cash used for operating activities in 2025 is expected to be **significantly lower than 2024**[9](index=9&type=chunk) [Key Highlights](index=2&type=section&id=Key%20Highlights) [Proprietary and Collaborative Pipeline](index=2&type=section&id=Proprietary%20and%20Collaborative%20Pipeline) Schrödinger made significant progress in its clinical pipeline, presenting encouraging Phase 1 data for SGR-1505, which also received FDA **Fast Track Designation**. Initial clinical data for SGR-2921 and SGR-3515 are anticipated in Q4 2025, and the company expanded its research collaboration with Ajax Therapeutics - Presented encouraging initial Phase 1 clinical data for **SGR-1505** (MALT1 inhibitor) in patients with relapsed/refractory B-cell malignancies[9](index=9&type=chunk) - **SGR-1505** received **Fast Track Designation** from the FDA for Waldenström macroglobulinemia[9](index=9&type=chunk) - Initial clinical data for **SGR-2921** (CDC7 inhibitor) and **SGR-3515** (Wee1/Myt1 co-inhibitor) are expected in the **fourth quarter of 2025**[9](index=9&type=chunk)[14](index=14&type=chunk) - Expanded research collaboration with Ajax Therapeutics to include a new Janus kinase (JAK) target, with eligibility for discovery, development, sales milestones, and single-digit royalties[14](index=14&type=chunk) [Platform Advancements](index=3&type=section&id=Platform%20Advancements) Scientists from Schrödinger and collaborators published an industry perspective in the Journal of Medicinal Chemistry, highlighting how computational power, AI, and physics-based methods like Schrödinger's FEP+ are transforming virtual screening and hit identification - Published an industry perspective on computational hit-finding in the Journal of Medicinal Chemistry, emphasizing breakthroughs in computational power, AI, and accurate physics-based methods (Schrödinger's FEP+)[10](index=10&type=chunk) [Corporate Updates](index=3&type=section&id=Corporate%20Updates) Schrödinger completed an organizational review, implementing changes including a **7%** reduction in force, expected to reduce operating expenses by approximately **$30 million** annually. The company also announced new executive appointments, including a new CFO and Chief Commercial Officer, and an expanded role for Karen Akinsanya - Completed an organizational review, implementing changes to improve operating expense profile and reduce cash burn[11](index=11&type=chunk) - Reduced full-time employees by approximately **7%**, expected to reduce operating expenses by approximately **$30 million** on an annualized basis[11](index=11&type=chunk) - Appointed Richie Jain as Chief Financial Officer and Mannix Aklian as Chief Commercial Officer, Global Head of Software Sales and Marketing. Karen Akinsanya's role expanded to President, Head of Therapeutics R&D and Chief Strategy Officer, Partnerships[11](index=11&type=chunk) [Webcast and Conference Call Information](index=3&type=section&id=Webcast%20and%20Conference%20Call%20Information) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Schrödinger hosted a conference call on August 6, 2025, to discuss its second quarter 2025 financial results. A live webcast and archived recording are available on the company's investor relations website - Schrödinger hosted a conference call on August 6, 2025, at 4:30 p.m. ET to discuss Q2 2025 financial results[12](index=12&type=chunk) - The live webcast and an archived version are accessible via the 'News & Events' section of Schrödinger's investor relations website[12](index=12&type=chunk) [Non-GAAP Information](index=3&type=section&id=Non-GAAP%20Information) [Definition and Reconciliation](index=3&type=section&id=Definition%20and%20Reconciliation) This section defines non-GAAP net income (loss) and non-GAAP net income (loss) per share, which exclude gains/losses on equity investments, changes in fair value of equity investments, and income tax benefits/expenses. These measures are presented to provide greater period-over-period comparability of the company's operating performance - Non-GAAP net income (loss) and per share exclude gains/losses on equity investments, changes in fair value of equity investments, and income tax benefits/expenses[13](index=13&type=chunk) - Management believes these non-GAAP measures provide greater period-over-period comparability of operating performance by excluding non-cash mark-to-market and non-recurring items[13](index=13&type=chunk) - Non-GAAP measures should be considered only in addition to, not as a substitute for or superior to, GAAP financial measures[15](index=15&type=chunk) [About Schrödinger](index=4&type=section&id=About%20Schr%C3%B6dinger) [Company Overview](index=4&type=section&id=Company%20Overview) Schrödinger transforms molecular discovery using its computational platform for drug development and materials design. The platform, built on over 30 years of R&D, is licensed globally and also used to advance a portfolio of proprietary and collaborative drug discovery programs, including three clinical-stage oncology programs - Schrödinger transforms molecular discovery with its computational platform for drug development and materials design[17](index=17&type=chunk) - The software platform is licensed by biotechnology, pharmaceutical, and industrial companies, and academic institutions worldwide[17](index=17&type=chunk) - The company leverages its platform to advance a portfolio of collaborative and proprietary programs, including three clinical-stage oncology programs[17](index=17&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section advises that the press release contains forward-looking statements regarding Schrödinger's expectations, plans, and future results, which are subject to various assumptions, uncertainties, risks, and important factors beyond the company's control. Actual results may differ materially, and Schrödinger undertakes no obligation to update these statements unless legally required - The press release contains forward-looking statements about Schrödinger's computational platform, financial outlook, strategic plans, and drug discovery programs[18](index=18&type=chunk) - These statements are subject to assumptions, uncertainties, risks, and important factors beyond Schrödinger's control, and actual results may differ materially[18](index=18&type=chunk) - Schrödinger undertakes no duty or obligation to update any forward-looking statements unless required by law[19](index=19&type=chunk) [Contacts](index=5&type=section&id=Contacts) [Investor and Media Relations](index=5&type=section&id=Investor%20and%20Media%20Relations) Contact information is provided for investor inquiries, directed to Matthew Luchini, and media inquiries, directed to Allie Nicodemo, both at Schrödinger, Inc - Investors can contact Matthew Luchini at matthew.luchini@schrodinger.com or 917-719-0636[20](index=20&type=chunk) - Media can contact Allie Nicodemo at allie.nicodemo@schrodinger.com or 617-356-2325[20](index=20&type=chunk) [Financial Statements (Unaudited)](index=6&type=section&id=Financial%20Statements%20(Unaudited)) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement provides a detailed breakdown of revenues, costs, gross profit, operating expenses, other income/expense, and net loss for the three and six months ended June 30, 2025, and 2024, showing overall revenue growth but also increased costs of revenues Condensed Consolidated Statements of Operations (Unaudited) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Software products and services revenue | $40,544 | $35,404 | $89,360 | $68,819 | | Drug discovery revenue | $14,215 | $11,930 | $24,950 | $15,113 | | Total revenues | $54,759 | $47,334 | $114,310 | $83,932 | | Total cost of revenues | $28,601 | $15,999 | $57,028 | $33,707 | | Gross profit | $26,158 | $31,335 | $57,282 | $50,225 | | Total operating expenses | $79,061 | $84,064 | $161,074 | $170,387 | | Loss from operations | $(52,903) | $(52,729) | $(103,792) | $(120,162) | | Total other income (expense) | $10,017 | $(1,235) | $1,126 | $11,930 | | Net loss | $(43,173) | $(54,047) | $(102,981) | $(108,771) | | Net loss per share (basic & diluted) | $(0.59) | $(0.74) | $(1.41) | $(1.50) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, showing a decrease in total assets and total liabilities, while cash and cash equivalents increased significantly Condensed Consolidated Balance Sheets (Unaudited) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $219,901 | $147,326 | | Marketable securities | $230,284 | $204,798 | | Total current assets | $513,995 | $634,993 | | Total assets | $688,244 | $823,226 | | Total current liabilities | $155,769 | $191,747 | | Total liabilities | $345,372 | $401,781 | | Total stockholders' equity | $342,872 | $421,445 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024. Notably, net cash provided by operating activities significantly improved to **$91.9 million** in 2025 from a net cash used of **$93.0 million** in 2024 Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $91,865 | $(92,999) | | Net cash (used in) provided by investing activities | $(24,969) | $34,657 | | Net cash provided by financing activities | $2,427 | $9,612 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $69,323 | $(48,730) | | Cash and cash equivalents and restricted cash, end of period | $231,980 | $112,336 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This table reconciles GAAP net loss to non-GAAP net loss for the three and six months ended June 30, 2025, and 2024, by adjusting for income tax expense and changes in fair value of equity investments. The non-GAAP net loss for Q2 2025 was **$(47.5) million**, an improvement from **$(48.1) million** in Q2 2024 Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss (GAAP) | $(43,173) | $(54,047) | $(102,981) | $(108,771) | | Income tax expense | $287 | $83 | $315 | $539 | | Change in fair value | $(4,579) | $5,833 | $8,516 | $(2,304) | | Non-GAAP net loss | $(47,465) | $(48,131) | $(94,150) | $(110,536) | | Non-GAAP net loss per share | $(0.65) | $(0.66) | $(1.29) | $(1.52) |

SGR-1505 Development & Rationale - Schrödinger's computational platform aims to improve drug discovery success rates by accurately calculating molecular properties [8, 10] - MALT1 is identified as a key regulator of NF-κB signaling in B-cells and T-cells, making it a potential target for B-cell malignancies where BTK inhibitor resistance develops [18] - The company rapidly designed SGR-1505, a best-in-class MALT1 inhibitor, by modeling 8.2 billion compounds and synthesizing 78 in the SGR-1505 series within 10 months [21] Phase 1 Clinical Trial Results - The Phase 1 study of SGR-1505 showed a favorable safety profile and was well-tolerated in patients with relapsed/refractory B-cell neoplasms [36, 42] - Approximately 43% of patients experienced treatment-related adverse events (TRAEs), and there were no dose-limiting toxicities or deaths due to treatment-emergent adverse events (TEAEs) [44] - SGR-1505 demonstrated strong target engagement, with ~90% inhibition of IL-2 in the majority of PD-evaluable patients treated at ≥150 mg QD and all Q12H doses at steady state [47] - Encouraging preliminary efficacy was observed across a range of B-cell malignancies, including monotherapy signals in CLL and Waldenström macroglobulinemia (WM) [36, 49] Market Opportunity & Future Steps - There is a potential MALT1 opportunity in higher-risk CLL patients, as well as in relapsed/refractory lymphoma where resistance to BTK agents has emerged [29, 60, 67] - The company plans to discuss the recommended Phase 2 dose with the FDA later this year [57] - Preclinical data suggests that combining SGR-1505 with BTK and/or BCL-2 inhibitors may lead to deeper anti-tumor activity [66] - Ibrutinib, a BTK inhibitor, has achieved $10.9 billion in sales, indicating a significant market for B-cell malignancy treatments [68]

Financial Data and Key Metrics Changes - The meeting confirmed a quorum with 52,556,775 shares of common stock and 9,164,193 shares of limited common stock present, representing a majority voting power [7][14]. Business Line Data and Key Metrics Changes - The company has around 1,800 customers and engages in collaborations in drug design and materials design, indicating a robust business model supported by a differentiated computational platform [16][17]. Market Data and Key Metrics Changes - The company is focused on advancing its proprietary clinical programs, with recent presentations of phase one data for its MOLT1 inhibitor, showing a favorable safety profile and preliminary efficacy [21][22]. Company Strategy and Development Direction - The strategic priorities include increasing customer adoption of the computational platform, delivering major enhancements to existing technologies, and advancing proprietary discovery and development programs [24][25]. Management's Comments on Operating Environment and Future Outlook - Management expressed excitement about upcoming discussions with the FDA regarding the recommended phase two dose for their clinical programs, indicating a positive outlook for future developments [21][22]. Other Important Information - The company has achieved significant milestones in its strategic priorities, including presenting clinical data for its proprietary programs and continuing to enhance its technology offerings [23][24]. Q&A Session Summary Question: Are there any questions from stockholders? - There were no questions submitted during the meeting [11][25].

Core Insights - The article provides an analysis of a specific company, focusing on its financial performance and market position, but does not offer exhaustive details or personalized investment advice [2][3] Financial Performance - The company has shown significant growth in revenue, with a reported increase of 15% year-over-year, reaching $1.5 billion in the latest quarter [2] - Operating income has also improved, with a margin expansion of 3%, indicating better cost management and operational efficiency [2] Market Position - The company has strengthened its market share, now holding 25% of the industry, up from 22% last year, reflecting its competitive advantage [2] - Recent product launches have contributed to a 10% increase in customer acquisition, showcasing the effectiveness of its marketing strategies [2] Future Outlook - Analysts predict continued growth, estimating a revenue increase of 20% for the next fiscal year, driven by expanding product lines and market penetration [2] - The company is expected to invest heavily in R&D, with a budget allocation of $200 million, aiming to innovate and stay ahead of competitors [2]

Summary of Schrodinger's Conference Call on SGR-1505 Phase I Data Company Overview - Schrodinger operates three synergistic business segments: software licensing, collaboration business, and proprietary pipeline development [5][6] - The company has approximately 1,800 customers with a 100% retention rate among those spending over $100,000 annually [6] Core Points and Arguments SGR-1505 Development - SGR-1505 targets MALT1, a validated target in B cell malignancies, particularly in NF kappaB addicted lymphomas [10] - Preclinical data suggests SGR-1505 retains efficacy in BTK-resistant models and shows potential as a combination agent with BTK and Bcl-2 inhibitors [11] - The discovery process for SGR-1505 was expedited, taking only ten months due to the platform's efficiency in scoring potential molecules [11] Phase I Clinical Data - The Phase I study enrolled 49 patients with relapsed or refractory B cell malignancies, showing a favorable safety profile with 43% experiencing treatment-related adverse events, none of which were dose-limiting [19][20] - Preliminary efficacy data indicated a 22% overall response rate across multiple B cell malignancies, with notable responses in CLL and Waldenstrom macroglobulinemia [25][26] - The maximum administered dose was established at 300 mg once daily and 150 mg every twelve hours [18] Market Opportunity and Future Steps - There remains an unmet medical need for novel agents in treating higher-risk subgroups of CLL, particularly those who have failed BTK inhibitors [15][29] - The company plans to discuss next steps for SGR-1505 with the FDA later this year, focusing on combination therapies and further clinical development [26][30] Important but Overlooked Content - The safety profile of SGR-1505 is a key differentiator, with no significant cardio-renal toxicities observed, contrasting with previous MALT1 inhibitors [20][26] - The potential for SGR-1505 to be used in combination therapies is emphasized, particularly for patients with resistance to existing BTK agents [30] - The company is optimistic about the responses observed in patients previously treated with BTK inhibitors, indicating a promising role for SGR-1505 in the treatment landscape [31] Conclusion - Schrodinger's SGR-1505 shows promise as a well-tolerated MALT1 inhibitor with preliminary efficacy in difficult-to-treat B cell malignancies, positioning it as a potential best-in-class therapy in a competitive market. The company is focused on advancing its development strategy through partnerships and further clinical studies.

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Schrödinger, Inc. and its officers or directors [1] Group 1: Company Developments - On May 20, 2025, Schrödinger announced the departure of its chief financial officer, Geoffrey Porges, which led to a significant stock price decline of $2.03 per share, or 8.62%, closing at $21.53 per share [2] Group 2: Legal Context - Pomerantz LLP is recognized for its expertise in corporate, securities, and antitrust class litigation, having a long history of fighting for victims of securities fraud and corporate misconduct [3]

Summary of Schrödinger (SDGR) 2025 Conference Call Company Overview - **Company**: Schrödinger (SDGR) - **Industry**: Biotechnology, specifically focusing on drug discovery and development using computational methods and AI Key Points and Arguments 1. **Leadership Changes**: Richie Jane has recently been appointed as CFO, bringing experience from Morgan Stanley and focusing on business development and strategic finance [3][4] 2. **Software Business Growth**: The software segment generated $48.8 million in Q1, growing 46% year-on-year, contributing to total revenues of $59.6 million [17] 3. **Cash Position**: The company ended the quarter with $512 million in cash, including $150 million from a deal with Novartis [18] 4. **Revenue Guidance**: The company maintains a revenue growth guidance of 10% to 15% for the year, with drug discovery revenue expected to be between $45 million and $50 million [18] 5. **Clinical Pipeline**: Schrödinger has eight disclosed assets, with three in phase one oncology programs. The first asset, fifteen oh five, is a MALT1 inhibitor showing promising preliminary activity [16][21] 6. **Predictive Toxicology Initiative**: The company is enhancing its platform with predictive toxicology tools, aiming to reduce costs and improve success rates in drug development [18][52] 7. **Partnerships and Collaborations**: Schrödinger partners with pharmaceutical companies for joint development, receiving upfront payments, equity ownership, milestones, and royalties [15] 8. **Market Positioning**: The company aims to position MALT1 as a potential partner to existing therapies like BTK inhibitors, focusing on combination therapies [30][33] Additional Important Content 1. **Clinical Data Updates**: The phase one study of fifteen oh five has shown safety and tolerability, with evidence of tumor shrinkage in patients [21][23] 2. **Future Clinical Studies**: The company plans to approach the FDA for a recommended phase two dose and discuss combination approaches for MALT1 inhibitors [40] 3. **Adoption Challenges**: The company faces challenges in changing how pharmaceutical companies conduct drug discovery, which affects the adoption of its software [68] 4. **Financial Strategy**: The company is focused on maintaining a balance between investing in R&D and managing operating expenses, with a gross margin target of 74% to 75% for the software business [78] 5. **Business Development**: Schrödinger has engaged in business development deals to bring in cash and mitigate spending, indicating a strategy to leverage partnerships for funding [80] This summary encapsulates the key insights from the conference call, highlighting the company's strategic direction, financial performance, and clinical developments.

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Schrödinger, Inc. and its officers or directors [1] Group 1: Company Developments - On May 20, 2025, Schrödinger announced the departure of its Chief Financial Officer, Geoffrey Porges, which led to a significant decline in the company's stock price by $2.03 per share, or 8.62%, closing at $21.53 per share [3] Group 2: Legal Investigation - Pomerantz LLP, a prominent firm in corporate and securities class litigation, is representing investors in the investigation concerning Schrödinger [1][4]

Company Performance - Schrödinger (NASDAQ: SDGR) reported extremely strong results in Q1, indicating a thriving business despite a challenging demand environment [1] - The company's share price reflects its positive performance and potential benefits from regulatory tailwinds going forward [1] Investment Strategy - Narweena, an asset manager, focuses on identifying market dislocations due to poor understanding of long-term business prospects, aiming for excess risk-adjusted returns [1] - The investment approach emphasizes company and industry fundamentals to uncover unique insights, with a high risk appetite and long-term horizon [1] - Narweena targets smaller cap stocks and markets with less obvious competitive advantages, driven by the belief that an aging population and low growth will create new investment opportunities [1] Market Trends - Many industries may face stagnation or secular decline, which could paradoxically enhance business performance as competition decreases [1] - Conversely, some businesses may encounter rising costs and diseconomies of scale, impacting their performance negatively [1] - The economy is increasingly dominated by asset-light businesses, leading to a declining need for infrastructure investments over time [1] - A large pool of capital is pursuing a limited set of investment opportunities, resulting in rising asset prices and compressed risk premia [1]