PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related management discussion for the reporting period Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024, and 2023, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2024, and December 31, 2023 Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash, cash equivalents, and marketable securities | $377,289 | $463,003 | | Total current assets | $449,179 | $567,796 | | Total assets | $688,371 | $802,955 | | Total current liabilities | $99,759 | $133,673 | | Total liabilities | $214,391 | $254,397 | | Total stockholders' equity | $473,980 | $548,558 | Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss or income for the three and six months ended June 30, 2024, and 2023 Statement of Operations (in thousands) | Statement of Operations (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $47,334 | $35,189 | $83,932 | $99,971 | | Gross profit | $31,335 | $13,810 | $50,225 | $59,503 | | Loss from operations | $(52,729) | $(61,133) | $(120,162) | $(91,634) | | Net (loss) income | $(54,047) | $4,278 | $(108,771) | $133,414 | | Net (loss) income per share, basic | $(0.74) | $0.06 | $(1.50) | $1.86 | Condensed Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024, and 2023 Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(92,999) | $(49,537) | | Net cash provided by investing activities | $34,657 | $239,445 | | Net cash provided by financing activities | $9,612 | $5,391 | | Net (decrease) increase in cash | $(48,730) | $195,299 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of the company's accounting policies, revenue recognition, segment performance, and other financial disclosures - The company operates a physics-based computational platform for drug and materials discovery, generating revenue from software licensing and drug discovery collaborations, and is also advancing its own pipeline of proprietary drug programs28 - In February 2024, the company amended its at-the-market (ATM) offering program, allowing for the sale of up to $250 million in common stock, with $241.1 million remaining available as of June 30, 202429 Revenue by Source (in thousands) | Revenue by Source (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Software Products and Services | $35,404 | $68,819 | | Drug Discovery | $11,930 | $15,113 | - Under the collaboration with Bristol-Myers Squibb (BMS), one active program remains, for which the company is eligible for up to $482.0 million in future milestones as of June 30, 2024, with BMS returning rights to the SOS1 program in Q1 2024 and an immunology target in July 20245961 Segment Performance (in thousands) | Segment Performance (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Software Revenue | $35,404 | $68,819 | | Software Gross Profit | $28,237 | $53,676 | | Drug Discovery Revenue | $11,930 | $15,113 | | Drug Discovery Gross Profit (Loss) | $3,098 | $(3,451) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 35% year-over-year revenue increase for Q2 2024, driven by growth in both software and drug discovery segments, and confirms sufficient liquidity for at least the next 24 months Overview Introduces the company's strategic advancements in its proprietary drug discovery pipeline and expansion of its computational platform - The company is advancing its proprietary drug discovery pipeline, with SGR-1505 (MALT1 inhibitor) in a Phase 1 trial for B-cell lymphomas, with initial data expected in the first half of 2025, and SGR-1505 also received orphan drug designation for mantle cell lymphoma147148 - The FDA cleared INDs for SGR-2921 (CDC7 inhibitor) and SGR-3515 (WEE1/MYT1 inhibitor), with Phase 1 trials initiated for both, SGR-2921 received Fast Track designation for acute myeloid leukemia, and initial data for both trials are anticipated in the second half of 2025149150 - In July 2024, the company launched an initiative to expand its computational platform to predict toxicity, initially funded by a $10 million grant from the Bill & Melinda Gates Foundation151 Results of Operations Analyzes the company's financial performance, including revenue growth, gross profit, and operating expenses for the reported periods Financial Performance (in thousands) | Financial Performance (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $47,334 | $35,189 | 35% | | Software products and services | $35,404 | $29,352 | 21% | | Drug discovery | $11,930 | $5,837 | 104% | | Gross Profit | $31,335 | $13,810 | 127% | | Research and Development | $50,835 | $42,705 | 19% | | Net (Loss) Income | $(54,047) | $4,278 | N/M | - Q2 2024 software revenue growth was driven by a significant increase in hosted software revenue (+82% YoY), reflecting higher spending from existing customers and new customer growth183184 - Q2 2024 drug discovery revenue increased primarily due to the timing and amount of collaboration milestones achieved, though for the six-month period, revenue decreased significantly due to a $25.0 million milestone from BMS recognized in Q1 2023187 - Research and development expenses increased by 19% in Q2 2024 YoY, primarily due to higher personnel-related costs and increased external costs for early-stage product candidates and ongoing Phase 1 trials for SGR-1505 and SGR-2921194 Liquidity, Capital Resources and Funding Requirements Assesses the company's cash position, funding sufficiency, and significant contractual obligations - As of June 30, 2024, the company had $381.5 million in cash, cash equivalents, restricted cash, and marketable securities214 - Management believes existing cash is sufficient to fund operating expenses and capital expenditure requirements through at least the next 24 months215 - The company has significant contractual obligations, including $186.8 million for leases through 2037, a $21.8 million minimum payment over five years for a facility in India, and a $60.0 million minimum payment over five years for cloud computing219220 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risks or risk management policies since the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There have been no material changes in reported market risks since the company's 2023 Annual Report227 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2024228 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls229 PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity security sales, other disclosures, and a list of exhibits filed with the report Legal Proceedings The company states that it is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings231 Risk Factors This section outlines the key risks facing the company, including financial, software business, drug discovery, intellectual property, and regulatory and compliance risks - Financial Risks: The company has a history of significant operating losses, with a net loss of $108.8 million for the first six months of 2024, and expects to incur losses for the next several years as it invests in its proprietary drug programs and platform233 - Software Business Risks: A significant portion of software revenue comes from customer renewals, and failure to retain customers or sell additional solutions, along with long and unpredictable sales cycles and intense competition, could harm operating results253258260 - Drug Discovery Risks: The company may not realize a return on its investment in drug discovery collaborations due to the lengthy, expensive, and uncertain nature of clinical development, having very limited experience in clinical development and relying on third parties for clinical trials and manufacturing282301305 - Intellectual Property Risks: The company's success depends on its ability to obtain and maintain patent protection for its technology and product candidates, facing risks of failing to comply with license agreements, patent claims not being sufficiently broad, and potential infringement lawsuits364373397 - Regulatory and Compliance Risks: The regulatory approval process is expensive and uncertain, and changes in healthcare legislation, such as the Inflation Reduction Act (IRA), could increase costs and pressure pricing, potentially impacting the value of the company's small molecule discovery programs408419429 Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities This section indicates that there were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the reporting period - No unregistered sales of equity securities or issuer purchases of equity securities were reported for the period496 Other Information This section discloses the adoption of Rule 10b5-1 trading arrangements by several company executives and a director during the quarter, intended to facilitate transactions in the company's securities while complying with insider trading laws - During the quarter, Yvonne Tran (EVP, Chief Legal Officer), Jenny Herman (SVP, Finance), and Richard Friesner (Director) adopted Rule 10b5-1 trading arrangements for the sale of company securities497498500501 Exhibits This section lists all the exhibits filed with the Quarterly Report on Form 10-Q, including the Restated Certificate of Incorporation, various agreements, officer certifications, and Inline XBRL documents - The report includes several exhibits, such as the Restated Certificate of Incorporation, a consultant agreement, a lease amendment, equity incentive plans, and required officer certifications (302 and 906)503
Schrodinger(SDGR) - 2024 Q2 - Quarterly Report