Schrodinger(US:SDGR)2022-11-02 16:00PART I—FINANCIAL INFORMATION Financial Statements This section presents unaudited condensed consolidated financial statements, highlighting decreased cash, increased drug discovery revenue, and a wider net loss Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2022 ($ in thousands) | Dec 31, 2021 ($ in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 102,817 | 120,267 | | Marketable securities | 370,739 | 456,212 | | Total Assets | 661,985 | 756,487 | | Total Liabilities | 198,863 | 199,402 | | Total Stockholders' Equity | 463,122 | 557,085 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric ($ in thousands) | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 36,980 | 29,850 | 124,112 | 91,761 | | Software Revenue | 24,667 | 24,280 | 87,759 | 74,672 | | Drug Discovery Revenue | 12,313 | 5,570 | 36,353 | 17,089 | | Gross Profit | 17,201 | 11,115 | 62,318 | 39,259 | | Loss from Operations | (46,163) | (34,674) | (118,279) | (88,928) | | Net Loss | (39,856) | (35,011) | (121,981) | (70,504) | | Net Loss per Share | (0.56) | (0.49) | (1.71) | (0.99) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Nine Months Ended Sep 30) | Activity ($ in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | (94,741) | (50,931) | | Net cash provided by investing activities | 78,466 | 5,279 | | Net cash provided by financing activities | 1,628 | 6,735 | | Net decrease in cash | (14,647) | (38,917) | - On January 14, 2022, the company acquired XTAL BioStructures, Inc. ("XTAL") for a cash purchase price of approximately $7.4 million to augment its ability to produce high-quality target structures for its drug discovery programs9091 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the dual-segment business model, highlighting significant revenue growth in drug discovery, increased operating expenses, and pipeline progress Revenue Performance (Q3 2022 vs Q3 2021) | Revenue Segment ($ in thousands) | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Software products and services | 24,667 | 24,280 | 387 | 2% | | Drug discovery | 12,313 | 5,570 | 6,743 | 121% | | Total revenues | 36,980 | 29,850 | 7,130 | 24% | - The increase in drug discovery revenue was primarily due to accelerated revenue recognition from the BMS collaboration after BMS elected not to proceed with a specific program212 Operating Expense Performance (Q3 2022 vs Q3 2021) | Expense Category ($ in thousands) | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | 32,885 | 23,219 | 9,666 | 42% | | Sales and marketing | 7,161 | 5,556 | 1,605 | 29% | | General and administrative | 23,318 | 17,014 | 6,304 | 37% | | Total operating expenses | 63,364 | 45,789 | 17,575 | 38% | - The 42% increase in R&D expense was driven by higher personnel costs (+$4.9M), increased CRO expenses (+$2.7M), and higher cloud computing costs (+$1.0M)219 - The company initiated a Phase 1 clinical trial for SGR-1505 and expects to submit an IND for SGR-2921 in the first half of 2023168 - As of September 30, 2022, the company had $479.4 million in cash and marketable securities, believed sufficient to fund operations for at least the next 24 months235237 Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks or risk management policies have occurred since the last annual report filing - There have been no material changes in market risks or risk management policies since the last annual report filed on February 24, 2022250 Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2022251 - No material changes occurred in internal control over financial reporting during the quarter252 PART II. OTHER INFORMATION Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings255 Risk Factors This section outlines significant risks including operating losses, revenue dependence, intense competition, drug development uncertainty, and IP/cybersecurity challenges - Financial Risks: The company has a history of significant operating losses ($39.9 million in Q3 2022) and expects to incur losses for the next several years257258 - Business Model Risks: Revenue depends on software license renewals and collaborator success in drug development, with no guaranteed return on drug discovery investments259279302 - Drug Discovery Risks: The company has limited clinical development experience, with no guaranteed success for its proprietary pipeline, and failure could harm business prospects315323 - Competitive Risks: Significant competition exists in both molecular design software and drug discovery markets from various industry players and academic packages286334 - Intellectual Property Risks: Reliance on licensed technology and challenges in protecting its own patents and trade secrets pose critical risks, with non-compliance potentially leading to IP loss369380404 - Cybersecurity and IT Risks: Vulnerability of IT systems to security breaches could compromise sensitive data, leading to liability and reputational damage427428 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred, and no material change in IPO proceeds use was reported - There were no unregistered sales of equity securities in the period466 - No material change occurred in the planned use of $209.6 million net proceeds from the February 2020 IPO467468 Defaults Upon Senior Securities This item is not applicable to the company - Not applicable469 Mine Safety Disclosures This item is not applicable to the company - Not applicable470 Other Information The company reported no other information for this period - None471 Exhibits This section lists exhibits filed with the quarterly report, including agreements, officer certifications, and XBRL data files - The report includes exhibits such as a consultant agreement, employment agreement, incentive plans, and officer certifications473