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Schrodinger(SDGR) - 2022 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for Schrödinger, Inc. as of June 30, 2022 Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $127,319 | $120,267 | | Marketable securities | $382,246 | $456,212 | | Total current assets | $556,872 | $625,060 | | Total assets | $687,880 | $756,487 | | Liabilities & Stockholders' Equity | | | | Deferred revenue (current) | $47,440 | $55,368 | | Total current liabilities | $85,590 | $91,211 | | Total liabilities | $194,807 | $199,402 | | Total stockholders' equity | $493,073 | $557,085 | Condensed Consolidated Statements of Operations Details the company's financial performance, including revenues, expenses, and net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenues | $38,469 | $29,784 | $87,132 | $61,911 | | Gross profit | $17,134 | $11,980 | $45,117 | $28,144 | | Loss from operations | $(43,473) | $(30,342) | $(72,116) | $(54,254) | | Net loss attributable to stockholders | $(47,686) | $(34,644) | $(82,126) | $(34,673) | | Net loss per share, basic and diluted | $(0.67) | $(0.49) | $(1.15) | $(0.49) | Condensed Consolidated Statements of Cash Flows Outlines cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(64,378) | $(40,293) | | Net cash provided by (used in) investing activities | $70,626 | $(47,097) | | Net cash provided by financing activities | $1,304 | $5,293 | | Net increase (decrease) in cash | $7,552 | $(82,097) | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies, transactions, and events - On January 14, 2022, the Company acquired XTAL BioStructures, Inc. for a cash purchase price of approximately $7.4 million to augment its structural biology services and drug discovery programs91 - The company's collaboration with Bristol-Myers Squibb (BMS), initiated in November 2020, involves an upfront payment of $55 million and potential milestones up to $2.7 billion. For the six months ended June 30, 2022, $9.4 million was recognized as revenue from this agreement687076 Segment Revenue and Gross Profit (in thousands) | Segment | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | | | | Software | $63,092 | $50,392 | | Drug discovery | $24,040 | $11,519 | | Gross Profit | | | | Software | $48,480 | $38,845 | | Drug discovery | $(3,363) | $(10,701) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, revenue growth, operational progress, and liquidity Overview Summarizes strategic initiatives, operational highlights, and key pipeline advancements - The company is advancing its internal drug discovery pipeline, having received FDA clearance in June 2022 for its Investigational New Drug (IND) application for SGR-1505, a MALT1 inhibitor. A Phase 1 clinical trial is expected to begin in Q4 2022160 - An IND application for the CDC7 inhibitor, SGR-2921, is planned for the first half of 2023, with a Phase 1 trial anticipated in the second half of 2023160 - In January 2022, the company acquired XTAL BioStructures, Inc. to expand its structural biology services and support its drug discovery programs167 Results of Operations Analyzes revenue and expense trends, explaining key drivers of financial performance Revenue by Segment (in thousands) | Segment | Q2 2022 | Q2 2021 | Change (%) | Six Months 2022 | Six Months 2021 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Software products and services | $30,011 | $24,052 | 25% | $63,092 | $50,392 | 25% | | Drug discovery | $8,458 | $5,732 | 48% | $24,040 | $11,519 | 109% | | Total revenues | $38,469 | $29,784 | 29% | $87,132 | $61,911 | 41% | - The 109% increase in drug discovery revenue for the six months ended June 30, 2022, was primarily due to the timing and amount of collaboration milestones achieved and progress on existing and new collaborations203 Operating Expenses (in thousands) | Expense Category | Six Months 2022 | Six Months 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $58,945 | $42,540 | 39% | | Sales and marketing | $14,099 | $10,619 | 33% | | General and administrative | $44,189 | $29,239 | 51% | | Total operating expenses | $117,233 | $82,398 | 42% | - The increase in R&D expense for the first six months of 2022 was driven by an $8.5 million increase in personnel costs and a $4.2 million increase in CRO expenses related to the progression of internal drug discovery programs211 Liquidity, Capital Resources and Funding Requirements Assesses cash position, funding needs, and ability to meet obligations - As of June 30, 2022, the company had $513.1 million in cash, cash equivalents, restricted cash, and marketable securities226 - Management believes existing cash will be sufficient to fund operating expenses and capital expenditure requirements for at least the next 24 months228 - Key contractual obligations include $150.1 million in operating leases through 2037 and a five-year, $60 million minimum payment obligation with a third-party cloud provider that began in December 2020231233 Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes in market risks or risk management policies since the 2021 Annual Report - There have been no material changes in the company's reported market risks since the filing of its 2021 Annual Report on Form 10-K241 Item 4. Controls and Procedures Management evaluated disclosure controls and procedures, concluding they were effective - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level243 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls244 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings247 Item 1A. Risk Factors Details significant risks including operating losses, customer retention, and drug discovery uncertainties - The company has a history of significant operating losses, with an accumulated deficit of $312.1 million as of June 30, 2022, and expects to incur further losses as it invests in its drug discovery programs and computational platform249 - A significant portion of software revenue is derived from customer renewals. Failure to retain customers, sell additional solutions, or maintain pricing could harm operating results269 - The company's drug discovery collaborations and internal programs are subject to high risk, with no guarantee of successful development, commercialization, or realization of milestone payments or royalties292299 - The COVID-19 pandemic could cause future delays in drug discovery programs. For example, CROs have experienced reduced capacity, which has delayed the IND-enabling studies for the company's CDC7 program, pushing the expected IND submission to the first half of 2023332 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities and no material change in IPO proceeds use - There were no unregistered sales of equity securities in the period447 - The planned use of proceeds from the February 2020 IPO has not materially changed449