On February 28, 2023 Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based computational platform is transforming the way therapeutics and materials are discovered, reported financial results for the fourth quarter and full-year ended December 31, 2022, and provided its financial outlook for 2023 (Press release, Schrodinger, FEB 28, 2023, View Source [SID1234627876]).
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"We are very pleased with our performance across all areas of our business last year, with strong fourth quarter 2022 software revenue growth even in a challenging macroeconomic environment. Drug discovery revenue for 2022 nearly doubled compared to the prior year, our portfolio advanced and expanded, and we added two new collaborations," stated Ramy Farid, Ph.D., chief executive officer of Schrödinger. "Looking ahead, we are focused on our strategic priorities of driving continued growth in use of our technology, further enhancing the capabilities of our platform, and advancing our collaborative and proprietary pipeline. We are already making important progress on these priorities, and today we announced the selection of our Wee1 development candidate, SGR-3515, and have initiated IND-enabling studies for this program."
"We are pleased that we overcame several headwinds specific to our business in 2022 to deliver strong fourth quarter and full-year financial results. Our software revenue growth was driven by larger renewals from existing customers, including collaborators who significantly scaled up their adoption of our software in their internal discovery programs, and accelerated renewal of multi-year agreements," stated Geoff Porges, MBBS, chief financial officer of Schrödinger. "We expect both software and drug discovery to contribute to revenue growth this year. With significant operating leverage emerging from our business and a strong balance sheet, we are very well positioned for continued growth and investment in the unique opportunities offered by our technology platform."
Fourth Quarter 2022 Financial Results
•Total revenue for the fourth quarter increased 23% to $56.8 million, compared to $46.2 million in the fourth quarter of 2021.
•Software revenue for the fourth quarter increased 24% to $47.8 million, compared to $38.6 million in the fourth quarter of 2021. Multi-year agreements contributed significantly to revenue in the quarter and approximated the contribution to reported revenue from such agreements in the fourth quarter of 2021.
•Drug discovery revenue was $9.0 million for the fourth quarter, compared to $7.6 million in the fourth quarter of 2021.
•Software gross margin increased to 83% for the fourth quarter, compared to 78% in the fourth quarter of 2021.
•Operating expenses were $67.2 million for the fourth quarter, compared to $48.9 million for the fourth quarter of 2021.
•Other income, which includes changes in fair value of equity investments and interest income/expense, was $1.2 million for the fourth quarter, compared to other expense of $7.9 million for the fourth quarter of 2021.
•Net loss for the fourth quarter was $27.2 million, compared to $30.7 million in the fourth quarter of 2021.
Three Months Ended
December 31,
2022 2021 % Change
(in millions)
Total revenue $ 56.8 $ 46.2 23%
Software revenue 47.8 38.6 24%
Drug discovery revenue 9.0 7.6 19%
Software gross margin 83 % 78 %
Operating expenses $ 67.2 $ 48.9 38%
Other income (expense) $ 1.2 $ (7.9) (115)%
Net loss $ (27.2) $ (30.7) (11)%
Full Year 2022 Financial Results
•Total revenue for the full year increased 31% to $181.0 million, compared to $137.9 million for 2021.
•Software revenue for the full year 2022 increased 20% to $135.6 million, compared to $113.2 million for 2021, with multi-year agreements making a similar contribution to reported revenue to the contribution in 2021 and 2020.
•Drug discovery revenue for the full year was $45.4 million for the full year 2022, compared to $24.7 million for 2021.
•Software gross margin was 78% for the full year, compared to 77% for 2021.
•Operating expenses were $247.8 million for the full year, compared to $177.1 million for 2021.
•Other expense, which includes gains/loss on equity investments, changes in fair value of such investments and interest income/expense, was $2.3 million for the full year, compared to other income of $10.6 million for 2021.
•Net loss for the full year was $149.2 million, compared to $101.2 million for 2021.
•At December 31, 2022, Schrödinger had cash, cash equivalents, restricted cash and marketable securities of approximately $456 million, compared to approximately $479 million at September 30, 2022.
Twelve Months Ended
December 31,
2022 2021 % Change
(in millions)
Total revenue $ 181.0 $ 137.9 31%
Software revenue 135.6 113.2 20%
Drug discovery revenue 45.4 24.7 84%
Software gross margin 78 % 77 %
Operating expenses $ 247.8 $ 177.1 40%
Other income (expense) $ (2.3) $ 10.6 (122)%
Net loss $ (149.2) $ (101.2) 47%
Full Year 2022 Key Performance Indicators (KPIs)
Schrödinger today reported 2022 key performance indicators for both the software and drug discovery components of its business.
Software. Total annual contract value (ACV) increased 25% to $140.6 million, and the ACV of Top 10 customers increased 36% to $46.5 million. The number of customers with an ACV over $5 million increased to four from two customers, the number of customers with an ACV over $1 million increased to 18 from 15, and the number of customers with an ACV over $100,000 increased 19% to 227. Schrödinger’s customer retention rate in 2022 was 96%, and the company ended the year with 1,748 customers with an ACV ov her $1,000.
Drug discovery. Schrödinger ended 2022 with 15 ongoing programs eligible for royalties, up from 13 the previous year. For the year ended December 31, 2022, the number of collaborators since 2018 increased to 17 from 15.
Software KPI 2022 2021
Total annual contract value (ACV) $140.6 million $112.1 million
ACV of Top 10 customers $46.5 million $34.1 million
Number of customers over $5M in ACV 4 2
Number of customers over $1M in ACV 18 15
Number of customers over $100,000 in ACV 227 190
Customer retention over $100,000 ACV 96% 98%
Number of active customers with ACV over $1,000 1,748 1,647
Drug Discovery KPI 2022 2021
Ongoing programs eligible for royalties 15 13
Number of collaborators since 2018 17 15
For additional information about our KPIs, see "Operating Metrics" below.
2023 Financial Outlook
As of February 28, 2023, Schrödinger provided the following expectations for the fiscal year ending December 31, 2023:
•Software revenue growth is expected to be in the range of 13 to 17 percent
•Drug discovery revenue is expected to range from $70 million to $90 million
•Software gross margin is expected to be similar to software gross margin for the full year 2022
•Operating expense growth in 2023 is expected to be significantly lower than operating expense growth in 2022 and to be similar to revenue growth in 2023
•Cash used for operating activities in 2023 is expected to be below cash used for operating activities in 2022
For the first quarter of 2023, software revenue is expected to range from $31 million to $35 million, and drug discovery revenue is expected to range from $30 million to $34 million.
Recent Highlights
Corporate
•In February, Schrödinger reported the receipt of an approximately $111.3 million cash distribution from Nimbus Therapeutics in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus Therapeutics, and its tyrosine kinase 2 (TYK2) inhibitor NDI-034858. Schrödinger expects to receive a second distribution of approximately $36.0 million, also related to Takeda’s $4.0 billion upfront payment to Nimbus, in the second quarter of 2023, for a total distribution of approximately $147.3 million. NDI-034858 is being evaluated for the treatment of multiple autoimmune diseases following positive Phase 2b results in psoriasis. The distribution was on account of Schrödinger’s equity stake in Nimbus, which as of December 31, 2022, was 3.8% on a fully diluted basis.
•In February, Structure Therapeutics, Inc., a collaborator focused on developing novel oral small molecule therapeutics for metabolic and pulmonary diseases, completed an initial public offering for gross proceeds of $185.3 million. Schrödinger participated in the IPO and now holds a 3.7 percent equity stake in Structure Therapeutics.
•In January, Schrödinger announced that it amended its discovery, development and commercialization collaboration with Bristol Myers Squibb to include a new discovery program in neurology. Schrödinger received an additional upfront payment for the new program and is eligible to receive discovery, development and commercialization milestones, as well as royalties on net sales, similar to the terms of the original agreement.
•In January, Schrödinger and Otsuka Pharmaceutical Co., Ltd. announced an innovative multi-part agreement that includes a collaboration to discover molecules for an emerging CNS disease target, as well as a knowledge-transfer agreement and an expanded licensing agreement to deploy Schrodinger’s technology platform at scale in Otsuka’s new drug discovery center in Osaka. Schrödinger received an upfront payment and will be eligible to receive discovery, development and regulatory milestones, as well as tiered royalties on net sales of any products emerging from the drug discovery collaboration in all markets.
Pipeline
•Schrödinger is advancing its MALT1 inhibitor, SGR-1505, in Phase 1 clinical development. A dose-escalation study designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and early signals of clinical activity of SGR-1505 as a monotherapy is open to enrollment in patients with relapsed or refractory B-cell malignancies.
•Schrödinger announced today that it has selected SGR-3515 as its development candidate for its Wee1 program. SGR-3515 demonstrated strong anti-tumor activity with limited off-target effects in preclinical studies. Activities to support IND-enabling studies are underway.
•Schrödinger is continuing to progress its CDC7 inhibitor, SGR-2921, through IND-enabling studies to support a planned IND submission this year. In December, the company presented data at the American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting demonstrating that SGR-2921 exhibited strong anti-tumor activity as a monotherapy and in combination with standard of care agents in multiple preclinical tumor models.
•Today, Schrödinger announced that it is expecting the first program from the Bristol Myers Squibb collaboration to advance to development candidate status. Following finalization of this advancement, Schrödinger will recognize a drug discovery milestone associated with advancement of the program, which is projected in the first quarter of 2023.
•In January, Schrödinger announced a new proprietary program targeting LRRK2, a genetically validated target with therapeutic potential for the treatment of Parkinson’s disease. Schrödinger has generated cryo-EM structures of LRRK2 which is helping to accelerate the identification of novel LRRK2 inhibitors.
Platform
•Schrödinger scientists continued to advance the company’s platform, and recently published research highlighting a computational, physics-based approach to enable accurate prediction of brain penetrant molecules. This computational advancement is being leveraged in Schrödinger’s programs in neurology.
•In a collaborative effort with AbbVie, Schrödinger and AbbVie scientists published research demonstrating in silico methods to accurately predict the oxidation risk of residues in monoclonal antibodies, a characteristic that is critical to understand during antibody discovery and development.
•Scientists at L’Oréal and Schrödinger recently published research highlighting the potential of molecular dynamics simulations to study the interactions between complex polymers and biological substrates, such as hair. The research is expected to play an increasingly important role in advancing eco-friendly polymer formulation design.
•Schrödinger reported that it appointed Pratyush Tiwary, Ph.D., to its scientific advisory board. Dr. Tiwary’s research is at the interface of computational chemistry and machine learning, underscoring Schrödinger’s commitment to further integrate next-generation machine learning methods with highly predictive atomistic simulations. Dr. Tiwary is an associate professor at the University of Maryland, College Park in the Department of Chemistry and Biochemistry and the Institute for Physical Science and Technology. He is also an affiliated faculty member of Applied Mathematics, Biophysics, Chemical Physics and Materials Science and Engineering.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its fourth quarter and full year 2022 financial results on Tuesday, February 28, 2023, at 4:30 p.m. ET. The live webcast can be accessed under "News & Events" in the investors section of Schrödinger’s website, View Source To participate in the live call, please register for the call here. It is recommended that participants register at least 15 minutes in advance of the call. Once registered, participants will receive the dial-in information. The archived webcast will be available on Schrödinger’s website for approximately 90 days following the event.