On August 2, 2023 Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based computational platform is transforming the way therapeutics and materials are discovered, reported financial results for the quarter ended on June 30, 2023 (Press release, Schrodinger, AUG 2, 2023, View Source [SID1234633656]).
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"This year, we’ve witnessed unprecedented interest in computational drug discovery and, as leaders in this field, we are excited by the growing recognition that computational approaches can transform pharmaceutical innovation," said Ramy Farid, Ph.D., chief executive officer of Schrödinger. "During the second quarter, we made progress across all aspects of our business, building new capabilities in our platform, delivering revenue in line with our expectations and advancing our proprietary pipeline. We are very excited about our outlook for the balance of the year."
"We are pleased to report FDA clearance of our IND application for SGR-2921, our CDC7 inhibitor, and expect to initiate a Phase 1 clinical study in patients with acute myeloid leukemia or myelodysplastic syndrome this year," said Karen Akinsanya, Ph.D., president of R&D therapeutics. "Our two SGR-1505 MALT1 inhibitor Phase 1 studies are progressing and we expect to share preliminary data from the healthy volunteer study later this year. In addition to these two clinical-stage programs, we continue to advance our discovery portfolio and look forward to providing updates on our pipeline later this year."
To support Schrödinger’s continued pipeline progress, Margaret Dugan, M.D., joined the company as chief medical officer effective July 31, 2023. In this role, Dr. Dugan will be responsible for clinical development and regulatory strategy for Schrödinger’s pipeline of wholly-owned programs. Dr. Dugan is a board certified medical oncologist and hematologist with more than 30 years of clinical, medical research, and drug development experience. Prior to joining Schrödinger, Dr. Dugan served as chief medical officer of Dracen Pharmaceuticals, an oncology company. During her career, she has held roles of increasing responsibility, including serving as a senior vice president at Novartis, where she led oncology-focused global strategic drug development, including several regulatory filings and approvals.
Today Schrödinger also announced that, for strategic reasons, Zai Lab has elected not to advance their discovery collaboration with Schrödinger to the next stage of development. In the two years of the collaboration, the joint team made substantial progress toward the technical goals for this complex target. The program is now wholly-owned by Schrödinger.
Second Quarter 2023 GAAP Financial Results
•Total revenue for the second quarter was $35.2 million compared to $38.5 million in the second quarter of 2022.
•Software revenue for the second quarter was $29.4 million compared to $30.0 million in the second quarter of 2022.
•Drug discovery revenue was $5.8 million for the second quarter compared to $8.5 million in the second quarter of 2022.
•Software gross margin was 77% for the second quarter compared to 76% in the second quarter of 2022.
•Operating expenses were $74.9 million for the second quarter compared to $60.6 million for the second quarter of 2022.
•Other income for the second quarter was $45.0 million compared to a loss of $4.2 million in the second quarter of 2022, driven by changes in the fair value of equity investments and interest income.
•Net income for the second quarter was $4.3 million, compared to net loss of $47.7 million in the second quarter of 2022. During the second quarter, the company reported $20.4 million in tax benefit, reducing the company’s tax liability recorded in the first quarter of 2023.
•At June 30, 2023, Schrödinger had cash, cash equivalents, restricted cash and marketable securities of approximately $554 million, compared to approximately $456 million at December 31, 2022.
Three Months Ended
June 30,
2023 2022 % Change
(in millions)
Total revenue $ 35.2 $ 38.5 -8.5%
Software revenue 29.4 30.0 -2.2%
Drug discovery revenue 5.8 8.5 -31.0%
Software gross margin 77 % 76 %
Operating expenses $ 74.9 $ 60.6 23.7%
Other income (expense) $ 45.0 $ (4.2) N/M
Net income (loss) $ 4.3 $ (47.7) N/M
For the three and six months ended June 30, 2023, Schrödinger reported non-GAAP net losses of $56.8 million and $84.4 million, respectively, compared to non-GAAP net losses of $43.8 million and $72.1 million for the three and six months ended June 30, 2022, respectively. See "Non-GAAP Information" below and the table at the end of this press release for a reconciliation of non-GAAP net income (loss) to GAAP net income (loss).
2023 Financial Outlook
As of August 2, 2023, Schrödinger provided the following updated expectations for the fiscal year ending December 31, 2023:
•Software revenue growth is expected to be in the range of 15 percent to 18 percent.
•Drug discovery revenue is now expected to range from $50 million to $70 million, compared to the prior expectation of $70 million to $90 million. This updated range reflects the company’s new expectations for the timing of collaboration milestones and for the completion of new business development activity.
•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.
•Cash used for operating activities in 2023 is expected to be below cash used for operating activities in 2022.
For the third quarter of 2023, software revenue is expected to range from $27 million to $31 million.
Recent Company Highlights
Wholly-Owned Pipeline
•Schrödinger continues to advance its MALT1 inhibitor, SGR-1505, in Phase 1 clinical development. Enrollment is ongoing in the dose-escalation study in patients with relapsed or refractory B-cell malignancies, and the company is expanding the patient study to Europe to support enrollment. Schrödinger is also conducting a Phase 1 dose-escalation study in healthy volunteers. Emerging data from the healthy volunteer study support further development, and the company expects to share preliminary data from this study later this year.
•Today Schrödinger announced FDA clearance of its investigational new drug (IND) application for SGR-2921, the company’s investigational CDC7 inhibitor. SGR-2921 has exhibited strong anti-tumor activity as a monotherapy and in combination with standard of care agents in multiple preclinical tumor models. The company expects to initiate a Phase 1 clinical trial this year. The study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and determine the recommended dose of SGR-2921 in patients with acute myeloid leukemia or myelodysplastic syndrome.
•Schrödinger continues to advance its Wee1 inhibitor, SGR-3515, through IND-enabling studies to support a potential IND submission in 2024.
•The company continues to progress a pipeline of early-stage wholly-owned programs with potential across a broad range of therapeutic areas. Schrödinger is planning to share updates during its Pipeline Day. Given the timing of data availability, abstract submission and embargo periods associated with conferences, this event is now planned for December 2023 rather than the previously communicated September 28 date.
Schrödinger Collaborators
•In July, Nimbus Therapeutics and Schrödinger published a paper highlighting the impact of computational physics-based predictions in the identification of TAK-279 (formerly NDI-034858), a TYK2 inhibitor currently in Phase 2 clinical trials for the treatment of psoriasis and psoriatic arthritis.
•In June, Structure Therapeutics presented encouraging preclinical and Phase I single ascending dose data from GSBR-1290, an oral GLP-1R in development for Type 2 diabetes and obesity at the American Diabetes Association Scientific Sessions. Structure Therapeutics reported that GSBR-1290 has demonstrated encouraging safety and tolerability as well as a dose-dependent pharmacokinetic and pharmacodynamic profile.
•In May, Morphic Therapeutic presented new biomarker data for MORF-057, an oral ɑ4ꞵ7 inhibitor in development for ulcerative colitis and Crohn’s disease at Digestive Disease Week 2023. Morphic Therapeutic reported that the preclinical data provide new support to mechanistic understanding of the activity of MORF-057 in ulcerative colitis.
Platform
•Schrödinger scientists published research showing how, in the hit identification stage of drug discovery, the use of absolute protein-ligand binding free-energy perturbation (ABFEP) can substantially improve the hit rate compared to docking scores or other methods like metadynamics. The research confirms ABFEP as a useful tool for improving hit rates in virtual screening and thus facilitating hit discovery.
•Schrödinger scientists published a paper describing a computational method to quantify protein reorganization free energy which is necessary to accurately predict binding free energies for ligands, a requirement to design ligands with stronger binding potency and selectivity. The use of two retrospective design case studies reinforces the method’s utility and potential for computer-aided drug design to better support complex protein targets.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its second quarter 2023 financial results on Wednesday, August 2, 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 access the call by phone, please dial 1-888-440-5983 (Toll-Free) or 1-646-960-0202 (Toll) and refer to conference ID 2440689. The archived webcast will be available on Schrödinger’s website for approximately 90 days following the event.