On November 1, 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 September 30, 2023 (Press release, Schrodinger, NOV 1, 2023, View Source [SID1234636656]).

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"Schrodinger had an excellent third quarter marked by strong revenue growth and significant pipeline progress. More of our software customers are increasing the scale of their use of our technology, and we remain very confident about the outlook for the full year," said Ramy Farid, Ph.D., chief executive officer of Schrödinger. "We initiated our Phase 1 clinical study of SGR-2921 and our Phase 1 study of SGR-1505 in healthy volunteers is nearing completion. We look forward to sharing more details about our proprietary programs later this year."

Today, Schrodinger announced that the rights to two related oncology discovery programs would revert to the company, after Bristol Myers Squibb elected not to proceed with further development of these programs for strategic reasons.

Third Quarter 2023 GAAP Financial Results
•Total revenue for the third quarter was $42.6 million compared to $37.0 million in the third quarter of 2022.
•Software revenue for the third quarter was $28.9 million compared to $24.7 million in the third quarter of 2022.
•Drug discovery revenue was $13.7 million for the third quarter compared to $12.3 million in the third quarter of 2022.
•Software gross margin was 76% for the third quarter compared to 72% in the third quarter of 2022.
•Operating expenses were $79.8 million for the third quarter compared to $63.4 million for the third quarter of 2022.
•Other expense for the third quarter was $8.7 million compared to other income of $6.5 million in the third quarter of 2022, driven by changes in the fair value of equity investments and interest income.
•Net loss for the third quarter was $62.0 million, compared to $39.9 million in the third quarter of 2022.
•At September 30, 2023, Schrödinger had cash, cash equivalents, restricted cash and marketable securities of approximately $503 million, compared to approximately $456 million at December 31, 2022.

For the three and nine months ended September 30, 2023, Schrödinger reported net losses of $62.0 million and net income of $71.4 million, respectively, compared to net losses of $39.9 million and $122 million for the three and nine months ended September 30, 2022, respectively.

For the three and nine months ended September 30, 2023, Schrödinger reported non-GAAP net losses of $50.4 million and $134.8 million, respectively, compared to non-GAAP net losses of $44.9 million and $117.0 million for the three and nine months ended September 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
•Schrödinger today updated its financial guidance for 2023. The company’s financial expectations for the fiscal year ending December 31, 2023 are as follows:
•Software revenue growth is expected to be in the range of 15 percent to 18 percent.
•Drug discovery revenue is expected to range from $50 million to $70 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.
•Cash used for operating activities is now expected to be higher in 2023 than 2022, based on the mix of revenue, the timing and size of milestones and expectations for new business development activity this year.
Recent Company Highlights
Wholly-Owned Pipeline
•Schrödinger continues to advance SGR-1505, its investigational MALT1 inhibitor. The Phase 1 dose-escalation study in healthy volunteers is nearing completion, and the company expects to report data from the study in the fourth quarter of 2023. Enrollment in the Phase 1 dose-escalation study in relapsed or refractory B-cell malignancy patients is ongoing in the U.S. and EU. The U.S. Food and Drug Administration recently granted Orphan Drug Designation to SGR-1505 for potential treatment in mantle cell lymphoma.

•Today Schrödinger announced the initiation of the Phase 1 clinical study of SGR-2921, an investigational CDC7 inhibitor, in patients with acute myeloid leukemia or myelodysplastic syndrome. The study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and determine the recommended dose. SGR-2921 has exhibited anti-tumor activity as a monotherapy and in combination with standard of care agents in multiple preclinical tumor models.

•Schrödinger continues to advance SGR-3515, an inhibitor of Wee1 and Myt1. Concurrent loss of function of Wee1 and Myt1 confers selective vulnerability in cancer cells, a mechanism referred to as synthetic lethality. IND-enabling activities are ongoing to support an IND submission for SGR-3515 in the first half of 2024.

•Today Schrödinger announced that one of its previously undisclosed discovery programs is PRMT5-MTA (protein arginine methyltransferase 5/methylthioadenosine). PRMT5 has been shown to be a synthetic lethal target for MTAP-deleted cancers with potential roles in the treatment of both hematologic and solid tumors. The company expects to provide more details about its PRMT5-MTA program and other early-stage programs at its Pipeline Day on December 14, 2023.

Schrödinger Collaborators
•In October, Schrödinger collaborator Morphic Holdings presented additional Phase 2a data from the EMERALD-1 trial of MORF-057, an oral ɑ4ꞵ7 inhibitor in development for ulcerative colitis and Crohn’s disease at United European Gastroenterology (UEG) week.

•In September, Structure Therapeutics presented positive results from the Phase Ib multiple ascending dose study of GSBR-1290, an oral GLP-1R, in healthy overweight or obese individuals.

•In September, Schrödinger and the Bill & Melinda Gates Foundation renewed their agreement to invest in the discovery and development of novel non-hormonal contraceptive agents for global health.

Platform

•During the third quarter, Schrödinger and Gates Ventures LLC extended their agreement to develop and apply simulation methods to improve battery performance for a second three-year period. The new research agreement includes total consideration of $6M and runs through August 2026.

•Schrödinger announced quarterly software release 2023-3, which incorporated a number of important updates, including a major enhancement to the company’s Induced Fit Docking (IFD) technology for optimization of certain key ADMET properties, the first full release of technology that can be used to optimize antibody affinity as a function of pH, and technology to more accurately predict small molecule pKa values, a key intrinsic molecular property.

•In August, Schrödinger scientists published the results of a novel automated workflow, FEP Protocol Builder (FEP-PB), which uses active-learning to automate development of accurate FEP+ protocols, increasing the number of targets amenable to the technology.

Third Quarter 2023 Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its third quarter 2023 financial results on Wednesday, November 1, 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 The archived webcast will be available on Schrödinger’s website for approximately 90 days following the event.

Schrödinger Pipeline Day Webcast Information
Schrödinger will host its Pipeline Day in New York City on Thursday, December 14, 2023, beginning at 10:00 a.m. ET. Pipeline Day will be a hybrid event, with limited in-person attendance available to members of the investment community, and a simultaneous webcast will be available for individual investors and other interested parties who wish to join virtually. The live presentation can be accessed in the "Investors" section of Schrödinger’s website and will be archived for approximately 90 days. To participate in the live webcast, please register for the event here. It is recommended that participants register at least 15 minutes in advance of the event.