On November 12, 2020 Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, reported financial results for the third quarter ended September 30, 2020 (Press release, Schrodinger, NOV 12, 2020, View Source [SID1234570776]).
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"We are executing on our strategic plan across every area of our business," said Schrödinger CEO Ramy Farid, Ph.D. "We’re excited about the strong growth we’ve seen in our software business and the rapid progress of our internal and collaborative programs to discover and develop therapeutics."
Third Quarter Financial Results
Revenue was $25.8 million for the third quarter of 2020, an increase of 29% compared to the third quarter of 2019.
Software revenue was $22.9 million for the third quarter of 2020, an increase of 42% over the third quarter in 2019. Drug discovery revenue was $2.9 million for the third quarter of 2020, a decline of 24% versus the third quarter of 2019.
Gross profit reached $15.3 million in the third quarter of 2020, an increase of 43% over the third quarter in 2019. Software gross margin was 81% in the third quarter, unchanged versus the third quarter of 2019.
Operating expenses for the third quarter of 2020 were $30.7 million, an increase of 40% over the third quarter of 2019.
Other income, which includes gains on equity investments and changes in fair value of such investments, was $18.7 million in the third quarter of 2020 versus a loss of $0.9 million in the third quarter of 2019. Other income for the third quarter of 2020 included an $18.0 million non-cash gain from our equity in Relay Therapeutics which completed its IPO in July 2020.
Net income, after adjusting for non-controlling interests, was $3.9 million for the third quarter of 2020, compared to a net loss of $11.5 million in the third quarter of 2019.
Schrödinger ended the third quarter of 2020 with cash, cash equivalents, restricted cash and marketable securities of $599.5 million, an increase of $315.0 million from the end of the second quarter of 2020, primarily as a result of net proceeds of $325.6 million from the equity financing in the third quarter.
"In the third quarter, we continued the excellent momentum across our business established in the first half of 2020," said Schrödinger CFO Joel Lebowitz. "With our strong balance sheet and growing revenue, we believe we are well-positioned to continue to invest in R&D and execute on all elements of our strategy."
Third Quarter Business Update
Driving growth in our Software business
42% revenue growth in the third quarter of 2020, driven by growth in both Life Sciences and Materials Science revenue
Increased Financial resources
Raised $325.6 million of net proceeds from an equity follow-on offering
Ending cash, cash equivalents, restricted cash and marketable securities for the third quarter were $599.5 million
Advancing internal discovery programs and pipeline progress
Expect to initiate IND enabling studies in 2021 on most advanced internal programs
Presenting data on our MALT 1 inhibitor program at the American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting & Exposition; progressing research in single agent and combination studies targeting B-cell lymphomas
Advancing the underlying science of our platform and methods
Several scientific publications describing and validating our differentiated computational platform
Improved methods for accurately modeling the relative binding free energies of metalloenzyme inhibitors
Improved approaches to optimize binding selectivity
Validation and extension of our technologies to more comprehensively support macrocycle design and optimization
"We are very pleased with the significant progress we have made this year on our software business, our drug discovery collaborations and our internal pipeline," said Dr. Farid. "Our ongoing commitment to advance the science underlying our industry-leading physics-based computational platform to achieve new breakthroughs will drive our continued success."
Business Impact of COVID-19 Pandemic
While we did not see material impacts to our business from the COVID-19 pandemic during the first nine months of 2020, we have identified certain market risks that, if they materialize, could affect the growth of our software business and the timing of our drug discovery revenues for at least the remainder of 2020. Some of our software customers may experience increasing budgetary pressures, which may cause them to delay or reduce purchases. In addition, our sales force has limited in-person interactions, and their ability to attend industry conferences and events that promote and expand knowledge of our company and platform has been hampered. Relative to our drug discovery programs, certain programs, particularly ones that are in clinical studies or preparing to enter clinical studies, could be delayed which could result in delays in achieving milestones and related revenue. While there remains uncertainty about the extent of the effect of the COVID-19 pandemic, we do not envision a long-term impact from the COVID-19 pandemic on our ability to execute on our long-term strategy.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its third quarter financial results on Thursday, November 12, 2020 at 8:30 AM Eastern Time. The conference call can be accessed live over the phone by dialing (833) 727-9520 (domestic) or +1 (830) 213-7697 (international) and refer to conference ID 8486343. The 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 following the event.