On November 3, 2022 Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based computational platform is transforming the way therapeutics and materials are discovered, reported financial results for the third quarter of 2022 (Press release, Schrodinger, NOV 3, 2022, View Source [SID1234622960]).

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"We delivered a strong quarter, with third quarter software revenue in line with our expectations and strong drug discovery revenue, reflecting progress across our portfolio of collaborative and proprietary programs," stated Ramy Farid, Ph.D., chief executive officer at Schrödinger. "As we progress through the remainder of the year, we are focused on continuing to drive software adoption and advancing our pipeline. Today we announced that we’ve initiated our Phase 1 study for our MALT1 program and we are looking forward to presenting new preclinical data from our CDC7 program at the upcoming ASH (Free ASH Whitepaper) meeting. We are very positive about the long-term potential of our underlying business – this quarter’s results highlight the benefits of our balanced model encompassing software licensing, collaborations and proprietary programs."

At September 30, 2022, Schrödinger had cash, cash equivalents, restricted cash and marketable securities of approximately $479 million, compared to approximately $513 million at June 30, 2022.

Recent Company Highlights

In October, Schrödinger hosted Platform Day during which the company provided a detailed review of its technology platform and demonstrated the impact of this platform across a growing portfolio that includes 9 collaborative programs in the clinic, 12 active collaborative projects and 18 proprietary programs. During the event, Schrödinger highlighted areas for future innovation and discussed the opportunities for value creation. The company also described six drug discovery case studies, including collaborative programs with Nimbus Therapeutics and Morphic Therapeutic as well as case studies from Schrödinger’s proprietary MALT1, CDC7 and Wee1 programs. Additionally, the company reviewed near- and longer-term opportunities for continued innovation of its physics-based computational platform, including increasing the number and type of discovery targets the platform can advance through hit identification, improving the effectiveness and efficiency with which the platform can advance targets through lead optimization, and expanding the applicability of the platform to new high-value areas.
In October, Schrödinger announced that it entered into a collaboration with Eli Lilly and Company. Under the terms of the agreement, Schrödinger is responsible for the discovery and optimization of small molecule compounds addressing an undisclosed target. Lilly is responsible for preclinical development, clinical development and commercialization. Schrödinger received an upfront payment and is eligible to receive up to $425 million in discovery, development and commercial milestone payments. Schrödinger is also eligible to receive low single- to low double-digit royalties on net sales of any products emerging from the collaboration in all markets.
Schrödinger reported that its Phase 1 clinical trial of its MALT1 inhibitor, SGR-1505, is open to patient enrollment. This dose-escalation study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and early signals of clinical activity of SGR-1505 as a monotherapy in patients with relapsed or refractory B-cell malignancies. Once the recommended dose is determined, an expansion cohort is planned to evaluate SGR-1505 in combination with other anti-cancer agents, such as BTK and BCL-2 inhibitors, in patients with specific B-cell malignancies.
Earlier today, Schrödinger announced that new preclinical data for SGR-2921, a CDC7 inhibitor, will be presented during a poster session at the American Society of Hematology (ASH) (Free ASH Whitepaper) 64th Annual Meeting in December 2022. The data demonstrate the strong anti-tumor activity of SGR-2921 in preclinical models of acute myeloid leukemia (AML) both alone and in combination with standard of care therapies for the treatment of AML. SGR-2921 is advancing through IND-enabling studies to support a planned IND submission in the first half of 2023.
Schrödinger has identified multiple novel Wee1 inhibitors, and preclinical studies are ongoing. Schrödinger’s goal is to select a differentiated Wee1 inhibitor that demonstrates strong anti-tumor activity with limited off-target effects. The company now expects to select a Wee1 development candidate in the first half of 2023 and submit an IND in the first half of 2024. Wee1 is emerging as a potentially important therapeutic target for a range of solid tumors, including ovarian and uterine cancer.
In October, Schrödinger’s collaborator Morphic Therapeutic presented Phase 1 data from MORF-057 at the United European Gastroenterology Week 2022. These data reinforce previously reported safety and pharmacodynamic data from the MORF-057-101 study. MORF-057 is being developed as an oral α4β7 inhibitor candidate for the treatment of inflammatory bowel disease, with an initial focus in ulcerative colitis.
In August, Schrödinger’s collaborator Nimbus Therapeutics presented data at the American Chemical Society Fall 2022 meeting describing how structural biology and computational chemistry insights were leveraged to produce NDI-034858, its novel TYK2 inhibitor. Phase 2 clinical studies are ongoing to evaluate NDI-034858 in moderate-to-severe plaque psoriasis and psoriatic arthritis.
Schrödinger was recently ranked Number 21 on Newsweek’s List of "America’s 100 Most Loved Workplaces."
2022 Financial Outlook
As of November 3, 2022, Schrödinger outlined the following expectations for the fiscal year ending December 31, 2022:

Total revenue is now expected to range from $167 million to $175 million, compared to the prior expectation of $161 million to $181 million. The updated range represents growth of 21 percent to 27 percent over 2021.
Total software revenue is now expected to range from $122 million to $127 million, compared to the prior expectation of $126 million to $136 million. The updated range represents eight percent to 12 percent growth over 2021. The full year 2022 software revenue expectation implies fourth quarter 2022 software revenue to range from $34 million to $39 million.
Total drug discovery revenue is now expected to range from $45 million to $48 million, compared to the prior expectation of $35 million to $45 million. This higher range represents 82 percent to 94 percent growth over 2021.
Operating expense growth is now expected to be approximately 40 percent for 2022 compared to the prior expectation of slightly lower than 42 percent.
Software gross margin percentage is still expected to be in the mid-70s.
"Despite the challenging macroeconomic and industry environment, our tightened total revenue guidance for 2022 remains within our original range," stated Geoff Porges, MBBS, chief financial officer at Schrödinger. "We consider our balanced business model to be one of our greatest strengths, and this quarter’s results reflect the growing contribution of our drug discovery portfolio to our operating results and overall value."

Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its third quarter 2022 financial results on Thursday, November 3, 2022, 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.