On August 12, 2021 Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, reported financial results for the quarter ended June 30, 2021, and provided an update on the company (Press release, Schrodinger, AUG 12, 2021, View Source [SID1234586475]).
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"The second quarter was highly productive for Schrödinger. We continued to make progress on our key strategic priorities, including our investments to advance our internal drug discovery pipeline and drive adoption of our software," stated Ramy Farid, Ph.D., chief executive officer at Schrödinger. "We announced a collaboration on a new program with Zai Lab, which expands our pipeline and provides the option to co-develop and co-commercialize in collaboration with an established commercial leader in oncology. We look forward to sharing additional updates on our progress throughout the year, and remain committed to making strategic investments in our business to drive long-term growth of the company."
Recent Business Highlights
Continued pipeline progress
During the second quarter, Schrödinger continued to advance its MALT1, CDC7 and Wee1 preclinical development programs. The company has initiated IND-enabling studies for its MALT1 program, and CDC7 and Wee1 continue to advance toward IND-enabling studies. Subject to completion of the preclinical data packages, the company expects to submit up to three IND applications in 2022, with the first submission to the FDA expected in the first half of next year. Schrödinger expects to present preclinical data from at least one of its internal programs in the second half of 2021.
The company continued to advance discovery efforts to allow the addition of new programs to the company’s internal pipeline in 2021.
Collaborations highlight continued strategic execution
In August, Schrödinger and Zai Lab Limited announced a global discovery, development and commercialization collaboration focused on a novel DNA damage response program in oncology. The research program will be conducted jointly by the Schrödinger and Zai Lab scientific teams. Following the selection of a development candidate, Zai Lab will assume primary responsibility for global development, manufacturing and commercialization. Schrödinger has the option to equally fund clinical development in the U.S. with Zai Lab, as well as the option to co-commercialize in the U.S. The companies will share research expenses for the program, and Zai Lab will make an upfront payment to Schrödinger to help fund Schrödinger’s share of research costs. If Schrödinger elects to co-fund clinical development of a product candidate under the collaboration, it will be entitled to 50 percent of any profits from the commercialization of such product candidate in the U.S. Schrödinger will also be eligible to receive up to approximately $338 million in preclinical, development, regulatory and sales-based milestone payments. Additionally, Schrödinger is entitled to receive royalties on net sales outside the U.S.
In June, Schrödinger’s partner, Ajax Therapeutics, completed a $40 million financing to support the advancement of Ajax’s lead drug development programs targeting hematologic malignancies. Through the companies’ collaboration, Schrödinger and Ajax scientists are working together to design and optimize molecules targeting cytokine signaling pathways.
Continued commitment to education and publication
In August, Schrödinger hosted its first annual Educator’s Day, which brought together K-12 and university educators from across the globe to discuss the growing role of computational tools in the classroom. The company also announced "Teaching with Schrödinger," a new initiative to develop curricula for academic institutions to teach students about chemical interactions, drug design and materials research using Schrödinger software.
During the second quarter, Schrödinger scientists authored multiple publications in peer-reviewed journals, independently and with customers, supporting application of the company’s platform to advance both drug discovery and materials science. Materials science advancements included research with the Edwards Air Force Base to develop molecular dynamics simulations to aid in the development of next-generation aerospace materials, as well as research with Panasonic Corp. to identify new molecules that can improve the efficiency of printed electronics.
Second Quarter 2021 Financial Results
Revenue was $29.8 million for the second quarter of 2021, a 29 percent increase compared to the second quarter of 2020.
Software revenue was $24.1 million for the second quarter of 2021, a 15 percent increase compared to the second quarter of 2020.
Drug discovery revenue was $5.7 million for the second quarter of 2021, compared to $2.2 million in the second quarter of 2020. Discovery revenue in the second quarter of 2021 included $3.3 million in revenue from our collaboration with Bristol Myers Squibb. Discovery revenue in the second quarter of 2021 also included a payment from a collaborator for the acquisition of intellectual property from Schrödinger related to a drug discovery program following the achievement of a lead optimization milestone.
Gross profit was $12.0 million in the second quarter of 2021, compared to $13.6 million in the second quarter in 2020. Software gross margin was 77 percent in the second quarter of 2021, compared to 82 percent for the same period in the prior year, reflecting planned investment to drive and support large-scale adoption of Schrödinger’s platform.
Operating expenses for the second quarter of 2021 were $42.3 million, compared to $30.7 million in the second quarter of 2020, driven by expenses required to scale the company’s business and advance its internal drug discovery programs.
Other expense, which included gains and losses on equity investments, changes in fair value of equity investments and interest income, was $4.6 million in the second quarter of 2021 compared to income of $13.1 million for the second quarter of 2020 due to adjustments to the fair value of the company’s equity investments.
Net loss, after adjusting for non-controlling interest, was $34.6 million for the second quarter of 2021, compared to a net loss of $3.4 million in the second quarter of 2020, driven by adjustments to the fair value of the company’s equity investments as well as planned investments to advance the company’s growth strategy.
Cash, cash equivalents, restricted cash and marketable securities as of June 30, 2021 were $616.6 million, compared to $649.0 million as of March 31, 2021.
Full-Year 2021 Financial Outlook
As of August 12, 2021, Schrödinger continues to expect total revenue to range from $124 million to $142 million, with software revenue expected to range from $102 million to $110 million and drug discovery revenue expected to range from $22 million to $32 million for the fiscal year ending December 31, 2021. Additional details are as follows:
Schrödinger expects the majority of anticipated second half software revenue growth to occur in the fourth quarter of 2021.
Drug discovery revenue can be highly variable quarter to quarter based on the timing of potential milestones related to collaborative agreements.
Schrödinger continues to aggressively fund R&D to advance its technology and drug discovery pipeline. The company continues to expect operating expense growth to be higher than the 42 percent annual growth rate reported in 2020 and expects software gross margin to be lower than the 81 percent reported in 2020.
Webcast and Conference Call Information
Schrödinger will host a conference call to discuss its second quarter financial results on Thursday, August 12, 2021, at 8:30 a.m. ET. The conference call can be accessed live by dialing (833) 727-9520 (domestic) or +1 (830) 213-7697 (international) and referring to conference ID 5365647 The webcast can also 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.