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              Schrödinger, Inc. Reports Third Quarter 2020 Financial Results and Business Update

              November 12, 2020
              PDF Version

              Total revenue of $25.8 million, up 29% year-over-year;

              Software revenue of $22.9 million, up 42% year-over-year

              Raised $325.6 million net proceeds in equity financing

              Presenting data on our MALT 1 inhibitor program at the American Society of Hematology (ASH) Annual Meeting & Exposition

              Conference call today, Thursday, Nov. 12, 2020 at 8:30 a.m. ET

              NEW YORK--(BUSINESS WIRE)--Nov. 12, 2020-- Schrödinger, Inc. (Nasdaq: SDGR), whose physics-based software platform is transforming the way therapeutics and materials are discovered, today announced financial results for the third quarter ended September 30, 2020.

              “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) 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, https://ir.schrodinger.com/news-and-events/event-calendar. The archived webcast will be available on Schrödinger’s website following the event.

              About Schrödinger

              Schrödinger is transforming the way therapeutics and materials are discovered. Schrödinger has pioneered a physics-based software platform that enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at lower cost compared to traditional methods. The software platform is used by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. Schrödinger’s multidisciplinary drug discovery team also leverages its software platform to advance collaborative programs and its own pipeline of novel therapeutics to address unmet medical needs.

              Founded in 1990, Schrödinger has over 400 employees and is engaged with customers and collaborators in more than 70 countries. To learn more visit www.schrodinger.com and follow us on LinkedIn and Twitter.

              Cautionary Note Regarding Forward-Looking Statements

              This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 including, but not limited to those regarding our expectations about the speed and capacity of our computational platform, our plans to continue to invest in research and our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery programs, our ability to improve and advance the science underlying our platform, including through these use of new technologies, the timing of potential IND-enabling studies for our internal drug discovery programs, our expectations related to the use of our cash, cash equivalents, and marketable securities as well as our expectations related to the COVID-19 pandemic’s impact on our business. Statements including words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "target," "will," "would" and statements in the future tense are forward-looking statements. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in these forward-looking statements and are subject to a variety of assumptions, uncertainties, risks and factors that are beyond our control, including the demand for our software solutions, our ability to further develop our computational platform, our reliance upon third-party providers of cloud-based infrastructure to host our software solutions, our reliance upon our third-party drug discovery collaborators, the ability to retain and hire key personnel and the direct and indirect impacts of the ongoing COVID-19 pandemic on our business and other risks detailed under the caption "Risk Factors" and elsewhere in our Securities and Exchange Commission filings and reports, including our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 filed with the Securities and Exchange Commission on November 12, 2020, as well as future filings and reports by us. Any forward-looking statements contained in this press release speak only as of the date hereof. Except as required by law, we undertake no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events, changes in expectations or otherwise.

              Condensed Consolidated Statements of Operations (Unaudited)
              (in thousands, except for share and per share amounts)
                               
                 

              Three Months Ended
              September 30,

               

              Nine Months Ended
              September 30,

                 

              2020

               

              2019

               

              2020

               

              2019

              Revenues:                
              Software products and services  

              $

              22,861

               

               

              $

              16,118

               

               

              $

              67,573

               

               

              $

              49,205

               

              Drug discovery  

               

              2,936

               

               

               

              3,842

               

               

               

              7,490

               

               

               

              10,506

               

              Total revenues  

               

              25,797

               

               

               

              19,960

               

               

               

              75,063

               

               

               

              59,711

               

              Cost of revenues:                
              Software products and services  

               

              4,334

               

               

               

              3,097

               

               

               

              12,197

               

               

               

              9,901

               

              Drug discovery  

               

              6,191

               

               

               

              6,152

               

               

               

              18,386

               

               

               

              16,244

               

              Total cost of revenues  

               

              10,525

               

               

               

              9,249

               

               

               

              30,583

               

               

               

              26,145

               

              Gross profit  

               

              15,272

               

               

               

              10,711

               

               

               

              44,480

               

               

               

              33,566

               

              Operating expenses:                
              Research and development  

               

              17,019

               

               

               

              10,353

               

               

               

              47,376

               

               

               

              28,322

               

              Sales and marketing  

               

              3,969

               

               

               

              5,185

               

               

               

              13,120

               

               

               

              15,621

               

              General and administrative  

               

              9,729

               

               

               

              6,465

               

               

               

              28,316

               

               

               

              20,491

               

              Total operating expenses  

               

              30,717

               

               

               

              22,003

               

               

               

              88,812

               

               

               

              64,434

               

              Loss from operations  

               

              (15,445

              )

               

               

              (11,292

              )

               

               

              (44,332

              )

               

               

              (30,868

              )

              Other income:                
              Gain on equity investments  

               

              —

               

               

               

              —

               

               

               

              4,156

               

               

               

              —

               

              Change in fair value  

               

              18,233

               

               

               

              (1,427

              )

               

               

              23,513

               

               

               

              10,607

               

              Interest income  

               

              463

               

               

               

              501

               

               

               

              1,732

               

               

               

              1,463

               

              Total other income (loss)  

               

              18,696

               

               

               

              (926

              )

               

               

              29,401

               

               

               

              12,070

               

              Income (loss) before income taxes  

               

              3,251

               

               

               

              (12,218

              )

               

               

              (14,931

              )

               

               

              (18,798

              )

              Income tax (benefit) expense  

               

              (35

              )

               

               

              (257

              )

               

               

              120

               

               

               

              (262

              )

              Net income (loss)  

               

              3,286

               

               

               

              (11,961

              )

               

               

              (15,051

              )

               

               

              (18,536

              )

              Net loss attributable to noncontrolling interest  

               

              (566

              )

               

               

              (453

              )

               

               

              (1,727

              )

               

               

              (734

              )

              Net income (loss) attributable to Schrödinger common and
              limited common stockholders
               

              $

              3,852

               

               

              $

              (11,508

              )

               

              $

              (13,324

              )

               

              $

              (17,802

              )

              Net income (loss) per share attributable to Schrödinger
              common and limited common stockholders, basic:
               

              $

              0.06

               

               

              $

              (0.26

              )

               

              $

              (0.23

              )

               

              $

              (0.40

              )

              Weighted average shares used to compute net income (loss)
              per share attributable to Schrödinger common and
              limited common stockholders, basic:
               

               

              66,339,570

               

               

               

              44,879,188

               

               

               

              56,802,567

               

               

               

              44,623,383

               

                               
              Net income (loss) per share attributable to Schrödinger
              common and limited common stockholders, diluted:
               

              $

              0.05

               

               

              $

              (0.26

              )

               

              $

              (0.23

              )

               

              $

              (0.40

              )

              Weighted average shares used to compute net income (loss)
              per share attributable to Schrödinger common and
              limited common stockholders, diluted:
               

               

              72,693,173

               

               

               

              44,879,188

               

               

               

              56,802,567

               

               

               

              44,623,383

               

              Condensed Consolidated Balance Sheets (Unaudited)
              (in thousands, except for share and per share amounts)
                       
              Assets   September 30, 2020   December 31, 2019
              Current assets:        
              Cash and cash equivalents  

              $

              210,490

               

               

              $

              25,986

               

              Restricted cash  

               

              500

               

               

               

              500

               

              Marketable securities  

               

              388,494

               

               

               

              59,844

               

              Accounts receivable, net of allowance for doubtful accounts of $50 and $50  

               

              12,290

               

               

               

              18,676

               

              Unbilled and other receivables  

               

              4,891

               

               

               

              7,062

               

              Prepaid expenses  

               

              4,449

               

               

               

              6,468

               

              Total current assets  

               

              621,114

               

               

               

              118,536

               

              Property and equipment, net  

               

              5,296

               

               

               

              6,268

               

              Equity investments  

               

              40,914

               

               

               

              15,366

               

              Right of use assets  

               

              10,583

               

               

               

              12,762

               

              Other assets  

               

              2,209

               

               

               

              2,338

               

              Total assets  

              $

              680,116

               

               

              $

              155,270

               

              Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit)        
              Current liabilities:        
              Accounts payable  

              $

              4,812

               

               

              $

              3,524

               

              Accrued payroll, taxes, and benefits  

               

              7,702

               

               

               

              7,034

               

              Deferred revenue  

               

              19,067

               

               

               

              25,054

               

              Lease liabilities  

               

              5,491

               

               

               

              5,584

               

              Other accrued liabilities  

               

              2,204

               

               

               

              3,824

               

              Total current liabilities  

               

              39,276

               

               

               

              45,020

               

              Deferred revenue, long-term  

               

              2,592

               

               

               

              2,205

               

              Lease liabilities, long-term  

               

              6,762

               

               

               

              8,888

               

              Other liabilities, long-term  

               

              600

               

               

               

              900

               

              Total liabilities  

               

              49,230

               

               

               

              57,013

               

              Commitments and contingencies        
              Convertible preferred stock:        
              Series E convertible preferred stock, $0.01 par value. Authorized zero and 77,150,132
              shares; zero and 73,795,777 shares issued and outstanding at September 30, 2020 and
              December 31, 2019, respectively
               

               

              —

               

               

               

              109,270

               

              Series D convertible preferred stock, $0.01 par value. Authorized zero and 39,540,611
              shares; zero and 39,540,611 shares issued and outstanding at September 30, 2020 and
              December 31, 2019, respectively
               

               

              —

               

               

               

              22,000

               

              Series C convertible preferred stock, $0.01 par value. Authorized zero and 47,242,235
              shares; zero and 47,242,235 shares issued and outstanding at September 30, 2020 and
              December 31, 2019, respectively
               

               

              —

               

               

               

              19,844

               

              Series B convertible preferred stock, $0.01 par value. Authorized zero and 29,468,101
              shares; zero and 29,468,101 shares issued and outstanding at September 30, 2020 and
              December 31, 2019, respectively
               

               

              —

               

               

               

              9,840

               

              Series A convertible preferred stock, $0.01 par value. Authorized zero and 134,704,785
              shares; zero and 134,704,785 shares issued and outstanding at September 30, 2020 and
              December 31, 2019, respectively
               

               

              —

               

               

               

              30,626

               

              Total convertible preferred stock  

               

              —

               

               

               

              191,580

               

              Stockholders' equity (deficit):        
              Common stock, $0.01 par value. Authorized 500,000,000 and 425,000,000 shares; 56,298,216 and
              6,121,821 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
               

               

              563

               

               

               

              61

               

              Limited common stock, $0.01 par value. Authorized 100,000,000 and 146,199,885 shares; 13,164,193
              and zero shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
               

               

              132

               

               

               

              —

               

              Additional paid-in capital  

               

              748,123

               

               

               

              11,655

               

              Accumulated deficit  

               

              (118,420

              )

               

               

              (105,096

              )

              Accumulated other comprehensive income  

               

              480

               

               

               

              16

               

              Total stockholders’ equity (deficit) of Schrödinger stockholders  

               

              630,878

               

               

               

              (93,364

              )

              Noncontrolling interest  

               

              8

               

               

               

              41

               

              Total stockholders’ equity (deficit)  

               

              630,886

               

               

               

              (93,323

              )

              Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)  

              $

              680,116

               

               

              $

              155,270

               

              Condensed Consolidated Statements of Cash Flows (Unaudited)
              (in thousands)
                       
                 

              Nine Months Ended
              September 30,

                 

              2020

               

              2019

              Cash flows from operating activities:        
              Net loss  

              $

              (15,051

              )

               

              $

              (18,536

              )

              Adjustments to reconcile net loss to net cash used in        
              operating activities:        
              Gain on equity investments  

               

              (4,156

              )

               

               

              —

               

              Noncash revenue from equity investments  

               

              (342

              )

               

               

              (139

              )

              Fair value adjustments  

               

              (23,513

              )

               

               

              (10,607

              )

              Depreciation  

               

              2,648

               

               

               

              2,732

               

              Stock-based compensation  

               

              7,542

               

               

               

              1,612

               

              Noncash research and development expenses  

               

              1,694

               

               

               

              680

               

              Noncash investment accretion  

               

              359

               

               

               

              (277

              )

              Decrease (increase) in assets:        
              Accounts receivable, net  

               

              6,386

               

               

               

              1,760

               

              Unbilled and other receivables  

               

              2,580

               

               

               

              2,719

               

              Reduction in the carrying amount of right of use assets  

               

              3,957

               

               

               

              3,045

               

              Prepaid expenses and other assets  

               

              290

               

               

               

              658

               

              Increase (decrease) in liabilities:        
              Accounts payable  

               

              1,254

               

               

               

              3,324

               

              Accrued payroll, taxes, and benefits  

               

              668

               

               

               

              896

               

              Deferred revenue  

               

              (5,258

              )

               

               

              (1,461

              )

              Lease liabilities  

               

              (3,997

              )

               

               

              (2,961

              )

              Other accrued liabilities  

               

              (1,922

              )

               

               

              1,761

               

              Net cash used in operating activities  

               

              (26,861

              )

               

               

              (14,794

              )

              Cash flows from investing activities:        
              Purchases of property and equipment  

               

              (1,652

              )

               

               

              (1,679

              )

              Purchases of equity investments  

               

              (2,869

              )

               

               

              —

               

              Distribution from equity investment  

               

              4,582

               

               

               

              —

               

              Purchases of marketable securities  

               

              (446,816

              )

               

               

              (96,278

              )

              Proceeds from sale and maturity of marketable securities  

               

              118,272

               

               

               

              37,725

               

              Net cash used in investing activities  

               

              (328,483

              )

               

               

              (60,232

              )

              Cash flows from financing activities:        
              Issuances of common stock upon initial public offering, net  

               

              211,491

               

               

               

              —

               

              Issuances of common stock upon follow-on public offering, net  

               

              325,610

               

               

               

              —

               

              Issuances of Series E preferred stock, net  

               

              —

               

               

               

              29,893

               

              Issuances of common stock upon stock option exercise  

               

              2,747

               

               

               

              425

               

              Contribution by noncontrolling interest  

               

              —

               

               

               

              100

               

              Payment of deferred offering costs  

               

              —

               

               

               

              (19

              )

              Net cash provided by financing activities  

               

              539,848

               

               

               

              30,399

               

              Net increase (decrease) in cash and cash equivalents and restricted cash  

               

              184,504

               

               

               

              (44,627

              )

              Cash and cash equivalents and restricted cash, beginning of period  

               

              26,486

               

               

               

              77,716

               

              Cash and cash equivalents and restricted cash, end of period  

              $

              210,990

               

               

              $

              33,089

               

                       
              Supplemental disclosure of cash flow and noncash information        
              Cash paid for income taxes  

              $

              225

               

               

              $

              91

               

              Supplemental disclosure of non-cash investing and financing activities        
              Accrued deferred offering costs  

               

              10

               

               

               

              928

               

              Purchases of property and equipment  

               

              24

               

               

               

              —

               

              Acquisitions of right of use assets in exchange for lease obligations  

               

              1,778

               

               

               

              464

               

              Right of use assets recognized on adoption  

               

              —

               

               

               

              16,475

               

              Reclass of deferred financing costs to additional paid in capital  

               

              1,858

               

               

               

              —

               

               

              View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005038/en/

              Media Contact:
              Stephanie Simon
              Ten Bridge Communications
              stephanie@tenbridgecommunications.com
              617-581-9333

              Investor Contact:
              Christina Tartaglia
              Stern IR, Inc.
              christina.tartaglia@sternir.com
              212-362-1200

              Source: Schrödinger, Inc.

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