Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Schrodinger Inc (SDGR, Financial) reported strong revenue growth with total revenue for Q2 2024 at $47.3 million, up from $35.2 million in the same period last year.
- Software revenue increased by 21% year-over-year to $35.4 million, driven by higher revenue from global accounts and combined software drug discovery collaboration customers.
- The company initiated dosing in a Phase 1 solid tumor study for SGR-3515, a Wee1 and Myt1 inhibitor, and is progressing well with its first two clinical programs in Phase 1 studies.
- Schrodinger Inc (SDGR) received a $10 million grant from the Bill & Melinda Gates Foundation to fund a new computational initiative aimed at reducing the risk of development failure due to off-target protein binding.
- The company maintained its full-year software and drug discovery revenue guidance, reflecting confidence in its revenue outlook and ongoing customer engagements.
Negative Points
- Despite the revenue growth, Schrodinger Inc (SDGR) reported an operating loss of $52.7 million for Q2 2024, although this was an improvement from a loss of $61.1 million in the same period last year.
- The company continues to face challenges in certain geographies, particularly in China, due to reduced availability of capital for biopharma research and geopolitical issues.
- There is volatility around renewals and scale purchasing among emerging and small biotech customers, with some reducing or halting drug discovery efforts due to balance sheet and strategic concerns.
- The gross margin for software is expected to be slightly lower than last year due to the lower profitability of the grant-funded predictive toxicology project compared to software revenue from contracts with customers.
- Schrodinger Inc (SDGR) anticipates higher cash use this year compared to last year, and there are concerns about the company's cash position and potential need for additional capital in the future.
Q & A Highlights
Q: Can you tell us about your thoughts around any dynamic changes in your end user customers and your confidence towards the end of the year?
A: We are pleased with the level of engagement and interest in scaling up software usage. We expect near 100% customer retention and have visibility into renewals, mostly in Q4. (Ramy Farid, CEO)
Q: What are your thoughts around your year-end cash and options for capital over the next year?
A: We expect additional cash from the Morphic sale and have opportunities for partnering and collaborations to match our expected cash burn. (Geoffrey Porges, CFO)
Q: Can you give clarity on growth in the software-based business, especially among smaller biotech companies?
A: Despite a turbulent environment, we are seeing more new accounts and growth accounts than reducing accounts. The business is driven by large customers, but we are weathering the challenges well. (Geoffrey Porges, CFO)
Q: When will the new predictive toxicology tools launch and start generating revenue?
A: We are building out the technology now and expect it to contribute to software revenue growth over the coming years. (Ramy Farid, CEO)
Q: Has there been any change to the cadence of the back half software revenue guidance?
A: The middle part of the year is proceeding better than anticipated, but the full-year results are still heavily dependent on Q4 renewals. (Geoffrey Porges, CFO)
Q: Can you comment on trial enrollment for your key assets in the clinic and the updated clinical timelines?
A: Enrollment is going well, and the updated timelines reflect our intention to share information at Medical Congress. (Karen Akinsanya, President of R&D Therapeutics)
Q: Are the talks with large-scale global companies about significant scale-ups incorporated into the current guidance?
A: Yes, the guidance reflects expected renewals and scale-ups. We believe it's early days in the industry's adoption of our technology at scale. (Geoffrey Porges, CFO)
Q: For the initial MALT1 data expected in the first half of 2025, what will the data set look like and are there plans for a partnership?
A: The data will include safety, pharmacokinetics, pharmacodynamics, and exploratory clinical activity. We are open to partnering for broader development. (Karen Akinsanya, President of R&D Therapeutics)
Q: Was the predictive toxicology initiative driven by customer demand or market opportunity?
A: Both. The technology has reached a level of performance that makes this ambitious project possible, driven by customer demand and advances in science and computer hardware. (Ramy Farid, CEO)
Q: Does the Gates Foundation have any downstream rights for discoveries made through the predictive toxicology initiative?
A: No, the Gates Foundation does not have downstream rights. (Ramy Farid, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
