Schrodinger, Inc. Q1 FY2025 earnings call

Key Points

• Software and Drug Discovery revenue demonstrated strong growth in Q1 2025.
• Schrödinger has been pioneering computational molecular discovery for 35 years, integrating physics with machine learning to accelerate drug discovery. They are advancing a predictive toxicology initiative with over 50 off targets enabled and plan to beta release a solution later this year.
• The second software update of the year included new crystal structure prediction software, expanded support for protein degrader modeling, and new capabilities for T cell receptor structure prediction.
• The therapeutics team is advancing a collaborative and proprietary pipeline, with initial Phase I data from three lead clinical programs expected, starting with SGR-1505, a MALT1 inhibitor.

Total revenue for the first quarter was $59.6 million. Software revenue was $48.8 million, representing a 46% growth and contributing 46% to total revenue. Drug Discovery revenue was $10.7 million, up from $3.2 million in Q1 2024, driven by milestones from collaborative programs and the upfront revenue from the Novartis collaboration.

Guidance

• Full year 2025 financial guidance remains unchanged: software revenue growth expected 10%-15%, drug discovery revenue in the range of $45 million to $50 million, software gross margin 74%-75%, and operating expense growth less than 5%.
• Q2 software revenue is expected to be in the range of $38 million to $42 million, with the majority of remaining software revenue likely recognized in Q4, and drug discovery revenue evenly distributed through the remaining quarters.

Risks

• Political and economic uncertainty, including potential tariffs and trade barriers that could impact the pharmaceutical industry's profitability.
• Currency fluctuations affecting reported revenue growth from ex-US markets.
• Uneven treatment of biologics and small molecules remaining a headwind for software sales in some accounts.

Q: Thinking about the first presentation of SGR-1505, could you right-size expectations around meaningful single agent activity?

A: Karen Akinsanya mentioned they're sharing safety, pharmacokinetic, pharmacodynamic data, and preliminary efficacy data from the Phase 1 trial in relapsed refractory B-cell malignancies at the European Hematology Association Meeting in mid-June.

Q: What could break pharma partners' sentiment and change their approach to investing in a platform like yours?

A: Geoff Porges stated that impact is what customers are looking for, and as companies using the technology scale and see significant impact, it will start to transform how the industry deploys the technology at scale.

Q: With FDA's guidance on reducing animal testing, are you seeing broad-based demand?

A: Ramy Farid noted there has been significant inbound interest in their predictive toxicology initiative since the FDA announcement, with interest from both biotech and large pharma companies.