SDGR - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. Welcome to Schrodinger's conference call to review our second quarter 2024 financial results. My name is Madison and I will be your operator for today's call. [Operator Instructions] Please be advised that this call is being recorded at the company's request.

Now I would like to introduce your host for today's conference, [ Mr. R. President Relations Vice Corporate Senior Madden, of and Investor Affairs. ] ahead. go Please

Jaren Madden

company second at you, Welcome today, financial provide and on we the everyone. good we available an which is progress review today's on Thank release afternoon, results which issued to a and summarizing results. XXXX quarter financial call schrodinger.com. press during update across website and Earlier company, our our our will the

Officer; are with Therapeutics. Chief Geoff me Executive on Farid, Here Akinsanya, R&D, Porges, today Officer; of Ramy Karen call and Financial Chief our President

our call Following prepared Q&A. remarks, the we'll for open

our of and year of our During including based statements considerations strategies clinical are our we forward-looking quarter we safe are compounds, otherwise. Also result today's to as including events current the will harbor ended related you collaborative about advance our new differ by only XX-Q required factors, and in for except for statements properties intentions, expenses. not future, Risk accounting cash on with information, our our caution to Please XXXX, to press whether that release, XXXX, tables with superior which not plans and Litigation potential a number the described that the views make statements available in software the represent may as our the should us reflect GAAP or and information in currently and update These the the substitute to to the measures. refer included website XXXX. call assumptions GAAP and These of of of use of non-GAAP these discovery are our These of a made. Actual most plans, our views the and measures. With to in quarter Form addition measures are our our which Securities that, over directly section forward-looking only generally timing our today at resources of from we comparable initiation we is Private have and a to accordance Factors important available outlook not third like to reconciliations elsewhere for or and prospects SEC, statements in certain in of results trials, growth and forward-looking to on materially expectations, to and prepared measures. of clinical call, programs, on the filings I'd due future management and principles our the financial provisions the Reform accelerate June to non-GAAP end as limitation, be our the of the accepted made XX, for call financial the Ramy. may the measures without law, business pursuant drug Act today's and make proprietary full future the the considered them readouts turn of including, non-GAAP

Ramy Farid

today. thank Thanks, us Jaren, everyone, you, and joining for

during proprietary progress excellent and advance revenue to continuing our pipeline. the with pleased quarter, our very are We delivering growth

co-inhibitor. Total study have As in to Phase and was second revenue well Karen in quarter initiated clinical you tumor software our $XX.X first report from studies. SGR-XXXX, the clinical $XX.X will Phase for And our I'm X programs million for a are that was X hear solid X shortly, revenue progressing happy million. we dosing WeeX/MytX

our software revenue reiterating about confident full for year revenue outlook discovery are drug full are guidance. and and year our We the

the business revenue are computation levels of in of scale-ups are high. Collaborations maturing discovery important and quarter. facilitated at impact discussions progress clear meaningfully software. These to the continuing We of drug highest second companies companies our large-scale have discussions our and expanded with be programs to It's continue very drug discussions line engage our several been contributed global to about at in the deployment customers interest an in productive expectations by our and significant deploying large use element with of about computational in of remains methods and that discovery. across advanced partner these

an companies Lilly planned an would our are $X.X our to of Morphic for billion. also for co-founded Therapeutic of platform strategy important and and capital. We success validation our our extend congratulations provides to on like acquisition their Our by part their overall further source partner, is additional

on recent congratulate side-by-side are and on C to scientists demonstrate X presentation Morphic companies achievements for We including also partners in for data of on Structure as the their proud IND platform our partner worked at our discovery. Phase and a JAKX financing Therapeutics programs, clearance the our cofounded catalyst to with have obesity would like several These MORF-XXX. We innovation their serve their Series of drug to power inhibitor. Ajax

AI develop continuum. We and to we with to platform of proteins, solution our have development physics-based across full to launched to machine continue R&D binding advanced deployed We with developed an risk initiative reduce computational off-target new drive unlock and which be can the side exciting will with and methods powerful potential computation of a learning recently serious to associated to designed advance efficiency amplified effects. associated failure the the

programs. In of to built key technology already many our have begun using well-known off-target proteins. accurate in for years, a predictive coming this the build models proprietary and most partnered of we off-target models have proteins the handful for We and aim

the success to to these the contribute trials. likelihood expect drug future toxicity screen that clinical given to for We software growth demand solutions assays in molecules help can of optimize predictive enhance and

million that from this Melinda a Foundation. grant funded Bill initially & Gates $XX being by is effort the delighted are We

considerable and turn the call science We hard year are and to to strategic progressing programs. remainder adoption, Geoff. mission. I now driving have our whose advancing including greatly in and and software I first of for achieving platform year, underlies progress and critical the our half work our are collaboration on the of the partnered executing we made of over that dedication the the priorities our the employees our proprietary appreciate will scale-up

Geoffrey Porges

quarter an QX recognition portfolio in revenue revenue collaboration milestones of afternoon, excellent Morphic proprietary our progress Thank several achieved strongly, validation Schrodinger strategy acquisition. therapeutics business for technology projects, Ramy, of the software the everyone. the discovery in you, by progress significant associated drug from elevated and with and and had with good our growing planned

certain showed its segments. Our in revenue and global our market accounts challenges business resilience growth in as offset geographies

project, provided growth the revenue We in are the such us for are confident maintaining and the toxicology previously that as for full year predictive increasingly guidance recently position sustained announced years. coming opportunities, our

was discovery $XX.X The XXXX. XX% revenue increased recognized due was to in our million QX in revenue from compared global well million customers. QX combined as increase Software collaboration drug revenue $XX.X software from as to accounts

we revenue and by XX%. with and $X.X in million to As grew XX% a ratable our this revenue increase hosted by to million. to actual by this period software software making Maintenance previously, that conversion customers revenue our is software compared grew grew in and XXXX. On-premise strongly, customers revenue services and progressively at professional in our significant software million contracts conversion this same both even are increase It the companies the total noteworthy global companies. XX.X% indicated was quarter. The is biotech pharmaceutical to QX hosted in increased percentage $XX.X are hosted the $X in converting software reflected established year-over-year flat of

on midpoint hosted software make XX.X% period our like QX dynamics year of a and to few percentage to total a we XX.X% the compared this in in of As in XX.X% seeing was the our revenue, a software the compared at ago year. comments are in revenue QX business to the year. I'd same

our technology has our increasing strategy the First, focus of established adoption working. been and And of customers. strategy is this on to scale our

benefits and in of as software more drug the their efforts our of suite this our customers utilization more scale quarter's reflected and adopting outcomes. solutions recognizing in foundational reiterated better and of guidance that results seeing are are results to strategy for year. in that increased discovery The We

around are strategic or and advanced some customers. continue sheet reducing X concerns of emerging drug small scale with these or among balance and their renewals purchasing see and volatility we concentrating halting of efforts most Second, by dealing customers X biotech and discovery In programs. cases, to

in the is seeing bookings on new from are discovery customers the outpace first increase reducing of half from balance, customers. year, new efforts and shoots and accounts And continues our software we to more encountering the the contribution finding accounts we terms retrenchments. In accounts increasing powering are exceeding are discontinuing software. the that we growth their companies booking decrease with from customers new drug also are of However, green than

We emerging accounts greater company and in growth large that the segment. are the in are the issues considerably confident than opportunities new

capital of challenges business by had reduced risks for geographically, and And Third, there. challenges has associated research issues. are in China are opportunities. small with availability we balancing relatively biopharma exacerbated geopolitical also those A

other are seeing very in and and we we encouraged in the are opportunities Asia Europe businesses North Our America. advancing are growth by

Our this year drug discovery of recognition in $XX.X in for revenue revenue achievement period to discovery The drug $X.X collaboration of planned was a million due ago. to compared same quarter quarter same milestones million this revenue year compared $XX.X by and drug revenue the was million increased the ongoing $XX.X year-over-year was discovery year. this ago period projects. Total to million driven for and contributions million the revenue. a software $XX.X from The in QX was in increase compared the quarter to

margins. Turning now gross to

a period in ago XX% scale margin to QX software compared associated year customers in the compared this increased with to to Our renewals royalties lower XX% efficiencies and was QX and increase was the and at large year. during sequential contributed the same improvement. period FTE gross XX% in in gross The margin of

or expenses be The services of $XX.X projects, from lower of employees and period in and drug absence In collaboration decrease proprietary discontinued associated future collaboration to year. million the to CRO same of also expenses this other are million cost other XXXX in compared QX to $X.X was shifting compared in with the decreased likely allocation Our our periods. collaborations discovery project projects significantly research driven drug to decreased the these collaboration in and range projects. the discovery by to current also

million XX% period year-over-year lower in overall lower collaboration by The nondrug year year increased mainly QX this increased to changes expense severance by which $XX and commissions compared nondrug were a and FTE in CRO due period year year million decline driven was year-over-year a the count X% ago, reduced FTE marketing $XX to in FTE to was while increase by compared to $XX this The revenue compared underlying the million to expense the ago discovery. to increased in in million expense X/X and QX in increase and allocation from The to cloud was higher Our QX $XX.X QX in year-over-year including X.X% drug to marketing million by to expenses due to and by accruals. Total discovery to and gross gross R&D, compared due and and approximately by was declined driven increase and was costs. R&D increase R&D million technology year. to margin to decreased in a same QX compared same lower the of period decrease $XX X/X expenses shift G&A. higher for staff for same the $XX.X QX. expenses, GAAP total in increase and head prior the QX XXXX QX. year. was projects to quarter during by QX, to to a offset R&D proprietary in The million The X.X% in compared lower in operating The this for was but ago investment. G&A as higher XX% compared QX the compared expense XX% discovery was to expenses for margin period increased of R&D. Sales for internal $XX.X QX, higher was allocation same drug year. mainly million year $X.X quarter last compared and due compared programs X.X% discovery was the R&D and expense increased Compared expenses the compared expenses, was due were increase and programs. The compared flat this to expense by expenses. royalties FTE overall to

quarter a QX. from in and year the to compared for million of loss $XX.X million to a of Our million in the period loss a $XX.X $XX.X same loss ago operating operations was

as not the and During the of is of of an period. results. our these quarter, investments Morphic in Morphic declined to fair value the equity expense was Lilly's during reflected in million of investments the offer Structure QX and occurred change $X.X the after value acquire close in

in total million loss $X.X interest expenses to on was compared million and of $X.X mainly associated same $X.X the other was period income other Our million. a cash year, with our last reserves

both as earnings taxes per now $X.XX. million negligible by was our loss loss QX tax loss and driven This share to $XX per were net of and $X.X and net last was before share year, Our income the $X.XX. distribution expense of in million our numbers compares

fully diluted share was in in to XX.X last year. QX million average Our compared QX XX.X count million

their in low program use securities compared royalties to used declined largely operating million offset to cash portfolio. balance receive to remain eligible royalties was the expected Morphic's in period. We in clinical of and of our operations holding we Morphic, other leading $XX In QX, for $XX and which and cash cash our is to quarter, variable in programs the and our million single-digit marketable on the the During sale $XX by end QX. expect from the million

own And during our Ajax Structure Therapeutics outstanding quarter, invested X.X%. ownership X.X% million continue at additional to common the Therapeutics. we $X We at to of the an approximately shares into maintain

Looking maintaining software are ahead, the year. our we previously guidance for provided

be expect of We revenue $XX to in in software range million. million $XX the to QX

gross software to from of project contribution on which margins, revenue our in from modest effect announced with existing software We Gates to that to some our aligning than year, software with half is is revenue have of funding our expected do lower the because project. We Foundation profitability contracts second this the of the expect revenue the resources the expect the commitment recently negative new customers. a primarily grant, and contribute

matched than of result, dollar now we range full margin expect of the the year slightly software grant to range grant, a of revenue the in same our year expected as operating duration of moderate with low year XX% software the cost persist is of our goods in for growth but with of increase the range expect expense a percentage year. now the likely overall gross expense, lower reverse. XX%. gross for our software gross should to range the end by be expect decrease similar full year expense by to of The negative our to at reported is our X% grant, or of on the margin last conclusion customers previously to in we X% last lower At the to growth expected the be our from in provided and effect As contracts operating XXXX. The the margin be trending our associated which to profitability R&D expected our approximately likely X to point. We is the

discovery Our million of the million full is towards year guidance unchanged to QX. realized at be drug balance revenue $XX and we revenue our weighted expect to $XX

I'll cash that over greater forecast last will updates. therapeutics be than to continue we our Finally, our cash that, call to year. With this to use used our the discuss Karen turn year

Karen Akinsanya

Thank you, afternoon, Geoff, and good everyone.

of pipeline advance are collaborative programs. to and continuing our We proprietary

have the including at Ajax that platform partnered our Structure, to continues and we companies demonstrate which very are power the and deployed to when of programs and with progress We scale. compounds of pleased see clinical cofounded,

its Lilly. several We As Ramy on Morphic by the highly alphaXbetaX oral is MORF-XXX, recently which inhibitors, planned with discovery worked including announced the closely Morphic mentioned, a integrin acquisition selective of inhibitor. team

relapsed refractory proprietary patients X MALTX is programs B-cell Our in Beginning we Phase with study and the our advancing. is with X pipeline have our inhibitor, progressing SGR-XXXX, in well clinic. lymphomas now

first data present evaluating a we in We have a as are SGR-XXXX pharmacokinetic and to efficacy study clinical patients We dosing in cohort. We now from and this peer-reviewed in XXXX. administered enroll preliminary plan twice-daily initiated data safety pharmacodynamic as initial well continuing present cohorts half to setting. data once of to expect the daily

patients or our in to is SGR-XXXX, inhibitor, acute myeloid study our enrollment Phase syndrome. ongoing in X CDCX with Turning leukemia myelodysplastic

FDA pace and As escalation for determine study now meetings, abstract a safety, steps we to The with progressing co-inhibitor. to X well medical with elevated tumors the reminder, patients population are stress. SGR-XXXX the lethality. cancer dose is will to evaluate mechanism-based WeeX/MytX the these designation allowing Phase strength XXXX. with hematological of also of SGR-XXXX, Track the and MytX uterine relapsed/refractory X study other of preliminary the X in data. Today, underscores of The timing inhibits with we clinical This confers be evaluate primary expect sensitive half recently from cells function dose. Phase recommended on solid recommended deadlines need dose. The concurrent clinical advanced Based termed of objectives efficacy antitumor and preclinical in proteins cancer dose replication and solid ovarian to escalation the side predicted of X is the Phase amplified the including maintaining our to designed in X both Fast unmet us in multiple an study Phase granted allows initiation AML, of dosing completed. tumors while profile and study the tolerability intermittent dosing of any SGR-XXXX initial safety, in study the of to best from WeeX/MytX vulnerability announced was goal our our schedule study and loss of present PK/PD addition data WeeX implement inhibition, include to and this the to second effects. which synthetic recovery potential activity

SOSX to program. Turning our

pleased the this package very preclinical for IND-ready with are We program.

with to a BMS advance our neurology a of is KRAS inhibition will the stages expected this and advanced SOSX to into later we Given program used pathway we discovery. partnership. Within through be program inhibitors, other collaboration, combination in MAPK successfully seek

strategy future engage collaboration new our viability and part existing basis aligned partners the the product mutually important We and we to about the profile. Collaborations target opportunities. initial project remain competitive of with program the with on of positioning immunology also an of BMS continue on and discontinuing

approach off-target to predict increasing binding of access expanding revolution with about numbers structures structure-based launch proteins. for of the biology expansion models proteins. The accurate is are We of the excited ongoing structural first X-dimensional to our of

pursue models computational realizing solutions further binding computational toxicology our on we of power and transform have the already begun pleased our the are discovery to internal and with very progress see proprietary this pipeline. leveraging We making discovery. In expected we impact are Fully collaborative off-target across projects. the is expansion broad to summary, are to drug

discovery both all we value We now year advancing looking the X in to readouts of independently. I back the by opportunities these to that that clinical generate programs Phase represent through or partnerships are beginning next can Behind have from programs best-in-class data first half call them forward XXXX. X first-in-class turn Ramy. and programs, will

Ramy Farid

Thank you, Karen.

We toxicology forward half the to to of have deal that in scale-up our a half and develop in opportunities lie launch and initiative of an your this ahead adoption advanced of progress great first the year. software, a the the of We We witnessed pipeline. year. At made computational we'd look on our exciting you be second new the time, solution happy continued predictive questions. take updating to

Operator

[Operator we from take Instructions] Yee will question with And Geofferies. Michael our first

Michael Yee

had Congrats any around of comes the us One the down thinking Obviously, about about the outlook X always year. changes thoughts quarter. the rest the Tell was dynamic we your guidance on user maintaining you're customers? We it know good essentially questions. the your to for and quarter. fourth end in

conversations thought around second little an question I'm and relates cash. year? And have our a to relates the a to it us confidence your tell sure towards as this important it as the is Geoff the financial question. more just of you're maybe the end having bit good year-end So dialogue about would

for about year, the hundred year didn't a you own next year of options around capital. where We additional of other $XXX for less burn perhaps the options tell But capital than would have estimate so, or you that? million us so. leaving million couple is if Can of a of cash there about the over course about next us tell or partnership, you be thoughts a have your our

Ramy Farid

the to the first and to hand obviously add it question the then over I'll first to Mike. take response second to Thanks, question and either answer question. your Geoff

this of of kinds scaling of the predictive very the to this with up pleased still the helpful in our a with clear have nature is software. including we're excited excitement really year, with that the the And discussions platform customers, impact advance the around things. One of they're about that level regard talking of their engagement, level in we're but won't these project. science is the usage engagements. advancements about, and on interest few an tox Obviously, our So

to customer we also, XXX% have high previous I'll we as rate. have very have We continue you that continue expect, we -- remind in to years retention the to near

So it's want as mostly you We the will flush of a these [ have and a do cash customers scale matter might in of lot answer what the be add really renewing out, just QX. Geoff, to you know be visibility we and pointed in the, ]? discussions. into up that then to

Geoffrey Porges

Yes. Thanks, Ramy. Yes.

that, that is of renew contributes degree But of our think to of nature confidence year we've to what the we've much and add big they ratable high don't does their going range how revenue Mike, scale to much that that and this or those much customers always including customers is versus how the are we're providing, the in of customers mix of in experience had, going when maintenance use know quarter have on-prem. And to to experience cash may realize additional structure course, lastly, to the pretty is well. And advance continue continued have we and future. of programs first to of the number to going service the take position opportunity guidance immediate independently. that's that circumstances, the respect likely exact and contract, not Morphic increased guidance. of they're are of opportunity the there half as as highlighted up our We I and clear scale. With the maybe are us of to that's ahead closes then the uncertainty course, largest we'll Karen's QX, renew how have to our clearly the is one very into is -- the the had in the receive renew. clinic, been are a the we And our then right we we all be the position, them. team all and is cash Just developing, that you presuming I transact on exactly move And programs. we the -- reflect from obviously, -- to in some over our that at that saw of that that the we to the our time But or expecting more intention under given programs have programs

we for So discussions collaboration. of Karen a have we to also, continue we engaged believe actively number to, opportunities alluded partnering. as about And be in

going those So sort to what of both of are less capital match we the burn or additional more expect sources be cash to of forward.

Operator

take will from next Leerink. Foroohar with we And Mani question our

Mani Foroohar

quarter. growth little a business. in on want on to bit software-based down Congrats the drill the I

little founded markets you're what investments You've companies, bit seeing large companies, your around clarity us extent use customer capital the growth. market you biotech seeing of a state and biotech with Can use given give funding we're the one venture end on et in and new what engagement newly around some of driver adds? of reflected in amongst deepening smaller companies, to continuing And cetera? clarity customers your expanding that's and

Ramy Farid

Yes. Geoff, to... want do you

Geoffrey Porges

remarks. way I environment in I novel favorite Thanks to Sure. allude come formed new their at with emerging the the for Look, companies but sort doubt most to still formed. turbulent prepared it's being molecules my for a against cost-effective the tried up to there biotech Mani. no targets. companies, Yes. that looking question, of tend There's are be to companies And new --

they're reaching us And becoming to out so a very customer. frequently, about software

they've we use or When that the back accounts. discovery that number that accounts look scaling And we customers not of growth X more compared Phase customers than so We're do accounts significantly I drug don't X accounts reducing our and when look we're Phase sort anymore. just that because still seeing our of I and advancing software seeing we're are than that are stopping at said, or seeing revenue the effect to software seeing, more new of customers we're are at opportunities program.

say definitely would It's a modest fairly it's effect. I effect. So an

the that is but an it's think increasing. really large driven it's business Now I customers, being don't by effect,

we're company I that that results seeing think and is us the it the weathering you're optimism of reaching guidance we're out of I'm the green there's the providing. And saying, think I us in to alluding But to and or that like it in say to shoots that become growth some contribution sort little signs result we'd absorb and in way and to 'XX. there that sort customers. the segment, that's in sort 'XX real hard since in not going recovery really a been to of it's that large customer a a has which of of early

Operator

Schoenhaus take will we our Scott And next question KeyBanc. from with

Scott Schoenhaus

I for is you. this question guess Geoff, a

should follow-up new we When I opening your in a you well. to incremental second on comments revenues a the seeing taking And on When up following launch? of I will as this can year. then believe You're you start flow predictive said the this expand start initiative orders? application through? computational tools for toxicology. have next When one exactly

Ramy Farid

companies use positive. we've been programs We've getting And our universally very excited we're started bit also, that internally this from nice and proprietary gotten and Scott, it project. a Yes. Well, we've as it's let this extremely already collaborative we've it. Yes, pharma our indicated, with results with and to in feedback thank some quite me programs of that first, technology you. about take obviously discussed

excited have out it Now funded Foundation building obviously be now. we're when very $XX with with by to will to are that that We something available that's regard Gates it customers, the to million grant.

we and thing a smart to with it's project. That's what tell expect more never contribute you details handful any to that. done. we do. on how company put new growth near more from we've think We sort I add that of released about done targets us to novel help sign when the into it additional past about expect we we've partners exactly to as to going in get continue not can be we're contribute necessarily with let's software We've will to released. is over to future, and can't work But up off already it That's that technology. the in it the done And talking something coming -- be to that the way. And the certainly revenue years software this for that

Scott Schoenhaus

color color, just been a your back is change helpful and earlier provided I that it's XX half the even from days the pin picked guess, terms the say, I customers. of Has to really earlier of changed on established you're of increasing half back contribution that of green at on the over seeing shoots That's quarter, since questions. all and put in or anything software software of back back with in terms guess revenue guidance Geoff the to on more revenue of there half guidance? -- cadence the last half poked any the the cadence based scale -- Ramy. customer, from the

Geoffrey Porges

do want to in? Ramy, me you jump

Ramy Farid

Yes. Thank you.

Geoffrey Porges

say don't I think little think the All I would than of we I is, part better year so. proceeding middle is a the anticipated.

the I of us scaling guidance, scale in of encouraging and of scale-up accounts the range seeing have come middle a I of renewals they established their up and The of by in customers part are or to kind that customers contract, as see mentioned. terms of, contract. some say, mentioned, global both And can the of But signs which the we the helping influenced the contract as still We the biotech heavily to of we course, that's about very have but is the and the and that have really multiyear that high is don't. then, upon a sort mentioned us length of year, some the will year opportunities confidence we full dependent degree nature in fourth result quarter. I've renewal contract, contract renew. the fact the the and of course, the you we will the want

there that those in different happen. are we're So that but guidance, contribute very variance the all those to will elements renewals that confident

Operator

next Seigerman our from question comes Capital with And BMO Evan Markets.

Conor MacKay

quarter. for Evan. congrats on And MacKay Conor is This the on again

are new currently Just in for on trial just we one assets you And key on maybe updated got has been a progressing 'XX, Can a 'XX this the that for clinic? previous that just lines clinical maybe discuss the range? your comment time change enrollment of today. what how half me little a the half your more first specific XXXX Is and prior guidance the tightening second of late bit just drove sort guide? to from

Karen Akinsanya

Yes, much our dosing tightening range. our indeed, And Enrollment going in very well we both is it the for the started in program. programs. Thanks just of is question. advanced you heard, Yes. third as most

abstract able submission We we're add are really the CDCX. share We've into enrollment very things our congress our is now of happy way going. And MALTX that and the with the medical this timing But plan second are at of dates. and seeing. around first focus been and half information understanding overall, with studies and to that and really, of intention half pleased the well to things going

Operator

question And come Please And will is more, our next line ahead, Michael your open. open. with from Bank your once America. is Ryskin of line Ryskin, Michael Michael, go

Geoffrey Porges

Mike, you be on might mute.

Operator

next our take question. And we'll

Ramy Farid

back to him. come We'll

Operator

question next the David from take Lebowitz with We will Citi.

David Lebowitz

the Or you incorporated into fourth something the software. uptick? years? use fourth talks call, acceleration beginning of in more the and about a of global that typical the Is that's scale-ups see coming referenced with we that quarter something actually data broad -- that companies statement large-scale is expanded significant talks that about would the the your potential in At the

Ramy Farid

Geoff? Yes,

Geoffrey Porges

a both. I it's actually think good Dave, really question. That's Yes.

a year. as the a we that that we think know, quarter I a of in from had contract fourth contribution recognize, multiyear large customer last large you renewing

we you way the that and and more want through growing in terms the go benefit. Ramy, discussions I to on the to journey of what's of days think And had? in focused realize see cycle our also, early our do this And doing this the which adopting in think of they're have are starting still it's quarter very little full scale. customers where about bit the a technology larger they many to at of relatively I talk to about long talk is adoption is early the quarter that, guidance. But I we're for of from long number a they that we've this the and relatively predictive and the the in days industry's in so of think from comments think the a of our fourth to technology. we capturing an term year tox comments, had opportunities And general around have in opportunity

Ramy Farid

specifically right. question Or was fourth did that's The correct? I this the long in The about about [indiscernible] year quarter, mishear? term,

David Lebowitz

extent I scale are and future we adoption increasing Or talking talking actually years? them are substantial to into about going a that the that's on overall how basically of of we the the their broader incorporated meant software. upticks might affect use that the forward in That's already numbers? something

Ramy Farid

Yes.

Okay.

chicken it software, which So acceleration very scale it impact about of raising see that more of yes, I fuels to critical in of and the have impact. of growth. to interesting, covered you that have you're the very think up problem see sort sort to that the the but is usage the that well, -- you some egg using has have often software talked and Geoff We've as customers level something be they really an usage this at

finally we're So on And customers seeing where scale finding we that we, way that really using times, impact have and customers go sort to to you excited projects, our where as And still really that's but get our a internally are the kind many nice should impact they of customers like success this are software are scale, the be the thing at to and profound long clear about use moment, many proprietary the it that's the as going. at Geoff to many, have it. also, and times, the growth. And partners a that I and programs. to partners using said, fuel full it benefit scale to collaborative its that our see they very we've use see to we're having. -- as technology the continues realize said, the the that said in further at And said of we're we're the and that we've seeing their can what up, of of they is point full

and what you're at, that's getting think I it's a great question.

Operator

Vikram And Purohit with Morgan our next question Stanley. comes from

Unknown Analyst

Morgan MALTX X ] for Vikram. This questions I to is [ Greg program. have related the on

the of number color data for patients on first this of in plans reporting? anticipate in in you following initial parameters to could more until could follow-up any the half set XXXX, additional envision partnership? like and data MALTX provide terms the level, First, potential data expected readout some do what XH 'XX, data you of establish And maintaining look readouts? you then are Or a molecule there data this proprietary of ownership of

Karen Akinsanya

Yes.

understanding the in are we focused this So safety, pharmacokinetics escalation X well, Phase and patients, on very described, pharmacodynamics. as we've the dose

I we comparing our said collecting in pharmacodynamic twice daily daily we're data. think and prepared currently remarks, once and

in And what half insight of into so this X study. be escalation first we're XXXX will dose that giving seeing Phase really that

an activity are that. hope exploratory clinical also able in way also we be to We at and obviously present to looking

forward setting. And so opportunity that accumulate bring the data and peer-reviewed all of looking a to to to share together in

In inhibitors, own terms the inhibitors think of the result assets of we broadest BTK for of clear past range that combine with partnership that, products plans pretty in or MALTX that that what will I a in companies lymphomas. those mechanism actually inhibitors potential as we've that some on BCLX our market. in think well the will MALTX, really is a And with been drugs, be are think of we well-established MALTX development actually a

we with will be potentially data Phase the are while talking and that set a X think continue as our that partners we program an about study to there the internally, and to socialize opportunity conclude study. will molecule partner we so projects always we with to complete more And pharma our

Operator

Group. And we with take Craig-Hallum next will from Hewitt Capital our question Matt

Matthew Hewitt

opportunity is see the gets I Congratulations software launch the in given putting strength something on methods? this methods a the studies? your benefit those this toxicology this tools. utilizing there basically versus guess do is was where together, you had the new addition the looking quarter. adopted, Or the studies? Will question? The you customers traditional this as come second this, traditional for Maybe gets predictive the traditional this as changing to tox the market of to Or up this part for is help? cost be adopted, part you your an regarding in first that Was tox and first to you seeing

Ramy Farid

Thanks, Matt. questions. Those are great

encounters question, So forever. that first is of your And everybody and that's discovery to absolutely about they're the everybody customers their all, this drug serious doing known in as both. complaining very it's problem. a drug This And industry with in a first discovery, widely projects. regard problem

to seemed is a making of of is few this years number a even technology possible. computers, pieces what's performance level happened that what and of just funding which and different is problems. to where a done about not was time seem number we ago, seemingly got is project, not where it not possible. It's NVIDIA, So where certain an technology this recognize of ambitious before, with at -- that possible. science is actually performance only It also now the the really to what now we but sudden impossible the gotten right ago that few only of we're excited the now like a has and our about all it making partnership The talked years this that a already given even very impossible with a it's of think, we've targets problem a we our

interest obviously the and the in So in bringing this and like with the together for advances hardware. something it's advances computer demand science

to sort toxicity. There profile course, And of Now imagine people obviously pretty with make time one are used One high most targets run slow, with even that's is throughput methods regard are a and at that's it through the to determine to X molecule basically our of experimental. are now. doing. can And molecule costly very the of off-target that regard to the the methods. not traditional obviously what you actually of and panels

The other one using has approach been that machine learning. involves purely

be problem that has possible experimental means a reliable accumulated is with then just in molecules lot you severe start like this is as look have predictions very is ML predictive to work been limitation, molecules synthesized. What already these a late that only projects computational that basically get the methods can after as only you for that that and that data collecting much The reasonably that is So models. building accurately which these can that to that in yet obviously experimental missing any any that be projects And doesn't published be predict developed existing able a need panel novel. that data. completely is for it molecule to off huge whether any experimental to a allows of of ton novel of targets. early to problems physics-based a approaches to There we opportunity data the with catch binds and

this to methods. is So breakthrough for that's in it do that's technology very early is yet experiment. But saying, and need dead." a be never to for of the up the Eventually, able instead reduce hands your sort and what profile that idea actually to be prediction of "Oh, just you well, those and this throwing significantly it projects is. There replacement behind fix the toxicology is experimental that allow have do going to complete this series of Hope will the it makes sense. another

Matthew Hewitt

That's helpful. very Absolutely.

Operator

And from our Shibutani comes question next Goldman Chris with Sachs.

Chris Shibutani

may. Two questions, if I

understand is is what informed in are the team allocation better, the distribution, of not strengthened or utilizing terms way you leaner, how example by the give speak, about some you In clinic, in best-in-class your rightsizing phase, to where and margin the in sort think And could doing? the is development discovery the modalities. or and of which so And of is forward, you that smarter, this are apply her artificial to that development or represent in benefit? And it. of the that the or it the whether proprietary something class you of being happens right you distribution there clinical clinical where of guys gross may approaching [indiscernible] shaping from the now? taking even the sense a the trying the natural provide often described, of essence, into continue quicker can a leading the some I'm contemplating, you of way continues of if to so, the and employees [ type secondly, of through if particularly pipeline to so Karen curious know, improved be what observe ability can [indiscernible], stage, on then wonder ] portfolio we all intelligence shifting it that margin you're end expanding terms the And you you gross think with? Just of the advance clinic, us might own we drug to guys, to of as

Ramy Farid

Geoff, would Thanks, you take like Chris. the gross first? to question margin

Geoffrey Porges

as to drug thanks there with gross margin, have for associated work revenue remarks, drug kind some the on services on been shifted The the of of discovery side, the Chris, a your Sure. were collaborations gathered that has prepared discovery as question. of you the my in over from on cost working proprietary project reduction teams programs.

CRO of as there. or to in services what the those work other my upon much lot R&D. I And so also respect remarks, with collaboration. outlook more associated shifted I shift depends a is very over think do prepared their associated the has but we mentioned services there from any services cost with And with to employees, expense that to don't

future to periods, of way. number might the a if I that that engages shift a in be back it's collaboration employees, other move don't another those is going then there think the to trend the back other back course, question, larger related it spend. shift over way, few seismic as Yes, has somewhat. The it past the other of way? quarters, could been So R&D but

and in the the be we're QX. good as we're of side. But given step-up that in the investment an line making You we R&D see flat I seeing don't upon for I proprietary time the investment in that a a we've the their and clinical Depending advance, generally really cetera, you with the imminent being decide feel over we clinical et programs what saw medicines. because step-up was with there QX to a and what think progress And happens clinical in making data. terms we're associated could place platform

turn to with continuing we're so And those over trials current those cards.

reduction in or big I software, on where the conclusion in to cost of of software think different don't services. And lastly, temporary alluded think explain there of between anomaly that I a project to there's predictive puts tox just be contract on line that itself I takes I funding. managed will a with customers. line gross then research the and reverse either that the the profitability margin and So the the software that hopefully, initiative an at a change and the for the associated That's with will the funding a R&D that

want So clear. And do to that's hopefully, talk about Karen, AI? you

Karen Akinsanya

yes. Certainly,

are right as that capabilities. building ourselves, our types you obviously, We, mindset So we into as programs those not the possible. be and efficient quite of predict is clinic, as move first our are

know, As our very platform you much chemistry-focused. is

platforms have including engaging and accelerate in with the can things, selection. run regulated doing of improve companies whether they are these of who to we evaluating site or help of kinds patient like trials, selection how those and efficiency way things are additive we sort However, built

on focused be However, that. something want at this to that's clear not that with I building will point, internally. just be we

Operator

[Operator Cowen. take with will Steven question TD Instructions] our We Mah next from

Poon Mah

on quarter. the Congrats

does have partners biologics? molecules Just X Gates And and applicable both One, on quick software for the follow-up to or questions toxicology any discover? the initiative. Foundation you predictive two, is this small downstream your right anything

Ramy Farid

technology to of to targets no. short for off small question, stage by at being question binding prediction is molecules. first answer The the With the the developed regard second its to current

example, not associated, with that's this So Toxicity off-target with of mechanism -- of of sort with immunogenetic toxicity focus antibodies associated The for the is often binding. responses. where is. is

different also kind problem, why is of yes. That's focus a it's So the [indiscernible].

Poon Mah

the launch Could biologics. for give us staying in design color traction on And has you been Yes, What since on then Okay. the the March? maybe [indiscernible]. live some biologics?

Ramy Farid

the was what yes, -- was the Sorry, question? what

Poon Mah

No, software. design March, enterprise for you the that in guys launched biologics live the

Ramy Farid

yes, Yes, yes.

been again, it that demand of in Yes. discussions for really, clearly doing customers, product a been And a with how great. And the fantastic. going? is lot we've has that it. Yes. really of demos is sort This all had pent-up The Yes. been Okay. of the reception reception -- has was

software. cycle -- result longer software, of As they're Again, the enterprise being that once the of and the little sales sticky about with developed. time hear the a software. the is just not a it results is to little enterprise with This once The it's in, using so adoption stickiness it extreme the customers it's next is in also expected sort bit fact that slower. sort it's day, is of that

So again, feedback what can we is it. we tell using you customers quite had And the have positive. is

Operator

call. I am today's at questions further showing no That concludes time. this

disconnect. now may You

Schrödinger (SDGR) 31 Jul 242024 Q2 Earnings call transcript