Q1 2020 Earnings Call
[music].
Operator: Good morning, and welcome to the Schrodinger First Quarter 2020 Earnings Clips Call. At this time, all participants are in a listening mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. It is now my pleasure to turn the call over to the Schrodinger team. Please go ahead.
Good morning, welcome to the show your first quarter 2020, I mean, let's call at this time all participants are in listen only mode.
Question answer session will follow the formal presentation.
As a minor just comes called leaves me recorded.
It's now my pleasure to turn call over to try and the team. Please go ahead.
Thank you operator, and thank you all for listening in on our first quarter earnings call.
Unknown Executive: Thank you, operator, and thank you all for listening in on our first quarter earnings call. Today you will hear from Ramy Farid, President and Chief Executive Officer; Karen Akinsanya, Chief Biomedical Scientist and Head of Discovery R&D; and Joel Lebowitz, our Chief Financial Officer.
Today, you will hear from Rami for Reed, President and Chief Executive Officer.
Karen I can sanya, chief bio medical scientist and head of discovery, R&D and Joe Lebel with our Chief Financial Officer.
Unknown Executive: Before we begin, I'd like to remind you that management will make statements related to our business that are forward-looking under federal securities laws and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to the potential advantages of our platform, our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery program, risks related to the COVID-19 pandemic, our expectations related to the 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.
Before we begin I'd like to remind you that management will make statements related to our business that are forward looking under federal securities laws and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Including statements related to the potential advantages of our platform.
Our strategic plans to accelerate the growth of our software business and advance our collaborative an internal drug discovery program.
The risks related to the cobot 19 pandemic, our expectations related to the use of our cash cash equivalents and marketable securities as well as our future operating expenses.
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.
Unknown Executive: Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks, and factors that are beyond our control, including those risks detailed under the caption risk factors and elsewhere in our most recent Securities and Exchange Commission filings and reports. Except as required by law, we undertake no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations, or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. With that, I'd like to turn the call over to Ramy.
Actual results may differ materially from those described in the forward looking statements and are subject to a variety of assumption uncertainties risks and factors that are beyond our control, including those risks detailed under the caption risk factors and elsewhere in our most recent securities annex.
Change Commission filings and reports.
Except as required by law, we undertake no duty or obligation to update any forward looking statements contained in this release as a result of new information future events changes in expectations or otherwise.
These forward looking statements should not be relied upon as representing our views as of any date to subsequent to today with that I'd like to turn the call over to Rami. Thank you and thank you everyone for joining Schrodinger his earnings call to review our results for the first fiscal quarter of 2020. This is an exciting time for the company and the.
Ramy Farid: Thank you, and thank you everyone, for joining Schrodinger's earnings call to review our results for the first fiscal quarter of 2020. This is an exciting time for the company, and the first quarter was an important one for us. In early February, we raised $232 million in gross proceeds through our IPO, positioning us well as we continue to execute on our mission of improving human health and quality of life by transforming the way therapeutics and materials are discovered. Our leading physics-based computational platform enables the discovery of high-quality novel molecules for drug discovery and materials designed more rapidly at lower costs and with, we believe, a higher likelihood of success compared to traditional methods. We license our software to pharmaceutical and biotech companies, industrial companies, academic institutions, and government laboratories all around the world.
First quarter was an important one for us in early February we raised 232 million in gross proceeds through our IPO positioning us well as we continue to execute on our mission of improving human health and quality of life by transforming the way therapeutics and materials are discovered.
Our leading physics base Connotational platform enables discovery of high quality novel molecules for drug discovery and materials design more rapidly at lower cost and with we believe a higher likelihood of success compared to traditional methods.
We license our software to pharmaceutical and biotech companies industrial companies academic institutions and government labs, all around the world. We also apply or computational platform in a broad pipeline of drug discovery program in collaboration pharmaceutical and biotech companies and on a pipeline of internal wholly owned drug discovery programs.
Ramy Farid: We also apply our computational platform to a broad pipeline of drug discovery programs in collaboration with pharmaceutical and biotech companies and in a pipeline of internal, wholly-owned drug discovery programs. We achieved record total revenue of $26.2 million in the first quarter, which represented 26% growth over the first quarter of 2019, demonstrating how well we executed on our strategy to invest in our platform, grow our software business, and advance our drug discovery program. Joel will present our Q1 results in more detail later in the call.
We achieved record total revenue of 26.2 million in the first quarter, which represented 26% growth over the first quarter of 2019, demonstrating how well we executed on our strategy to invest in our platform grow our software business and advance our drug discovery programs Joel will present, our Q1 results in more detail.
Till later in the call.
As companies increasingly recognize the potential impact of our platform. We are seeing deeper engagement from our software customers feedback on the performance of our software and the value. It is bringing to their projects continues to be very positive pharma and biotech customers are adopting our platform on a larger scale and we are adding new customers help.
Thing us to achieve record software revenue this quarter of 23.8 million, representing 28% growth over the first quarter of 2019.
We remain excited about the opportunity for growth and our software business from both new customers and the continued larger scale adoption of our computational drug discovery platform by pharmaceutical companies, who have been our long term customers, while we focus on helping our software customers and drug discovery collaborators advance their projects.
Ramy Farid: As companies increasingly recognize the potential impact of our platform, we are seeing deeper engagement from our software customers. Feedback on the performance of our software and the value it is bringing to their projects continues to be very positive. Pharma and biotech customers are adopting our platform on a larger scale, and we are adding new customers, helping us to achieve record software revenue this quarter of $23.8 million, representing 28% growth over the first quarter of 2019. We remain excited about the opportunity for growth in our software business from both new customers and the continued larger-scale adoption of our computational drug discovery platform by pharmaceutical companies who have been our long-term customers. While we focus on helping our software customers and drug discovery collaborators advance their projects and progress our own drug discovery programs, we also remain strongly committed to advancing the science that underlies our platform.
And progress our own drug discovery programs. We also remain strongly committed to advancing the science that underlies our platform with nearly half the company approximately 200 people involved and advancing our Compensational platform. We continue to make scientific breakthroughs, enabling us both to improve the accuracy of our method while expanding.
And accelerating its applicability into new domains in industries. We for example, released last quarter, a major improvement to our virtual screening application that in our tests is producing higher screening hit rates.
We also released a next generation version of our protein refinements software package that is being used to predict protein ligand complex structures in advance of obtaining crystal structures potentially accelerating drug discovery programs by month.
We've also made advances in add any talks property predictions. The result of these advances is that the number of protein targets, we and our customers can work on has expanded and we continue to unlock the potential for higher quality molecules and accelerated discovery timelines.
And finally before handing it over to Karen I'd like to say a few words about what we're doing to help address the cobot 19 crisis like so many other companies. We felt at this critical moment than in addition to growing our own business and creating value for our shareholders, we needed to do something meaningful to address this devastating disease. Consequently after.
Ramy Farid: With nearly half the company, approximately 200 people, involved in advancing our computational platform, we continue to make scientific breakthroughs, enabling us both to improve the accuracy of our methods while expanding and accelerating their applicability into new domains and industries. We, for example, released last quarter a major improvement to our virtual screening application that, in our test, is producing higher screening hit rates. We have also released a next-generation version of our protein refinement software package that is being used to predict protein ligand complex structures in advance of obtaining crystal structures, potentially accelerating drug discovery programs by months. We have also made advances in Admetox property predictions.
Considering several different approaches we have made the decision to participate in a multi company philanthropic efforts to develop novel small molecule antiviral therapeutics. We have chosen this project because we believe it most effectively leverages, both our computational platform and the expertise that resides within our drug discovery group.
The intent of the alliance form between us and several pharma companies, including Takeda Novartis and Gilliat is to make any discoveries available to the public while there is no expectation that this effort will generate revenue for any the companies involved in the alliance, including Schrodinger. We are proud to be involved in this alliance and hopeful that week.
Contribute meaningfully to combating this global health crisis.
Ill now turn it over to Karen who will update you on our drug discovery programs. Thank you roundly. Good morning, everyone. As Rami just discussed we continue to make good progress across our diversified portfolio of drug discovery collaboration and our internal wholly owned program.
We have been pleased with the availability of data from our wide network of contract research organization to support our internal programs. Despite covis 19 related changes to working arrangement.
Karen Akinsanya: And finally, before handing it over to Karen, I'd like to say a few words about what we are doing to help address the COVID-19 crisis. Like so many other companies, we felt at this critical moment that, in addition to growing our own business and creating value for our shareholders, we needed to do something meaningful to address this devastating disease. Consequently, after considering several different approaches, we have made the decision to participate in a multi-company philanthropic effort to develop novel small molecule antiviral therapeutics. We have chosen this project because we believe it most effectively leverages both our computational platform and the expertise that resides within our drug discovery group.
Our globally connected team comprised of trading and external scientists have been able to continue working together with minimal delays in the design synthesis and testing by molecule by leveraging our like design Informatics platform. This enabled global collaboration and lab.
Scale data management.
A key achievements of the quota is this still progress we have made and advancing our internal portfolio.
Several programs have met the plans criteria, including improved potency selectivity and other properties designed to address limitations of existing clinical stage inhibitors.
Ill take a few moments to highlight some examples.
In our next generation, we won kinase inhibitor program, we have leveraged physics based technology, including recent advances in the selectivity predictions to design higher affinity structurally differentiated needs. That's our selective this PL, okay, one when compared to existing.
One inhibitors.
Our leads have good drug like properties, including no observable time dependent inhibition of key liver enzyme like sit through April.
We believe that this more optimized profile is a key differentiator.
Karen Akinsanya: The intent of the alliance formed between us and several pharmaceutical companies, including Takeda, Novartis, and Gilead, is to make any discoveries available to the public. While there is no expectation that this effort will generate revenue for any of the companies involved in the alliance, including Schrodinger, we are proud to be involved in this alliance and hopeful that we can contribute meaningfully to combating this global health crisis. I will now turn it over to Karen, who will update you on our drug discovery programs.
Recent publications indicate that selectively limited edition, all degradation with diminished or absent PL K, one activity is Angie proliferative in lung and ovarian tumor model.
We believe that's an improved therapeutic index can be accomplished through more potent and selective inhibitors.
Clinical stage, we want to inhibitors being advanced by third parties have demonstrated efficacy in multiple cancer types in combination with other agents, let's improved tolerability of these regimens is desirable.
In addition to the progress we have made on lead compound profile. We have also generated combination data without potent and selective DNA damage repair, we won and CDC seven molecules, which we believe provides compelling opportunities for further study in the clinic.
Karen Akinsanya: Thank you, Ramy. Good morning, everyone.
Now moving onto our model one program.
We have advanced to later stages of discovery ahead of schedule. We have continued to expand the available data in levels of Hematological malignancies.
Karen Akinsanya: As Ramy just discussed, we continue to make good progress across our diversified portfolio of drug discovery collaborations and our internal wholly owned programs. We have been pleased with the availability of data from our wide network of contract research organizations to support our internal programs, despite COVID-19-related changes to working arrangements. Our globally connected teams, comprised of Schrodinger and external scientists, have been able to continue working together with minimal delays in the design, synthesis, and testing of our molecules by leveraging our live design informatics platform. This enables global collaboration and large-scale data management.
As a reminder, activated T cells diffuse large b cell lymphoma is the most common type of aggressive non hodgkin's b cell lymphoma.
These changes are associated with a number of mutations that trigger constituents, certainly active Nf Kappa b signaling and increase not one protease activity.
We have shown that our small molecule Alistair remote one inhibitors drive anti proliferative effects in models of resistance to the marketed BTK inhibitor in bridge in it.
In addition, we have shown synergistic effect in combination with first second and third generation BTK inhibitors and other standard of care agents.
Karen Akinsanya: A key achievement for the quarter is the strong progress we have made in advancing our internal portfolio. Several programs have met the planned criteria, including improved potency, selectivity, and other properties designed to address limitations of existing clinical stage inhibitors. I'll take a few moments to highlight some examples.
We believe this anti proliferative profile strongly supports the potential of our moat, one inhibitor to benefit patients with aggressive b cell lymphoma, who are in need of new treatments.
Based on the progress across our wholly owned portfolio. We plan to begin nomination of candidates. The preclinical development by year end Twentytwenty with the goal of initiating our first on the enabling studies by the first half of 2021.
We continue to strategic pillar evaluate advancing programs into the clinic cancelled or outlicensing them in order to maximize clinical development and commercial opportunities.
Karen Akinsanya: In our next-generation WE1 kinase inhibitor program, we have leveraged our physics-based technology, including recent advances in selectivity predictions, to design higher affinity, structurally differentiated leads that are selective versus PLK1 when compared to existing WE1 inhibitors. Our leads also have good drug-like properties, including no observable time-dependent inhibition of key liver enzymes like CYP3A4. We believe that this more optimized profile is a key differentiator.
We have also continued to make progress in our collaborative pipeline.
I'd like to highlight the Neurodegeneration program that we are advancing with Takeda.
Our novel lead molecules have greater affinity for the target and question when compared to publish molecules and has been shown to be protective in preclinical neuronal injury model.
Based on the results generated to date. The program has progressed into late stage discovery and we are advancing towards identifying a development candidate.
We have continued to expand that drug discovery groups expertise to meet the translational scientific and operational needs of our late stage discovery programs.
Karen Akinsanya: Recent publications indicate that selective WIMON inhibition or degradation with diminished or absent PLK1 activity is anti-proliferative in lung and ovarian tumor models. We believe that an improved therapeutic index can be accomplished through more potent and selective inhibitors. Clinical stage V1 inhibitors being advanced by third parties have demonstrated efficacy in multiple cancer types in combination with other agents, but improved tolerability of these regimens is desirable. In addition to the progress we have made on lead compound profiles, we have also generated combination data with our potent and selective DNA damage repair molecules, WE1 and CDC7, which we believe provide compelling opportunities for further study in the clinic. Moving on to our MoT1 program, we have advanced to later stages of discovery ahead of schedule. We have continued to expand the available data in models of hematological malignancies. As a reminder, activated B-cell, diffused large B-cell lymphoma, is the most common type of aggressive non-Hodgkin's B-cell lymphoma.
We have engaged and onboarded experts in oncology biology drug metabolism, toxicology and formulation sciences to help guide the transition of our programs into preclinical development and to prepare for interactions with regulators. In addition, we have continued to evaluate.
John opportunities and have identified a pipeline of future programs across multiple disease areas that will benefit from our computational platform.
With that I'll turn the call over to Joe to discuss our financial results. Thank you Karen Hello, everyone. It's a pleasure to be speaking with you to share our first quarter results. As a reminder, we report revenue for both our business segments software and drug discovery.
Our software business includes pharmaceutical and biotech customers as well as a large number of academic and government labs, and an increasing number of industrial companies for materials science applications.
Our software is generally license through annual subscriptions paid upfront we recorded a majority of our revenue from these licenses when the contract period begins with the remainder recorded as deferred revenue.
Revenues associated with ongoing software maintenance and support we recognize revenue over the contract period.
We also record revenue for our drug discovery business. Currently this segment reflects revenues from research fees and milestones associated with our collaboration programs ranging from early discovery to clinical stages are wholly owned programs, which are all in discovery or not yet generating revenue.
As Rami indicated we are executing on our strategy across our business.
The first quarter, we recorded total revenue of $26.2 million, an increase of 26% versus the first quarter of 2019.
Karen Akinsanya: These tumors are associated with a number of mutations that trigger constitutively active NF-kappa B signaling and increased MOLT1 protease activity. We have shown that our small molecule allosteric MOLT1 inhibitors drive anti-proliferative effects in models of resistance to the marketed BTK inhibitor, ibrutinib. In addition, we have shown synergistic effects in combination with first, second, and third generation BTK inhibitors and other standard of care agents. We believe this anti-proliferative profile strongly supports the potential of our MOLT1 inhibitors to benefit patients with aggressive B-cell lymphoma who are in need of new treatments.
This was powered by record software revenue of 23.8 million, representing 28% growth versus the first quarter of 2019. This growth reflects the continuing trends have increased adoption of our software by pharmaceutical biotech and industrial companies.
We believe our solutions can be especially beneficial in the current environment. We continue to see expanded adoption of live design. Our enterprise solution that enables full project access and interactive collaboration among discovery teams at multiple sites and across many traditionally silos areas of research as we look forward to the rest of the year. It is important.
Note that typically the first quarter tends to be our largest quarter of the year for software revenue and we expect that will again be the pattern. This year.
Moving to drug discovery revenue was 2.4 million growing 11% versus the first quarter of 2019.
Revenues from this segment depend heavily on the timing of specific program milestones, which fluctuate significantly from quarter to quarter and even year to year. In addition, we ended the quarter with deferred revenue of $23.8 million down 3.4 million versus the fourth quarter of 2019.
Karen Akinsanya: Based on the progress across our wholly owned portfolio, we plan to begin nomination of candidates for preclinical development by year end 2020, with the goal of initiating our first I&E enabling studies by the first half of 2021. We continue to strategically evaluate advancing programs into the clinic ourselves or out-licensing them in order to maximize clinical development and commercial opportunities. We have also continued to make progress in our collaborative pipeline. I'd like to highlight the neurodegeneration program that we are advancing with DECADA. Our novel lead molecules have greater affinity for the target in question when compared to published molecules and have been shown to be protective in preclinical neuronal injury models.
Deferred revenue was up 5.9 million versus the first quarter of 2019, reflecting our strong underlying year on year performance.
Gross profit reached 15.6 million in the first quarter versus 13 million in the first quarter of 2019.
This growth was driven by the increase in revenue offset by higher drug discovery expenses recorded as cost of revenues as we continue to invest in advancing our collaboration programs. Our software gross margin in the first quarter was 83% unchanged from the first quarter of 2019 moving to operating expenses, we saw an increase of 47%.
27.4 million in the quarter versus $18.6 million in the first quarter of 2019.
This growth reflects the ramping up of our investment in research and development throughout 2019, and the first quarter of 2020, as we advance our technology in our wholly owned drug discovery programs.
It also reflects an increase in general and administrative expenses, primarily to build the necessary infrastructure to support the transition of the company from private to public company status.
David Neil Lebowitz: Based on the results generated to date, the program has progressed into late-stage discovery, and we are advancing towards identifying a development candidate. We have continued to expand our Drug Discovery Group's expertise to meet the translational, scientific, and operational needs of our late-stage discovery programs. We have engaged and onboarded experts in oncology, biology, drug metabolism, toxicology, and formulation sciences to help guide the transition of our programs into preclinical development and to prepare for interactions with regulators. In addition, we have continued to evaluate program opportunities and have identified a pipeline of future programs across multiple disease areas that will benefit from our computational platform. With that, I'll turn the call over to Joel to discuss our financial results.
When we consider expense trends for the rest of the year. It is important to note that generally we do not have large variable components driven by revenue fluctuations in our expense lines, which include cost of revenues research and development sales and marketing in general and administrative expenses.
Looking forward in general we expect expenses to rise gradually during the years, we continue to invest in key capabilities in our workforce and technology.
Loss from operations was 11.8 million in the first quarter versus a loss of $5.6 million in the first quarter 2019, again, reflecting our increased investment in our technology and our discovery programs as well as general and administrative expenses associated with building a public company infrastructure, we recorded non operating expenses of two.
<unk> point 4 million in the first quarter of 2020 versus 0.2 in the first quarter of 2019. This was primarily driven by the conversion and mark to market revaluation of our shares in Morphic therapeutic which became a public company in June of 2019.
Really revaluation of our Nimbus therapeutic equity investment also contributed to the loss.
Net loss after adjusting for non controlling interest was $13.8 million versus 5.8 million in 2019 and of course that includes these non operating items I just million dollars versus 5.8 million in 2019 and of course that includes these non operating items I just discussed.
David Neil Lebowitz: Thank you, Karen. Hello, everyone.
David Neil Lebowitz: It's a pleasure to be speaking with you to share our first quarter results. As a reminder, we report revenue for both our business segments, software and drug discovery. Our software business includes pharmaceutical and biotech customers, as well as a large number of academic and government labs, and an increasing number of industrial companies for materials science applications. Our software is generally licensed through annual subscriptions paid up front.
As you know we successfully completed our IPO on February 10, raising approximately 232 million in gross proceeds approximately $210 million net proceeds after deducting underwriting discounts commissions and operating expenses.
Accordingly, we ended the first quarter with 288.8 million in cash and marketable securities providing significant resources to execute on our long term strategy.
I'd also like to make a few comments in relation to the coded 19 crisis.
Early in March we issued a global work from home policy as a technology enabled company. We are well equipped to work remotely engage with our customers and continue to advance our drug discovery programs.
Our software solutions continue to be leveraged efficiently by customers in a distributed environment also RCR Road network has to date been able to continue to support the progress of our internal wholly owned programs with minimal delays, while during the quarter, we do not see material impacts to our business from the crisis certain market risks are beginning to emerge.
David Neil Lebowitz: We record a majority of our revenue from these licenses when the contract period begins, with the remainder recorded as deferred revenue. For revenues associated with ongoing software maintenance and support, we recognize revenue over the contract period. We also record revenue for our drug discovery business. Currently, this segment reflects revenues from research fees and milestones associated with our collaboration programs, ranging from early discovery to clinical stages. Our wholly owned programs, which are all in discovery, are not yet generating revenue. However, as Ramy indicated, we are executing on our strategy across our business.
That could affect our software growth and the timing of our drug discovery revenues in 2020.
Some software customers may come under budget pressures over the next couple of quarters and potentially delayed decisions about purchases and general which could impact our software sales growth.
Software sales could also be impacted by our inability to engage with customers in person.
Relative to our collaboration programs the crisis could delay the progress of certain programs, particularly ones that are in clinical studies or preparing to enter clinical studies as has been reported generally.
Delays in these programs could result in delays achieving milestones and related revenue.
While we are monitoring these risks we view them as temporary and we believe we have ample resources to manage effectively during this time, we do not envision the long term impact on our ability to execute on our strategy in the crisis only makes clear the need for efficiency and speed and drug and materials design and the benefits of our technology was that we would like to open the.
David Neil Lebowitz: In the first quarter, we recorded total revenue of $26.2 million, an increase of 26% versus the first quarter of 2019. This was powered by record software revenue of $23.8 million, representing 28% growth versus the first quarter of 2019. This growth reflects the continuing trend of increased adoption of our software by pharmaceutical, biotech, and industrial companies. We believe our solutions can be especially beneficial in the current environment. We continue to see expanded adoption of live design, our enterprise solution that enables full project access and interactive collaboration among discovery teams at multiple sites and across many traditionally siloed areas of research.
Call to your questions operator.
Ladies and gentlemen, you asked a question.
Please standby we've compiled acuity roster.
There's no question comes from Doe, Kim with BMO capital markets. Your line is open.
So Kevin your line is open please check your mute button.
Our next question comes from David Lebowitz with Morgan Stanley. Your line is open.
Thank you very much for taking my question.
Given the pretty big step up in revenue from Q4 to Q1 for the software business.
I guess, how should we look at that business going forward, considering I would imagine a lot of that business.
Probably already in a lot of ways in the books for the rest of the year. So is that kind of a starting point for what we should look.
Software business.
Yeah.
And then as far as your commentary on Cobot 19 impacts looked at that as.
Potential potential impact on incremental revenues had.
How should we look at that number I guess visa be 34 Q.
David Neil Lebowitz: As we look forward to the rest of the year, it is important to note that typically, the first quarter tends to be our largest quarter of the year for software revenue, and we expect that to again be the pattern this year. Moving to drug discovery, revenue was $2.4 million, growing 11% versus the first quarter of 2019. Revenues from this segment depend heavily on the timing of specific program milestones, which fluctuate significantly from quarter to quarter and even year to year. In addition, we ended the quarter with deferred revenue of $23.8 million, down $3.4 million versus the fourth quarter of 2019. Deferred revenue was up $5.9 million versus the first quarter of 2019, reflecting our strong underlying year-on-year performance. Gross profit reached $15.6 million in the first quarter versus $13 million in the first quarter of 2019. This growth was driven by the increase in revenue, offset by higher drug discovery expenses recorded as cost of revenues, as we continue to invest in advancing our collaboration programs. Our software gross margin in the first quarter was 83%, unchanged from the first quarter of 2019.
Joel I'll take that.
Sure. So thanks, David for the question.
So.
Clearly, we're pleased with the first quarter, but I think more than that we're also very.
Happy about the underlying momentum that we saw in the first quarter.
So we saw growth from.
Across the business, including most of our regions, primarily driven by the us in Europe, which our largest two regions.
We also saw strong growth in both life Sciences and material science business.
So.
As customers continue to increased adoption of our solutions, including live design, which I mentioned in my comments.
And we also saw the addition of new customers and both.
Science and material science. So all of these are key growth drivers of our business and set up strong momentum for the rest of the year.
That being said I'll I'll make a couple of comments.
As we look forward first the first quarter is typically the highest revenue quarter for software for the rest of the for the year and I do expect that to be the case again this year.
Second you referenced I did and I did mention cobot related risks.
We think these are going to be company specific over the next couple of quarters.
As to specific companies come under pressure and we do believe they're going to be short term, but we're monitoring them and we're continuing to gauge.
But it could impact.
Our growth rate over the next couple of quarters.
The but I will point out though.
That.
The crisis highlights.
David Neil Lebowitz: Moving to operating expenses, we saw an increase of 47 percent to $27.4 million in the quarter versus $18.6 million in the first quarter of 2019. This growth reflects the ramping up of our investment in research and development throughout 2019 and the first quarter of 2020 as we advance our technology and our wholly owned drug discovery program. It also reflects an increase in general and administrative expenses, primarily to build the necessary infrastructure to support the transition of the company from private to public company status. When we consider expense trends for the rest of the year, it is important to note that, generally, we do not have large variable components driven by revenue fluctuations in our expense lines, which include cost of revenue, research and development, sales and marketing, and general and administrative expenses. Looking forward, in general, we expect expenses to rise gradually during the year as we continue to invest in key capabilities in our workforce and technology.
The continued need for efficiency and speed and drug discovery materials design and.
Of course, that's central to our strategy and we believe we're well positioned to execute on that strategy and we have ample resources to do that over the long term.
Luke.
[music].
The drug discovery business.
You had mentioned.
But comments about the deferred revenue is the deferred revenue in large part related to.
The drug discovery business the pay at payments from that.
I guess, how could we have perspective for the remainder of the year on how we could look at revenues from that particular business.
Thanks, David Yes, sure I'll answer that so in fact, our deferred revenue is mostly the majority of it is from our software business.
Partially because it's mostly the majority of our revenue in general this quarter.
I'll just make a few comments about our drug discovery revenue and and how much how we might be able to think about it. So we did get we did achieve 11% growth this year.
And just a reminder, rich it's highly dependent on the timing of individual project milestones. So last quarter, we had a contract.
The fourth quarter, we had a concentration of multiple programs hitting milestones.
And.
But that won't be linear quarter to quarter period to period as I've talked about.
And at the same time the code the emerging Kobin related risks that I mentioned.
We could start saying.
Specific program related delays.
And we are monitoring that but at the same time as you heard from Karen we're very happy with the portfolio progress both on the collaborations and the internal.
David Neil Lebowitz: Loss from operations was $11.8 million in the first quarter, versus a loss of $5.6 million in the first quarter of 2019, again reflecting our increased investment in our technology and our discovery programs, as well as general and administrative expenses associated with building a public company. We recorded non-operating expenses of $2.4 million in the first quarter of 2020 versus $0.2 in the first quarter of 2019. This was primarily driven by the conversion and mark-to-market revaluation of our shares in Morphic Therapeutic, which became a public company in June of 2019. Early revaluation of our Nimbus therapeutic equity investment also contributed to the loss. Net loss after adjusting for non-controlling interest was $13.8 million versus $5.8 million in 2019. And of course, that includes these non-operating items. $1 million versus $5.8 million in 2019.
Pipeline so.
We're really.
Feel good about our ability to to drive.
Value over the long term.
And we have the resources necessary to do that.
Thank you for taking my questions.
Thank you. Our next question comes from done with BMO capital markets. Your line is open.
Hi, Good morning can you hear me sorry about that yes.
Great.
Thanks for taking my questions.
I know you've talked about the coming risks.
Caused by Covance.
You speak more to what you saw in the first quarter.
We are you seeing any changes in the utilization of your software by customers. I mean, we have a pretty good visibility on covance impact on the clinical side of things and how patients are having trouble enrolling or getting assessments hows.
Covered didnt affecting the drug discovery side in the industry.
Yes, so I can take that as Rami soak up a couple of things one is.
On the software side, what we saw was a pretty significant increase.
And for example, the number of requests for support from the software, which was a pretty good indication of increased usage, we've seen a huge increase and the number of people signing up for example for courses that we hold online obviously now on molecular design. So there seems to be.
An increased interest and using the software and learning how to use that app in actual usage.
Karen can address the question about the impact on the drug discovery part of the business.
Yes, thanks, Amit so with respect to the drug discovery business in the conduct of drug discovery studies.
David Neil Lebowitz: And, of course, that includes these non-operating items. As you know, we successfully completed our IPO on February 10th, raising approximately $232 million in gross proceeds and approximately $210 million in net proceeds after deducting underwriting discounts, commissions, and offering expenses.
We have not seen any slowdown in terms of access to data.
The.
Results that we.
Required from upfront programs come from a distribution network of contract research organization and as such the contract research organization gradually using lives design with us and we've been able to access.
David Neil Lebowitz: Accordingly, we ended the first quarter with $288.8 million in cash and marketable securities, providing significant resources to execute on our long-term strategy. I'd also like to make a few comments in relation to the COVID-19 crisis. Early in March, we issued a global work-from-home policy.
Those results and compounds the being synthesised around the world.
We don't have visibility into obviously, what other companies are doing that was the using a lot design. We anticipate that there's a similar stories are in terms of synthesis of compounds analysis of results using these sort of online data management platform.
Great and then.
David Neil Lebowitz: As a technology-enabled company, we are well-equipped to work remotely, engage with our customers, and continue to advance our drug discovery program. Our software solutions continue to be leveraged efficiently by customers in a distributed environment. Also, our CRO network has to date been able to continue to support the progress of our internal wholly-owned programs with minimal delays.
And your recent expanded.
Deal with Astrazeneca could you speak more to the opportunity and biologics drug discovery and where are the extent of your software Kim abilities in that direction and what limitations you still have to work on.
Yes, sure. That's a great question. So as you know and as as was reported in the press release a component of that partnership does involve biologics research as I've said that number of times and other venues.
The one of the sort of exciting advantages of of physics base methods.
David Neil Lebowitz: While during the quarter we did not see material impacts on our business from the crisis, certain market risks are beginning to emerge that could affect our software growth and the timing of our drug discovery revenues in 2020. For example, some software customers may come under budget pressures over the next couple of quarters and potentially delay decisions about purchases in general, which could impact our software sales growth. Software sales could also be impacted by our inability to engage with customers in person. Relative to our collaboration programs, the crisis could delay the progress of certain programs, particularly ones that are in clinical studies or preparing to enter clinical studies, as has been reported generally. Delays in these programs could result in delays in achieving milestones and related revenue.
Is the fact that theyre really agnostic to the system or to the modality physics, especially excited if theyre Adams involved then.
On the technology in principle should work.
And so we're seeing the same thing as we.
As we expand small molecule discovery into biologics discovery, we were finding that the technology is is as working now that the challenge of course is going from essentially from the sort of software development phase into real world.
Old drug discovery programs.
There are always things that you learn from that and Thats, what is happening and the collaboration with the partnership with Astrazeneca, where we're able to take technology thats working in our hands and applied on real progress and as is always the case with any sort of any type anytime that transition occurs it.
Very helpful to have access to experimental data to validate the models and to improve them and to continue to improve the that technology.
And so thats what that partnership is about.
Great I answered yet.
Yes definitely.
And my last question and on the internal program.
When you look at your lead.
Lead drug.
David Neil Lebowitz: While we are monitoring these risks, we view them as temporary, and we believe we have ample resources to manage effectively during this time. We do not anticipate a long-term impact on our ability to execute on our strategy, and the crisis only makes clearer the need for efficiency and speed in drug and materials design and the benefits of our technology. With that, we would like to open the call to your questions. Operator?
CD cseven, whereas that in terms of licensing and partnership.
Yes carrying loan pickup.
Yes, I'm happy to answer that.
So we have a number of programs in late stage discovery and as such we have been interacting with a number of companies around the profile of our molecules.
We are as we've described in the past we expect to select the candidates.
For our preclinical development by the end of this yeah with the goal of initiating IND, enabling studies in the first half with 2021.
We continue to discuss the programs actually all of our late stage programs.
Operator: Ladies and gentlemen, who has a question? Please stand by while we compile the Q&A list.
Potential partners and despite the situation where people are working remotely we've been pleased.
Operator: Today's question comes from Dale Kim with BMO Capital Markets. Your line is open. So, Kim, your line is open. Please check your mute button.
Pace and intensive discussions that we've been able to have.
Great.
Thanks for taking my questions and congrats on a great quarter.
Thanks, Joe.
Thank you. Our next question comes from Michael Yee with Jefferies. Your line is open.
Yes, Thanks, I will keep it just two questions. One is just trying to understand sequential revenue growth how to think about Q2.
Operator: Our next question comes from David Lebowitz of Morgan Stanley. Your line is open. Thank you very much for taking my question. Given the pretty big step up in revenue from Q4 to Q1 for the software business, I guess, how should we look at that business going forward? I mean, I would imagine a lot of that business is probably already, in a lot of ways, in the books for the rest of the year. So is that kind of a starting point for what we should look at? The Software Business. And then, as far as your commentary on COVID-19 impacts, look at that as, [inaudible]
Versus Q1, when you look back last year of course.
Seasonality decline there in Q2, so how do you think of late Q2.
Sequentially or year over year.
And then.
Second question is thinking about what happened in Q1, how to think about that shell for revenue and what percentage recurring versus big quarter when share any sort of specific Austin that happened there that might have resulted in such a big jump up so just to think about that.
Appreciate it.
Yes, thanks, Michael Thanks for the questions Joe I'd like to.
Thanks, Rami sure. Thanks, Thanks, Mike.
Now I'll talk about that so.
Calls so I assume both questions around the software business.
David Neil Lebowitz: Joe, do you want to take that?
First of all we're excited about as I said not just the results, but the underlying momentum that we saw in the first quarter.
David Neil Lebowitz: Sure. So thanks, David, for the question.
David Neil Lebowitz: Clearly, we're pleased with the first quarter, but I think more than that, we're also very happy about the underlying momentum that we saw in the first quarter. So we saw growth across the business, including most of our regions, primarily driven by the U.S. and Europe, which are our largest two regions. We also saw strong growth in both the life sciences and material science business. As customers continued to increase the adoption of our solutions, including live design, which I mentioned in my comments, we also saw the addition of new customers in both life science and material science. So all of these are key growth drivers for our business and set up strong momentum for the rest of the year.
The key growth drivers of.
Increased customer count an increased adoption by our customers of our solutions.
Really drove the quarter.
And that is fundamental to our strategy going forward.
As I mentioned the first quarter is the highest 10 does tend to be the highest quarter of the year for software revenue, we do expect that to be it. The case again. This year. So there is some seasonality there.
Which you mentioned that you saw last year.
So.
So that's how we expect the and then there's the additional risks for from coded that could affect the next couple of quarters of growth.
But again because of the underlying momentum of the business we are.
Excited about the.
Continue prospect for being able to drive growth over the longer term.
David Neil Lebowitz: That being said, I'll make a couple of comments as we look forward. First, the first quarter is typically the highest revenue quarter for software for the rest of the year, and I do expect that to be the case again this year. Second, as you mentioned, I did mention COVID-related risks. We think these are going to be company-specific over the next couple of quarters as specific companies come under pressure, and we do believe they're going to be short-term, but we're monitoring them and we're continuing to engage, but it could impact our growth rate over the next couple of quarters. The, uh, but I will point out though that, you know, the crisis highlights. The Continued Need for Efficiency and Speed in Drug Discovery Materials Design, and of course, that's central to our strategy, and we believe we're well positioned to execute on that strategy, and we have ample resources to do so over the long term.
I think your other question was also about was there.
Were there any major major drivers or step up drivers in the software.
Growth in the first quarter major milestones or deals that we may have signed in the first quarter actually it was really broad based growth. It was as I mentioned really across the entire business. Both regionally I mentioned U.S. and Europe being primary drivers is our largest markets.
Also very strong growth in both the life Science segment and the material science business.
And increased customers and increase adoption in both so really broad based growth and not not overly dependent on any one particular event.
Okay.
Can I just ask a follow up when you look at.
Software revenues for Q2.
Appreciate their seasonality due essentially still expect growth year over year year over year. So Q2 over Q2 in Q3 Q3 that would get helpful. Starting point for looking at where.
Revenues could be each quarter. Thanks, so much.
Sure. Thanks, I think again I would just point to the underlying business momentum in the first quarter and that we were able to drive growth.
David Neil Lebowitz: I'm in the drug discovery business, as you mentioned. The comments about the deferred revenue are the deferred revenue in large part related to the Drug Discovery Business, the payments from that. I guess, how can we have perspective for the remainder of the year on how we could look at revenues from that particular business?
I'm pretty robust growth through the increase customer adoption and also through adding new customers.
Of course, we're not giving general guidance. So I mean, we're not giving specific guidance on the rest of the year, but I think that underlying momentum is a great business indicator for us.
Okay got it thank you so much.
Thank you next question comes from Michael Lysine with Bank of America. Your line is open.
Hi, guys. Thanks for taking the question Canada.
David Neil Lebowitz: Thanks, David. Yeah, sure, I'll answer that. So, in fact, our deferred revenue is mostly, the majority of it is from our software business, partially because it's mostly, you know, it's the majority of our revenue in general this quarter. I'll just make a few comments about our drug discovery revenue and how we might be able to think about it. So, you know, we did get, we did achieve 11% growth this year, which, and just a reminder, it's highly dependent on the timing of individual project milestones. So, last quarter, we had a contract. In the fourth quarter, we had a concentration of multiple programs hitting milestones. And, you know, but that won't be linear quarter to quarter or period to period, as I've talked about.
Yes, yes, we can.
Hey.
I want to follow up on your earlier comments on crowing about us potential impact your customers sort of across or your customer base.
I think it's pretty clear you're alluding to some of your smaller customers potential coming under budget pressure. These obviously aren't the large guys that are over a million dollars annual contract value, but have you seen anything.
In terms of peso work flow sort of demand on the licenses and how much people are tapping into the network as a lot of these labs shift or mode, and what I'm getting too as.
We expect.
Some labs are not able to operate at levels that they would have been previously product launching levels. Just wondering if it has any sort of lingering impact on the business.
Yes, I got a follow up question.
What we're seeing so great question, what we're seeing and we've been alluding to this but let's be more specific about it.
In a situation.
Core chemistry resources experimental chemistry resources are our diminished for a period of time.
That is obviously a situation where the demand for better prioritization of synthesis Q.
It is actually more important right, if you're going to make fewer compounds you need to make a youve put more effort into making sure that the composite do make are progressing the program and we've gotten that feedback from from customers. So that is.
David Neil Lebowitz: And at the same time, the emerging COVID-related risks that I mentioned could start seeing specific program-related delays, and we're monitoring that. But at the same time, as you heard from Karen, we're very happy with the portfolio progress, both in the collaborations and the internal pipeline. So we really feel good about our ability to drive value over the long term, and we have the resources necessary to do that.
The sort of indicating that.
It's actually a time, where the demand for computational Lee prioritizing synthesis is going up and as I said before they are these other indicators about the interest in the software the actual usage, which is something that we that we can track appears to be robust so hope.
Operator: Thank you for taking my question. Thank you. Our next question comes from Doe M. with BMO Capital Markets.
Hopefully that answers that question does that make sense.
Yep Yep that's helpful.
Can you talk about your potential work on antibody development at R&D.
Operator: Your line is open. Hi, good morning. Can you hear me? Sorry about that earlier. Great. Thanks for taking my questions.
I was on could you expand a little bit on your agreement or sort of your work you're doing with quest, but seems like a twist biopharmaceutical really interesting approach and.
Coupling of a couple of novel technologies, obviously, some some near term application difficult as well, but could you talk about the work you're doing there and how that fits into those are the bigger picture.
Ramy Farid: I know you've talked about the coming risks caused by COVID. Could you speak more about what you saw in the first quarter? Were you seeing any changes in the utilization of your software by customers? I mean, we have pretty good visibility on COVID's impact on the clinical side of things and how patients are having trouble enrolling or getting assessments. How has COVID been affecting the drug discovery side in the industry?
Yes, I think we can't get into the details of course of of the partnership but you're right that does.
It is another example of a partnership that is.
Sort of helping us get into new areas, new modalities and biologics and in particular.
We it's an early project that something that's that's sort of pretty early in the stages, Karen as or anything else that you think you can add to that and to answer Michael's question.
Ramy Farid: Yeah, so I can take that. This is Ramy.
Ramy Farid: So a couple of things. One is on the software side, what we saw was a pretty significant increase in, for example, the number of requests for support from the software, which was a pretty good indication of increased usage. We've seen a huge increase in the number of people signing up, for example, for courses that we hold online, obviously, now on molecular design. So there seems to be an increased interest in using the software and learning how to use it. Karen can address the question about the impact on drug discovery.
No I think you've addressed most of it I would say some you know we remain.
Yeah those are interested in the potential for peptides biologic.
On to benefit from our technology into working with a company like twists gives us the opportunity to pressure test those approaches.
Finding ways to design those molecules that still holds an important strengthen in.
On the modalities for treating patients.
Okay I appreciate that.
Quarterly understanding and I'll be able to get into details on specific yes, yes for me what can I squeeze in one more on sort of on the RCN now for the rest of the year.
Given the equity raise and how that went.
Earlier this year, but also the more recent updates from coal that.
Any changes to your prior expectations to pacing of R&D or or Salesforce investments as you get the after the year.
Karen Akinsanya: Yes, thanks, Ramy. So, with respect to the drug discovery business and the conduct of drug discovery studies, we have not seen any slowdown in terms of access to data. The results that we require for our program come from a distributed network of contract research organizations, and as such, those contract research organizations are actually using live design with us, and we've been able to access those results, and compounds are being synthesized around the world. We don't have visibility into, obviously, what other companies are doing, but with their use of live design, we anticipate that there's a similar story there in terms of the synthesis of compounds, and analysis of results using these sort of online data management platforms.
Sure I can address that so.
So we've been investing steadily in R&D through 2019 in the first quarter of this year and the way I would think about that is were investing directly in the underlying technology and are continuing to develop those capabilities, which power our business.
And also in advancing our underlying our internal wholly owned programs and so as we think about the resources that we have relative to our execution on our long term strategy. We believe we have ample resources to continue to execute on that strategy and I would expect as we look forward through.
The rest of the year.
A gradual sequential quarter quarterly increase.
Through the year in and overall expenses.
Driven by growth in research.
Ramy Farid: Great. And then in your recent expanded deal with AstraZeneca, could you speak more about the opportunity in biologics, drug discovery, and where the extent of your software capabilities in that direction is, and what limitations do you still have to work on?
And in terms of your question about sales and marketing it was actually down.
Sense was actually down slightly versus.
Prior year.
And.
I think when we think about.
Our business model. It we don't believe it requires a large incremental increases in the salesforce to drive the kind of growth that for instance, we saw in the first quarter. So.
Ramy Farid: Yeah, sure. That's a great question.
Ramy Farid: So, as you know, and as was reported in the press release, a component of that partnership does involve biologics research. As I've said a number of times in other venues, one of the sort of exciting advantages of physics-based methods is the fact that they're really agnostic to the system or to the modality. And, as is always the case with any sort of any time that a transition occurs, it's very helpful to have access to experimental data to validate the models and to improve them, and to continue to improve the technology. And so that's what that partnership is about. Great. Did I answer your question?
Rather we will look.
Focused way towards a targeted investments when opportunities arise.
Great. Thanks, so much appreciated.
Thank you and I'm currently showing no further questions at this time.
Ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.
[music].
Operator: Yes, definitely. And my last question is on the internal program. When you look at your lead CDC7, where is it in terms of licensing and partnership? Yeah, Karen, do you want to...
Karen Akinsanya: Take that.
Karen Akinsanya: Yes, I'm happy to answer that. We have a number of programs in late-stage discovery, and as such, we have been interacting with a number of companies around the profile of our molecules. As we've described in the past, we expect to select a candidate for preclinical development by the end of this year with the goal of initiating IND-enabling studies in the first half of 2021. We continue to discuss the programs, actually all of our late-stage programs, with potential partners, and despite the situation where people are working remotely, we've been pleased with the pace and intensity of discussions that we've been able to have.
Operator: Great. Thanks for taking my questions and congrats on a great quarter.
Operator: Thanks, Joe.
Operator: Thank you. Our next question comes from Michael Yee with Jeffreys. Your line is open.
Operator: Guys, thanks. I will keep it to two questions. One is just trying to understand sequential revenue growth, how to think about Q2 versus Q1 when you look back at last year, of course, a seasonality decline there in Q2. So how do you think of Q2, either sequentially or year over year? And then the second question is thinking about what happened in Q1, how to think about that solver revenue and what percent is recurring versus the big quarter? Was there any sort of specific milestone that happened there that might have resulted in such a big jump up? So just think about that as Q2. I appreciate it.
[music].
Operator: Thanks, Mike.
Operator: Any other questions? Joel, would you like to?
David Neil Lebowitz: Thanks, Ramy. Sure. Thanks. Thanks, Mike.
David Neil Lebowitz: I'll talk about that. So I assume both questions are related to the software business. First of all, we're excited about, as I said, not just the results but the underlying momentum that we saw in the first quarter. You know, the key growth drivers of increased customer count and increased adoption by our customers of our solutions really drove the quarter, and that's fundamental to our strategy going forward. As I mentioned, the first quarter tends to be the highest quarter of the year for software revenue. We do expect that to be the case again this year, so there is some seasonality there, which you mentioned that you saw last year. So that's how we expect the, you know, and then there's the additional risk from COVID that could affect the next couple of quarters of growth.
David Neil Lebowitz: But again, because of the underlying momentum of the business, we are excited about the continued prospect of being able to drive growth over the longer term. I think your other question was also about, were there any major drivers or step-up drivers in the software growth in the first quarter, major milestones, or deals that we may have signed in the first quarter? Actually, it was really broad-based growth. It was, as I mentioned, really across the entire business, both regionally, I mentioned the US and Europe being primary drivers as our largest markets, and also very strong growth in both the life science segment and the material science business, increased customers, and increased adoption in both. So really broad-based growth and not overly dependent on any one particular event.
David Neil Lebowitz: Okay. Can I just ask a follow-up? When you look at software revenues for Q2, appreciating their seasonality, do you essentially still expect growth year over year, year over year? So, Q2 over Q2 and Q3 over Q3. That would be a helpful starting point for looking at where revenues could...
David Neil Lebowitz: Sure, thanks. I think, again, I would just point to the underlying business momentum in the...
Unknown Executive: Unknown Executive, David Luchini, Joseph Catanzaro, Scott Shibutani, Gary Nachman, Michael Ryskin, Jaren Madden, Michael Yee, Joseph Chanoff, Chad Wiatrowski, Gary Nachman, is a great business indicator for us.
Operator: Okay, got it. Thank you so much. Thank you. Our next question comes from Michael Ryskin with Bank of America. Your line is open. Hey guys, thanks for taking the question. Can you hear me?
Operator: Yep. Yes, we can.
Operator: Hey, I want to follow up on your earlier comments on the coronavirus potential impact on your customers across your customer base. I think it's pretty clear you're alluding to some of your smaller customers potentially coming under budget pressure. These obviously aren't the large guys that are over a million dollars in annual contract value. But have you seen anything in terms of the pace of workflow, demand for the licenses, and how much people are tapping into the network as a lot of these labs shift to remote? And what I'm getting to is, we expect some labs are not able to operate at levels that they, you know, would have been prior to quarantine levels. Just wondering if that has any sort of lingering impact on the business. Yeah,
Ramy Farid: Yeah, what we're seeing is a great question. What we're seeing, and we've been alluding to this, but let's be more specific about it.
Ramy Farid: In a situation where chemistry resources, experimental chemistry resources, are diminished for a period of time, that is obviously a situation where the demand for better prioritization of a synthesis queue is actually more important, right? If you're going to make fewer compounds, you need to make, you need to put more effort into making sure that the compounds that you do make are progressing the program. And we've gotten that feedback from customers. So that is, you know, sort of indicating that it's actually a time where the demand for computationally prioritizing, you know, synthesis is going up. And as I said before, there are these other indicators about the interest in the software, the actual usage, which is something that we can track, and appears to be robust. So hopefully, that answers that question. Does that make sense?
[music].
Ramy Farid: Yep, yep, that's helpful. And you talked about your potential work in antibody development and R&D. I was wondering, could you expand a little bit on your agreement or sort of your work you're doing with TWIST? That seems like a TWIST bioscience, it seems like a really interesting approach and a coupling of a couple of novel technologies, obviously some near-term applications there for COVID as well. But could you talk about the work you're doing there and how that fits into sort of the bigger picture?
Ramy Farid: Yeah, I think we can't get into the details, of course, of the partnership, but you're right, that is another example of a partnership that is sort of helping us get into new modalities and biologics in particular. It's an early project, it's something that's sort of, you know, pretty early in the stages. Karen, is there anything else that you think you can add to that and to answer Michael's question?
Karen Akinsanya: No, I think you've addressed most of it. I would say that, you know, we remain, as many others are, interested in the potential for peptides and biologics to benefit from our technology. And so working with a company like Twist gives us the opportunity to, you know, pressure test those approaches and find new ways to design those molecules that still hold an important place in new modalities for treating patients.
Operator: Okay, I appreciate that. I perfectly understand that you may not be able to get into details with specifics.
David Neil Lebowitz: Yeah, yeah. Let me, can I squeeze in one more sort of on our T&L for the rest of the year, given the equity raise and how that went earlier this year, but also the more recent updates from COVID. Can you talk about any changes to your prior expectations for the pacing of R&D or Salesforce investments as you go through the rest of the year?
David Neil Lebowitz: Sure, I can address that. Okay. So, we've been investing steadily in R&D through 2019 and in the first quarter of this year. And the way I would think about that is that we're investing directly in the underlying technology and are continuing to develop those capabilities which power our business, and also in advancing our internal wholly owned programs. So, as we think about the resources that we have relative to our execution on our long-term strategy, we believe we have ample resources to continue to execute on that strategy. And I would expect, as we look forward through the rest of the year, a gradual sequential quarterly increase through the year in overall expenses driven by growth and research. And in terms of your question about sales and marketing, it was actually down.
[music].
David Neil Lebowitz: The expense was actually down slightly versus the prior year. And, you know, I think when we think about our business model, we don't believe it requires large incremental increases in the sales force to drive the kind of growth that, for instance, we saw in the first quarter. Rather, we will look in a focused way toward targeted investments when opportunities arise.
Operator: Great. Thanks so much. I appreciate it.
Operator: Thank you, and I'm currently showing no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
, , , , , , , ,
, , , , , , , , , , , , , , ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??