Q1 2021 Schrodinger Inc Earnings Call
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Thank you for standing by welcome the shortage of this conference call to review the company's first quarter financial results. My name is Kevin and I'll be your operator for today's call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question. During the session you. The press star one on your telephone if you require any further assistance. Please.
Kevin: Thank you for standing by. Welcome to Shortinger's conference call to review the company's first quarter financial results. My name is Kevin, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press Star 1 on your telephone. If you require any further assistance, please press Star rather than zero.
The press Star then zero. 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 call Jared Madden Senior Vice President of Investor Relations and corporate Communications. Please go ahead.
Kevin: 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 call, Jared Madden, Senior Vice President of Investor Relations and corporate communications. Please go ahead.
Thank you and Hello, everyone welcome to today's call during which we provide an update on the company and review our financial results for the first quarter of 2021.
Jaren Irene Madden: Thank you and hello everyone. Welcome to today's call, during which we provide an update on the company and review our financial results for the first quarter of 2021. Earlier this morning, we issued a press release summarizing our financial results and progress across the company, which is available on our website at www.shreddinger.com. Here with Manor on the call today are Rami Farid, President and Chief Executive Officer, Karen Ak and Sonia, Executive Vice President, Chief Biomedical Scientist, and Head of Discovery R&D, and Joel Leibowitz, Executive Vice President and Chief Financial Officer.
Earlier. This morning, we issued a press release summarizing our financial results and progress across the company, which is available on our website at www dot shredding or dotcom here with me on our call today are on me for Reid, President and Chief Executive Officer.
Fair enough and the Tanya Executive Vice President Chief Biomedical scientist and head of discovery R&D.
On Joe Lebel, Executive Vice President and Chief Financial Officer.
Following our prepared remarks, well open the call for Q&A I'd.
Jaren Irene Madden: Following our prepared remarks, we'll open the call for Q&A. I'd like to remind you that during today's call, management will make statements related to our business that are forward-looking and are made pursuant to the Safe Harbor provisions of the Private Security's Litigation Reform Act of 1995, including without limitation statements related to our future financial performance, including our outlook for the year 2021, 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 programs, risks relating to the COVID-19 pandemic, are expectations related to the use of our cash, cash equivalents, marketable securities, as well as our other future operating expenses.
I'd like to remind you that during today's call management will make statements related to our business. The are forward looking and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including without limitation statements related to our future financial performance, including our outlook for the year 2021 of the potential advantages of <unk>.
The platform, our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery programs risks relating to the COVID-19 pandemic, our expectations related to the use of our cash cash equivalents and marketable securities as well as our other future operating expenses. These forward looking statements.
Jaren Irene Madden: These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks, and factors that are beyond our control, including the demand for our software solutions, our ability to further develop our computational platform, our reliance upon our drug discovery collaborators and other risks detailed under the caption risk factors and elsewhere in our most recent Securities and Exchange Commission filings and reports.
Our current views about our plans intentions expectations strategies and prospects, which are based on the information currently available to us and the honest sanctions we have made.
Actual results may differ materially from those described in the forward looking statements and are subject to of a variety of assumptions uncertainties risks and factors that are beyond our control, including the demand for our software solutions, our ability to further develop our computational platform our reliance upon our drug discovery collaborators and other.
Risks detailed under the caption risk factors and elsewhere in our most recent securities and Exchange Commission filings on reports, except as required by law, we undertake no duty or obligation to update any forward looking statements discussed on this call as a result of new information future events changes in expectations or otherwise.
Jaren Irene Madden: Except as required by law, we undertake no duty or obligation to update any forward-looking statements discussed on this call 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.
These forward looking statements should not be relied upon as representing our views as of any date subsequent to today and with that I'd like to turn the call over to Ronny. Thanks, Sharon and thank you everyone for joining us today at Schrodinger. We have developed the competition of platform that is transforming the way therapeutics and materials are discovered the <unk>.
Ramy Farid: Thanks, Sharon, and thank you everyone for joining us today. At Schrodinger, we have developed a computational platform that is transforming the way therapeutics and materials are discovered. The platform is enabling our customers and our internal drug discovery team to discover high-quality molecules for drug development and materials applications faster, at lower cost, and with, we believe, a higher probability of success compared to traditional methods. We license our platform to pharmaceutical, biotech, and materials companies, as well as universities and government labs worldwide.
Not for them is enabling our customers and our internal drug discovery team to discover high quality molecules for drug development and materials applications faster at lower cost and with we believe of higher probability of success compared to traditional methods.
We license our platform the pharmaceutical biotech of materials companies and universities and government labs worldwide. We are also leveraging our platform in a number of drug discovery programs in collaboration with pharmaceutical and biotech companies.
Ramy Farid: We are also leveraging our platform in a number of drug discovery programs in collaboration with pharmaceutical and biotech companies, and we are advancing an internal drug discovery pipeline, which Karen will review shortly. As we look out at the next decade, we believe that increasing speed of computing, expanding access to high-resolution three-dimensional protein structures, coupled with our platform's ability to predict molecular properties with a high degree of accuracy, will allow us to broadly explore even greater chemical space and ultimately enable us to identify novel, high-quality development candidates for a broad range of targets within as little as one year from program launch.
And we are advancing an internal drug discovery pipeline, which Karen will review shortly.
As we look out at the next decade, we believe the increasing speed of computing expanding access to high resolution three dimensional protein structures, coupled with our platform's ability to predict the molecular properties with the high degree of accuracy will allow us to broadly explore even greater chemical space and ultimately enable.
US to identify novel high quality development candidates for a broad range of targets within as little as one year from program launch.
Beyond the progress we are making across our internal drug discovery pipeline. We are continuing to see exciting examples of the power of our platform and the potential for continued scale up by the industry in March our collaborator Morphic therapeutic reported promising clinical results from one of their integrin programs for the treatment of inflammatory bowel disease.
Ramy Farid: Beyond the progress we are making across our internal drug discovery pipeline, we are continuing to see exciting examples of the power of our platform and the potential for continued scale-up by the industry. In March, our Collaborative Morphic Therapeutics reported promising clinical results from one of their indigrant programs for the treatment of inflammatory bowel disease.
We also.
Ramy Farid: We also recently expanded our collaboration with Asterozenica to fully deploy our platform across all their structurally enabled discovery programs. We are making continued investments in the science underlying our platform to maintain our leadership position in physics-based computation and machine learning, with a focus on increasing accuracy of the predictions and expanding the domain of applicability to a wider range of therapeutic targets and industrial applications. We also continue to look for opportunities to make supercomputing even more accessible for our customers.
<unk> recently expanded our collaboration with Astrazeneca to fully deploy our platform across all of their structurally enabled discovery programs we.
We are making continued investments in the science underlying our platform to maintain our leadership position and physics based computation and machine learning, where the focus on increasing accuracy of the predictions and expanding the domain of applicability to wider range of therapeutic targets.
And industrial applications. We also continue to look for opportunities to make supercomputing, even more accessible for our customers last month, we establish a strategic collaboration with Nvidia to further optimize our platform for one of Nvidia as key enterprise systems designed to enable companies to reach supercomputing power as you'll hear.
Ramy Farid: Last month, we established a strategic collaboration with NVIDIA to further optimize our platform for one of NVIDIA's key enterprise systems designed to enable companies to reach supercomputing power. As you'll hear shortly from Joel, we are in a strong financial position, ending the quarter with cash resources of $649 million. This allows us to continue to invest in our science, invest in growing our software business, advance our internal pipeline, and add new talent to support our strategic initiatives.
Shortly from Joel we are in a strong financial position ending the quarter with cash resources of $649 million.
This allows us to continue to invest in our science investing growing our software business advance our internal pipeline and add new talent to support our strategic initiatives. We're excited by the progress. We've made so far this year across all aspects of our business. We are continuing to navigate the challenges of COVID-19, and are planning for a return to <unk>.
Ramy Farid: We're excited by the progress we've made so far this year across all aspects of our business. We are continuing to navigate the challenges of COVID-19 and are planning a return to several of our offices in the fourth quarter. We appreciate the dedication of all our employees, and we are optimistic about the ability to return to working together in person again. I'll now turn the call over to Karen for an update on our drug discovery programs.
Several of our offices in the fourth quarter. We appreciate the dedication of all our employees and we are optimistic about the ability to return to working together in person again.
I'll now turn the call over to Karen for an update on our drug discovery programs.
Karen Akinsanya: Thank you, Rami, and good morning, everyone. We are continuing to make important advances on many fronts across our internal pipeline and portfolio of collaborative programs. We have collaborations with both small biotech companies and large pharmaceutical companies spanning a broad range of target classes. And in these collaborations, we are leveraging our platform at the same scale we do internally.
Thank you Rami and good morning, everyone, we still continuing to make important advances on many fronts across our internal pipeline and portfolio of collaborative programs. We have collaborations with both small biotech and large pharmaceutical companies spanning a broad range of target classes.
And then these collaborations we are leveraging our platform at the same scale, we do in terms of me.
We believe this level of large scale deployment enables us to more rapidly identify high quality development candidate.
Karen Akinsanya: We believe this level of large-scale deployment enables us to more rapidly identify high-quality development candidates. We expect several collaborative programs to continue to advance in the clinic, and new programs to enter the clinic this year. We have also made significant progress in our own internal oncology programs targeting solid tumors and hematological malignancies. Today, I will highlight three of our most advanced programs, Malt 1, CDC 7, and Wii 1. Based on the strong data we have generated to date, we plan to move forward with I&D enabling studies for these programs.
We expect several of collaborative programs to continue to advance in the clinic and the new programs to enter the clinic. This year. We have also made significant progress on our own internal oncology programs targeting solid tumors and Hematological malignancies today I will highlight three of our most advanced programs.
One C D C seven and we won.
Based on the strong data we have generated to date, we plan to move forward with IND, enabling studies for these programs subject to completion of the preclinical data package is we expect to submit up to three IMT applications in 'twenty 'twenty two with our first submission expected in the first half of next year.
Karen Akinsanya: Subject to completion of the preclinical data packages, we expect to submit up to three I&D applications in 2022, with our first submission expected in the first half of next year. Starting with our Malt 1 Inhibitor Program, today we announced we have selected a development candidate. To give you a sense of how we explored chemical space to identify a novel potent selective malt one inhibitor with favorable drug-like properties, our team triaged over 8 billion compounds, scored approximately 12,000 compounds using our most advanced multi-parameter optimization methods, and synthesized just 78 molecules to identify those suitable for development candidate nomination within 10 months of program initiation. Malt 1 has emerged as an interesting target because it is downstream of BTK in the NFC Constant activation of NFCAPAB is a hallmark of several subtypes of lymphoma.
Starting with Alamo, one inhibitor program today, we announced we have selected a development candidate.
To give you a sense of how we explode chemical space to identify the novel potent selective <unk> inhibitor with favorable drug like properties out of teen triage to over 8 billion compounds school of approximately 12000 compounds easing of our most advanced multi parameter the optimization methods and thank the <unk>.
Guys, just 78 molecules to identify those suitable for development candidate nomination within 10 months of program initiation malt. One has emerged as an interesting target. It because it is downstream of be TK in the Nf Kappa B signaling pathway constant activation of Nf Kappa B is a.
Hallmark of several subtypes of lymphoma, we believe that inhibiting moat, one could be an effective therapeutic strategy to treat certain relapsed or resistant b cell lymphomas.
Karen Akinsanya: We believe that inhibiting malt 1 could be an effective therapeutic strategy to treat certain relapsed or resistant B cell lymphomas and chronic lymphocytic leukemia. In December, we presented preclinical data from our Mort-1 inhibitor program at the American Society of Hematology Annual Meeting. We reported potent in vitro inhibition of malt one enzymatic activity and in vivo antitumor activity in mouse xenograph models of diffused large B cell lymphoma. Additionally, in vivo oral models, our malt one inhibitors demonstrated dose-dependent antiproliferative effects in combination with ibupinib and venetoclux, which are approved BTK and BCL2 inhibitors, respectively. We are very excited about it.
The chronic lymphocytic leukemia in.
In December we presented preclinical data from our <unk> one inhibitor program at the American Society of Hematology annual meeting.
We reported potent in vitro the inhibition of Mir one enzymatic activity and in vivo antitumor activity in mouse xenograft models of diffuse large b cell lymphoma. Additionally in in vivo mouse models, our moat, one inhibitors demonstrated dose dependent anti proliferative effects of income.
Of the nation with Ibrutinib, and Vanessa class, which are approved BTT and Bcl two inhibitors, respectively. We are excited about evaluating the potential of combining our mobile on development candidate with be Teekay obese L. Two inhibitors in the clinic, our G O P Tox studies.
Karen Akinsanya: evaluating the potential of combining our Mort-1 development candidate with BTK or BCL2 inhibitors in the clinic. Our GOP TOX studies are expected to begin shortly, and we are beginning to make plans for Phase 1 studies in patients with hematological malignancies. We expect to share more details about the clinical study after the Phase 1 protocol is finalized. Now, I'll turn to CDC7 and Wii 2 programs that target cancer through replication stress and DNA repair mechanisms. CDC 7 is a protein kinase that has been shown to be required for DNA replication initiation.
The team to begin shortly and we are beginning to make plans for phase one studies in patients with Hematological malignancies, we expect to share more details about the clinical study after the phase one protocol is finalized now I'll turn to see D. C. Seven and we won two programs that target cancer through replication.
Yes on DNA repair mechanisms C. D. C 17 of the protein kinase that has been shown to be required in DNA replication initiation C. D. C. Seven is thought to be linked to cancer cells proliferative capacity and ability to bypass normal DNA damage responses.
Karen Akinsanya: CDC 7 is thought to be linked to cancer cells' proliferative capacity and ability to bypass normal DNA damage responses. Targeting proteins that play important roles in DNA replication and replication stress is gaining momentum as a new therapeutic approach for cancer. Last month, we presented preclinical data from our CDC7 inhibitor program at the AACR annual meeting. Our compounds demonstrated dose-dependent pichamolar potency and were highly selective. They also showed synergy with several approved and investigational cancer therapies that modulate apoptosis, DNA repair mechanisms, and DNA checkpoints.
Targeting proteins the play important roles in DNA replication and replication the strength is gaining momentum as the new therapeutic approach for cancer.
Last month, we presented preclinical data from our C. D C. Seven inhibitor program at the ACR annual meeting.
Our compound demonstrated dose dependent picomolar potency and we're highly selective.
They also showed synergy with several approved and investigational tenths of therapies that modulate apoptosis DNA repair mechanisms and DNA checkpoint. These compounds significantly inhibited tumor growth in mouse models of both of acute myeloid leukemia and colorectal cancer.
Karen Akinsanya: These compounds significantly inhibited tumor growth in mouse models of both acute myeloid leukemia and colorectal cancer. The data we have generated to date suggests that we have an opportunity to develop a best-in-class inhibitor with a very favorable pharmacokinetic profile. Our other DNA damage repair program targets V1, a tyrosine-kinase regulator of the G2M cell cycle checkpoints. The therapeutic objective of targeting Wii 1 is to reduce cell viability by inducing G2M phaser rest and apoptosis of cancer cells. Others have shown clinically meaningful tumor regression in uterine cirrhic carcinoma, ovarian, and other solid tumors through V1 inhibition.
The day two we have generated to date suggests that we have an opportunity to develop the best in class inhibitor with a very favorable pharmacokinetic profile.
The other DNA damage repair program targets. The one a tyrosine kinase regulator of the G. T cell cycle checkpoint. The therapeutic objective of targeting we want is to reduce cell viability by inducing G to N phase of arrest and apoptosis of cancer cells all of those have shown clinically.
Meaningful tumor regression in uterine serous carcinoma, ovarian and other solid tumors through B. One inhibition. However, existing inhibitors have profiles that may make dosing and combination therapy more difficult. The design challenge in our program was to develop highly selective molecule in an effort to.
Karen Akinsanya: However, existing inhibitors have profiles that may make dosing and combination therapy more difficult. The design challenge in our program was to develop highly selective molecules in an effort to minimize off-target effects, limit drug-drug interactions, and maximize the potential for combinations. We have identified multiple potent molecules that are highly selective for Wii 1 and show strong pharmacodynamic responses and anti-tumor activity in vivo. Our molecules also have optimized drug-like properties, including no observable activation of SIP-3A4, a key liver enzyme. We believe this profile limits the potential for accumulation and the need for dose adjustment of combination products.
Minimize off target effect limit drug drug interactions and maximize the potential for combinations. We have identified multiple potent molecules that are highly selective there'll be one and show strong pharmacodynamic responses on the antitumor activity in vivo.
All of molecules also have optimized drug like properties, including no observable inactivation of Sip three for a key liver enzyme. We believe this profile of limits the potential for accumulation and the need for dose adjustment of combination products.
As these programs advance and transition into development, we expect to initiate new program. We have prioritized several new program opportunities with human genetics support on emerging pharmacology data in oncology and immunology.
David Neil Lebowitz: As these programs advance and transition into development, we expect to initiate new programs. We have prioritized several new program opportunities with human genetic support and emerging pharmacology data in oncology and immunology. We expect to launch these programs during the year. In summary, we have multiple programs advancing into GLP toxicology studies to enable I&D submissions and the initiation of phase one clinical studies. Studies next year. Activities to support expansion of our pipeline into additional disease areas are well underway. We look forward to updating you on our R&D activities throughout the year. I will now turn the call over to Joel to review our financial results. Thank you, Karen.
We expect to launch these programs during the year.
In summary, we have multiple programs advancing into the G. L. P. Toxicology studies to enable I'm the submission and the initiation of phase one clinical studies next year.
Activities to support expansion of our pipeline into additional disease areas are well underway. We look forward to updating you on our R&D activities throughout the year I will now turn the call over to Joe to review our financial results. Thank you Karen and Hello, everyone. This morning, I'm pleased to discuss our financial results.
David Neil Lebowitz: Thank you, Karen, and hello everyone. This morning, I'm pleased to discuss our financial results for the first quarter of 2021, and I'll also review our outlook for the year. We reported total revenue of $32.1 million for the first quarter, up 23% compared to the first quarter of 2020. Software revenue was $26.3 million, representing 11% growth compared to the first quarter of 2020. The growth in software revenue was driven by increased deployment of our solutions, including FEP Plus and live design, as well as growth in new customers.
For the first quarter of 2021, and I'll also review our outlook for the year.
We reported total revenue of $32 1 million for the first quarter up 23 per cent compared to the first quarter of 2020 software revenue was $26 3 million, representing 11% growth compared to the first quarter of 2020 the growth in software revenue was driven by increased deployment of our solutions, including a P P plus and life design.
As well as growth of new customers' drug discovery revenue was $5 8 million for the first quarter compared to 2.4 million in the first quarter of 2020.
David Neil Lebowitz: Drug discovery revenue was 5.8 million for the first quarter compared to 2.4 million in the first quarter of 2020. Of note, drug discovery revenue this quarter included recognition of 2.2 million from a collaboration milestone related to the advancement of a preclinical program. We recognized this revenue one quarter earlier than anticipated. First quarter drug discovery revenue also included 2.4 million dollars recognized from our collaboration with Bristol-Myers Squibb. As a reminder, the BMS agreement, which we signed in November 2020, included a 55 million upfront cash payment, which we expect to recognize over a four-year period as we progress the BMS programs to development candidates.
Of note drug discovery revenue. This quarter included recognition of 2.2 million from our collaboration milestone related to the advancement of our preclinical program.
We recognized this revenue one quarter earlier than anticipated.
First quarter drug discovery revenue also included 2.4 million recognized from our collaboration with Bristol Myers Squibb as a reminder, the BMS agreement, which we signed in November 2020 included a $55 million upfront cash payment, which we expect to recognize over a four year period as we progressed the BMS programs to development candidates.
Gross profit was 16.2 million in the first quarter of 2021 of 3% over the first quarter of 'twenty 'twenty.
David Neil Lebowitz: Gross profit was $16.2 million in the first quarter of 2021, up 3% over the first quarter of 2020. Software gross margin was 78% in the first quarter of 2021, compared to 83% for the same period in the prior year, reflecting our investment to support the rollout of large-scale deployments of our platform. Operating expense was $40.1 million compared to $27.4 million in the first quarter of 2020, reflecting our investment in R&D to advance our technology and our pipeline, the addition of staff to drive long-term software sales growth, and expenses required to support a public company infrastructure.
Software gross margin was 78% in the first quarter of 2021 compared to 83% for the same period in the prior year, reflecting our investment to support the rollout of large scale deployments of our platform operating expense was $40 1 million compared to $27 4 million in the first quarter of 2020, reflecting our investment in R&D.
D to advance our technology and our pipeline. The addition of staff to drive long term software sales growth and expenses required to support a public company infrastructure.
Other income was $23 5 million versus a loss of 2.4 million in Q1 2020 during the quarter, we recorded $24.8 million of income from the Mark to market of our shares in Morphic therapeutic.
David Neil Lebowitz: Other income was $23.5 million versus a loss of $2.4 million in Q1. During the quarter, we recorded $24.8 million of income from the mark-to-market of our shares in Morphic Therapeutic. As we mark to market our shares each quarter, we can experience significant fluctuations in the value of our holdings, depending on stock price movements. For the three months ended December 31, 2018, we recorded a net loss after adjusting for non-controlling interests of approximately $29,000, compared to a loss of $13.8 million for the same period in the prior year.
As we mark to market our shares each quarter, we can experience significant fluctuations in the value of our holdings, depending on stock price movements. We recorded a net loss after adjusting for non controlling interests of approximately $29000 compared to a loss of $13 8 million for the same period in the prior year. We ended the first quarter with cash equivalents marketable.
<unk> unrestricted cash balances of $649 million up from $643 2 million at the end of the fourth quarter of 2020.
David Neil Lebowitz: We ended the first quarter with cash, equivalence, marketable securities, and restricted cash balances of $649 million, up from $643.2 million at the end of the fourth quarter of 2020. In March, we provided our financial outlook for the full year, and today we are reaffirming that guidance. We expect total annual revenue in 2021 to be in the range of $124 to $142 million, which includes software revenue of $10 million and discovery revenue of $22 to $32 million.
In March we provided our financial outlook for the full year and today, we are reaffirming that guidance. We expect total annual revenue in 2020 one to be in the range of $124 million to $142 million, which includes software revenue of $102 million to $110 million and discovery revenue of $22 million to $32 million. We continue to expect software re.
Revenue growth to be higher in the second half of the year with the majority of second half gross in the fourth quarter drug discovery revenue is expected to be highly variable based on the timing of potential milestones related to collaboration agreements as.
As we said before we anticipate that operating expense growth will be higher than the 42% annual growth rate. We saw in 2020, primarily driven by our commitment to fund R&D to advance our technology and our internal drug discovery pipeline.
David Neil Lebowitz: We continue to expect software revenue growth to be higher in the second half of the year, with the majority of second half growth in the fourth quarter. Drug discovery revenue is expected to be highly variable.
We also anticipate the software gross margin will be lower than the 81% reported in 2020, reflecting investment to drive and support large scale adoption by our customers. We are pleased with the progress we have made so far this year, particularly the advances we have seen across our collaborative programs and internal pipeline. We are also excited about the potential for.
David Neil Lebowitz: on the timing of potential milestones related to the collaboration agreement. As we said before, we anticipate that operating expense growth will be higher than the 42% annual growth rate we saw in 2020, primarily driven by our commitment to fund R&D to advance our technology and our internal drug discovery pipeline. We also anticipate that software gross margin will be lower than 81% reported in 2020, reflecting investment to drive and support large-scale adoption by our customers.
For large scale utilization of our software in drug discovery and materials science applications and finally, we have the resources to invest in our growth strategy across our business I'll now turn the call back over to Ronny. Thanks, Joel we are excited about the significant impact our technology is having on our internal and collaborative drug discovery programs.
It is exciting to see the power of our platform has to advance the discovery of new therapeutics with the potential to improve treatment paradigms across a broad range of disease areas.
Ramy Farid: We are pleased with the progress we have made so far this year, particularly the advances we have seen across our collaborative programs and internal pipeline. We are also excited about the potential for large-scale utilization of our software and drug discovery and material science applications. And finally, we have the resources to invest in our growth strategy across our business. I'll now turn the call back over to Ron. Thanks, Joel. We are excited about the significant impact our technology is having on our internal and collaborative drug discovery program.
We are also excited about the potential of our platform to impact sustainability initiatives across multiple industries.
We have an exceptional team committed to advancing our vision and we look forward to providing updates on our progress throughout the year at this time, we'd be happy to take your questions operator.
Ladies and gentlemen, if you of a question of our time and at this time. Please press. The Star then the one key on your Touchtone telephone if for your question has been answered of Houston with yourself from the queue. Please press the pound key our first question comes from Michael Yee with Jefferies.
Ramy Farid: It is exciting to see the power our platform has to advance the discovery of new therapeutics with the potential to improve treatment paradigms across a broad range of disease areas. We are also excited about the potential of our platform to impact sustainability initiatives across multiple industries. We have an exceptional team committed to advancing our vision, and we look forward to providing updates on our progress throughout the year. At this time, we'd be happy to take your questions.
Hey, guys. Good morning, and thanks for the update of maybe two questions for us.
First I guess on software.
I noticed that you maintained the guidance you know of short of and can may now.
Gave an update on March 23rd and also on January do you get the sense that things are picking up do you feel more confident about about the range of the guidance share or the higher end does it relates to either get our people getting back to work COVID-19 the of.
Ramy Farid: Operator? Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchdown telephone. If your question has been answered, are you shooting yourself from the Q? Please press the pound key. Our first question comes from Michael Yee, with Jeff.
The option because all of those things do you have any sense of how things are going whether better or not here. We aren't the can mid point of the year that that's question one on on software.
As it relates to the guidance and the question to maybe for Karen or the team you have of candidate now for more one that's fantastic do you feel you'd like to get these things in the I N D. Before you consider partnering is that kind of out of that line on the sand, but kind of a good a good place to think about where it's most optimal <unk> and <unk>.
Michael Jonathan Yee: Hey guys, good morning, and thanks for the update. We have two questions for you. First, I guess, on software, I noticed that you maintain the guidance, you know, we're sort of into May now. You gave an update, I think, March 23rd and also in January. Do you get the sense that things are picking up, if you're more confident about the range of the guidance or the higher end, as it relates to either, you know, people getting back to work, COVID, adoption, just all of those things? Do you have any sense of how things are going, whether better or not, here we are at the midpoint of a year?
Maybe just talk to that for meltwater shut the Nash. Thank you.
Joe do you want to take Mike's first question or sure. Thanks, Rami Thanks, Mike.
Good morning so.
Yes.
Of course, we did maintain our guidance for the full year you know if you look at the quarter. We came in slightly above what we had guided to back in March.
At 11% versus high high single digit.
Michael Jonathan Yee: That's question one on software as related to the guidance. And then question two, maybe for Karen or the team. You have a candidate now for Mall 1, that's fantastic. Do you feel you'd like to get these things into IND before you consider partnering? Is that kind of, I don't say a line in the sand, but kind of a good place to think about where the most optimal I&D and greater are. Maybe just talk to him about that for malt one or something else.
And you know as we look out over the rest of the year. We also reaffirmed the color around the pacing.
And it's important to keep in mind. So we believe that the second half will we see the second half on folding to be higher growth than the first half.
And most of that growth in the fourth quarter.
And you know as.
As we the way we.
Look at the year is we look at.
You know the customers that we are interacting with the renewal timing, whether those renewals are on premise or hosted so that determines whether revenue is recognized on a particular quarter or over time, whether they're upsizing opportunities.
David Neil Lebowitz: Chold, do you want to take Mike's first question? Sure, thanks, Rami. Thanks, Mike. Good morning.
David Neil Lebowitz: Of course, we did maintain our guidance for the full year. You know, if you look at the quarter, we came in slightly above what we had guided to back in March at 11% versus high single digits. And, as we look out over the rest of the year, we also reaffirmed the color around the pacing, and it's important to keep in mind. So we believe that the second half will unfold to be higher growth than the first half, and most of that growth in the fourth quarter.
Within those renewals and also the prospect for new customers.
And at this time, we feel comfortable with the guidance that we provided for the full year. So we're maintaining it.
Karen.
Okay.
Yes, good morning, Mike So on the our moat one program other.
That's in the path of.
We do plan to move the program forward.
David Neil Lebowitz: And, you know, as we, uh, look at the year is we look at, you know, the customers that we are interacting with, the renewal timing, whether those renewals are on-premise or hosted, so that determines whether revenue is recognized in a particular quarter or over time, whether there are upsizing opportunities within those renewals, and also the prospect for new customers. And, you know, at this time, we feel comfortable with the guidance that we provided for the full year, so we're maintaining it.
And.
At this moment, we are looking towards the opening studies next year as we discussed in the.
Coal however.
However, we do stay very cognizant of the landscape of each of these mechanisms.
For the NCR in Ics, a lot of information coming out and the.
The stay in contact with the potential partners as you know each of the mechanism has the potential to combine with existing marketed agents and so on.
Karen Akinsanya: Yes, good morning, Mike. So on our Mot One program and others, as we've discussed in the past, we do plan to move these programs forward ourselves. And at this moment, we are looking towards IMD opening studies next year, as we discussed in that call. However, we do stay very complacent about the landscape.
We expect to see combination trial the of part of the clinical development program and so you know we remain interested in the potential to benefit from the combination compounds.
There's a number of ways to accomplish that and for us quite we are planning to.
Karen Akinsanya: Each of these mechanisms, as you're aware, from AACR and AACR. There is a lot of information coming out, and we stay in contact with potential partners. As you know, each of these mechanisms has the potential to combine with existing marketed agents, and so we expect to see combination trials be part of the clinical development program. And so, you know, we remain interested in the potential to benefit from those combination compounds. But there are a number of ways to accomplish that. And so at this point, we are planning to open those I&D studies ourselves and stay in touch with potential partners.
To open the design the studies themselves.
Stay in touch with potential partners.
Oh.
Great. Thank you guys appreciate that.
Thanks, Michael.
Our next question comes from Michael Russell with Bank of America.
Hey, guys. Thanks for taking the question I wanted to follow up on the last one on just real quick on the software pacing through the year on.
I want to make sure the thing about this correctly.
Of the quantity debate on.
Last quarter, and that's what sort of yeah, let.
We started the year.
Typically there is the wood a bit of seasonality of on <unk> tends to be a little bit stronger than two Qs for software revenues goes is that is that the airway to think about that just because I know that some of the comps last year of COVID-19 could've been a little bit messed up so.
Michael Raskin: Great. Thank you, guys. I appreciate that.
Michael Raskin: Our next question comes from Michael Raskin with Bank of America. Hey, guys, thanks for taking the question.
I just want to.
Confirm that a mild step down once you get your acute software is appropriate and then I've got for.
David Neil Lebowitz: I want to follow up on the last one on the, just real quick, on the software pacing through the year. I want to make sure we think about this correctly because I know this was a big point of debate last quarter and that's what sort of, you know, as we started the year. Typically, there is a little bit of seasonality where one quarter tends to be a little bit stronger than the other as far as software revenues go.
Follow up for Karen.
Sure Mike Good morning.
No.
You're right.
You know, we have seen that kind of seasonality in the past and you know I think the at the things that we have guided to.
David Neil Lebowitz: Is that, is that a fair way to think about that? Just because I know that some of the comps last year with COVID could have been a little bit messed up. So I just want to, you know, confirm that a mild step down, one Q to 2Q software, is appropriate. And then I've got to follow up for Taryn. Sure, Mike. Good morning.
Back half being higher growth from the first half and fourth quarter being the majority of that growth. So I think as you.
Think about the pacing of the year you know I think it's important to keep that in mind.
So if you look at the you know.
The performance in the first quarter as.
As I mentioned, it's a sort.
Karen Akinsanya: So, you're right, we have seen that kind of seasonality in the past, and, you know, I think the other thing is that we have guided to the back half being higher growth than the first half, and the fourth quarter being the majority of that growth. So I think as you think about the pacing of the year, you know, I think it's important to keep that in mind. Also, if you look at the, you know, performance in the first quarter, as I mentioned, it's, uh, uh, just slightly above what we had guided to in the first quarter in terms of high single digits.
Just slightly above what we had guided to in the first quarter in terms of high single digit. So I think that hopefully that's helpful in thinking about the pacing throughout the year.
Yeah.
Okay, Thanks, and churn for you it.
It sounds like you're you know you can see the emphasize that beyond the three week compounds on the internal pipeline, you've got more and more of a potential candidates ramping up.
That you're sort of finding some early hits for I'm just wondering.
How should we think about the the breadth of that early pipeline how many how many assets can you do you currently have the headcount and the the ability to run at the same time the.
Karen Akinsanya: So I think that hopefully that's helpful in thinking about the pacing throughout the year. Okay, thanks. And Taryn, for you, it sounds like you're, you know, you can see to emphasize that beyond the three-lead compounds in the internal pipeline, you've got more and more potential candidates ramping up that you're sort of finding some early hits for. I'm just wondering... How should we think about the rest of that early pipeline? How many assets can you, you know? Do you currently have the head count and the ability to run at the same time? How should we think about that going forward?
Sort of how should we think about that going forward.
Yeah. Thanks, Mike. So the answer is described in the past of.
Capacity to run our discovery program.
What's going on around 2025 of these programs both of them.
But the two celebration of holding on pipeline.
Yeah, we've been really ramping up of the team that's looking at the end.
Earlier stage programs.
Able to initiate our Hittite the.
Karen Akinsanya: Yeah, thanks, Mike. So as we've described in the past, our capacity to run our discovery programs, we can run around 20, 25 of these programs. Those are both in collaboration and a wholly owned pipeline. This year, we've been really ramping up the team that's looking at these early stage programs where we're able to initiate hit ID and hit to lead. And I would say that, you know, right now, we have the capacity for around five steady state programs that are wholly owned, and we intend to maintain that steady state over the next couple of years.
Lead on.
And I would say the you know right now we have the capacity for the science steady state of pros.
Brands that are wholly owned and the intensity of maintain that steady state over the next couple of years and as the team guys that gives us the ability to.
Further expanding our internal pipeline, obviously has the candidate to move forward and into the development clinical advancement of planets to replace them. So are the two.
On the very busy right now working on additional programs that you'll be hearing or of that in the future.
Okay, and one last quick one for for Joel If I could squeeze. The then you had some comments on the prepared remarks on sort of gone back for the office post COVID-19. The returning to normal operations should we be assuming any significant impacts of the operating expense line.
Karen Akinsanya: And as the team grows, that gives us the ability to further expand their internal pipeline. Obviously, as these candidates move forward and into development, and clinical development, our plan is to replace them. So the team is very busy right now working on additional programs that you'll be hearing about in the future. Okay.
As we go into the <unk> from those activities or is it going to be a more gradual transition.
David Neil Lebowitz: Okay, and one last quick one for Jill, if I could squeeze it in. You had some comments in the prepared remarks on sort of going back to the office, post-COVID, returning to normal operations. Should we be assuming any significant impact on the operating expense line as we go into 4Q from those activities, or is it going to be a more gradual transition? Thanks, Mike.
Thanks, Mike sure so.
We are planning to be back on the office in the fourth quarter.
And we.
Of course had these plans in place are.
Not knowing the exact timing at the beginning of the year, but as we planned out the whole year expenditures. So I think it is more of a gradual ah.
The gradual thing.
David Neil Lebowitz: So we are planning to be back in the office in the fourth quarter, and we, of course, had these plans in place, not knowing the exact timing at the beginning of the year but as we planned out the whole year's expenditures. So I think it is more of a gradual thing as we get back to the office. I mean, obviously, other than being in the office, we're operating at full strength, so they really shouldn't.
As we get back to the office I mean, obviously other than being in the office, we're operating at full strength. So there really shouldn't be much change.
All of them in kind of the way we are.
Our supporting our operations just the fact that we're able to collaborate together.
We'll be a chemical welcome change on the other thing is you know more of the thing that will drive variability in the expense to a greater degree as really our R&D side and the timing.
David Neil Lebowitz: will be much change in the way we kind of support our operations. Just the fact that we're able to collaborate together will be kind of a welcome change. The other thing is, you know, more the thing that will drive variability and expense to a greater degree is really our R&D side and timing of, you know, pacing and timing of our pacing and timing of our programs as they move towards the clinic, hiring throughout the year as we build up our capabilities for early clinic clinical operations and also the timing of CRO expenses as we advance our internal programs in that regard.
Timing of.
The pacing and timing of our programs as they move towards the clinic.
Hiring throughout the year as we build up our capabilities.
For our early clinic clinical operations and also the timing of C. R. O expenses as we advance our internal programs on that regard. So I think those all of those those operate those core operating metrics have more of an impact than perhaps the return of the office.
David Neil Lebowitz: So I think those those core operating metrics have more of an impact than perhaps return to the office that, Great. Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchstone telephone. Our next question comes from Doe Kim with BMO Capital Markets.
Yeah.
Great. Thank you.
Again, ladies and gentlemen, if you of a question of our comment at this time. Please press. The Star then the one key on your Touchtone telephone.
Our next question comes from do Kim with BMO capital markets.
Hi, good morning, everyone.
Doe Kim: Hi, good morning, everyone. I wanted to ask about the
Just wanted to ask about the <unk>.
Ramy Farid: about the expanded AstraZeneca collaboration. Could you provide a little more detail on that? How much of a step-up in usage would AstraZeneca be involved in the platform, and what does the expansion mean in terms of economics for Schroeder? Yeah, so first of all, thanks, though, for the question.
Banded astrazeneca collaboration.
Could you provide a little more detail on that how much of a step up in usage.
Wood Astrazeneca.
The evolved in the.
Platform and what does the expansion mean in terms of economics for sure on air.
Yeah. So first of all of what it thanks, Joe for the for the question.
This was the really highly successful pilot.
Ramy Farid: This was a really highly successful pilot program, if you will, and it was really great to see how successful it was and the rollout to the entire company. We're, of course, not revealing the details of the agreement, but I think it speaks very well to not just the short-term impact of the expansion but really the long-term one. As you know, we've talked a lot about the relative usage of our software at pharma companies relative to what we're using, as Karen said, in our collaborations and internal programs.
Pilot program, if you will and it was really great to see how successful it was on the rollout to.
For the entire company, we are of course, not revealing the details of of the agreement, but I think.
It speaks very well to the not just the short term impact of of the expansion, but we're really the long term expansion as you know we've talked a lot about.
The relative usage of our software as pharma companies relative to what we're using as Karen said in our collaborations of internal program and seeing this kind of transition to a much larger scale deployment is a very good indicator of us achieving that as we've talked about sort of in some sense.
Ramy Farid: And seeing this kind of transition to a much larger scale deployment is a very good indicator of us achieving that, as we've talked about, in some sense, the tsunami of the software. So we're really very excited about that transition from a sort of pilot program to a real broad deployment across their whole set of programs.
The the Tam of the of the software. So we're really very excited about about the that transition from a sort of a pilot program to a real broad.
Deployment across the whole there for the whole set of programs.
Ramy Farid: Great, and you talked previously about how Schroding has
Great.
You've talked previously about how shuddering of has the ability to use their own software platform and unlimited for him.
Ramy Farid: to use their own software platform in an unlimited fashion. Could you quantify for us how much it would cost an external company to construct the internal program that you have currently – in terms of dollar figures, the number of licenses, Schrodinger theoretically used, Absolutely, that's a good question. So what we've, as Karen said, we're running around 2025 programs. And at the moment, and this is going to increase, by the way, with time. I'll explain that in a second.
Okay.
Quantify for us how much of what cost of an external company to.
Struck the internal program that you have currently just like.
In terms of dollar figures the number of licenses theory shorten or theoretically used.
Absolutely that's a good question so.
What we've as Karen said were running around 2025 programs and at the moment and this is going to increase by the way with time I'll explain that in the second but at the moment that turns out the usage of the software to support that number of programs is around $30 million to $40 million of software that does.
Ramy Farid: But at the moment, it turns out that the usage of the software to support that number of programs is around $30 to $40 million. That doesn't include the compute cost, just the software license. Now, a couple of things that are important to keep in mind.
Can include the compute costs just the software licenses.
Now.
Couple of things, it's important to keep in mind. One is that's just 20 to 25 structurally the programs of course pharma companies typically have more than that number of programs certainly the bigger bigger companies, but the incredible thing is that this keeps increasing at a pretty rapid pace as.
Ramy Farid: One is that it's just 20 to 25 structuring labor programs. Of course, pharma companies typically have more than that number of programs, certainly bigger companies. But the incredible thing is that this keeps increasing at a pretty rapid pace. As we've discussed before, the performance of computers, the availability of computers, and the availability of protein structures, which is a key input to these methods, are increasing exponentially and continue to, and have been for a long time, and still continue today to increase exponentially.
As we've discussed before the performance of computers, the availability of computers, the availability of structures of proteins, which is of key input. The these methods are increasing exponentially and continue to and have been for a long time and still continue today to increase exponentially. So that's what it is right now, but as we see we've talked about this before you know a year ago or so.
Ramy Farid: So that's what it is right now, but as we see, we've talked about this before. You know, a year ago or so, we were exploring a single-digit billion number of molecules. Now we're exploring hundreds of billions of molecules. And of course, as computer performance goes up, as the number of structural labor programs goes up, that 30 to 40 million will continue to increase. So that's what the value is right now.
We were exploring of single digit billing number of molecules now we're exploring hundreds of billions of molecules on of course as the as computer performance goes up as the number of structured name of programs goes up that 30 to 40 million will will continue to increase so that's what the value is right now.
Karen Akinsanya: Great, that's very helpful.
Great that's very helpful.
Karen Akinsanya: And for Karen, you previously said that you expected some, a number of your collaborations that are in lead optimization to move into GLP talk studies. Is that still your expectation over the next few quarters? And the milestones that you expect to achieve, will they be cash payments or just recognition of prior payments?
And for Karen you previously said that.
Do you expect some.
The number of your of collaborations that.
Of our lead optimization.
To move into.
GOP Tox studies.
Is that still your expectation over the next few quarters.
The milestones that you expect to achieve well they'd be cash payments or just recognition of prior payment.
So I'll say that from thoughtful we don't have full visibility into everything going on in all of our collaboration.
Karen Akinsanya: So I'll say that, first of all, we don't have full visibility into everything going on in all of our collaborations. However, we have seen, and I think you have also seen, the progress that's being made in the programs that are described publicly. You've seen progress, for example, with Morphic, and we know that these programs that we're working on with a variety of different partners are meeting their scientific milestones and moving forward with regard to the data packages.
However, we have seen and I think you've also seen the progress that's being made in the.
The programs that I'll describe the publicly you've seen our progress for example.
Mosaiq and we.
We know that the programs that we're working on with the variety of different part of all meeting the.
The scientific milestones.
Moving forward with regard to the data packages. So we continue to be very confident that these programs are going to move.
Karen Akinsanya: So we continue to be very confident that these programs are going to move forward through the various stage gates, GLP talks, and include a number that are in I&D enabling studies actually moving into the clinic with the data packages supporting that. So I would say that we remain confident about a number of these programs, not just moving into lead up, but to further milestones and gates. I would, though, turn over the question on the financials to Joel, if that's okay.
The move full edge through the various states gates G. L P talk from including a number.
That are in R&D, enabling studies actually moving into the clinic.
With the data packages of coating that so I would say that we remain confident about a number of these programs not just moving it to leave out the.
To further milestones of gates.
I would the ton of the debt.
On the financial the gel if that's okay.
David Neil Lebowitz: Sure. And Doe, if I misinterpret your question, please just clarify. But, you know, I think with regard to our discovery revenue, what we have signaled this year is, you know, growth in our, you know, full year guidance, growth in our discovery revenue versus the prior year. And what we've also said is that as we continue to advance collaboration programs, generally speaking, milestones get larger. That's certainly the case on the BMS side, as we've talked about, the potential to earn up to well over $2 billion in milestones, with two-thirds of it being roughly pre-commercial.
Sure.
And Doe if I misinterpreted your question. Please just clarify.
But you.
I think with regard to our discovery revenue.
What we.
Have signaled this year is growth on our you know in the full.
Full year guidance as growth in our in our discovery revenue versus prior year.
And and what we've also said is that as we continue to advance.
The collaboration programs are generally speaking milestones get larger that's certainly the case on the BMS side as we've talked about the potential to earn up to.
Ah well over $2 billion in milestones with two thirds of it being roughly being a pre commercial.
David Neil Lebowitz: And so we're really excited about investing in advancing those programs towards these very significant step-ups and milestones in the future. And, you know, and I think, you know, we continue to see, as Karen mentioned, progress in the pipeline in that regard. So we're confident, really across that pipeline, that over time we're going to continue to see opportunities for significant growth on the discovery side and coming out of the collaborations. And we did see a signal in the first quarter where we were able to recognize $2.2 million related to a single milestone, an early, pre-clinical stage milestone, one quarter earlier than anticipated, which I think is a nice signal in that particular case. of the continued advancement of a specific program. But, you know, we're seeing broad advancement, as we've talked about. And so we're excited to continue to grow that side of the business.
And so where we're really excited about investing in and advancing those programs towards the very significant step up step ups and milestones in the future and.
Thank God you know, we continue to see as Karan mentioned advancement in the pipeline in that regard so we're confident.
Really across the pipeline that over over time, we're going to continue to see opportunities for significant growth on the discovery side and the coming out of the collaboration. So we did see a signal in the first quarter, where we were able to recognize $2.2 million related to a single milestone early clinic of preclinical stage.
<unk> stone, one court for one quarter earlier than anticipated.
Which I think is a nice signal in that particular case of the continued advancement of the specific program, but you know.
We're seeing broad advancement the.
As we've talked about and so we're excited to continue to grow that side of the business.
Great. Thanks for taking my question.
David Neil Lebowitz: Great. Thanks for taking my question.
Thanks, Phil.
Our next question comes from David Leibowitz of Morgan Stanley.
David Neil Lebowitz: Our next question comes from David Leibowitz of Morgan Stanley.
David Neil Lebowitz: Thank you very much for taking my question. Could you run us through the purchasing dynamics of a pharmaceutical company?
Thank you very much for taking my question could you run us through the purchasing dynamics for a pharmaceutical company.
Ramy Farid: How do they, what's the typical cycle for making decisions? Obviously, they tend to make decisions on an annualized basis, but do they ever make incremental decisions throughout the year?
How does the what's the typical cycle for making decisions obviously, they tend to make decisions.
The basis, but do they ever make incremental decisions throughout the year or is it really on a onetime basis on an annual each year.
Ramy Farid: Yeah, it's typically that most of our contracts are one-year contracts, so the decisions are made on an annual basis. There are certainly examples of cases where companies have essentially recognized in the middle of the year that they're running out of licenses and have done contracts in the middle of the year. That does sometimes happen, but typically it's every year.
They tend to make FID.
To upgrade at the end of the cycle.
Yeah, it's typically the most of our.
Contracts are one year contracts. So the decisions are made on an annual basis. They are certainly examples.
Of cases, where companies have essentially recognized in the middle of the year that they're running out of licenses and have we've done contracts for the multi year that does sometimes happen, but typically it's every year now the interesting thing about that.
Ramy Farid: Now, the interesting thing about that is that, in 2020, as you know, there was quite a large increase. I think this was at a time when validation of the technology was coming from sort of external sources. It came from the success of Nimbus and Morphick and our internal programs, and that was catalyzing a broad adoption of the whole platform by quite a number, you know, a very large number of companies.
Is that in in 'twenty 'twenty as you know there was quite a large increase I think this was at a time where.
On the validation of the technology was coming from sort of external sources. It was coming from the success of Nimbus on Morphic on our internal programs and that was catalyzing of.
Broad adoption of the whole platform by quite a number of them.
Of very large number of companies now even though the decisions that are made on an annual basis of of you know the the renewals.
Ramy Farid: Now, even though the decisions then are made on an annual basis about, you know, the renewals, the decision to scale up in a very significant way can actually take longer than a year because there, now the validation switches over to sort of internal validation. So what does that mean? You know, now you have to, first of all, deploy the technology at a much larger scale than they're used to. This involves, you know, obviously running the calculations on the cloud.
The decision to scale up in a very significant way can actually take longer than a year because they're now of the validation switches over to sort of internal validation. So what does that mean you know now you have the first of all you have to dips.
Deploy the technology on a much larger scale than than they're used to this involves obviously running the calculations on the cloud and then you have to go through the design.
Ramy Farid: And then you have to go through these design, design tests, and cycles where you're determining whether the technology is really having the kind of impact that we're seeing and that they've seen from other collaborations. And that can sometimes take a little bit longer than a year. And that's what we have, what we've talked about, growth in the business, it's not necessarily completely linear. We know where it's headed, as we talked about before in response to other questions, but it can, it can take a sort of lumpy course to get there. Does it make sense? yes, it does. On the occasion, when does it add on, would that add on? A year-long contractor
Design tests make cycles, where you're determining whether the technology is really having the kind of impact that we're seeing in that they they've seen from other collaborations and that can sometimes take a little bit longer than a year and that's what we have.
What we've how we've talked about sort of the gross in the business, it's not necessarily completely linear we know where it's headed right as we talked about before and the response out of the question, but it can it can it can take a sort of lumpy course to take to get there.
It makes sense.
Yes, it does.
When a.
Customer does add on incrementally during the year.
That add on.
A year long contract or would it be too.
Ramy Farid: fit into the current contract and then conclude that in the fourth quarter, so if that's when the contract's currently in, and so the It really varies. It's a really good question. It varies. Sometimes the contract is started so that it's coincident with the earlier contract, but actually, just as often, it's a contract now where there are two renewals in the year, and then later on, they're merged. It's really all, every possible way of doing it has occurred. Sometimes it's six months, sometimes three months, nine months, sometimes a little bit over a year. I mean, there's quite a bit of variability. Thank you very much for taking my question.
I guess two.
A bit into the current contract and then concluded that.
In the fourth quarter. So that's when the contracts currently in and yes basically.
Incorporated into the current cycle. It really varies that's it's a really good question of it varies we sometimes the the the contract has started and so the its coincident with the earlier contract, but actually just as often it's the contract now where there are two new rules in the year and then later on there they're merged.
It's really all every different possible way of doing it has as it for it sometimes it's six months, sometimes three months nine months, sometimes a little bit over a year I mean, there's quite a bit of variability.
Thank you very much for taking my questions sure.
David Neil Lebowitz: Thank you very much for taking my questions.
Unknown Executive: Thank you. There are no further questions. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Thank you there are no further questions ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.