Q3 2023 Schrödinger Inc Earnings Call
Great.
Thank you for standing by welcome to show to hear this conference call to review third quarter 2023 financial results. My name is Eric and I'll be your operator for today's call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Thank you.
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 Ms. Jared Madden.
And your vice President of Investor Relations and corporate Affairs.
Please go ahead.
Thank you and good afternoon, everyone welcome to today's call during which we will provide an update on the company and review our third quarter 2023 financial results.
Earlier today, we issued a press release summarizing our results and progress across the company, which is available on our website. That's trading in the dotcom here with me on our call today are Rami theory, CEO, Geoff Porges, Chief Financial Officer, and Karen, Arkansas, President of R&D Therapeutics, following our prepared remarks, well open the call for Q&A during.
Call management will make statements that are forward looking and made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Living without limitation statements related to our outlook for the full year 2023, our quarter ending September 32023 are our plans to accelerate the growth of our software business and advance our collaborators and proprietary drug discovery programs the timing of initiation oven readouts from our clinical trials the clinical potential in properties.
Compounds the use of our cash resources as well as our future 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 other assumptions. We have made actual results may differ materially due to a number of important factors, including the considerations described.
And the risk factors section and elsewhere in filings, we make with the SEC, including our Form 10-Q for the quarter ended September 32023.
Forward looking statements represent our views only as of today and we caution you that except as required by law, we may not update them in the future whether as a result of new information future events or otherwise also included in today's call are certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.
And should be considered only in addition to and not a substitute for or superior to GAAP measures. Please refer to the tables at the end of our press release, which is available on our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and with that I'd like to turn the call over to Rami.
Thanks, Shannon and thank you everyone for joining US today, we had a successful and exciting third quarter marked by several important milestones for the company. We reported total revenue of $42 6 million, representing 15% growth compared to the third quarter of 2022, and we are on track to deliver on our full year revenue guidance, we began patient dosing for our phase.
One study of <unk> 2000, 1921, and we received Cta approval to open clinical trial sites for STR 15 O five patient study in Europe. Additionally, STR $35 15 is advancing and we also have a number of exciting discovery programs just behind our lead programs, which we will discuss at more length at our pipeline day in December.
Unknown Executive: Thank you for standing by. Welcome to Schrodinger's conference called to review third quarter 2023 financial results. My name is Eric and I'll be your operator for today's call.
Today, we reported that rights to two related oncology discovery programs within the BMS collaboration reverted to us after BMS elected not to proceed with further development for strategic reasons. These programs, we're making excellent technical progress and our team is assessing the next steps for these programs in the context of our overall portfolio strategy.
Unknown Executive: All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
BMS continues to be an important partner, we have three active research programs in the collaboration as well as source, one which reached development candidate status and transitioned to BMS earlier. This year. We are also discussing the potential for additional discovery programs with BMS collaborations are an important part of our business and we continue to evaluate.
Unknown Executive: Please be advised that this call is being recorded at the company's request.
Jaren Madden: Now I would like to introduce your host for today's conference, Ms. Jaron Madden, Senior Vice President of Investor Relations and Corporate Affairs. Please go ahead. Thank you and good afternoon, everyone. Welcome to today's call during which we will provide an update on the company and review our third quarter 2023 financial results. Earlier today, we issued the press release summarizing our results and progress across the company, which is available on our website at Schrodinger.com. Here with me and our call today are Ramey Fareed, CEO, Jeff Porges, Chief Financial Officer, and Karen Ahkinsonia, President of R&D Therapeutics. Following our prepared remarks, we'll open the call for Q&A.
New partnerships, where the science overall scope and value are consistent with our strategy.
Turning to our software business, we remain confident about the opportunity for significant revenue growth among our largest software customers. This year. The interest in computationally driven drug discovery is quite high and we are seeing more customers increasing their utilization of our platform. We're continuing to invest in the development of new capabilities to enhance the value of our <unk>.
Platform and we expect these capabilities to support continued growth in our software business for many years to come our latest quarterly software release incorporates a number of key technologies, including the ability to more accurately predict certain admit properties such as binding decided from <unk> and heard and technology that allows for predict.
Jaren Madden: During today's call, management will make statements that are forward looking and may pursuant to the safe harbor provisions of the private security's litigation reform act of 1995, including without limitation, statements related to our outlooks that are due to the full year 2023, our quarter ending September 30, 2023, our plans to accelerate the growth of our software business and advance our collaborative and proprietary drug discovery programs, the timing of initiation of and review that's from our clinical trials, the clinical potential and properties of our compounds, the use of our cash resources as well as our future expenses. These forward looking statements reflect our current views about our plans and tensions, expectations, strategies, and prospects, which are based on the information currently available to us.
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We are pleased with the progress we have made this year and we're very excited about the opportunities that lie ahead I greatly appreciate the hard work and commitment of all of our employees are instrumental in our mission I will now turn the call over to Jeff.
You Rami and good afternoon, everyone. It's been a strong quarter for shortening or and this is reflected in our quarterly results and financial guidance. Our software business is growing despite a challenging biopharma industry environment.
Jaren Madden: And on assumptions we have made. Actual results may differ materially due to a number of important factors, including the considerations described in the risk factors section and elsewhere in filings we make with the SEC, including our form 10 queue for the quarter ended September 30, 2023. These forward looking statements represent our views only as of today, and we caution you that, except as required by laws, we may not update them in the future whether as a result of new information, future events or otherwise.
Proprietary portfolio is progressing nicely.
Today I'll share details of our financial results and then close with some comments about our financial guidance.
Our revenue results for the quarter were above our expectations and reflect the impact of the changes in our collaboration portfolio that Rami explained earlier.
We remain very positive about our outlook for the year and continue to expect significant growth in software revenue in Q4, and then both price discovery in software revenue for the year overall.
Jaren Madden: Also included in today's call are certain non-gap financial measures. These non-gap financial measures are not prepared in accordance with generally accepted accounting principles and should be considered only in addition to a not a substitute for or superior to gap measures. Please refer to the tables at the end of our press release, which is available on our website for recommendations of these non-gap measures to the most directly comparable gap measures.
Software revenue for Q3 was $28 9 million up 17% compared to Q3 2022.
The revenue growth was driven by existing customers increasing their investment in our technology with a number of additional customers, reaching the $1 million per year threshold during Q3.
Hosted software grew strongly to some large customers elected to initially increase their access to the technology on a hosted basis.
Ramy Farid: And with that, I'd like to turn the call over to Rami. Thanks, Sharon. And thank you, everyone, for joining us today. We had a successful and exciting third quarter marked by several important milestones for the company. We reported total revenue of 42.6 million, representing 15% growth compared to the third quarter of 2022, and we are on track to deliver on our full year revenue guidance. We began patient dosing for our phase one study of SGR 29-21, and we received CTA approval to open clinical trial sites for SGR 15-05 patient study in Europe.
Services revenue declined due to the shift away from our structural biology services and towards our proprietary programs.
Contribution revenue increased to $1 $8 million driven by the expanded renew all of our battery chemistry research project with gates fences.
Drug discovery revenue increased by 11% to $13 7 million compared to $12 3 million in Q3 last year.
There was a $10 million contribution in the quarter from the acceleration of previously deferred revenue associated with the two BMS programs that reverted to us.
Ramy Farid: Additionally, SGR 35-15 is advancing, and we also have a number of exciting discovery programs just behind our lead programs, which we'll discuss at more length at our pipeline day in December. Today, we reported that rights to two related oncology discovery programs within the BMS collaboration reverted to us after BMS elected not to proceed with further development for strategic reasons. Eason's. These programs were making excellent technical progress and our team is assessing the next steps for these programs in the context of our overall portfolio strategy.
Therefore remaining programs in the BMS collaboration, including the source one program the transition to their portfolio in Q1 2023.
Total revenue for the quarter was $42 6 million compared to $37 million in Q3, 2022, and $35 2 million in Q2 2023.
For the first three quarters of the year, our software revenue was $90 5 million compared to $88 million for the first same period last year and our drug discovery revenue was $52 million compared to $36 million for the same period a year ago.
Our gross margin performance was positive this quarter with higher revenue producing improved product profitability suffered gross margin was 76% compared to 72% in the same period last year and 77% in Q2 2023 drug.
Drug discovery gross margin was 13% compared to a 5% loss ratio for the same period a year ago.
Ramy Farid: The partnerships were the science, overall scope, and value are consistent with our strategy. Turning to our software business, we remain confident about the opportunity for significant revenue growth among our largest software customers this year. The interest and computationally driven drug discoveries quite high, and we are seeing more customers increase in their utilization of our platform, where continuing to invest in the development of new capabilities to enhance the value of our platform, and we expect these capabilities to support continued growth.
Combined reported gross margin was 56% compared to 47% in the same period in 2022 software gross margins should continue to improve slowly and I, probably discovery margin will be volatile depending on the timing and amount of milestone payments associated with collaborations.
Ramy Farid: And our software business for many years to come. Our latest quarterly software release incorporates a number of key technologies, including the ability to more accurately predict certain admin properties, such as binding decided from P450s and HERG, and technology that allows for prediction of antibody affinity as a function of pH. We are pleased with the progress we have made this year, and we're very excited about the opportunities that lie ahead.
In general we expect our cost per collaboration programs to trend down thus, increasing the potential gross profitability of successful achievement of milestones and collaborations.
<unk> expenses were $46 8 million in Q3 compared to 33 million in the same period a year ago.
A significant portion of this increase is due to redeployment of our existing employees from collaborations to proprietary programs from customer facing structural biology surfaces to internal programs.
<unk> expenses and head count also contributed materially to the increase as we supported the progress with our most advanced programs into clinical development.
Compared to Q2, 2023, R&D expenses increased by 10% again, driven by shifting allocation of our soft to proprietary programs and by higher <unk> expenses.
Ramy Farid: I greatly appreciate the hard work and commitment of all of our employees who are instrumental in our mission.
Geoffrey Porges: I have now turned the call over to Jeff. Thank you, Rami, and good afternoon, everyone. It's been a strong quarter of a shorting, and this is reflected in our quarterly results in financial guidance. Our software business is growing despite a challenging biophonic industry environment, and our proprietary portfolio is progressing nicely.
For the first three quarters, our R&D expenses were $130 million compared to $92 million in the same period in 2022.
Sales and marketing expenses were $9 1 million in Q3 compared to $7 2 million in Q3 2022 with most of the increase coming from increased head count and associated cost to support our software business.
Geoffrey Porges: Today I'll share details of our financial results, and then close with some comments about our financial guidance. Our revenue results for the quarter were above our expectations, and reflect the impact of the changes in our collaboration portfolio that Rami explained earlier. We remain very positive about our outlook for the year, and continue to expect significant growth in software revenue in Q4, and in both folk discovery and software revenue for the year overall.
Sales and marketing expense was flat compared to Q2 of this year.
G&A expense was 24 million in Q3 compared to $23 million in Q3 2022 $23 million in Q2 2023 increases in head count were offset by savings in professional services compared to prior periods.
Total operating expenses were $80 million compared to 63 million in Q3, 2022 and $275 million in Q2, 2023 operating expenses increased due to higher R&D and somewhat higher sales and marketing expenses.
Geoffrey Porges: Software revenue for Q3 was 28.9 million, up 17% compared to Q3 2022. The revenue growth was driven by existing customers increasing their investment in our technology, with a number of additional customers reaching the 1 million per year threshold during Q3. Hosted software grew strongly, and some large customers elected to initially increase their access to technology on a hosted basis. Services revenue declined due to the shift away from our structural biology services, and towards our proprietary programs.
Loss from operations was $56 million in Q3 compared to 46 million in the same period in 2022.
Our other income was once again affected by significant changes in the value of our equity positions in public we've tried to biopharma companies.
<unk> and these valuations resulted in a $14 5 million loss in Q3 other.
Geoffrey Porges: And our contribution revenue increased to 1.8 million, driven by the expanded renewal of our battery chemistry research project, with Gates Ventures. Like discovery revenue increased by 11%, the 13.7 million compared to 12.3 million in Q3 last year. There was a $10 million contribution in the quarter from the acceleration of previously deferred revenue associated with the two BMS programs that reverted to us. There are four remaining programs in the BMS collaboration, including the SOS-1 program, the transition to their portfolio in Q1 2023.
Other income also included $5 8 million in interest income tax provision was a benefit of $3 million, which was the anticipated reversal of the tax estimate we reported in Q1 2023 associated with the Nimbus distribution.
Our net loss was $62 million or 86 cents per basic and diluted share for the quarter compared to a loss of $39 9 million or <unk> 56 per share in Q3 2022.
non-GAAP net loss for the quarter was $50 4 million compared to a net loss of $44 9 million in Q3, two tranches a.
Our weighted average basic and diluted share count increased by 1% compared to the prior year in.
Total cash used in operating activities for the quarter was $49 $9 million and our cash and marketable securities decreased from 554 million on June $30 million to $503 million on September 30th.
Geoffrey Porges: Toto Revenue for the quarter was 42.6 million compared to 37 million in Q3 2022 and 35.2 million in Q2 2023. For the first three quarters of the year our software revenue was 90.5 million compared to 88 million for the first same period last year, and I'd like to discover revenue was 52 million compared to 36 million for the same period a year ago. Our gross margin performance was positive this quarter with higher revenue producing improved product profitability.
I'll now turn to our financial guidance for the year.
Our guidance for software and drug discovery revenue for 2023 is unchanged. We continue to expect full year software revenue growth to be 15% to 18% and we expect drug discovery revenue to be in the $50 million to $70 million range.
We continue to expect total operating expense growth in 2023 to be below operating expense growth. In 2022, we now expect cash used for operating activities to be somewhat higher in 2023, and 2022 based on the mix of revenue the timing and size of milestones in our expectations for new business development activity. This year.
Geoffrey Porges: The software gross margin was 76% compared to 72% in the same period last year and 77% in Q2 2023. Drug discovery gross margin was 13% compared to a 5% loss ratio for the same period a year ago. Combined reported gross margin was 56% compared to 47% in the same period in 2022. Our software gross margin should continue to improve slowly, and our drug discovery margin will be volatile depending on the timing and amount of milestone payments associated with collaborations.
Our net cash position at the end of the year is likely to be similar to our net cash position at the end of 2022 with a cash distributions in the first half of the year from our investment in Nimbus offsetting our expected full year cash used for operating activities.
Geoffrey Porges: In general we expect our cost for collaboration programs to trend down thus increasing the potential gross profitability of successful achievement of milestones in collaborations. Our D expenses were 46.8 million in Q3 compared to 33 million in the same period a year ago. A significant portion of this increase is due to redeployment of our existing employees from collaborations to proprietary programs and from customer facing structural biology services to internal programs. CRO expenses and head cap also contribute materially to the increase as we supported the progress of our most advanced programs into clinical development.
The major uncertainties for our financial outlook, our ability to predict changes in the strategic priorities of our partners and customers.
The timing and value of new business development activity, and the timing and probability of development milestones.
These are reflected in our updated guidance.
Overall, we reported strong financial results for the quarter and are maintaining our revenue guidance for the year.
Proprietary portfolio is maturing our capital allocation is shifting towards supporting the progress of our proprietary programs and to capturing the value generated by our technology and emerging companies such a structure and Norfolk.
Geoffrey Porges: Compared to Q2 2023 R&D expenses increased by 10%, again driven by shifting allocation of our staff to proprietary programs and by higher CRO expenses. For the first three quarters our R&D expenses were 130 million compared to 92 million in the same period in 2022. Sales and marketing expenses were 9.1 million in Q3 compared to 7.2 million in Q3 2022, with most of the increase coming from increased head count and associated costs to support our software business.
Now I'll turn the call over to Karen to comment on the progress in our drug discovery and development portfolio.
Thank you, Jeff and good afternoon, everyone.
During the quarter, we continued to make strong progress across our pipeline. We are close to completing our STR <unk> healthy volunteer study, we initiated dosing in our STR $29 21 oncology trial and the IMD submission. So STR 35 15 is on track.
Geoffrey Porges: Sales and marketing expenses flat compared to Q2 of this year. Q&A expenses 24 million in Q3 compared to 23 million in Q3 2022 and 23 million in Q2 2023. Increases in head count were offset by savings and professional services compared to prior periods. Total operating expenses were 80 million compared to 63 million in Q3 2022 and to 75 million in Q2 2023. Operating expenses increased due to higher R&D and somewhat higher sales and marketing expenses.
We're also preparing to present four posters at the Ash annual meeting next month. These presentations will include data on 55, and $29 21, as well as two clinical trial in progress posters.
In addition to our proprietary programs several collaborative programs are advancing and nine molecules have transitioned to the clinic through our collaborations.
Rami and Jeff reported earlier.
Operative programs, which target the same protein research at tissue, adding F&B E&S and our team is assessing next steps in the context of our overall proprietary portfolio.
Geoffrey Porges: A reported loss from operations was 56 million in Q3 compared to 46 million in the same period in 2022. Our other income was once again affected by CDVN changes in the value of our equity positions in publicly traded by a farmer company. Changes in these valuations resulted in a 14.5 million loss in Q3. Other income also included 5.8 million in interest income and our tax provision was a benefit of 3 million which was the anticipated reversal of the tax estimate we reported in Q1 2023 associated with the member's distribution.
I will now review recent progress on several of our proprietary programs in more detail.
First beginning with Alamo, one inhibitor S. J F 15 F. Five we are continuing to advance our development program to further characterize the clinical profile of the whole molecule earlier. This year, we initiated a study of STL 15, 85 in healthy volunteers to assess initial safety pharmacokinetic anthem.
Geoffrey Porges: A net loss was 62 million or 86 cents per basic and diluted share for the quarter compared to a loss of 39.9 million or 56 cents per share in Q3 2022. A non-gap net loss for the quarter was 50.4 million compared to a net loss of 44.9 million in Q3 2022. A weighted average basic and diluted share count increased by 1% compared to the price. E.R.
Nick how dynamic relationships.
This study is nearing completion and we expect to share data from this study at upcoming medical scientific and Investor events in outpatient study. We recently opened additional sites in Europe and the U S to support recruitment. In addition to the Cta approval in Europe in the third quarter, the FDA granted <unk>.
Geoffrey Porges: A total cash used in operating activities for the quarter was 49.9 million, and a cash and marketable security decreased in 554 million on June 30th to 503 million on September 30th.
Orphan drug designation to STL 15, aside for the potential treatment of mantle cell lymphoma.
Geoffrey Porges: I'm now turn to our financial guidance for the year. Our guidance to software and drug discovery revenue for 2023 is unchanged. We continue to expect full-year software revenue growth to be 15 to 18 percent, and expect drug discovery revenue to be in the 50 to 70 million dollar range. We continue to expect total operating expense growth in 2023 to be below operating expense growth in 2022. We now expect cash used for operating activities to be somewhat higher in 2023 than 2022, based on the mix of revenue, the timing and size of milestones and our expectations for new business development activity this year.
<unk> seven inhibitor in SJI 2921 has also entered the clinic with patient dosing underway in the U S.
The primary objectives of this study to evaluate the safety pharmacokinetics and pharmacodynamics.
The Stablish the recommended phase two dose for <unk> 2991 in patients with acute myeloid leukemia, and Myelodysplastic syndrome pre clinically Spi 2921 exhibit as monotherapy and combination activity in AML patient derived models independent genetic drivers.
Geoffrey Porges: On that cash position at the end of the year, it's likely to be similar to on that cash position at the end of 2022, with the cash distributions in the first half of the year from our investment in Nimbus, offsetting our expected full-year cash used for operating activities. The major uncertainties for our financial outlook are ability to predict changes in the strategic priorities of our partners and customers, the timing and value of new business development activity, and the timing and probability of developing milestones. These uncertainties are reflected now updated guidance. Overall, we reported strong financial results for the quarter and maintaining our revenue guidance for the year.
And re sensitize as AML models to standard of care agents, such as <unk> inhibitors.
Turning to SG&A of 35 15 today, we provided new details on our development candidate S. Gel 35 15 were selected based on the same condition as both we won and Mitch one carat loss of function of these two proteins confer selected vulnerability in cancer cells. In addition to this.
Mechanistic advantage 10 synthetic lethality STL 35, 15 has a favorable pharmacologic profile.
Geoffrey Porges: Our proprietary portfolio is maturing, a capital allocation is shifting towards supporting the progress of our proprietary programs and to capturing the value generated by our technology in emerging companies such as Structure and Morphic.
We are on track to submit the IMD for S. J F 35, 15 in the first half of 2024 to support initiation of a phase one study by the end of next year.
Beyond the disclosed programs, we are working on a number of other programs in oncology and immunology at various stages of discovery today, we disclosed that one of these programs is PRN T. Five MTA CRM T. Five has been shown to be a synthetic lethal targets and tap deleted cancers with <unk>.
Karen Akinsanya: I'll now turn the call over to Karen to comment on the progress in our drug-discovering development portfolio. Karen?
Karen Akinsanya: Thank you, Jeff, and good afternoon, everyone. During the quarter, we continue to make strong progress across our pipeline. We are close to completing our STR-505 Healthy Volunteer Study. We initiated those things in our STR-2921 Oncology Trial, and the IMD submission for STR-3515 is on track. We are also preparing to present four posters at the Ash and Walnuting next month. These presentations will include data on STR-505 and 2921, as well as two clinical trial in progress posters.
Potential roles in the treatment of both hematologic and solid achievements.
In summary, our proprietary portfolio is advancing and we are very excited to be sharing our first clinical data from healthy subjects.
<unk> 15, or five later this quarter, we look forward to sharing more information about our proprietary programs at our pipeline today on December 14th.
I'll now turn the call back to Rami. Thank.
Karen Akinsanya: In addition to our proprietary programs, several collaborative programs are advancing, and nine molecules have transitioned to the clinic through our collaborations. As Ramy and Jeff reported earlier, two collaborative programs, which target the same protein, revert it to shredding it from BMS, and our team is assessing next steps in the context of our overall proprietary portfolio.
Thank you Karen as you heard we've made excellent progress across the business this quarter and we look forward to providing further updates on our discovery and clinical programs. Later this year at this time, we'd be happy to take your questions.
Thank you.
This time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.
Karen Akinsanya: I'll now review recent progress on several of our proprietary programs in more detail. First, beginning with our more one inhibitor, STR-505, we are continuing to advance our development program to further characterize the clinical profile of our molecule. Earlier this year, we initiated a study of STR-505 in Healthy Volunteers to assess initial safety, pharmacokinetic, and pharmacodynamic relationships. This study is near in completion, and we expect to share data from the study at upcoming medical, scientific, and investor events.
Your first question comes from Michael Yee with Jefferies. Please go ahead go ahead.
Karen Akinsanya: In our patient study, we recently opened additional sites in Europe and the US to support recruitment. In addition to the CTA approval in Europe, in the third quarter, the FDA granted often drug designation to STR-505 for the potential treatment of mantle cell lymphoma. Our CDC-7 inhibitor, STR-2921, has also entered the clinic with patient dosing underway in the US. The primary objectives of this study are to evaluate the safety, pharmacokinetic, and pharmacodynamics, and establish the recommended Phase II dose for STR-2921 in patients with acute myeloid leukemia and myeloid dysplastics syndrome. Preclinically, STR-2921 exhibits monotherapy and combination activity in AML patient-derived models, independent of genetic drivers, and resensitizes AML models to standard of care agents, such as flip-3 inhibitors.
To to jump for the for the second one.
So first of all let me be very clear that the.
The visibility we have into the fourth quarter is very high we've had very productive discussions that have been going on as we've been saying all year.
With our largest customers and there's very clearly significant interest in scaling up their usage.
Karen Akinsanya: Turning to STR-3515, today we provided new details on our development candidate. STR-3515 was selected based on its inhibition of both Wii 1 and MIIT-1. Concurrent loss of function of these two proteins confirmed selective vulnerability in cancer cells. In addition to this mechanistic advantage, trans-ynthesically-thality, STR-3515 has a favorable pharmacologic profile. We are on track to submit the ID for STR-3515 in the first half of 2024 to support initiation of a Phase I study by the end of next year.
I just want to emphasize that we have a lot of visibility into that.
And to answer your question I'm drug discovery Uh Huh.
Reported drug discovery revenue to 310 million of that was from BNS associated with with the two programs.
There was also a program.
Decision by them in the prior year in the third quarter.
Yeah that contributed then so.
Full of payment, but that was a pilot and two three of last year and then to the branch of the guidance I think it's it should be fairly clear by now that our revenue reflect discovery side is chunky.
Karen Akinsanya: Beyond the disclosed programs, we are working on a number of other programs in oncology and immunology at various stages of discovery. Today, we disclose that one of these programs is BRMT5MTA. PRMT5 has been shown to be a synthetic lethal target for M-tap deleted cancers with potential roles in the treatment of both hematologic and solid tumours. In summary, our proprietary portfolio is advancing and we are very excited to be sharing our first clinical data from Healthy Subject for SGR 1505 later this quarter.
And we've just begun strange Y two incomes.
Encompass what we think is a weasel ranch of probable outcomes to just state. The obvious we don't think that's gonna be a diversion of revenue for low end of the guidance range, but equally.
So a number of things that can occur in the fourth quarter push us to different points in that branch. So that's why we bought the ranch attacked.
Okay, I'll, let someone else to ask if we could go from 52 to 50, [laughter], Jeff, but Ah Ah human that's not happening it's still a wide range. So I will take a look and figure that out but look forward to the results for the fourth quarter. Thank you.
Karen Akinsanya: We look forward to sharing more information about our proprietary programs at our pipeline day on December 14th.
Ramy Farid: I'll now turn the call back to Ramy. Thank you, Karen. As you heard, we've made excellent progress across the business this quarter and we look forward to providing further updates on our discovery and clinical programs later this year.
Thank you. Your next question comes from the line of Vikram Pearl head with Morgan Stanley. Please go ahead.
Hi, This is people if they contested pick out by chance. So I'm gonna ask the questions regarding the M. L. M. I L. T y first.
Unknown Executive: At this time, we'd be happy to take your questions. Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
First what is the current sense of timing towards <unk>, except for <unk>, because I know you are going to <unk>, but what other states <unk> patient [laughter] timing <unk> and second of <unk> Africa.
Michael Yee: Your first question comes from Michael Yee with Jeffries. Please go ahead. Hey guys, thank you for the question and appreciate all the detail.
Advocacy for the data for the initial thing I said thank you.
Hi, yes.
Michael Yee: Two questions for the team, one on software and one on drug discovery. On software, you know, there's been prior commentary around how your customers are accelerating use. I think you mentioned that word utilization. Can you just talk about how much visibility and how you are seeing those things come through both in the third quarter and presumably what we would see in the fourth quarter, other metrics or things that would show that.
10, 30 is nearing completion and we do it that's for sure.
From study upcoming medical compensate as an Investor then.
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Concerned that study is ongoing and continuing to add.
Pull enrollment, but we expect initial data from the patients that need to be available in late 2020 or 25, depending on enrollment.
Michael Yee: And I asked that in the context of, you know, Wall Street likes to see beating numbers and beating by one or two million. And so I just wanted to understand that because you came in the middle of your guidance for the quarter.
And so.
Back to your question on the <unk>, we will not be discussing that today I think we do have a pipeline day coming up place you on this year and I think will be giving a lot more color on a strategy and thoughts about the program at that time.
Ramy Farid: And then on drug discovery, can you clarify if there was a payment from Bristol in this quarter for the handback of the two compounds and what would explain the large $20 million range for drug discovery, then in the fourth quarter. That's a pretty large range. Thank you. Thanks Mike for the questions. Robbie, I'll take the first one and then hand it over to Jeff for the second one. So first of all, I'll be very clear that the visibility we have into the fourth quarter is very high.
Sure. Thank you.
Thank you. Your next question comes from the line of had been Siegman with BMO capital markets. Please go ahead.
Alright, I'm not coughing on for them.
Just wanted to ask what's your recently announced pure M. T. Five acid are you able to comment how long has has it has been in development and whether a recent interest from other biotech players quite a bit influence the decision to pursue the program and then how should we think about the indications are treatment settings retarded.
Ramy Farid: We've had very productive discussion that have been going on as we've been saying all year with our largest customers and there's very clearly significant interest in scaling up their usage. I think I just want to emphasize that we have a lot of visibility into that. And Mike just answered your question.
Okay.
Yeah. Thanks for the question. So we just have so we will be providing an update on the progress. So I program again, a pipeline. Today. However, we have initiated that program. Some time ago stated on the on the cool This program with one of our undisclosed.
Geoffrey Porges: I'm glad to discovery. I heard that I've reported for discovery revenue in Q3 10 million of that was from BMS associated with the return of the two programs that we just followed. Now, there was also a program decision by them in the prior year in the third quarter that contributed then. So that was a small payment, but that was a payment to in Q3 of last year. And then to the range of the guidance.
And today, we're updating you on the status of that obviously, we ended everyone outfits pretty excited about the data that's been coming out on that mechanism and so you know we'll look.
Four two progressing the program and updating your like <unk>.
Geoffrey Porges: I think it should be fairly clear by now that our revenue like discovery site is chunky. And we've tested the guidance range wide to encompass what we think is the recent range of probable outcomes to just say the obvious we don't think there's going to be a version of revenue for low end of the guidance range. I think we'll see a number of things that can occur in the fourth quarter that push us to different points in that range. So that's why we trust the range of time.
Thank you. Your next question comes from the line of David Leibowitz with city.
Go ahead.
Yeah.
Hi, guys John for David Thanks for taking my question just a quick one.
Turning off the previous question <unk> collaboration can you just clarify if there are any other potential financial implications of that decision.
Going forward beyond this quarter as well.
Sure. Thanks for the question. So the first is is for several quarters.
Michael Yee: Okay, let someone else ask if we could go from 52 to 50, Geoff, but assuming that's not happening, it's still a wide range, so I will take a look and figure that out, but look forward to the results for the fourth quarter. Thank you.
Transitioning.
Employees over from collaboration program.
Programs.
<unk> <unk> the cost of services for.
Detroit Discovery side, plus a slightly down.
<unk>, that's the results of that shift in deployment.
Unknown Executive: First, what is the current sense of timing towards the face 1 data, because I know you are going to release some data in ash, but what are the face 1 data in the patient, the timing will be your sense. And second, what's the bar in order to see for the data, for the initial data set? Thank you. Hi, yes, so the health volunteer study is nearing completion, and we do expect to share data from that study at upcoming medical conferences and investor events.
To your organization, that's going to continue in the future.
<unk> decision.
<unk> is going to continue going forward.
<unk> of course.
We are no longer eligible for downstream milestones associated with this both programs from the M. S.
That's Carol mentioned in her last <unk>.
Mature these for us to capture value for most programs February proprietary or potential.
Two of these in the future.
We still have to resolve that and come to some sort of final decision, but that's opportunity for but could potentially all set the.
Unknown Executive: As far as the study in a science, interlogic militancy is concerned, that study is ongoing, and we are continuing to add new sites to support enrollment, but we expect initial data from the patient study to be available in late 2024 or 25, depending really on enrollment. And so with respect to your question on our hurdle, we will not be discussing that today.
This is no longer the payments collaboration.
Got it thank you very much.
Thank you. Your next question comes from the line of Michael Riskin with Bank of America. Please go ahead.
Great. Thanks for taking the question guys.
First I want to ask on the updated Guy I, just Wanna make sure I'm understanding like properly.
Unknown Executive: I think we do have a pipeline day coming out later on this year, and I think we'll be giving a lot more color on our strategy and thoughts about the program at that time. Sure, thank you. Thank you.
Chained revenues across the various segments maintain margins et cetera, but you are talking about more cash operating cash Houston last year I think he flagged.
Evan Seigerman: Your next question comes from the line of Evan Seagerman, with BMO Capital Markets. Please go ahead. Hi, I'm not going on for Evan, but we just want to ask with you, we recently announced Purim T5 acid.
Mix milestones.
Business activity, but.
Clarify why it's not showing up on the casuals, but not on the piano or maybe it is showing up on the piano and it just sort of you know not moving that basket of operating expenses be lower than last year.
Unknown Executive: Are you able to comment how long has acid has been in development, and whether recent interest from other biotech players might have influenced the decision to pursue the program? And then how should we think about the indications or treatment settings or targeting? Thank you. Yeah, thanks for a question. So we just that we will be providing an update on the progress of our program again at pipeline day. However, we had initiated that program some time ago, as we stated on the call.
Any any color there huh.
Absolutely really good question, it's because of the disconnect between when we book actual cash for my partners and path and when we actually recognize revenue. That's the first thing. It's also to do with the <unk>.
Actual mix of revenue that we reported during the third quarter.
Unknown Executive: This program with one of our undisclosed programs and today we're updating you on the data for that. Obviously, we and everyone else is pretty excited about the data that's been coming out on that mechanism. And so, you know, we're looking forward to progressing the program and updating you all later on this year. Thank you.
Shift between for example payment so.
That versus new business development activity for example.
It's it's really in the mix of revenue advice.
Prepared remarks, but also the timing and size of milestones.
Expectations for business activity, all three of those things contributed.
I will say that the operating cashews in the third quarter was around $50 million.
David Lebowitz: Your next question comes from the line of David Leibowitz with city. Please go ahead. Hi guys, John for David. Thanks for taking our question. Just a quick one building off the previous question of the BMS collaboration. Can you just clarify if there are any other potential financial applications of that decision? I'm going forward beyond this quarter as well. Sure. Thanks for the question.
That's so yesterday through the third quarter, it's hopefully $100 million, we do expect.
Fourth quarter cash upgrading cashews to be Lola.
Which is giving you a sense of of what they are but.
It's really those factors that I mentioned to my.
Change the outlook on the cache site, even though.
Opex.
Geoffrey Porges: So, the first is that for several quarters now, we've been transitioning our employees over from collaboration programs to proprietary programs that's reflected in our report expense results, but the cost of services for the play discovery side being flat to slightly down. And then the RDE expense going out, that's a result of that shift in deployment of those employees in the RDE organization. That's going to continue in the future after the CMS decision that trend is going to continue going forward.
Gotcha.
Okay. Thank you and then if I can pick up a follow up on.
Self per cent of the business, but you know you you reiterated the guide and you know three Q was pretty much right down the middle of your outlook, but still there's been a lot of chatter.
A lot of updates among other biopharma players in terms of.
Program Reprioritization, some cross cutting some reevaluating over there spend cross-purpose baskets obviously.
When they they eastern or software, it's a very small part of their total opex spend and I'm. Just wondering you know anything you're hearing from your customers in terms of you know <unk>.
Geoffrey Porges: The second is, of course, that we are no longer eligible for the downstream milestones associated with those programs from the MS. And as Karen mentioned in her last, we still believe that our opportunities for us to capture value from those programs, either as proprietary or potential partner opportunities in the future. We still have to resolve that and come to some sort of final decision, but that's an opportunity for us that could potentially offset the milestones that will be full gone because they're no longer in the CMS collaboration. Guy, thank you very much.
Reevaluating.
Revaluing spend levels, whether it is company specific updates or something really it's the iron right or whatnot could you just talk about those conversations.
Yeah. So first I just wanted to emphasize again that we have very high confidence and achieving the implied growth in queue for that that's applied from maintaining a persistent achy per cent overall growth for the year and what I'll tell you. The same thing that we've been talking about before we.
Unknown Executive: Thank you.
In this environment.
The cost cutting it as as you're describing environment. It appears and again I don't think that's a surprising.
Michael Ryskin: Your next question comes from the line of Michael Riskin with Bank of America. Please go ahead. Great. Thanks for taking the question, guys. First, I want to ask on the updated guide. I just want to make sure I'm understanding, I think, properly maintain revenues across the various segments, maintain margins, et cetera. But you are talking about more cash operating cash used in last year. I think you flagged, you know, mix, milestones, new business activity, but clarify why is that shown up on the cash rolls, but not on the PNL? Or maybe it is shown up on the PNL and it's just sort of not moving that basket of operating expense growth being lower than last year. Any color there?
To be resulting in higher demand for.
Technology that improve efficiency and reduce reduces cough it improves probabilities of success.
We <unk>, we we we certainly are aware of what you're talking about but we can tell you that it does not appear to be having an impact on the interest in scaling up of the usage of our software and it is not <unk>.
Impacting our sort of confidence and and achieving the grotesque.
Wired in queue for 10 to 15 to 18 per cent overall growth for the software business.
Super helpful. Thanks, So much yep.
Thank you. Your next question comes from the line of masculine with Craig Hallum. Please go ahead.
Good afternoon, thanks for taking the questions. It kind of following up on that [laughter] regarding the software and you've come into done. This a couple of different times, but significant growth potential. This year I just want to clarify that's it's not just about this year, you're also talking about the conversations you're having with your larger customers and what that will mean for next years.
Geoffrey Porges: Absolutely, really good question. It's because of the disconnect between when we book actual get cash from our partners in part and when we actually recognize revenue, that's the first thing. It's also to do with the actual mix of revenue that we reported during the third quarter. The other shift between, for example, prior payments or, you know, that versus new business development activity, for example. So it's really in the mix of revenue advice and repair remarks, but also the timing and the milestones and our expectations for business development activity.
Commitments from those same customers correct.
So.
We're definitely not giving finals financial guidance to next year or giving you any indication about next year.
The discussions that we've been having throughout the year.
And being very positive continue to be very positive very supportive.
Revenue guidance that we provide your updated reiterated today, but equally about the opportunity for us to continue to grow the deployment of our software allows us <unk>.
Geoffrey Porges: All three of those things contributed. I will say that the operating cash use in the third quarter was around $50 million, and that's, so year to date, through the third quarter, it's roughly $100 million. We do expect the fourth quarter cash operating cash used to be lower than the third quarter, which is, you know, giving you a sense of what the outlook for the year is. But it's really those factors that I mentioned to my sort of change. The outlook on the cash side, even though we've maintained revenue and off the operating spectrum.
A highlight in the comments that I've provided about the fourth quarter, we did see a number of smaller customers actually stepping up their use of that software. So even in part of the market that many people think is particularly stress as well.
You know, what I'm, saying customs coming forward and stepping up they use technology to become.
The customs office, so the scale of the global customers definitely contributed yeah, and let me add one more thing.
It's very important to keep in mind remember we are advancing the platform very aggressively continued to make very important scientific breakthroughs continuing to improve the software as we said many times we have four releases a year. So there are many more opportunities associated with just continued improvement.
Ramy Farid: Okay, thank you. And then, if I can take a follow-up on the self-profile of the business, again, know that you reiterated the guide and, you know, 3Q was pretty much right down the middle of your outlook. But still, there's been a lot of chatter, and a lot of updates among other biopharmal players, in terms of program repriorization, some crosscutting, some re-evaluating of their spend, cross various baskets. Obviously, when they use Schrodinger's software, it's a very small part of their total off-back spend, but I'm just wondering, you know, anything you're hearing from your customers in terms of re-evaluating, re-evaluating spend levels, whether it is company-specific updates or something really at the IRA or whatnot. Could you just talk about those conversations?
To the platform expanding its domain of of flexibility expanding the types of targets. We can work on expanding number of properties. We can predict they actually made a statement about that and are and are prepared remarks. So that's another important thing to keep in mind and I think addresses your question.
That's really helpful to.
[noise] to hear that you're even having smaller customer stepping up that actually is not what we're hearing from other companies. Other companies are talking about the scaling back the cutting of of perceived cost places. So that's actually a very positive development I guess the second question for me regarding the the to be.
Ramy Farid: Yeah, so, first, I just want to emphasize again that we have very high confidence in achieving the implied growth in Q4 that's applied from maintaining of the 15 to 80% overall growth for the year. And what I'll tell you is the same thing that we've been talking about before. We think in this environment of, you know, this cost-cutting as you describe an environment, it appears. And again, I don't think this is surprising to be resulting in higher demand for technology that improves efficiency and reduces cost and improves probabilities of success.
M S programs that have reverted back to you and I realize this might be still early days, but is this something where you will now take over those pregnant programs and look too real license. Those are re partner those or do you put them on the shelf and kind of wait for the market to improve or change what what happens to those two assets. Thank.
You.
Yeah.
Thanks for the questions. So, but these programs that state address unprecedented targets and we.
We were progressing according to the agreed upon time it kind of profile.
Ramy Farid: So, we certainly are aware of what you're talking about, but we can tell you that it does not appear to be having an impact on the interest in scaling up of the uses of our software, and it is not impacting our sort of confidence in achieving the growth that's required in Q4 to hit the 15 to 18% overall growth for the software business.
We've discussed uhm.
Not cheap.
Strategically.
We have a high degree of confidence in the work.
That's been done in collaboration and we are going to evaluate.
The fifth.
Uhm with Apple.
Point out.
It sounds very interesting and we believe that that may well as Jeff correct.
Unknown Executive: Super helpful. Thanks so much. Yep.
Unknown Executive: Thank you.
<unk> to create additional value from this program, we're not <unk>, we're still discussing that in sunlight.
Joe Catanzaro: Your next question comes from the line of Matthew with Craig Hallum. Please go ahead. Good afternoon. Thanks for taking the questions. We're kind of following up on that regarding the software, and you've commented on this a couple different times, but significant growth potential this year. I just want to clarify that it's not just about this year. You're also talking about the conversations you're having with your larger customers and what that'll mean for next years.
[noise] understood. Thank you.
Okay.
Thank you. Your next question comes from the line of Joe Kattan Zarro with Piper Sandler. Please go ahead.
Hi, everybody I. Appreciate you taking my question, maybe just one quick one for me on the pipeline side. So for 35 15 I think this is the first time, you're disclosing that it's actually a dual inhibitor of we want and became at once I just wanted to see whether this feature was an explicit goal of your drug discovery efforts or whether this was kind of.
Joe Catanzaro: Commitments from those same customers, correct? So, we're definitely not giving financial guidance to next year, or giving an indication about next year. The discussions that we've been having throughout the year have been very positive, continue to be very positive, very supportive of the revenue guidance that we've provided or updated today. But equally, about the opportunity for us to continue to grow the deployment of our software into our largest customers going forward.
During typically realize after the fact that you know what benefit you see over hitting both of these targets.
Relative to one or the other.
Yeah sure actually we identify.
<unk>, Oh, we want an ambition and outpatient drive model during the call Sir.
Joe Catanzaro: I also want to highlight in the comments that I've provided about the fourth corner, we did see a number of smaller customers actually stepping up their use of our software. So, even in part of the market that many people think is particularly stressed as a result of capital, etc. I've seen customers coming forward and stepping up their use of our technology to become a larger customer. So, the scale of the global customers, but definitely contributed.
We ended up selecting.
15 from a number of theory.
Our discovery lab.
And then develop in Canada. It shows that the cause of it we won and submit one activity, but also because of differentiation pharmacological properties.
Well everything excited about this because of the information on <unk>.
Joe Catanzaro: Yeah, and let me add one more thing. That's very important to keep in mind. Remember, we are advancing the platform very aggressively. We continue to make very important scientific breakthroughs. We continue to improve the software. As we said many times, we have four releases a year. So there are many more opportunities associated with just continued improvements to the platform, expanding its domain of applicability, expanding the types of targets we can work on, expanding the number of properties we can predict.
And we decided to disclose that because of that accident CNR excitement has not taken the since the clinic.
Okay, Great. That's helpful. Thanks for taking my question.
[laughter].
Thank you, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press star one on your telephone keypad.
Your next question comes from the line of Chris <unk>, Cebu Tammy with Goldman Sachs. Please go ahead.
Joe Catanzaro: We actually made a statement about that in our prepared remarks. So that's another important thing to keep in mind. And I think it addresses your question. That's really helpful. And to hear that you're even having smaller customers stepping up that actually is not what we're hearing from other companies. Other companies are talking about the scaling back, the cutting of perceived cost places. So that's actually a very positive development. I guess the second question for me regarding the two BMS programs that have reverted back to you.
Great. Thank you very much Jeff I know the queue for his seasonally tended to be the time of year, when you're getting renewals happening with your existing customers.
If I'm going to read into your comments about confidence and visibility and while I know you're not gonna be guiding on 24. We are now <unk> can you give us any sense for particularly maybe the higher velocity those greater than 5 million average kind of utilization customers how is that.
Joe Catanzaro: And I realize this might be still early days, but is this something where you will now take over those programs and look to re-outlicens those or repartner those. Or do you put them on a shelf and kind of wait for the market to improve or change what happens to those two assets. Thank you. Yeah. Thanks for the question. So these programs actually address precedented targets. And, you know, we were progressing according to the agreed upon target product profile.
<unk> and that will be helpful. And then to be absolutely clear for your December mid December analyst event, we should expect the focus to be entirely on the pipeline.
<unk> the timing for when you would expect to provide that 2024 guidance would be when would it be the fourth quarter report is there a chance at the annual kickoff conference in January just some perspective would be helpful. Thanks.
Oh, Thanks for the questions look I think we've made it clear throughout the year that we're having very constructive discussions with our largest customers.
Joe Catanzaro: As we've discussed BMS elected not to proceed with further development and strategic reasons. We have a high degree of confidence in the work that's been done in this collaboration. And we are going to evaluate as we discuss the fit of those programs with our portfolio. But, as you point out, the targets are very interesting. And we believe that there may well as Jeff could it be an opportunity to create additional value from those programs, but we're not we're still discussing that internally. Understood. Thank you.
And I think probably his favorite color that those discussions of progressed very nicely throughout the year.
Give us a lot of confidence.
That's for the here.
Equally if we were certain that we will be outside of the guidance branch will you would obviously be upgrading that guy.
And we think that those discussions.
<unk> well for next year.
Certainly not in a position to be providing guidance for next year.
In terms of the timing for that card.
Because so much of our revenue or.
Unknown Executive: Your next question comes from the line of Joe Katanzaro with Piper Sandler. Please go ahead. Great. Hi, everybody. I appreciate you taking my question. Maybe just one quick one for me on the pipeline side. So for 3515, I think this is the first time you're disclosing that it's actually a dual interpreter of we want and PKMit1.
Or at least a renewal activity is at the very end of the year.
Large customer sorry, okay.
Their licenses for this year.
The level of activity and utilization therefore, we're going to step up for change what are the next year that happens at the very end of the year. So I certainly don't want a certain expectation that there'll be a natural component on the pipeline date and time.
Karen Akinsanya: So just wanted to see whether this feature was an explicit goal of your drug discovery efforts or whether this was kind of serendipitously realized after the fact and, you know, what benefit you see over hitting both of these targets relative to one or the other. Thanks. Yeah, sure. Actually, we identified Mit1 as an important empirically talented gene for we want inhibition in our patient derived model during the course of the program.
Any sort of revenue commentary will need to close out the year that will be providing financial guidance from the fourth quarter in part because the fourth quarter outcome influence will be out next year as well.
And can I ask one expense follow up question, you talk about redeploying within R&D.
Sort of your your your employees from the collaborators to proprietary programs.
Karen Akinsanya: We ended up selecting actually our 3515 from a number of series that were in our discovery lab as a development candidate who chose it because of it. We won and Mit1 activity, but also because of its differentiated pharmacological properties. We're excited about this because of the information on synthetic decality and we decided to disclose it because of that activity and our excitement is about taking the sense of the clinic. Okay, great. That's helpful. Thanks for taking my question. Thank you.
Can we get a sense for sort of what that relative balance and that shift that ongoing is that more or less complete is that gonna be a continuous process I know that Karen is working to develop the proprietary pipeline, but just some perspective there because it does sound as is the sort of cost per head. When you go to the propriety programs as in.
<unk> mentally more constantly Emily uhm versus being in the collaboration thanks.
Yeah, but.
Quick comment <unk> because the head is the same it's it's.
They're they're they run through the income statement in a different part of the income statement, if they're working on a collaboration project.
Unknown Executive: Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one on your telephone keypad.
Work out a proprietary program so.
Chris Shibutani: Your next question comes from the line of Chris Shibutani with Goldman Sachs. Please go ahead. Great.
To a certain extent it's account.
Accounting convention shifting approach Uhm, a cost a good plan to do an orange.
Geoffrey Porges: Thank you very much. Geoff, I know that Q4 has seasonally tended to be the time of year when you're getting renewables happen with your existing customers. If I'm to read into your comments about confidence and visibility and while I know you're not going to be guiding on 24, we are now at a month in. Can you give us any sense for particularly maybe the higher velocity, those greater than 5 million average kind of utilization customers?
In terms of your question about the the trajectory I do think that the.
<unk> in the fourth quarter.
The that trend is going to continue because obviously, we have some programs that we were actively deployed on.
Third quarter that will not be actively deployed onto operation programs in the fourth quarter appeal.
But equally.
Think we still believe in collaboration we still think that's part of our business fixed. So we will continue to be engaged in collaboration.
Geoffrey Porges: How is that going? And that would be helpful. And then to be absolutely clear for your December mid-December analyst event, we should expect the focus to be entirely on the pipeline, definitively the timing for when you would expect to provide that 2024 guidance would be when? Would it be the fourth quarter report? Is there a chance at the annual kickoff conference in January? Just some perspective would be helpful. Thanks.
10 years at the expense for the the Therapeutics group going through that line. The income statement I hope that gives you at least a directional answer.
Yeah, No that's helpful perspective, thank you.
Thank you ladies and gentlemen, there are no further questions at this time.
Geoffrey Porges: So thanks for the questions, Chris. Look, I think we've made it clear throughout the year that we're having very constructive discussions with our larger customers. And I think Robbie has made it clear that those discussions have progressed very nicely throughout the year and give us a lot of confidence about our guidance for the year. Equally, if we were certain that we were going to be outside the guidance range, we would obviously be updating our guys.
Concludes today's conference call. Thank you all for joining and you may now disconnect your lines.
Geoffrey Porges: And we think that those discussions position as well for next year, but we're certainly not in a position to be providing guidance for next year. In terms of the timing for that guidance, because so much of our revenue, or at least our renewal activity, is it the very end of the year where our large customers say, okay, we've used our licenses for this year, and this has the level of activity and utilization.
[noise].
Geoffrey Porges: Therefore, we can step up for what's changed whatever next year. That happens at the very end of the year. So I certainly don't want to any sort of revenue commentary with you to close out the year, and we'll be providing financial guidance from the fourth quarter in part, because the fourth quarter outcome influences the outlook for next year as well. And can I ask one expense follow-up question? You talk about redeploying within R&D sort of your employees from the collaborations to proprietary programs.
Geoffrey Porges: Can we get a sense for sort of what that relative balance and that shift that's ongoing is that more or less complete? Is that going to be a continuous process? I know that Karen is working to develop the proprietary pipeline, but just some perspective there, because it does sound as if the sort of cost per head when you go to the proprietary programs is incrementally more costly, I believe, versus being in the collaboration.
Geoffrey Porges: Thank you. Yeah, but it's a quick comment, Chris. The cost ahead is the same. It's just that there's a run through the income statement in a different part of the income statement. If they're working on a collaboration project, mostly if they're working on a proprietary program. So, it's a certain extent. It's accounting convention shifting from a cost of goods line to an orange E-line. In terms of your question about the projectory, I do think that I was just in the fourth quarter, that trend is going to continue because obviously we have some programs that we were actively deployed on in the first quarter that will not be actively deployed on a collaboration program in the fourth quarter of the year.
Geoffrey Porges: But equally, I think we still believe in collaboration. We still think that's an important part of our business. So that we will continue to be engaged in collaborations, and so they'll continue to the expense for the product that their appearance group going through that line and the income statement. I hope that gives you at least a directional answer. Yeah, no, that's helpful for a second. Thank you.
Unknown Executive: Ladies and gentlemen, there are no further questions at this time. This concludes today's conference call.
Unknown Executive: Thank you all for joining and you may now disconnect your line.