Q1 2024 Schrödinger Inc Earnings Call

May 1, 2024

Chloe: Thank you for standing by. Welcome to Schrodinger's conference call to review the first quarter and 2024 financial results. My name is Chloe, and I'll be your operator for today. 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. Jaren Madden, Senior Vice President of Investor Relations and Corporate Affairs. Please go ahead.

Thank you for standing by welcome to Schroder Nerds Conference call to review <unk> first quarter 'twenty 'twenty four financial results. My name is Chloe and I'll be your operator for today's call.

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. Sharon Madden Senior Vice President of Investor Relations and corporate Affairs. Please go ahead.

Jaren Irene Madden: Thank you and good afternoon everyone. Welcome to today's call, during which we will provide an update on the company and review our first quarter 2024 financial results. Earlier today, we issued a press release summarizing our financial results and progress across the company, which is available on our website at Schrodinger.com. Here with me on our call today are Ramy Farid, Chief Executive Officer; Geoff Porges, Chief Financial Officer; and Karen Akinsanya, President of R&D Therapeutics.

Yeah.

Jaren Irene Madden: Thank you and good afternoon, everyone welcome to today's call during which we will provide an update on the company and review our first quarter 'twenty 'twenty four financial results earlier today, we issued a press release summarizing our financial results and progress across the company, which is available on our website at shredding or dot com.

Here with me on our call today are Rami Furry, Chief Executive Officer, Geoff Porges, Chief Financial Officer, and paradox in Sanya President of R&D Therapeutics.

Jaren Irene Madden: And following our prepared remarks, we'll open the call for Q&A. During today's 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, including, without limitation, statements related to our outlook for the second quarter and full year 2024, 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 readouts from our clinical trials, the clinical potential and properties of our compounds, the use of our cash resources, and the future expenses.

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

Jaren Irene Madden: During today's 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, including without limitation statements related to our outlook for the second quarter and full year 2024, our plans to accelerate the growth of our software business and advance our collaborative and proprietary drug.

Jaren Irene Madden: Every program the timing of initiation of an readouts from our clinical trials the clinical potential in properties of our compounds the use of our cash resources and 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.

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. However, actual results may differ materially due to a number of important factors, including the considerations described in the risk factors section and elsewhere in the filings we make with the SEC, including our Firm 10Q for the quarter ended March 31, 2024. These 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.

Jaren Irene Madden: 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 the filings, we make with the SEC, including our Form 10-Q for the quarter ended March 31st 2024.

Jaren Irene Madden: These 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.

Jaren Irene Madden: 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 as 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. With that, I'd like to turn the call over to Ramy.

Jaren Irene Madden: 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.

Jaren Irene Madden: non-GAAP measures to the most directly comparable GAAP measures with that I'd like to turn the call over to Rami.

Ramy Farid: Thanks, Jaren, and thank you, everyone, for joining us today. We are pleased with the start of the year, delivering revenue growth in line with our expectations and continuing to advance our proprietary pipeline. As you will hear from Karen, our first two clinical programs are progressing in phase one clinical studies, and today we announced IND clearance for SGR3515, our WE1MIT1 inhibitor. Total revenue for the first quarter was $36.6 million, with software revenue totaling $33.4 million, and we are reiterating our full year guidance.

Rami: Thanks, Sharon and thank you everyone for joining US today, we are pleased with the start of the year delivering revenue growth in line with our expectations and continuing to advance our proprietary pipeline as you will hear from Karen Our first two clinical programs are progressing in phase one clinical studies and today, we announced IMD clearance for STR of $35 15 or.

Rami: We won one inhibitor.

Rami: Total revenue for the first quarter was $36 6 million with software revenue totaling $33 4 million and we are reiterating our full year guidance. We are in active discussions with multiple global and emerging biopharma companies about increasing adoption of our platform. While it is too early to predict the magnitude of scale up.

Ramy Farid: We are in active discussions with multiple global and emerging biopharma companies about increasing adoption of our platform. While it is too early to predict the magnitude of scale-up from customers with renewals for the remainder of the year, we continue to see high interest in computationally driven drug discovery and believe we are well positioned to capitalize on the growing wave of research teams incorporating computation at scale into molecular discovery programs. Today, we reported that rights to the SOS-1 inhibitor discovered and developed as part of the collaboration with VMS have been referred to us based on portfolio prioritization decisions.

Customers with renewables in the remainder of the year, we continue to see high interest in computationally driven drug discovery and believe we are well positioned to capitalize on the growing wave of research teams incorporating computation at scale into molecular discovery programs.

Rami: Today, we reported that right to the source one inhibitor discovered and developed as part of the collaboration with BMS has referred to us based on portfolio prioritization decisions.

Ramy Farid: Collaborations are an important part of our business, and we are routinely assessing opportunities with existing and new collaborators and partners. Our venture activity has also been a very successful part of our overall strategy, validating our platform and strengthening our balance sheet with both cash distribution and equity from companies we have co-founded.

Rami: Collaborations are an important part of our business and we are routinely assessing opportunities with existing and new collaborators and partners. Our venture activity has also been a very successful part of our overall strategy validating our platform and strengthening our balance sheet with both cash distributions and equity from companies that we are co found.

Ramy Farid: We have been pioneering computational molecular discovery for over 30 years and continue to push new frontiers integrating physics and machine learning to extend our scientific and commercial leadership position in the industry. We have a bold vision of structurally enabling every protein in the human genome with an initial focus on the most important off targets known to cause serious side effects that derail clinical programs. There is an emerging requirement for such models to predict drug toxicity risks before animal or human studies. We are very actively developing computational solutions to meet these requirements. Our recent advances characterizing the structure of key proteins such as HERD and cytochrome P450 enzymes are examples of these efforts.

Rami: We have been pioneering computation on molecular discovery for over 30 years and continue to push new frontiers, integrating physics and machine learning to extend our scientific and commercial leadership position in the industry. We have a bold vision of structurally enabling every protein in the human genome with an initial focus.

Rami: The most important off targets known to cause serious side effects that <unk> clinical programs. There is an emerging requirement for such models to predict drug toxicity risks before animal or human studies. We are very actively developing computational solutions to meet these requirements are recent advances characterizing the structure of <unk>.

Rami: Proteins, such as herd and cytochrome <unk> hundred 50 enzymes are examples of these efforts.

Ramy Farid: We have also extended our informatics platform, and in March, we launched a new version of LiveDesign that supports Biologics. LiveDesign is an enterprise cloud-based solution that allows drug discovery teams to centralize access to computational modeling tools and data in a single interface. LiveDesign previously only supported small molecules, and we are pleased to expand our informatics capabilities to support biology. We are well-positioned to advance all aspects of our business this year. We see clear opportunities to drive software adoption, to extend our scientific leadership in the industry, and to advance our clinical programs toward multiple data readouts. I will now hand the call over to Geoff.

Rami: We have also extended our informatics platform and in March we launched a new version of live design that supports biologics like designed as an enterprise cloud based solution that allows drug discovery teams to centralized access to computational modeling tools and data in a single interface live designed previously only supported small.

<unk> and we are pleased to expand our informatics capabilities to support biologics, we are well positioned to advance all aspects of our business. This year, we see clear opportunities to drive software adoption to extend our scientific leadership in the industry and to advance our clinical programs towards multiple data readouts.

Rami: I will now hand, the call over to Jeff.

Geoffrey Craig Porges: Thank you, Ramy, and good afternoon, everyone. Schrodinger had a solid Q1, with software revenue meeting our expectations. A handful of software renewals were bumped into Q2 from Q1 and reduced some of the upside opportunities for the quarter, but we should see the benefit of these in Q2 and the balance of the year, underpinning our confidence in our full-year revenue growth guidance. Our business in China has been below our expectations this year based on the challenging commercial environment there, but we have many opportunities to offset that impact with larger renewals in the U.S. and Europe.

You Rami and good afternoon, everyone.

Jeff: Turning now to solid Q1 with software revenue meeting our expectations a handful of software renewals were bumped into Q2 from Q1 and reduce some of the upside opportunities for the quarter, but we should see the benefit of these in Q2 and the balance of the year underpinning our confidence in our full year revenue growth guidance.

Jeff: Our business in China has been below our expectations. This year based on the challenging commercial environment, there, but we have many opportunities to offset that impact with larger renewals in the U S and Europe.

Geoffrey Craig Porges: We continue to enhance the capabilities of our software and see multiple paths to secure multi-million dollar increases in contract size at global and emerging biopharmaceutical companies in 2024 and beyond. We are also very excited to have advanced our proprietary portfolio to now have a third program entering the clinic, and we are within sight of our first clinical data for our proprietary programs in patients later this year or in 2025. Finally, the return of our SUS1 program from BMS gives us another opportunity to evaluate our proprietary portfolio and to consider external partnership and combination development opportunities.

Jeff: We continue to enhance the capabilities of our software and see multiple paths to secure multimillion dollar increases in contract size are global and emerging biopharmaceutical companies in 2024 and beyond.

Jeff: We're also very excited to have advanced our proprietary portfolio to now have a third program entering the clinic.

Jeff: With inside of our first clinical data for our proprietary programs in patients later this year or in 2025.

Jeff: Finally, the return of our software programs and BMS. It gives us another opportunity to reevaluate for our proprietary portfolio and to consider for external partnership in combination development opportunities.

Geoffrey Craig Porges: In Q1, software revenue was $33.4 million, an increase of 4% compared to Q1 last year. However, Q1 last year benefited from a significant revenue contribution from multi-year renewals that did not recur in Q1 this year. Hosted software revenue is 22% of total revenue and grew more than 60% compared to Q1 2023. The faster growth in hosted software was in line with our expectations and consistent with our prior comments about an anticipated gradual transition to hosted software licenses across our customer base over a number of years. Maintenance and professional services were relatively constant, as new service and maintenance agreements largely offset the negative effects of projects that were completed or transitioned to hosted licensing.

Jeff: In Q1 software revenue was $33 4 million, an increase of 4% compared to Q1 last year Q1 last year benefited from a significant revenue contribution for multi year renewals that did not recur in Q1 this year.

Jeff: Hosted software revenue was 22% of total revenue and grew more than 60% compared to Q1 2023.

Jeff: Foster growth in hosted software was in line with our expectations and consistent with our prior comments about anticipated gradual transition to hosted software licenses across our customer base over number of years.

Jeff: Maintenance and professional services were relatively constant as your service and maintenance agreements largely offset the negative effects of projects that were completed or transition to hosted licenses.

Geoffrey Craig Porges: Drug discovery revenue of $3.2 million in the quarter compared to $32.6 million in the same quarter last year. Additionally, the first quarter of 2023 included a large collaboration milestone payment associated with the progression of a collaboration project with BMF. We continue to expect our drug discovery revenue to be variable from quarter to quarter due to the timing of milestones, and challenging to forecast given uncertainty about partner decisions and about the timing and value of new business development activities.

Jeff: Drug discovery revenue was $3 2 million in the quarter compared to $32 6 million in the same quarter last year.

Jeff: The first quarter of 2023 included a large collaboration milestone payment associated with the progression of a collaboration project with BMS.

Jeff: We continue to expect to have drug discovery revenues to be variable from quarter to quarter due to the timing of milestones and challenging to forecast given uncertainty about partner decisions about the timing and value of new business development activity.

Geoffrey Craig Porges: Total revenue was $36.6 million in Q1, compared to $64.8 million in Q1 of 2023. The difference was due to drug discovery revenue. Our cost of software revenue was $8 million, compared to $7.1 million in Q1 of 2023. The increase was mainly due to higher technology costs.

Jeff: Total revenue was $36 6 million in Q1, compared with $64 8 million in Q1 of 2023 different strategic drug discovery revenue.

Jeff: Cost of software revenue was $8 million compared to $7 1 million in Q1 2023. The increase was mainly due to higher technology costs are software gross margin was 76% for the quarter compared to 78% in Q1 2023 also mainly due to higher technology expense.

Geoffrey Craig Porges: Our software gross margin was 76% for the quarter compared to 78% in Q1 2023, also mainly due to high technology expenses. Our cost of drug discovery revenue was $9.7 million, compared to $12 million in Q1 2023. The decrease in the cost of drug discovery was due to the shift in allocation of staff from collaboration to proprietary programs and also lower CRO expenses for collaboration programs.

Jeff: Our cost of drug discovery revenue was $9 7 million compared to 12 million in Q1 2023. The decrease in the cost of drug discovery was due to the shift in allocation of staff from collaboration to proprietary programs and also lower <unk> expenses for collaboration programs.

Geoffrey Craig Porges: The drug discovery margin was negative compared to a profit in Q1 2023 when the quarter benefited from a single, relatively large milestone payment from BMS. Overall, our gross margin was 52% compared to 71% in Q1 2023. The decline was driven by lower drug discovery revenue.

Jeff: Our drug discovery margin was negative compared to a profit in Q1 2023, when the quarter benefited from a single relatively large milestone payment from BMS.

Overall, our gross margin was 52% compared to 71% in Q1 2023, the decline was driven by lower drug discovery revenue.

Geoffrey Craig Porges: Turning to operating expenses, R&D expenses $51 million, compared to $41 million in the same period of 2023. Most of the increase was for our therapeutics R&D, and was partly driven by changing allocation between our collaboration investments and our proprietary programs, as well as by high headcount and high CRO expenses. Overall, Platform on Therapeutics R&D continues to be approximately balanced in their contributions to our total R&D.

Turning to operating expenses R&D expense was $51 million compared to 41 million for the same period of 2023.

Jeff: Most of the increase was for our therapeutics R&D was partly driven by changing allocation between our collaboration investments in our proprietary programs as well as by higher head count and highest euro expenses.

Jeff: Overall platform a therapeutic challenges continues to be approximately balanced and their contributions to our total R&D.

Geoffrey Craig Porges: Sales and marketing expenses $10.2 million for the quarter and increased by 11% compared to the prior year. The increase is mainly due to high headcount and associated costs. GNA expense was $25.5 million in Q1 2024 and decreased slightly compared to the same period a year ago. The decrease was due to royalty payments associated with the Nimbus distribution in Q1 2023, which flows through GNA by a county convention. None of these effects underlying GNA expenses increased by approximately 5%, mainly due to higher FTE. Total operating expenses were 86 million in Q1 2024, compared to 76 million in the same period in 2023. The increase is mainly due to higher R&D expenditure.

Jeff: Marketing expense was $10 2 million for the quarter increased by 11% compared to the prior year.

Jeff: Increase was mainly due to higher head count and associated costs.

Jeff: <unk> expense was $25 5 million in Q1, 2024 and decreased slightly compared to the same period a year ago.

Decrease was due to royalty payments associated with Nimbus distribution in Q1, 2023, which flows through G&A by accounting convention.

Jeff: None of this effect underlying G&A expenses increased by approximately 5% mainly due to higher FTE expenses.

Jeff: Total operating expenses were $86 million in Q1, 2024 compared to 76 million in the same period in 2023, the increase was mainly due to higher R&D.

Geoffrey Craig Porges: For the quarter, our operating loss was $67 million compared to $31 million in the same period a year ago. Changed Value of Equity Method Investments was $8.1 million, compared to $35.7 million in Q1 2023. The change in Q1 2024 was due to changes in the value of our equity ownership in Structured Therapeutics and Morphic during the quarter. For the same period in 2023, the change in fair value was driven by the change in evaluation of our ownership position and structure associated with a successful IPO.

Jeff: For the quarter, our operating loss of $67 million compared to 31 million in the same period a year ago changing.

Jeff: Change in fair value of equity method investments was eight point of ongoing compared to $35 7 million in Q1 2023 to change into Q1, 'twenty 'twenty, four which due to changes in the value of our equity ownership instructor therapeutics in morphic during the quarter.

Jeff: The same periods in 2023, the change in fair value was driven by the change in valuation of our ownership position and structure associated with our successful IPO.

Geoffrey Craig Porges: Other income consisted of $5 million in Q1 2024, mainly consisting of interest on a cash balance. In Q1 2023, other income was $2.9 million. Gain on equity method investments was zero in Q1 2024 compared to $147 million reported in Q1 2023 driven by the number distribution. Total other expense or income was $13.2 million in Q1 2024 compared to $186 million in Q1 2023. Our loss before taxes was $54.3 million compared to a pre-tax profit of $155 million in Q1 2023.

Jeff: Other income consisted of $5 million in Q1, 2024, mainly consisting of interest on our cash balance in Q1 'twenty three other income was $2 9 million.

Jeff: Gains on equity method investments was zero in Q1, 'twenty 'twenty four compared to $147 million reported in Q1 2023, driven by the Nimbus distribution total other expense or income was $13 2 million in Q1 2024 compared to $186 million in Q1 2023.

Our loss before taxes was $54 3 million compared to a pretax profit of 155 million in Q1 2023.

Geoffrey Craig Porges: Our tax expense in Q1 2024 was $0.5 million compared to $26 million in tax expense in Q1 last year. The net loss per delivered share was 76 cents in Q1 2024 compared to a profit of $170.75 in Q1 2023. On a non-GAAP basis, excluding gains and changes in fair value for equity method investments, our loss per share was 86 cents in Q1 2024 compared to a loss of 39 cents per share in Q1 2026.

Jeff: <unk> expense in Q1, 2024 was <unk> 5 million compared to 26 million of tax expense in Q1 last year.

Jeff: Our net loss per diluted share was <unk> 76 cents in Q1 2024 compared to a profit of 177 five in Q1 2023.

Jeff: On a non-GAAP basis, excluding gains and changes in fair value for equity method investments.

Jeff: Loss per share was <unk> 86 cents in Q1, 'twenty 'twenty four.

Jeff: Pet to a loss of 39 cents per share in Q1 2023.

Geoffrey Craig Porges: Our cash used in operating activities was $39 million in Q1 2024 compared to $31 million in Q1 2023, and our total cash and marketable securities balance declined by $33 million in Q1, as our operating cash was offset by $7.6 million in cash realized from the sale of equity during the quarter from our ATM. At the end of Q1, we had $436 million in cash and markable securities, compared to $469 million at the end of Q4 2023.

Jeff: Our cash used in operating activities was $39 million in Q1, 2024 compared to $31 million in Q1, 2023, and our total cash and marketable securities balance declined by $33 million in Q1.

Jeff: Our operating cash was offset by $7 6 million in cash realized.

Jeff: From the sale of equity during the quarter primary T M.

Jeff: At the end of Q1, we had $436 million in cash and marketable securities compared to 469 million at the end of Q4 2023.

Geoffrey Craig Porges: Our previously provided financial guidance for the year is unchanged. We are confident about the outlook for our software business and see multiple opportunities for significant step-ups in contract size at many of our customers. We are encouraged by the interest and opportunities in front of our drug discovery business and by the potential of our proprietary medicine, and we believe the trajectory of our expenses and cash use this year will be consistent with our original expectations. For Q2 2024, we expect our software revenue to be in the range of $31 to $33 million. I now turn the call over to Karen to comment on the therapeutic guarantee.

Previously provided financial guidance for the year is unchanged. We are confident about the outlook for our software business and see multiple opportunities for significant step ups in contract size as many of our customers. We are encouraged by the interest and opportunities in front of our drug discovery business and by the potential of that proprietary medicines and we believe the true.

Jeff: <unk> of our expenses and cash use this year are consistent with our original expectations.

For Q2, 2024, we expect our software revenue to be in the range of $31 million to $33 million.

Jeff: I'll now turn the call over to Karen to comment on a therapeutics R&D. Thank.

Karen Akinsanya: Thank you, Geoff, and good afternoon, everyone. Our therapeutics team continues to advance our pipeline of collaborative and proprietary programs. With the IND clearance of SGR3515, our WI-NET1 inhibitor, we now have three clinical-stage proprietary programs. In addition to our proprietary pipeline, several collaborative programs are advancing in clinical trials at companies we have co-founded or partnered with, providing continued validation of our platform. As Ramy reported, we have received full rights to the SOS1 development candidate that we discovered as part of our collaboration with BMS.

Karen: Thank you, Jeff and good afternoon, everyone I'm, a therapeutics team continues to advance our pipeline of collaborative and proprietary programs with the IMD clearance of SG outside T 515 lb, one net funding EBITA, we now have three clinical stage proprietary programs.

Karen: In addition to my proprietary pipeline several collaborative programs are advancing in clinical trials companies. We have co founded or partnered with providing continued validation of our platform.

Karen: As Rami reported we have received full rights to this us one development candidate that we discovered.

Karen: Part of our collaboration with BMS.

Karen Akinsanya: As you know, BMS acquired a clinical-stage SOS-1 inhibitor when it completed its acquisition of a clinical-stage oncology company earlier this year. We received a milestone upon completing the SOS1 Development Candidate Package, and BMS had been conducting IMD-enabling studies. The transfer of information from BMS to Schrodinger is ongoing.

Karen: As you know BMS acquired a clinical stage Susquehanna inhibitor when it completed its acquisition of a clinical stage oncology company earlier this year.

Karen: We received a milestone upon completing this first one development candidate package and BMS had been conducting IND, enabling studies.

Karen: The transfer of information from BMS, just routing is ongoing we will determine the next steps and plans for further investment in this program based on our assessment of the updated data package from BMS as well as the opportunity within the context of our overall proprietary portfolio.

Karen Akinsanya: We will determine the next steps and plans for further investment in this program based on our assessment of the updated data package from BMS, as well as the opportunity within the context of our overall proprietary portfolio and the evolving therapeutic landscape. As we look ahead, we expect collaborations to continue to be an important component of our portfolio, and we continue to evaluate new partnerships where the science, project scope, and value are consistent with our strategy.

Karen: The evolving therapeutic landscape.

Karen: As we look ahead, we expect collaborations to continuing to be an important component of our portfolio and we continue to evaluate new partnerships, where the science project scope and value are consistent with our strategy.

Karen Akinsanya: Turning to SGR 1505, our MORT1 inhibitor, our Phase 1 study in patients with relapsed refractory B-cell lymphomas is progressing well. We've expanded the study to 15 sites globally, and dose escalation is ongoing. As a reminder, the primary objectives of the study are to evaluate the safety of PKPD and determine the recommended dose, while measures of clinical activity are secondary endpoints.

Karen: Turning to STR 15 in its size.

Karen: Inhibitor, our phase one study in patients with relapsed refractory B cell lymphomas is progressing well we've expanded the study to 15 sites globally and dose escalation is ongoing.

Karen: As a reminder, the primary objectives of the study to evaluate the safety Tolerability PK PD and determining the recommended dose.

Karen Akinsanya: We are on track to have clinical data in late 2024 or early 2025. Our CDC-7 inhibitor, SGR2921, is also being advanced in a Phase 1 dose escalation study in patients with acute myeloid leukemia or myelodysplastic syndrome. The study is progressing well, with multiple dose escalation steps completed, and we also expect to report initial data from this trial in late 2024 or 2025. Today, we announce that we received FDA clearance of our IMD for SGR3515, our WE1MIP1 inhibitor.

Karen: This is clinical activity a secondary endpoint we are on track to have clinical data in late 'twenty four or in 2025.

Karen: <unk> seven inhibitor <unk> 2019, 'twenty bonds also advancing in a phase one dose escalation study in patients with acute myeloid leukemia or all.

Karen: Myelodysplastic syndrome.

Karen: That is progressing well with multiple dose escalation steps completed and we also expect to report initial data from this trial in late 2004 or 2025.

Karen: Today, we announced that we received FDA clearance of our IMT for STR 35, 15, although we won one inhibitor.

Karen Akinsanya: Our preclinical data package demonstrated that SGR3515 exhibited sustained tumor growth inhibition while maintaining a favorable safety profile using an intermittent dosing schedule. Activities are underway to open clinical study sites, and we expect to begin patient enrollment in the third quarter. The Phase 1 study is designed to evaluate the safety, PKPD, and establish a recommended dose for SGR3515 in patients with solid tumors. The study population will include patients with advanced solid tumors predicted to be sensitive to WE1 or WE1Nit1 inhibition, including breast cancer, ovarian cancer, uterine cancer, and solid tumors with elevated replication stress.

Karen: Our preclinical data package demonstrated the S. J F 35, 15 exhibited sustained tumor growth inhibition, while maintaining a favorable safety profile using an intermittent dosing schedule activities are underway to open clinical study sites and we expect to begin patient enrollment in the third quarter.

Karen: The phase one study is designed to evaluate the safety PK PD and establish a recommended dose for S. J F 35, 15 in patients with solid achievements for <unk>.

Study population will include patients with advanced solid tumors predict it to be sensitive to we won we won one inhibition, including breast cancer ovarian cancer uterine cancer and solid tumors with elevated replication stress.

Karen Akinsanya: In addition, we are advancing several discovery programs in areas of high interest, including inhibitors of EGFR, C797S, PRMT5NTA, and NLRP3. We have identified potent selective inhibitors that may overcome product profile design challenges observed across other programs. We are on track to select development candidates to support an additional IND submission in 2025. In our collaborative portfolio, we are excited about the progress we have made in identifying oral small molecule inhibitors for targets previously addressed by antibodies or that required intravenous administration, and we anticipate advancing early-stage proprietary modality switch programs across multiple disease areas.

Karen: In addition, we are advancing several discovery programs in areas of high interest, including inhibitors of Egfr C. 797 S. CRM T. Five MTA and <unk>, we have identified potent selective <unk> inhibitors that may have become current profile design challenges observed across other programs.

Karen: We are on track to select development candidates to support an additional IND submission in 2025 and our collaborative portfolio. We are excited about the progress we have made in identifying oral small molecule inhibitors. So targets previously addressed by antibodies or that required intravenous administration.

Karen: And we anticipate advancing early stage proprietary modality switch programs across multiple disease areas.

Karen Akinsanya: In summary, we are pleased with the progress we are making across our collaborative and proprietary pipeline. With Phase I studies of SGR 1505 and 2921 advancing, and 3515 poised to enter the clinic this year, we are excited to be advancing towards clinical readouts and inflection points across three programs. Behind our clinical stage programs, we have a next generation of molecules with opportunities to generate value through partnerships, new ventures, or by advancing them independently.

Karen: In summary, we are pleased with the progress we are making across our collaborative and proprietary pipeline.

Karen: With phase one studies of <unk> 55 in 2991, advancing and 35 15 poised to enter the clinic. This year, we are excited to be advancing towards clinical readouts and inflection points from three programs.

Karen: Kind of a clinical stage programs, we have the next generation of molecules with opportunities to generate value through partnerships, new ventures or by advancing them independently. We are excited about our first in class and best in class opportunities within our portfolio and look forward to updating you on our progress in the <unk>.

Karen Akinsanya: We are excited about our first in class and best in class opportunities within our portfolio and look forward to updating you on our progress in the coming months. I'll now turn the call back to Ramy. Thank you, Karen.

Karen: Coming months.

Karen: I'll now turn the call back to Rami.

Ramy Farid: Thank you, Karen. As you heard, we are off to an excellent start this year and are continuing to make progress against our goals for the year. We appreciate the hard work and commitment of our employees who are instrumental to our mission. We look forward to providing further updates throughout the year. At this time, we'll open the lines for questions.

Rami: Thank you Karen as you heard we are off to an excellent start this year and are continuing to make progress against our goals for the year. We appreciate the hard work and commitment of our employees are instrumental to our mission. We look forward to providing further updates throughout the year at this time, we'll open the lines for questions.

Operator: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. And we'll take our first question from Michael Yee with Geoffrey. Your line is open.

At this time, if you would like to ask a question. Please press the star and one on your telephone keypad.

Withdraw yourself from the queue at any time by pressing star two.

Rami: And we will take our first question from Michael Yee with Jefferies.

Michael Jonathan Yee: Your line is open.

Michael Jonathan Yee: Hey guys, thank you for the question and for the update.

Michael Jonathan Yee: Hey, guys. Thank you for the question and thank you for the update question on software and question on the pipeline on on not on the core business.

Michael Jonathan Yee: Update. Question on software and question on the pipeline for on the core business. I think Geoff Porges made a comment about how some business was maybe pushed from Q1 to Q2. Can you talk a little bit about that and how that relates to ongoing trends, appreciating that the fourth quarter still is really your biggest quarter? So just comment on some of that dynamic, and then on the pipeline, maybe. For Karen, can you talk about the MALT1 study going on and what you would deem to be positive and very promising efficacy for a new small molecule for B cell lymphomas? Thank you.

I think Jeff just made a comment about how some business, which may be pushed from Q1 to Q2 can you talk a little bit about that and how that relates to ongoing trends appreciating that fourth quarter still is really your biggest quarter. So just comment on some of that dynamic and then R&D piped.

Speaker Change: <unk> maybe.

Speaker Change: Kidney.

Speaker Change: Karen can you talk about the one study going on and what you would deem to be positive and very promising efficacy for a new small molecule for b cell lymphomas. Thank you.

Geoffrey Craig Porges: Great. Hi Mike.

Speaker Change: Hi, Mike.

Speaker Change: On the contracts as I mentioned.

Geoffrey Craig Porges: Just on the contracts that I mentioned, there were a couple of relatively small contracts that were really the difference between the core meeting our expectations and then being a little bit lighter. But I don't think it reflects any underlying trends in the business. These were contracts that we knew were renewals, and for logistical reasons, they didn't renew at the very end of Q1, and they tipped into Q2. We don't think that there's any—there's no increase in the number of non-renewals or anything like that.

Karen: There were a couple of relatively small contract really the difference between.

Karen: The core meeting our expectations and then being a little bit later I don't think it reflects any underlying trends in the business Batesville contracts that we knew were renewals.

Karen: For logistics reasons, they didn't renew at the very end of Q1, let's shift into Q2.

Karen: Data presented.

Karen: There is no increase in the number of non renewals or anything like that.

Geoffrey Craig Porges: We continue to have very high conviction about the outlook for the full year and just don't see anything in the external environment that affects that outlook. I did highlight the effects in China. Our underlying business in China is relatively small; it's the smallest of our geography, and given what's going on there, perhaps not a surprise that the renewals there have dropped off somewhat, but it's not going to have a big impact, and the big driver for us, as I highlighted, those large renewals, they will tend to be concentrated in the fourth quarter, and Michael on

Karen: They have very high conviction about the outlook for the full year.

Karen: Don't see anything.

Karen: In the external environment the best setup.

Karen: I did highlight the effect in China.

Karen: Our business underlying business in China is relatively small.

Karen: Yes.

Smaller.

Geography.

Karen: Given what's going on there, perhaps not a surprise when you're almost there have dropped off somewhat.

Karen: Can have a big impact the big driver for us as a whole.

Speaker Change: Got it.

Speaker Change: Large renewals that will tend to be concentrated in the fourth quarter.

Karen Akinsanya: And Mike, on the MOT1 mechanism, as you're aware, we're obviously in our phase one dose escalation trial. But I think your question was broader than that with respect to the mechanism.

Speaker Change: And Michael.

Speaker Change: One mechanism.

Michael Jonathan Yee: Well, it's been a phase one dose escalation trial I think your question was.

Michael Jonathan Yee: Broader than that with respect to the mechanism.

Karen Akinsanya: We see this as a clinically validated mechanism, given data that's been published over the last few years showing monotherapy responses in the range of 28% ORR and combination activity in combination with BTK, giving you around 70% ORR. We also know that there were complete responses in prior trials. So, in terms of what we think would be exciting, obviously, monotherapy activity, but also combination activity, either with BTK inhibitors or with BCR2 inhibitors, and we showed a lot of that preclinically, but in preclinical studies, you can get to regression. And so, we hope to see similar data emerging from the MOT1 mechanism over the coming years.

Michael Jonathan Yee: We.

Michael Jonathan Yee: The 17 validated mechanisms given the data that's been published over the last few years.

Michael Jonathan Yee: Monotherapy responses in the range of 28%.

Michael Jonathan Yee: Or in combination activity in combination with being TK, giving you around 70% or we also know that they will complete responses in prior trials.

Michael Jonathan Yee: What we think would be exciting obviously.

Michael Jonathan Yee: Monotherapy activity, but also combination activity either with any of the tests always bcl two.

Michael Jonathan Yee: It says and we showed a lot of that pre clinically.

Michael Jonathan Yee: Obviously, you can get cheaper in question and so we.

We hope to see some of the things you imagine.

Michael Jonathan Yee: Mechanism over the coming year.

Speaker Change: Very good thank you.

Speaker Change: Yeah.

David Neil Lebowitz: And we'll take our next question from David Lebowitz with Citi. Your line is open.

And we'll take our next question from David Leibowitz with Citi. Your line is open.

Speaker Change: Yeah.

Geoffrey Craig Porges: Thank you very much for taking my question. Could you comment on, I mean, Michael to some extent got on this, but on the trends that we should expect? I know there was an effort to try to shift the nature of contracts to move revenues to be a little bit more smoothed out. It would result in them being smoothed out somewhat more. How are those efforts progressing, and how should we see that take hold?

David Neil Lebowitz: Thank you very much for taking my question could you comment on it.

David Neil Lebowitz: Michael to some extent got on this but.

David Neil Lebowitz: The trends that we should expect I know there was an effort to try to shift the nature of contracts to move revenues I gets to be a little bit more smoothed out would result in them excluding somewhat more how are those efforts progressing.

David Neil Lebowitz: How should we see that take hold.

Geoffrey Craig Porges: Yeah, thanks. Thanks very much for the question, David. Indeed, we are seeing some transition over to hosted for on-prem. You can see it in the breakout in the queue.

Speaker Change: Yeah. Thanks, Thanks very much.

Speaker Change: David and Dave we are seeing some transition over to host it for on Prem you can see it in the breakout in the Q.

Geoffrey Craig Porges: The hosted in this most recent quarter grew by 60% year-over-year and was now 21% of total software revenue, whereas in the first quarter of last year, it was only 14% of software revenue. It was a much higher percentage in the fourth quarter. So when we do have these large quarters with multi-year contract renewals, then the hosted proportion is going to go down. However, the long-term trend is that we think that the proportion of business that's hosted will gradually increase.

Speaker Change: Yeah.

Speaker Change: Hosted in this most recent quarter grew by 20 by 16% year over year of about 21% of total software revenue.

Speaker Change: Whereas in the first quarter of last year. It was only 14% of software revenue.

Speaker Change: Much smaller percentage in the fourth quarter. So when we do have these large quarters with a multiyear contract renewals.

Speaker Change: The proportion of its Gotta go down however, the long term trend is that we think that proportion.

Speaker Change: The toasted will gradually increase we did have a number of significant customers switch over from on Prem to hosted last year.

Geoffrey Craig Porges: We did have a number of significant customers switch over from on-premises to hosted last year. Now, as we've said, our business has been around selling software for nearly 30 years. That's longer than that, way before my history with the company. But we have complex contracts, and every contract is different. They're, to be honest, like snowflakes.

So our business has been around selling software for nearly 30 years, perhaps longer than that.

Speaker Change: Wait before my history the company well.

Speaker Change: We have complex contracts and every contract is different to be honest like snowflake and so we can go into them.

Geoffrey Craig Porges: And so we can't go in and sort of immediately change all of those contracts over. But we do think that over a number of years, that proportion of hosted will continue to increase. It won't be a rapid, sudden, or single-year transition, but we do think that it will increase over time.

Speaker Change: So immediately change all of those contracts over but we do think that over a number of years that proportionately from hostess will continue to increase so it won't be a single year transition, but we do think that it will increase over time.

Scott Anthony Schoenhaus: Thank you for taking my question. And we'll move next to Scott Schoenhaus with KeyBank. Your line is open. Hi, team. Could you give us an update?

Speaker Change: Thank you for taking my question.

Scott Anthony Schoenhaus: And we'll move next to Scott Schoenhaus with KeyBank. Hi team.

Speaker Change: And well move next to Scott showing house with Keybanc. Your line is open.

Scott: Hi team.

Scott: Could you give us an update on what youre seeing on the biotech end markets. We've had some peers in the space that have noted potentially some recovery.

Scott: Where its mixed commentary.

Scott: So I wanted to hear it from what you guys are seeing and then remind us.

Scott: What's baked into your guidance and in terms of the biotech end markets.

Geoffrey Craig Porges: Sure, Scott. Last year, we did highlight that there was an increase in the number of small companies that were not renewing, and you can see that in the KPI data that we provided. In the companies in the tier between 100,000 and 500,000 of ACV, there was an increase in the non-renewals in that tier. We don't provide quarterly ACV numbers or quarterly booking numbers, but we've seen a stabilization of that trend. We're not seeing any sort of continued increase in the number of non-renewals.

Scott: Sure.

Speaker Change: So last year, we did highlight that there was an increase in the number of small companies that we're non renewing here you can see that in the kpis that we provided.

Speaker Change: In the companies in the tier of between 100000 500000.

Speaker Change: There was an increase in the non renewals in that chair.

Speaker Change: We don't provide quarterly HCV numbers quarterly bookings numbers.

Speaker Change: We've seen a stabilization of that trend.

Speaker Change: We're not seeing any continued increase in the number of Nonrenewals that being said, we don't see an offsetting increase in the new inquiries.

Geoffrey Craig Porges: That being said, we aren't seeing an offsetting increase in new inquiries, but I will say we're seeing companies coming forward that are venture-backed who are asking, "Are there any creative ways they can get access to our software?" When engaging in those discussions, we do think, over time, they will result in software contracts. It may take longer than we normally would have expected, perhaps back in 2020 or 2021, to see that reflected in our results, but we're hearing about those opportunities coming forward. I would still characterize them as green shoots rather than anything that we can harvest, but we're definitely seeing some of those opportunities.

Speaker Change: Well I will say, we're seeing companies coming forward that are venture backed.

Speaker Change: Asking are there any creative ways. They can get access to our software we're engaging in those discussions we do think over time. They will result in software contract. It may take longer than we normally would have expected perhaps back in 2020 or 2021 to see that realized into our results, but we're hearing about those.

Speaker Change: The charities coming forward, so I would still characterize it as green shoots.

Speaker Change: Okay.

Speaker Change: Others.

Speaker Change: When you say some of those opportunities.

Speaker Change: Thank you.

Vikram Purohit: And we'll move next to Vikram Purohit with. Morgan Stanley, your line is open.

Speaker Change: And well move next to Vikram pure all hit with.

Vikram: Morgan Stanley Your line is open.

Vikram: Okay.

Vikram Purohit: Hi, good afternoon. Thanks for taking our questions. So we had two, one on the pipeline and then one on the full year software guidance. So on the pipeline, at what point do you think there might be some more visibility available on specifically when the late 24 or 25 data could come through for Malt 1 and CDC 7? And how are you currently thinking about what the initial size and scope of that data set could be?

Vikram: Hi, good afternoon, thanks for taking our questions. So we had two one on the pipeline and then one on the full year software guidance.

Vikram: On the pipeline at what point do you think there might be some more visibility available on <unk>.

Vikram: Specifically when they may 'twenty four 'twenty five data could.

Vikram: Come through from <unk> <unk> seven.

Vikram: And how are you currently thinking about what the initial size and scope of that dataset could be and then on the software guidance for the year with <unk> behind US now how are you thinking about which scenarios defined the bookends of your guidance.

Vikram Purohit: And then on the software guidance for the year, with one quarter behind us now, how are you now thinking about which scenarios define the bookends of your guidance of fixed or 13% year over year growth? Thanks.

Vikram: Fix or 13% year over year growth. Thanks.

Vikram: Yeah.

Speaker Change: So I can start.

Speaker Change: I think it.

Speaker Change: Too early to commit to specific data that we're going to be sharing as you know this is a dose escalation trial.

Speaker Change: With respect to safety PK and PD. Our goal is to determine the recommended phase two dose and clinical activity as a secondary endpoint.

Speaker Change: We are gathering all PK safety data.

Speaker Change: In the trials that we're running and so.

Speaker Change: That's all going it's going well.

Speaker Change: So over the course of the period that we've shed 24 through.

Speaker Change: June 25, we will be in a position Sharon update it too early to give you any color on what that might look like at this time.

Geoffrey Craig Porges: Vikram, let me jump in and give you an answer to your second question about the four-year guide and the circumstances that would lead us to either of the bookends. First of all, to just remind you, the guide philosophy is to guide to the range of

Speaker Change: Let me jump in.

Speaker Change: On your second.

Speaker Change: Good question about the full year guide.

Speaker Change: Is that related to either of the bookends.

Speaker Change: First of all so just remind you the guidance.

Speaker Change: This philosophy is to guide to the range of most likely outcomes, we don't try and guide to either extreme but very low probability.

Speaker Change: On the high side of the low side, but we do want to share with you. What we think is most likely.

Speaker Change: The branch, we provided that range right now we do think we'll get more information as we progress through the year and of course.

Speaker Change: Ultimately, we hope to narrow that range, but we don't know what do we get that information, but we'll have to incorporate it in terms of the circumstances that would drive us to either of those extremes. It does depend to a substantial degree on the nature of the renewals for example, if we have customers who are on prem customers.

Speaker Change: Come to us allow us to renew on a multiyear basis that will drive revenue towards the high end of the guidance range.

Speaker Change: Forward and say, we want to renew as we already have an annual contract basis that it would be more to the low end of the range.

Speaker Change: First in the world.

Speaker Change: Considering in the guidance.

We provide is some of the conditions that we have.

Speaker Change: Scott in terms of the biotech financing.

Speaker Change: Environment, if we see some of those conversations about providing our software. It's a relatively early stage companies come to fruition and if those companies successfully finance.

Speaker Change: Trigger revenue purchase that would also contribute to driving us towards the upper end of the range. So those are two variables that were mainly contemplating I hope that's helpful.

Speaker Change: Got it thank you.

Speaker Change: Okay.

Evan David Seigerman: And we'll take our next question from Evan Seigerman with BMO. Your line is open.

Speaker Change: And we'll take our next question from Evan <unk> with BMO. Your line is open.

Evan: Hi, there this is <unk> on for Ed and thanks for taking our questions and congrats on the IMD approval for $35 15.

Evan: With a number of assets either in clinic or soon to be in credit can you just talk a bit about how youre thinking about PL P&L management as it relates to your broader business and then also how are you thinking about the potential for collaborations and partnerships with your internal assets.

Evan: Of course balancing data maturity and preserving economics. Thank you.

Karen Akinsanya: Cut. Maybe collaborations for...

Evan: Okay.

Evan: The collaborations for sure yes.

Karen Akinsanya: That's probably a good way to... Yeah, so I can just start by saying, you know, each of the mechanisms that we've disclosed, we believe either serves a population that has existing drugs where additive mechanisms are going to lead to deeper responses. As you're well aware, we don't have those mechanisms, for example, BCL-2 and BTK inhibitors, and we view collaborations as an important way to basically...

Speaker Change: That's probably a good way to yes. So I can just start by saying you know each of the mechanism.

Evan: It's closed.

Evan: Believe I. This is a population that has existing drugs.

Evan: Attitude mechanism.

Evan: Yeah.

Evan: Sanchez.

Evan: We don't have those mechanisms for example, bcl two be Teekay inhibitors, and we view collaborations as an important way to basically.

Karen Akinsanya: Combining our assets with other companies' products or development assets to recognize the opportunities for these programs in various different indications. So we're very open to collaboration. We continue to be in those discussions, but obviously, we're gathering important data on all of these programs at the moment. Carl, let me just add to that on collaborations.

Evan: Combine our assets with other company, but that's all development asset to recognize the opportunities for these programs in various different indications. So we're very open to collaboration we continue to be in those discussions.

Evan: Obviously with gathering important channel as these programs at the moment.

Speaker Change: Let me just add to that on collaborations.

Geoffrey Craig Porges: It is a very dynamic deal environment for companies in the computational drug discovery space generally. And that dynamic environment, I think, is to our advantage. And we do see a lot of opportunities for a wide variety of different types of deals as we contemplate the business model environment. As we said previously, we aren't diving into that, we count this, really forecast timing, value, and probability of those discussions. That dynamic environment is to our benefit.

Speaker Change: It's a very dynamic deal environment for companies in the computational.

Speaker Change: Drug discovery space generally.

Speaker Change: And.

Speaker Change: That dynamic environment, I think is to our advantage and we just see a lot of opportunities for <unk>.

Speaker Change: Wide variety of different types of deals.

Speaker Change: We call to place the business probably bonds out.

Speaker Change: As I've said previously we are guiding to that.

Speaker Change: Forecast timing value probability of those discussions.

Geoffrey Craig Porges: In terms of your first question about P&L management, you know, assuming that you're asking us about the trajectory of expenses, and while we haven't guided to expenses for next year, I hope that we've been communicating consistently that we are seeing a slowing in the growth rate of a number of our different expense drivers. We think that we have opportunities to see slight improvements in our gross market, for example, that you're seeing some operating leverage now on our G&A line; you're seeing some operating leverage on sales and marketing as well.

Speaker Change: Sorry about that.

Speaker Change: Dynamic environment is dropdowns.

Speaker Change: In terms of your first question about P&L management.

Speaker Change: Sure, maybe you're asking us about the trajectory of expenses, while we haven't guided to expenses for next year I hope that we've been communicating consistently that we are seeing a slowing growth rate of a number of our different expense drivers.

Speaker Change: We think we have opportunities to see slight improvements in our gross margin. For example that you are seeing some operating leverage now on our G&A line, you're seeing some operating leverage on sales and marketing as well.

Geoffrey Craig Porges: And we think that our R&D, while it has been increasing, and it's likely to continue to increase, is going to increase significantly more slowly than it has in the past because there will be additional capital required for the advancing clinical programs. But relative to the totality of our R&D, which is still substantially for the platform, it's a relatively small contribution. So we don't think it's going to drive a large increase in our R&D requirements going forward. I hope that's clear.

Speaker Change: Think that R&D.

Speaker Change: While it has been increasing.

Speaker Change: Likely to continue to increase.

Speaker Change: It is going to increase significantly more slowly than it has in the past because the.

Speaker Change: There will be additional capital required for the advancing clinical programs, but relative to the totality of all LNG, which is still.

Speaker Change: Actually for the platform.

Speaker Change: A relatively small contribution so we don't think it's driving a large increase.

Speaker Change: It's going forward.

Speaker Change: Great.

Speaker Change: Great. Thank you.

Stephen Ma: We'll move next to Stephen Ma with T.D. Cowan. Your line is open.

Speaker Change: Okay.

Speaker Change: Well move next to Steven Mah with PD Cowen Your line is open.

Speaker Change: Okay.

Ramy Farid: Great. Thanks for the questions. I've got one on live design for biologics. Could you give us some color on the adoption and any traction with customers you've gotten since the launch in March? And then specifically, what types of companies are making inquiries? Are they big pharma or emerging biotech?

Steven Mah: Great. Thanks for the questions first one on live designed for biologics.

Steven Mah: Could you give us some color on the.

Steven Mah: The adoption and any traction with customers.

Steven Mah: You've got incentive law.

Steven Mah: Launch in March and then specifically.

Steven Mah: Types of companies are making inquiries are they big pharma or emerging biotechs.

Ramy Farid: Yeah, so... We just launched. But as with many of our launches, including Live Design itself, we worked very closely with a number of companies to understand the requirements and what they would want in a product. So, the feedback so far in all of the presentations that we've given before the launch, actually, and since the launch has been incredibly positive. There is clearly sort of pent up demand for something like this. There is not a good solution right now. There is so much significant interest, but, you know, this is a very new release. So we can't comment on anything about the number of customers that are revenue from it, but

Speaker Change: Yeah. So we just launched it.

Stephen Ma: Okay, great. That's fair enough.

Speaker Change: As with many of our launches including wide design itself. We worked very closely with a number of companies to understand their requirements.

Speaker Change: And what what they would want in the product so the feedback so far and all of the presentations that we've given for the launch actually and since the launch has been incredibly positive. There is clearly sort of pent up demand for something.

Speaker Change: This is not a good solution right now so significant interest but.

Speaker Change: <unk> is a very new release, so we can't comment on.

Speaker Change: Anything about the number of customers that are revenue from it but we're really excited about the launch.

Speaker Change: And it's going well so far.

Karen Akinsanya: And then I got one last question on the SOS-1 inhibitor that I reverted back to you guys from DMS. You know, appreciate the column on why they didn't take the option that they acquired a company with a similar asset. But, you know, do you know how similar that asset that BMS acquired is to the inhibitor that you guys developed? Is it, you know, how similar is it, you know? Is it the same?

Speaker Change: Okay, Great. That's fair enough and then I got one last question on the <unk>, one inhibitor that reverted back to you guys from BMS.

Speaker Change: Appreciate it.

Speaker Change: The color on why they didn't take the option that they acquired a company with some of our asset.

Speaker Change: Do you know how similar that asset.

Speaker Change: <unk> acquired us too.

Speaker Change: <unk> inhibitor that you guys.

Speaker Change: Developed.

Speaker Change: How similar is it is it the same mechanism.

Speaker Change: Yeah.

Karen Akinsanya: Yes. I mean, I think from a mechanism point of view, this is a PPI inhibitor. I think that mechanistically, they're both very similar. I will say that, obviously, we were in a position to benchmark our compound during the discovery phase of the program that we ran with BMS, and we were very happy, I would say, with the profile of the compound. BMS brought that program in on the basis of the work that we had done.

Speaker Change: Yes, I mean, I think from a mechanism point of view. This is a P. P. L a inhibitor.

Speaker Change: I think that mechanistically that both very similar.

Speaker Change: We'll say that obviously we were.

Speaker Change: In a position to benchmark that compound, Germany, the discovery phase.

Speaker Change: The program that we ran with BMS and we're very happy with the profile of the compound in BMS.

Karen Akinsanya: So we remain excited about the molecule. I think, obviously, that the molecule that they acquired through their acquisition is more advanced than ours. And so we have, obviously, work ahead of us as an industry to see how all these SOC1 compounds compare. And so, yeah, I think it's too early, obviously, to say how they stack up against each other in the clinic.

Speaker Change: That program and on the basis of the way.

Speaker Change: Got it.

Speaker Change: So we remain excited about the molecule.

Speaker Change: I think obviously that molecule that that product through their acquisition is more advanced than ours.

Speaker Change: So we have obviously, what's ahead of us to.

Speaker Change: An industry actually to see how all these tougher compares.

Speaker Change: Compounded comparator.

Speaker Change: Yeah, I think it's too early obviously to say, how they stack up against each other in the clinic.

Karen Akinsanya: Okay, got it. And how long do you think the evaluation will take, the internal evaluation, and what's perceived with it? Thank you.

Speaker Change: Okay got it and how long do you think the evaluation will take and then tunneling evaluation on what the perceived with it. Thank you.

Karen Akinsanya: It's a little hard to determine. We obviously are very early in the process of getting data back from BMS on the IMD-enabling studies they have been conducting. So I can't say exactly, but I think obviously we're in a hurry to understand the opportunity here. And again, we're excited about the profile and what we've seen so far. So hopefully, it won't take too long.

Speaker Change: It's a little hard to determine we obviously are very early in the process of getting data back from BMI. So from the IMD, enabling studies they have been conducting.

Speaker Change: So I cant say exactly but I think the same way.

Speaker Change: We're in a hurry to understand the opportunity here and again, we're excited about the profile and what we've seen so far.

Speaker Change: Let's take too long.

Michael Leonidovich Ryskin: Okay, great. Thanks for the questions.

Speaker Change: Okay, great. Thanks for the questions.

Speaker Change: Okay.

Michael Leonidovich Ryskin: We'll move next to Michael Ryskin with Bank of America. Your line is open.

Speaker Change: We'll move next to Michael Riskin with Bank of America.

Michael Riskin: Line is open.

Michael Leonidovich Ryskin: Great. Thanks for the questions, guys. First, I want to just follow up on exactly that last point, the BMS discontinuation. In the past, I think when you've had I'm just curious, was anything like that recognized in the first quarter, or do you expect it in the second quarter? Just any other details around the process of, uh... Reverting those rights. Okay.

Michael Riskin: Great. Thanks for the questions guys first I wanted to just follow up on on exactly that last point.

Michael Riskin: BMS is discontinuation.

Michael Riskin: In the past I think when you've had some.

Michael Riskin: Some trial programs sent back there might be a milestone fee or some sort of financials associated with it I'm. Just curious was there anything like that recognized in the first quarter or do you expected in the second quarter, just any other details around the process.

Michael Riskin: Reverting those rights.

Geoffrey Craig Porges: Hi Mike. The short answer is no. Because this program had transitioned to their portfolio and we had that milestone from it previously associated with that transition, there isn't any additional milestone or fee payable being returned to us, nor do we have any prior revenue that we accelerate. So it wasn't a contributing factor in Q1.

Speaker Change: Hi, Mike.

Mike: Short answer is no because this program had transitioned to their portfolio and we have that.

Mike: A milestone from a previously with associated with that transition there isn't any additional miles for iron ore.

Mike: <unk>.

Mike: A terrific return to us nor do we have any prior revenue that we accelerate so it wasn't a contributing factor in Q1.

Mike: Okay.

Michael Leonidovich Ryskin: [inaudible] Thanks. And then, for my follow-up, you know, it's been, I think, a couple quarters since you guys really talked about the material science part of the portfolio, so I thought I'd ask about that. Just, you know, any updates there, anything interesting to keep us going through this process of – I know it's always sort of in the background and it doesn't get a ton of light, but I just figured we'd – Sure, yep. So

Speaker Change: You didn't answer thanks, and then from a follow up.

Speaker Change: It's been I think a couple of quarters. Since you guys really talked about the materials science part of the portfolio. So I thought I'd ask on that.

Speaker Change: Just any updates there anything interesting to keep us.

Speaker Change: Two of progress.

Speaker Change: So we're sort of in the background and it doesn't get a ton of light, but just figured we'd see if theres anything new going on there. Thanks.

Ramy Farid: Sure, yep. So, the thing that we're most excited about on the materials science side, as we've talked about before, is we have this collaboration with Gates that was the initial project, which was a three-year project. It went so well that it was actually renewed, and that was on the basis of really progress in the science. This is a really, really hard problem.

Speaker Change: Sure yes so.

Speaker Change: The thing that we're most excited about on material science side as we've talked about before is we have this.

Speaker Change: Our collaboration with <unk>.

Speaker Change: The initial project with a three year project.

Speaker Change: So well that it was actually renewed and that was on the basis.

Mike: Really our progress on the science.

Mike: It's a really really hard problem.

Ramy Farid: And as with all really hard problems, we think success in the problem will have significant rewards, so we're really pleased with the progress on the basic science. But that's really the stage that we're at, and that's what we're really excited about. We think if we're successful in the project, as I said, it has the potential to have a really big impact, as far as the core business and the, you know, revenue for the business go. As we said before, we don't really break that down.

Mike: And.

Mike: As with all really hard problems, we think our success in the problem will have a significant reward.

Mike: So we're really pleased with the progress on the basic science, but that's really the states that were added.

Mike: And that's what we're really excited about we think.

Mike: If we're successful on the project as I said I think it has the potential to have a really big impact as far as.

Ramy Farid: We're pleased with the progress. It continues to, we continue to add new customers. There continues to be a scale-up of other customers, but we're not really disclosing, you know, we're not breaking down the revenue into the different, I hope I hope that answers the question.

Mike: Yes.

Mike: The core business and the revenue for the business as we've said before we don't really break that down we're pleased with the progress that continues to we continue to add new customers. There continues to be scale up about our customers, but we're not really disclosing.

Mike: We're not breaking down the revenue into the different components I hope I hope that answers the question.

Mike: Okay.

Speaker Change: Thank you.

Speaker Change: Got it.

Matthew Gregory Hewitt: We'll take our next question from Matt Hewitt with Craig Hallam Capital. Your line is open.

Mike: We'll take our next question from Matt Hewitt with Craig Hallum Capital. Your line is open.

Matthew Gregory Hewitt: Good afternoon. Thank you for taking the questions. Maybe first up, and this kind of goes back to Geoffrey, some of your comments about the R&D expense kind of leveling off a little bit. As we look out over this year, and maybe into next year, you've got a couple of phase one trials that'll be wrapping up. And then you've got us want, obviously, you know, a kind of flattening of the R&D expense over the next, call it, year and a half?

Matthew Gregory Hewitt: Good afternoon, and thank you for taking the questions maybe first up.

Matthew Gregory Hewitt: This kind of goes back to Jeffrey some of your comments about the.

Matthew Gregory Hewitt: The R&D.

Matthew Gregory Hewitt: <unk> kind of leveling off a little bit as we look out over this year and maybe into next year, you've got a couple of phase one trials that will be wrapping up.

Matthew Gregory Hewitt: And then you've got we want obviously kind of kicking off.

Matthew Gregory Hewitt: Is that part of the.

Matthew Gregory Hewitt: Flattening of the R&D expense over the next call it year year, and a half or is it more a function of kind of looking at those programs and trying to figure out where do we go next and which one do you want to kind of move on to phase two just help us out there.

Matthew Gregory Hewitt: Or is it more a function of kind of looking at those programs and trying to figure out where we go next? And which one do you want to kind of move on to phase two? Just help us out there.

Geoffrey Craig Porges: Yeah, I understand the question about the R&D trajectory. And, in fact, the flattening is due to a different phenomenon, which is that we think that we are at scale with respect to our R&D investment in our platform. As I previously indicated, it's a substantial portion of our R&D investment, and we think that this is such an exciting space and a dynamic industry environment. There is still a lot of opportunity in terms of new discoveries and new research that we can then translate into capabilities in the platform.

Speaker Change: Okay, Yeah, all right I understand the question about the R&D trajectory.

Speaker Change: And in fact, the flattening is due to a different.

Speaker Change: Richard.

Speaker Change: We think that we are at.

Speaker Change: Scale with respect to our R&D investment in our platform.

Speaker Change: Previously indicated it's a substantial portion of our R&D investment and where we think that this is such an exciting space dynamic.

Speaker Change: Industry environment.

Speaker Change: So a lot of opportunity.

Speaker Change: So new discoveries new research that we can then translate into capabilities in the platform. So.

Speaker Change: We're not dialing that back, but we don't think that needs to get a lot larger.

Geoffrey Craig Porges: So we're not dialing that back, but we don't think that needs to get a lot larger. The second component of our R&D is our drug discovery organization, not so much the development portion, but the investment that we're making to come up with the next wave of molecules and the next wave after that. General comment there.

Speaker Change: Second component is.

Speaker Change: Drug discovery organization, not so much the development portion.

Speaker Change: The investments that we're making to come up with the next wave of molecules in the next wave after that.

Speaker Change: Same.

Speaker Change: General comment there.

Geoffrey Craig Porges: We can't sort of manage 10 new programs a year or 15 new programs a year, and if we keep scaling up, that's where we'll end up. So again, we think that we're at scale in terms of the ability to discover the next wave of programs and the wave after that. So both of those pieces, we don't see a lot of need to increase. Now, you correctly identified that there has been an increase in the investment in the clinical programs, but that total clinical spend is a relatively small portion of that overall R&D.

Speaker Change: We can sort of manage 10, new programs, a year or 15, new programs a year and if we keep scaling up that's where we would hit so again, we think that we're at scale in terms of the ability to discover the next wave of programs in a way and after that so both of those pieces, we don't see a lot of need to increase.

Speaker Change: You correctly identified.

Speaker Change: <unk> been increasing the investment on our clinical programs, but that total clinical spend is a relatively small portion of that overall R&D. We do expect that piece to go up.

Geoffrey Craig Porges: We do expect that piece to go up, but the rest of the R&D space is likely to be pretty stable from here, and so that's where you get that. We just don't see a large other leg up from here. Is that clear?

Speaker Change: First of all R&D price is likely to be pretty stable from here and so that's where you get that we just don't see a large of a leg up from here is that clear.

Matthew Gregory Hewitt: Yeah, no, that's super helpful. Thank you.

Speaker Change: Yes, no that's super helpful. Thank you and then I.

Speaker Change: Separately.

Speaker Change: On the software side.

Matthew Gregory Hewitt: And then, I guess, separately, on the software side. So, last fall, obviously, and in particular, very challenging from a funding perspective. You've commented on how that likely weighed on some of your smaller customers kind of paring back or not renewing. As that funding environment is improving, and as more recently as China has announced a new stimulus package there, are you starting, like how quickly will that turn around where you start to get those customers that maybe didn't renew previously, they start coming back saying, okay, now we're ready to re-engage? Is it pretty quickly, or does it take quarters? How should we be thinking about the timing? As the environment improves, you'll start to see that as well.

Speaker Change: No.

Speaker Change: Last fall, obviously and in particular very challenging from a funding perspective, you've commented on how that likely weighed on some of your smaller customers kind of paring back or not renewing as that funding environment is improving and as in more recently as China has announced new stimulus package there.

Speaker Change: Are you starting to look how quickly will that turnaround where you start to get those customers that maybe didn't renew previously they start coming back saying, Okay. Now we are ready to reengage as it is it pretty quickly or does it take.

Speaker Change: Orders or how should we be thinking about the timing on as the environment improves youll start to see that as well.

Geoffrey Craig Porges: Yeah, so to be clear, I think what we expect to happen is new companies will come to us asking to use our technology as a foundation for their drug discovery efforts. And we are seeing those inquiries. Now, those companies are asking, okay, we're going after this particular target or this drug class, and we'd like to build our company based on your technology. There's all sorts of availability of funding in those companies. Some of them are well capitalized, some of them hope to be capitalized, and some of them may be capitalized in the future.

Speaker Change: Yeah, so to be clear.

Speaker Change: I think what we expect to happen is new companies will come to us asking to use our technology as a foundation for their price discovery efforts.

Speaker Change: And we are seeing those inquiries.

Speaker Change: Most companies are asking okay.

Speaker Change: We're going after this particular target or this drug class.

Speaker Change: We'd like to build a company based on your technology.

Speaker Change: There is all sorts of avail.

Speaker Change: Availability of funding and those companies some of them are well capitalized some of them hope to be capitalized some of them may be capitalized in the future.

Speaker Change: We're working with all of them, but we are seeing an uptick of interest there, but it's too early to bake that into our revenue outlook.

Matthew Gregory Hewitt: And we're working with all of them, and we are seeing an uptick in interest there, but it's too early to bake that into our revenue level. Now, the companies that have previously, My expectation is that they will not come back, whether they are based in China or based in the U.S. Those companies have shifted their strategy. In some cases, they've merged with other companies. In other cases, they've been acquired themselves. Or, in other cases, they've shut down drug discovery altogether, and they're just focusing on the prosecution of their clinical programs. So we're not assuming that they will come back and become drug discovery software customers.

Speaker Change: The companies that previously discontinued.

Speaker Change: And my expectation is that they will not come back whether they are based in China. All based in the U S. Both companies have shifted that strategy in some cases, they've merged with other companies. Other cases, basically an acquired themselves or in other cases, they've shut down drug discovery altogether and they just focusing on the prosecution of that clinical progress. So.

Speaker Change: We're not assuming that they come back and become drug discovery software customers again.

Matthew Gregory Hewitt: understood. Thank you.

Speaker Change: Understood. Thank you.

Speaker Change: Okay.

Joseph Michael Catanzaro: We'll move next to Joe Cantanzaro with Piper Sandler. Your line is open.

Speaker Change: Well move next to Joe Kenton Zoro with Piper Sandler Your line is open.

Joseph Michael Catanzaro: Hey everybody, thanks for taking my question. I had maybe a quick one on 3515. You know, I think we've seen in the space that patient selection strategy could be really important, and Karen, I think you mentioned selecting patients with elevated replication stress, so I would be curious to hear your thoughts and if you could elaborate a bit on sort of how you are thinking about going about detecting and defining elevated replication stress. Thanks.

Speaker Change: Hey, everybody. Thanks for taking my question here and maybe a quick one on 35 15, I think we've seen in the space that patient selection strategy could be really important and Karen I think you mentioned selecting patients with elevated replication stress. So would be curious to hear your thoughts if you could elaborate a bit.

Speaker Change: On sort of how are you thinking about going about detecting and defining elevated replication stress. Thanks.

Karen Akinsanya: Yes, great question. I mean, first of all, let's just say that RE-1 inhibitors have already been shown to have great efficacy in particular tumor types. So, uterine serous carcinoma, and ovarian cancer, really strong responses there. We do, though, believe that there are opportunities in solid tumors beyond those gynecological tumors. We mentioned breast cancer and other solid tumor types. As you know, we had a collaboration with MD Anderson for several years that sought to really help us understand sensitive tumor types, and we're going to be leveraging that information as we go forward with our clinical trials.

Karen: Yes, Great question I mean first of all let's just say that we know is that we one inhibitors have been shown to have great efficacy.

Speaker Change: Human types already.

Speaker Change: <unk>.

Speaker Change: I'm a very intense.

Speaker Change: Really strong response is that we.

Speaker Change: Let me do the opening.

Speaker Change: The opportunities in solid achievements beyond those gynecological tumors.

Speaker Change: That cancer and other LNG in the pipe.

Speaker Change: We have a collaboration with MD Anderson for several years.

Speaker Change: It really helps us understand sensitive tumor type.

Speaker Change: And.

Speaker Change: We're going to be leveraging that information as we go forward.

Speaker Change: With with our clinical trials.

Speaker Change: We're in a dose escalation.

Karen Akinsanya: As you know, we're in a dose escalation setup this year, but as we go to look for efficacy signals, we have the opportunity to leverage that information from the collaboration, as well as to think about how to select patients that we think are going to be the most sensitive. So, we'll be providing updates on that in the future.

Speaker Change: Yeah.

Speaker Change: As we go to the full efficacy signals, we have the opportunity to leverage that information from the collaboration.

Speaker Change: As well as to think about how to.

Speaker Change: Select patients that we think are going to be the most sensitive.

Speaker Change: We'll be providing updates on that in the future.

Joseph Michael Catanzaro: Okay, thanks. That's helpful. Thanks for taking my question.

Speaker Change: Okay. Thanks, that's helpful. Thanks for taking my question.

Speaker Change: Okay.

Chris Shibutani: And once more for your questions, that is star and one. We'll move next to Chris Shibutani with Goldman Sachs. Your line is open.

Speaker Change: And once more for your questions that is star one.

Speaker Change: Next to Chris <unk> with Goldman Sachs. Your line is open.

Chris Shibutani: Great, thank you very much. A question about the business as well as a question about the pipeline. On the business on an annual basis, you've tended to provide some insight into the annual contract value and the number of customers that you're having there. Can you talk about how the year is progressing and your confidence in terms of that ACV trend moving one direction or another, presumably favorably given the 6 to 13% range that you've provided?

Chris: Great. Thank you very much a question about the business as well as the question about the pipeline on the business on an annual basis, you've tended to provide some insight into the.

Chris: Annual contract value and the number of customers that you are having there can you talk about how the year's progressing and your confidence in terms of that HCV trend moving one direction or another presumably favorably given the 6% to 13% range that you've provided.

Chris Shibutani: and then within that, what tends to influence whether the gross margins are closer to sort of the mid-70s versus the 80% level? So if I had to explain to someone the mix of the customers and the gross margin impact and what you're seeing, how could you help me there?

Chris: And then within that.

Speaker Change: What tends to influence whether the gross margins are closer to sort of the mid seventies versus the 80% level. So if I had to explain to someone the mix of the customers and the gross margin impact and what Youre seeing how could you help me there and then secondly at the R&D day carrying at the end of last year I think there was a little bit of buzz that emerge.

Geoffrey Craig Porges: And then secondly, at R&D day, Karen, at the end of last year, I think there was a little bit of buzz that emerged when you guys identified a couple of potential targets that the street tends to perk up about. In particular, I'll mention NLRP3 this year has become somewhat trendy. PRMT5 also has a presence. So with those, you can talk about advancing one of them into an IND in 2025. What's the horse race like?

Speaker Change: <unk> when you guys identified a couple of potential targets that the street tends to perk up about in particular I'll mentioned NLRB three this year. It has become somewhat trendy PRN. Five also has that PRASM. So with those you talk about advancing one into an IND in 2025 whats the horse race like.

Geoffrey Craig Porges: And is that purely in the domain of something that you guys would plan to take forward? Or is that something you would contemplate possibly shifting over towards a partnership there as a way to perhaps leverage costs but still be able to get some of the carry, so to speak? Thank you.

Speaker Change: And is that purely on the domain of something that you guys would plan to take forward or is that something you would contemplate possibly shifting over towards a partnership there.

Speaker Change: As a way to perhaps leverage cost, but still be able to get some of the carrier service fees. Thank you.

Speaker Change: Yeah.

Karen Akinsanya: Thanks, Chris. I'll answer the last couple of questions. I'll let Chad answer the other five or six.

Speaker Change: Thanks, Chris I'll answer the first couple of questions ill, let John answer the other five or six.

Geoffrey Craig Porges: So, beginning with the ACV. We highlighted that last year revenue growth exceeded ACV growth by a significant margin, and we disclosed ACV growth. And we don't break out ACV trends quarterly, but we've definitely communicated that ACV growth will be significantly higher than revenue growth this year. And that was driven by the large contribution from the multi-year deals in the fourth quarter of last year, which effectively are recognizing revenue from future years, in that case, 24, 25, and 26 for a three-year deal. So ACV growth this year is likely to be significantly higher than revenue growth, and that was true in the first quarter.

John: So beginning with the ICB.

Speaker Change: We highlighted that that.

Speaker Change: Last year revenue growth exceeded ACB growth by a significant margin and we disclosed.

John:

John: And we don't break out ACP trends quarterly but.

John: Definitely communicated ACB growth will be significantly higher than revenue growth. This year and that was driven by the large contribution from the multi year deals in the fourth quarter of last year, which effectively.

John: Recognizing revenue from future years that case 'twenty four 'twenty five 'twenty six.

John: For a three year deal so.

John: <unk> growth this year is likely to be significantly higher than revenue growth that was true in the first quarter.

Geoffrey Craig Porges: We don't sort of have an audited ACV growth number, but qualitatively, it was significantly above revenue growth. And it is consistent with what we're expecting for the full year. Now, in terms of the number of customer trends, we do present that in our KPIs. I think we have confidence that the KPIs are going to trend positively this year. We don't guide to that, and I don't have specific numbers to share, but you could look at the numbers that we highlighted last year, and we remain pretty positive about the trajectory of those numbers this year and about their ability to contribute to us achieving the revenue guidance and, by implication, the ACV growth outlook that we're expecting.

John: We don't sort of have ordered ACB growth number.

John: But qualitatively it was significantly above the revenue growth.

John: It is consistent with what we're expecting for the full year.

John: Now in terms of the number of customer trends.

John: That present that in our Kpis.

John: I think we have confidence that the kpis the guy to trend positively this year, we don't guide to that.

Speaker Change: I don't have specific numbers to share.

John: But you could look up the numbers that we highlighted last year.

John: Remain pretty positive about the trajectory of those numbers this year and about their ability to contribute to us achieving the revenue guidance by.

John: By implication the ACB growth outlooks that we're expecting.

Geoffrey Craig Porges: And then, sorry, I meant the other question; I knew it would take me a while to get there, gross margin. So gross margin is somewhat influenced by the contribution of multi-year deals. If we have a large software renewal that includes revenue where we're providing the actual access to software two or three years out, then that revenue being recognized has a very high gross margin, and that tends to lift the gross margin overall.

John: And then sorry, the other question on Europe.

John: Gross margin.

John: So.

John: Gross margin is somewhat influenced by the contribution of multiyear deals. If we have a lot of software renewal that includes revenue.

John: Where we're providing the actual access the software two or three years out.

John: That revenue being recognized as a very high gross margin and that tends to lift the gross margin overall, whereas.

Geoffrey Craig Porges: Whereas a quarter, for example, like the one we most recently had, where we didn't have a lot of multi-year deals and we had a significant step up in hosted revenue, that tends to bring the gross margin down. Now, we are very confident that the gross margin is going to trend positively over time. There was a little bit of an increase in technology spend that I flagged in the first quarter. But I think that overall, we're very convinced that our gross margin trend, the guidance will be similar, and is similar to last year, and we think that it will trend positively over time. I wouldn't be dialing in any sort of substantial increase in our gross margin, but we do think there's reason to think that it will continue to gradually tick up by small amounts. Sorry, Karen.

John: For example, like the one we most recently have we didn't have a lot of multi year deals that we had a significant step up in hosted revenue.

John: Tends to bring the gross margin that now we are very confident that the gross margin is going to trend positively over time.

John: There was a little bit of an increase in technology spend that I flagged up in the first quarter.

John: But I think that overall, we're very convinced that our gross margin trend the guidance will be similar as similar to last year, and we think that it will trend positively over time I wouldn't be dialing in so substantial increase in our gross margin, but we do think there is reason to think that it will continue to gradually pick up.

John: By small amounts each year.

Speaker Change: Sure sure Yeah, So you're right. The <unk> five MTA has been pretty interesting over the last year with a lot of disclosures from other companies.

Karen Akinsanya: Sure, yeah, so you're right, the NLRP3 and PRMT5 MTA have been pretty interesting over the last year with a lot of disclosures from other companies. We are excited about both programs. I think what they both have in common is that there are a number of potential indications. So NLRP3, for example, is potentially useful in Parkinson's disease as well as a number of peripheral inflammatory diseases. For PRMT5, there's an opportunity in the brain, in brain tumors, but also in a number of solid tumors.

John: We are excited about both programs I think they both have in common is that there are a number of potential indications. So MRP three.

John: Potential obviously in Parkinson's disease, as well as a number of.

John: Peripheral inflammatory diseases.

John: <unk> opportunity and Brian and Brian <unk>.

John: A number of solid tumors.

Karen Akinsanya: So we're excited to have both of these programs in our portfolio. They're both in the optimization stage. We're working hard on the optimization of multiple series. I think we described that as Pipeline Day.

John: We are excited to have both of these programs in our portfolio.

John: That both in the optimization stage, we're working hard on the optimization of multiples. They raised I think he described that pipeline today and one of the important features.

Karen Akinsanya: And one of the important features is the opportunity to leverage our platform to optimize brain penetration, which is clearly a key feature for both of these programs. And that work is underway. But I think it's too early to talk about the sort of picking a horse in the race.

John: She entity to leverage our platform to optimize brain penetration, which is clearly a key feature.

John: And that work is underway I think it's too.

John: I'm going to talk about the sort of kicking in both in the race.

Karen Akinsanya: I think we're pleased with the progress that we're seeing. And then your other question, I think, was whether we would develop these alone or in collaboration with others. I think both opportunities are open to us, and we remain sort of open to collaboration discussions. But we also are working right now to think about indications for which we would conduct early clinical trials. So again, we'll keep you posted as we make progress. Thank you for all the answers.

Speaker Change: I think we're pleased with the progress that we're seeing and then your other question I think was whether we would develop these alone or income collaboration with others. I think both opportunities are open to us and we remain.

John: Sort of open to collaboration discussion.

John: But we also are working right now to think about indications in which we would conduct early clinical trials.

John: So again, we'll keep you posted as we make progress with that.

Chris Shibutani: Thank you for all the answers to all my questions. I appreciate it.

Speaker Change: Thank you for all the answers to all my questions I appreciate it.

Speaker Change: Yeah.

Operator: I am showing no further questions at this time. That concludes today's call. You may now disconnect.

Speaker Change: I'm showing no further questions at this time that concludes today's call you may now disconnect.

Speaker Change: [music].

John: Hmm mm.

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