Q3 2025 Schrodinger Inc Earnings Call

Speaker #1: Thank you for standing by . Welcome to Schrodinger, Inc. Conference Call to review third quarter 2020 financial results . My name is Rob , and I'll be your operator for today's call .

Speaker #1: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .

Speaker #1: If you'd like to ask a question during this time , simply press star . Then the number one on your telephone keypad . Please be advised that this call is being recorded at the company's request .

Speaker #1: Now , I would like to introduce your host for today's conference , Miss Jaren Madden , Chief Corporate Affairs Officer and Head of Investor Relations .

Speaker #1: Please go ahead .

Speaker #2: Thank you , and good afternoon , everyone . Welcome to today's call , during which we will provide an update on the company and review our third quarter 2020 financial results .

Speaker #2: Earlier today , we issued a press release summarizing our financial results and progress across the company , which is available on our website at Schrodinger, Inc. .

Speaker #2: I'm here with me on our call today . Are Ramy Farid Chief Executive Officer , Richie Jain Chief Financial Officer and Karen Akinsanya president Head of Therapeutics R&D and Chief Strategy Officer , Partnerships .

Speaker #2: 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 may , pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 , including , without limitation , statements related to our financial outlook for the full year 2025 .

Speaker #2: Our plans to accelerate the growth of our software business and advance our collaborative and proprietary drug discovery programs . The timing of and initiation of and readouts from our clinical trials , the clinical potential and properties of our compounds , the use of our cash resources , as well as future expenses .

Speaker #2: 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 .

Speaker #2: 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 September 30th , 2025 .

Speaker #2: 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 .

Speaker #2: And with that , I'd like to turn the call over to Rami .

Speaker #3: Thank you . And thank you , everyone , for joining us today . We made very solid progress during the third quarter . Total revenue was 54 million , a 54% increase from the third quarter of 2024 , reflecting strong execution across our business software revenue in the third quarter was 40.9 million , representing 28% year over year growth , and was just above our expectations .

Speaker #3: Drug discovery revenue was 13.5 million , highlighting the progress in our collaborative programs . We are seeing continued strong demand for advanced computational solutions across the industry .

Speaker #3: We are also pleased to see wide recognition that simulated data is required to realize the full potential of AI and drug discovery to effectively harness AI and machine learning from molecular discovery .

Speaker #3: Vast amounts of high quality , physics based simulation data are essential for training robust AI models . Experimental data alone is insufficient to generate the required training data .

Speaker #3: Schrödinger's differentiated and extensively validated platform generates high quality simulated data at a scale that far exceeds what is possible with experiments alone . With this new computational physics plus AI paradigm becoming the accepted standard , we are very optimistic about the long term potential and value of our platform as we execute through the remainder of 2025 , we are encouraged by the continued high level of customer engagement as the macroeconomic pressures that have impacted industry stabilize .

Speaker #3: While we remain confident about our long term growth opportunity , we are updating our software revenue growth guidance for 2025 to 8 to 13% from 10 to 15% to reflect our current expectations regarding the timing of certain pharma scale up opportunities .

Speaker #3: Turning briefly to our pipeline , we continue to work toward completing the phase one package for CR 1505 . Our Malt1 inhibitor , and the phase one dose escalation study for STR 3515 .

Speaker #3: Are we one minute, one inhibitor? Beyond these planned investments, we do not intend to advance our internal discovery programs into the clinic independently.

Speaker #3: This decision and the 30 million expense reduction in May improve our operational efficiency and long term profitability profile . We are continuing to invest in advancing our platform , including making significant improvements to the accuracy and domain of applicability , as well as usability , which is driving adoption among scientists throughout the R&D organization , not just dedicated computational chemists .

Speaker #3: Last week , we released our 2025 for Software update , which includes enhancements for challenging modalities such as bifunctional Degraders . Additionally , the beta for our predictive toxicology solution is ongoing .

Speaker #3: This version encompasses approximately 50 representative kinases . In addition to multiple key antitargets . We are continuing to expand the number of off target supported in our platform and our optimistic about the potential long term contribution of this product .

Speaker #3: Overall , we have made considerable progress this year and remain focused on executing against our strategic priorities , including increasing customer adoption of our software , delivering major scientific advancements to the platform , and advancing our therapeutics portfolio .

Speaker #3: I will now turn the call over to Richie to discuss the financials in greater detail . Richie , thank you , Rami , and good afternoon , everyone .

Speaker #3: Schrodinger had an excellent third quarter with strong growth in both software and drug discovery . Revenue , coupled with disciplined expense management . Total revenue for the quarter was 54.3 million , an increase of 54% compared to Q3 2020 .

Speaker #3: For . The increase was driven by both higher software and drug discovery revenue . Software revenue was 40.9 million , an increase of 28% compared to Q3 2024 , and just ahead of our expectations for the quarter .

Speaker #3: The increase was primarily driven by higher revenue from hosted contracts on premise renewals and contribution revenue from the grant related to our predictive toxicology initiative .

Speaker #3: This growth primarily reflects the expansion of existing accounts with limited contribution from new customers . Drug discovery revenue was 13.5 million , compared to 3.4 million in Q3 2024 .

Speaker #3: The increase reflects continued successful execution across our expanded portfolio of collaborations software gross margin for both Q3 2025 and Q3 2024 was 73% .

Speaker #3: R&D expenses were 42.8 million in Q3 2025 , a 16% decrease from 51 million in Q3 2020 . For the decrease was primarily due to lower employee related expenses and the continued shift of the predictive toxicology expenses into software .

Speaker #3: Cost of goods sold from internal R&D , sales and marketing expense was 9.5 million and 8% decrease compared to Q3 2020 . For G&A decreased 13% to 21.7 million .

Speaker #3: The decline in both expenses was primarily due to lower employee related expenses . Overall total operating expenses were 74 million in the quarter , a decrease of 14% compared to Q3 2024 .

Speaker #3: Total other income was a gain of 13 million , compared to a gain of 30 million in Q3 last year due to mark to market changes in our equity investments and currency fluctuations .

Speaker #3: Net loss was 33 million , or $0.45 per diluted share , versus a net loss of 38 million , or $0.52 per diluted share , in Q3 2020 .

Speaker #3: For the fully diluted share count for Q3 was 73.6 million , compared to 72.8 million in Q3 2020 . Four . We remain well capitalized , with 401 million in cash and equivalents as of September 30th .

Speaker #3: Turning to our full year software guidance , we are updating our revenue growth and gross margin expectations for the year . We now expect software revenue growth to be in the range of 8 to 13% , compared to prior expectations of 10 to 15% .

Speaker #3: This change is driven by the slowdown in pharma discussions , resulting from the multitude of factors impacting the industry and our relatively long sales cycle .

Speaker #3: For scale up opportunities , we are having positive conversations with customers and our scheduled renewals remain on track . While we may experience certain delays this quarter , we remain confident in the long term potential for growth as industry pressures lessen .

Speaker #3: We are encouraged by the early signals of recovery in the biotech sector , including in the capital markets . M&A and new capital formation , creating additional opportunities .

Speaker #3: We are addressing the industry's increasing demand for Agentic integration and R&D efficiency , as well as expanding the domain of applicability across the drug discovery and preclinical development continuum .

Speaker #3: Collectively, these provide additional opportunities for us to demonstrate value to our customers and access additional budgets. Shifting to the remainder of our guidance, we are pleased with the progress we have made across our collaborative portfolio and have increased our drug discovery revenue guidance to $49 million to $52 million, which slightly exceeds our prior expectation of $45 million to $50 million.

Speaker #3: Software gross margin is now expected to be 73 to 75% , versus 74 to 75% previously , reflecting the change in software revenue expectations and our relatively fixed cost structure for software cost of goods sold .

Speaker #3: We are committed to managing our expenses and our expense guidance remains unchanged . We continue to expect operating expenses to be lower than 2024 , and cash used in operating activities to be significantly lower than 2024 .

Speaker #3: Our headcount is now appropriately sized to achieve our business objectives after the 30 million expense reduction announced in May , we have already realized more than half of the 30 million savings and the remainder will be realized in 2026 .

Speaker #3: This action , plus the phasing out of independent clinical development activities in associated reduction in team , will provide savings of approximately 70 million and improve our long term profitability profile .

Speaker #3: Overall , we reported strong financial results for the quarter . Our business is resilient and we are committed to taking advantage of the opportunities in front of us .

Speaker #3: With that , I'll turn the call over to Karen to discuss our therapeutics , R&D and pipeline updates .

Speaker #4: Thank you . Rishi , and good afternoon , everyone . Our highly experienced drug discovery team are pioneers of the predictive computational approach to drug discovery .

Speaker #4: We leverage structural biology breakthroughs and physics combined with the power and speed of AI to enable broad exploration of chemical space to identify novel molecules that repeatedly meet a wide range of product profiles .

Speaker #4: Examples of molecules discovered as part of collaborations include Aster , Ceritinib , acquired by Takeda from Nimbus . Morpho 57 , now advancing at Lilly following the morphic acquisition and structure .

Speaker #4: Therapeutics GSB 1290 , which all continue to make progress through the clinic . These phase two and three assets represent the most advanced examples of medicines designed by leveraging large scale use of our physics based methods , along with AI and machine learning .

Speaker #4: Turning to updates on our clinical pipeline next month , we will present new translational data and a clinical update on SGR 1505 . Our Malt1 inhibitor .

Speaker #4: During a poster session at the American Society of Hematology conference , the abstract , published on Monday , builds on the encouraging data we presented in June , reinforcing cell 1505 as a potential best in class Malt1 inhibitor for the treatment of relapsed refractory B-cell malignancies in patients who become resistant to standard of care agents .

Speaker #4: The abstract includes initial data in patients with aggressive lymphomas , such as Abc-dlbcl , where one patient has now achieved a complete response , as well as updated safety and efficacy data in patients with Waldenström's , Macroglobulinemia , or CLL .

Speaker #4: The poster will also include translational data on the mutational profiling of BTK and Bcl2 inhibitor resistance mutations . These data , combined with the recent orphan drug designation by the FDA in Waldenström's , support the therapeutic potential and commercial opportunity for SGR 1505 .

Speaker #4: We are continuing to focus on securing the right strategic partnership to ensure this program receives the dedicated focus and resources required to pursue mid and late stage development , and we are encouraged by the conversations we have had to date .

Speaker #4: Moving to SGR 3515 . Our Wee1 H1 Co-inhibitor . We are currently focused on completing the phase one dose escalation study in patients with advanced solid tumors .

Speaker #4: We are encouraged by the progress to date based on our preliminary review of safety , PK and PD , and now expect to .

Speaker #4: Share initial clinical data in the first half of 2026 , which allows us more time to fully analyze and assemble the phase one data for 3515 .

Speaker #4: Last month , we presented preclinical data for SGR 5573 . Our potent selective brain penetrant inhibitor of osimertinib resistant EGFR variants at Esma , the data demonstrated that SGR 5573 is potent against resistant EGFR variants , has strong wild type selectivity and robust anti-tumor activity in preclinical brain metastases models .

Speaker #4: Additionally , we recently selected a development candidate in our Nlrp3 program . Str606 is structurally distinct from other known Nlrp3 inhibitors and has several potential best in class attributes , including brain penetrance and an encouraging preclinical potency , selectivity , and safety profile .

Speaker #4: Others have recently demonstrated clinical proof of concept for NLRP3 as a potential treatment for patients with cardiovascular risk factors and obesity. We have advanced more than 25 programs to the development candidate stage, either independently or through collaborations.

Speaker #4: Since establishing our therapeutics team since 2020 , we have generated approximately 600 million in cash from companies . We have co-founded or from our program licensing and collaboration activities .

Speaker #4: We intend to build on this track record by continuing to leverage our extensive combined expertise in structural biology , functional insights , and the full scale use of our platform to unlock high potential target product profiles .

Speaker #4: With approximately 15 programs currently eligible for future milestones and royalties from our past activities , we believe a discovery focused therapeutics R&D model has the potential to deliver additional long term value and significant returns through licensing new ventures and discovery collaborations .

Speaker #4: As we wrap up 2025 , we look forward to sharing our SGR 1505 update at Ash and to advancing our early stage and collaborative portfolio .

Speaker #4: We appreciate all of the hard work of our discovery and development teams, who have enabled our progress to date and future opportunities. I will now turn the call back to Ramy.

Speaker #3: Thank you . Karen . We have made significant progress across the business this quarter , and we are optimistic about our outlook through the end of the year .

Speaker #3: Looking ahead , we are operating at the intersection of two powerful currents shaping the future of molecular discovery . The integration of computational drug discovery and the industry's dramatically increased focus on AI .

Speaker #3: We are at the forefront of this paradigm shift . We believe our technological advantages , combined with the strategic actions we have taken to improve our operational efficiency and long term profitability profile , will position us to deliver growth in the years to come .

Speaker #3: At this time , we'd be happy to take your questions .

Speaker #1: Thank you . We will now begin the question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Speaker #1: If you would like to withdraw your question , simply press star one again . We ask that you please limit yourself to one question and one follow up .

Speaker #1: Your first question today comes from the line of Manny from Leerink Partners . Your line is open .

Speaker #5: Hey guys , thanks for thanks for taking taking me in here . A question about the implications of the guidance regarding the reduced spend year over year and trimming of opex .

Speaker #5: How should we think about that in line with your commentary around reduced focus on novel clinical development , etc. ? What is what does that imply in a longer term time horizon ?

Speaker #5: How do should think about your opex trajectory ?

Speaker #6: Yeah , thanks for the question . I think we've , you know , just to summarize actions we've taken , we announced a $30 million expense reduction in May .

Speaker #6: We've achieved more than half that goal . We'll achieve the full amount by next year . The announcements that we've made today regarding our clinical intentions , you know , that that has the effect of another roughly $40 million .

Speaker #6: That is the putting us on a track towards improving our profitability profile . We're not , you know , guiding to any specifics there , but these are actions that we've taken to improve the overall profitability profile that we're on .

Speaker #5: Okay . And as a quick follow up , you guys got the one . Sure . Do you guys think of formal profitability either in GAAP or cash terms as a meaningful milestone to pursue ?

Speaker #5: Or is that not a metric that you guys think is really meaningful on its own ?

Speaker #6: Yeah , it's a meaningful milestone for sure . And we're taking actions towards that goal . I think , again , another another way that we're thinking about this is , you know , the we went public in 2020 .

Speaker #6: We've not raised external capital since then . There was a follow on in 2020 , but nothing since then . We've been incredibly productive in growing the business between software revenue and drug discovery .

Speaker #6: Revenue . And we've had an incredibly productive business development effort in our discovery programs . That's generated $600 million of cash over the last five years .

Speaker #6: So we are focused on , you know , longer term profitability and improving the profile . And these are the actions that we're taking towards that goal .

Speaker #5: Great . That's very helpful . Thanks , guys .

Speaker #1: Your next question comes from the line of Scott Schoenhaus from KeyBanc Capital Markets . Your line is open .

Speaker #7: Hey team . Thanks for taking my question . And a nice quarter question on the software guidance here . You know , you've been reporting pretty nice software growth .

Speaker #7: Third quarter . Was really strong at 28% growth . And there was comments about sort of seeing a slowdown in the end markets with your discussions with your customers , maybe talk about what's changed over the or maybe when this started to slowdown started to happen and maybe by cohort where you're starting to see this , this slowdown happen on the software side .

Speaker #7: Thanks .

Speaker #6: Yep . Thanks , Scott . So yeah , as you mentioned , we're pleased with the quarter , the quarterly results and the year to date results .

Speaker #6: You know , with software growth of roughly 30% . As you know , there's been a multitude of factors impacting the whole pharmaceutical industry this year .

Speaker #6: Despite that backdrop , we've been encouraged with the continued high level of customer engagement . And . The initial signals that suggest that the industry is stabilizing and poised for a recovery .

Speaker #6: But I think we have to be honest that sustained improvement in the sector may take time , and we are cautiously optimistic . With that in mind , we did lower the software guidance by 2% at both ends of the range to reflect the uncertainty regarding the timing of certain pharma scale up opportunities .

Speaker #6: It's worth noting that our scheduled renewals continue to be on track . What's changed since our last call in August is the conversations that we've been having with our customers regarding scale up opportunities have been delayed longer than anticipated as these conversations matured or have matured , we have greater visibility into the size of the opportunity , but less visibility into the timing of close .

Speaker #6: We also did not anticipate the continued challenges in the biotech sector . We did not factor that into our revenue guidance . Growth for the year , but some of the challenges have been greater than we expected and have persisted over the previous few months .

Speaker #6: The underlying fundamentals with those customers have been weaker. You know, you’ve probably seen all the news that we’ve been seeing with layoffs and companies altogether shutting down, discovery or not achieving anticipated financing rounds.

Speaker #6: You know , even recently there's been some very high profile companies that have shut down their operations altogether as an indication of continued challenges .

Speaker #6: So we are seeing some early signs of recovery with biotech as well . Some new customer information that are creating opportunities for us .

Speaker #6: But across pharma and biotech , those are the tops of the waves that we're seeing since our last call in August .

Speaker #7: That's super helpful . And I guess a follow up question would be on the predictive toxicology . I know it's still in beta .

Speaker #7: How's the how's the customer response to it ? When do you think you can start monetizing it ? I know you said it's more of a longer term opportunity , but maybe if we can just like provide more color there .

Speaker #7: On the timing of the monetization of of this , of this product . Thank you .

Speaker #6: Sure . Yeah . So first of all , we and .

Speaker #3: Actually the Gates Foundation .

Speaker #6: Are who funded the .

Speaker #3: Work . Are .

Speaker #6: Quite pleased .

Speaker #3: With the progress we've made.

Speaker #6: It's been really going extremely well . There's also really significant .

Speaker #3: Interest in the project .

Speaker #6: And the , you know , in the initiative and , and in the ultimate product , the ability to actually predict toxicity associated with binding to off targets .

Speaker #6: .

Speaker #3: And we're engaged in quite .

Speaker #6: A number .

Speaker #8: Of discussions with customers . And as you noted , we are actually , yes , still in in the beta . There are customers using it , but it's a little to discuss feedback yet .

Speaker #8: So we're not quite there yet , but we're really , really pleased . Pleased with the the interest and the progress we're making both in the product itself , but also with the beta .

Speaker #9: Thank you .

Speaker #8: You . .

Speaker #1: Your next question comes from the line of Matt Hewitt from Craig-hallum Capital Group . Your line is open .

Speaker #10: Good afternoon . Thanks for taking the questions . Maybe just to dig in a little bit about your expectations of no longer advancing discovery into the clinic .

Speaker #10: Do you mean that you'll still be seeking and finding new molecules, but rather than advancing into the clinic and then looking for partnerships, now you'll be looking for those partnerships pre-clinical?

Speaker #10: And what does that mean from an economic standpoint ?

Speaker #11: Yeah , thanks for the question . I think that we can just affirm that we are indeed continuing to work on discovery stage programs .

Speaker #11: New ideas , new programs , as we have been doing actually , since the inception of the therapeutics team here at Schrodinger . In terms of expectations about when one would start to consider partnership , I want to reference the work that we've been doing over the last five years to essentially socialize programs from their very inception .

Speaker #11: Last year . You will recall that we partnered a program that was a very early stages of drug discovery with Novartis for very significant economics .

Speaker #11: That was $150 million upfront deal . It obviously allowed us to partner with a company that ultimately will take those programs into the clinic .

Speaker #11: But to do the discovery in sync with them so that not only are we very aligned on the target profile and the features of the molecule , but there at the time , learning about our platform as they go to adopt that system wide .

Speaker #11: So this has worked very well . You heard Richie say that we generated $600 million over the last five years from this model .

Speaker #11: And so we're very confident that we can continue to generate value while working on a very diverse and broad range of targets in the discovery space .

Speaker #10: Very helpful . Thank you . And maybe my follow up , as it sounds like the renewals are on track , you're having success there , but you did note that you're still or that you're struggling a little bit on the new logo or the new customer front .

Speaker #10: What do you think ? You mentioned that you're seeing some improvement in the macro . What do you think it's going to take to kind of flip over where you are starting to sign new contracts with new customers to , to drive some incremental growth ?

Speaker #10: What do you think ? You mentioned that you're seeing some improvement in the macro . What do you think it's going to take to kind of flip over where you also

Speaker #10: Thank you .

Speaker #6: take that . Yeah , yeah . Thanks for the second question , Matt . Yeah . We you know , I think the growth that we've delivered this quarter and most of the year to date has been growing within our existing customers .

Speaker #6: And , you know , closing adoption gaps and scaling up relationships as we think about , you know , new customers , new logos , you know , the biotech market we're seeing , as I say , our encouraging early signs every biotech company has its own features .

Speaker #6: I think we're still trying to figure out how this one's going to come together and what opportunities that will open for us . You know , they're while there's encouraging signs , there's also discouraging signs with customers going out of business .

Speaker #6: So there are some new capital formation opportunities that we think are exciting , that we are having nice conversations around . We are , you know , we need to advance those to to close .

Speaker #6: And that can give us some greater visibility into those opportunities .

Speaker #10: Got it . All right . Thank you .

Speaker #1: Your next question comes from the line of segerman from BMO Capital Markets . Your line is open .

Speaker #7: Hi there . This is Connor on . Thank you for taking our question . I just maybe had a follow up to the , you know , delay that was announced for 3515 today .

Speaker #7: I was just wondering if maybe you could expand a little bit on what occurred there and kind of , you know , maybe when we should be expecting to see data in the first half of 26 .

Speaker #9: Thank you .

Speaker #11: Yeah . So similar to what we did when we were preparing to share data on our first program , 1505 one inhibitor . We've elected to complete the collection and analysis of data related to PK , PD , and preliminary activity before providing an update on the ongoing trial .

Speaker #11: And just because of where we are in that cycle of data collection and analysis , we decided to move that over into the first half of 2026 .

Speaker #11: We have not yet confirmed the venue or the exact timing of that , but we do expect that to be in the first half , potentially at a medical meeting .

Speaker #7: Appreciate the additional color there .

Speaker #9: Thank you . Thanks .

Speaker #1: Your next question comes from the line of Sean Lehman from Morgan Stanley . Your line is open .

Speaker #12: Hi , everyone . This is Morgan on for Sean . Thanks for taking our question . Wondering if you could share any more details about the SGR 61 six .

Speaker #12: And I'll and LRP three inhibitor and any plans there in terms of what you're doing to progress that ? Thank you .

Speaker #11: Yes , we're very excited about this compound . We haven't talked a lot about Nlrp3 program . I think we covered it at Pipeline Day a year or so ago .

Speaker #11: We have selected development candidate that has really impressive properties . We predict this to be a very low dose drug , which we think sets it up to be an excellent candidate for combinations .

Speaker #11: And it is a brain penetrant . Nlrp3 molecule with pretty impressive properties . There . We used our Esol capability to really optimize that brain penetration .

Speaker #11: So a really nice looking molecule . Preliminary talks underway . And in terms of the plans for this molecule , it's kind of interesting .

Speaker #11: And timely given the recent updates in the Nlrp3 space . We have been socializing this program with potential partners and we'll update you with those discussions .

Speaker #11: Progress . As you heard , Rami point out on his in his remarks , we won't be taking this forward alone or ourselves .

Speaker #11: We'll be doing that in the context of a partnership . And so again , we'll update you once we have more information about that .

Speaker #12: Thank you .

Speaker #1: You are . Next question comes from the line of Dennis Ding from Jefferies . Your line is open .

Speaker #7: Hi .

Speaker #9: Thanks for taking my question . The decision to not do more clinical work on your own , I guess . Why now ? And is there any read through to the Wee1 data you guys are seeing so far ?

Speaker #11: What .

Speaker #13: Can you repeat ? The second part of the question .

Speaker #6: Was about wee1 or what was the second part ?

Speaker #9: Yeah , I mean , given the we wanted to escalation , I'm just curious . This as to not move things further into the clinic on your own is the timing and just why now and why not wait a little bit more before making that decision ?

Speaker #9: Seeing the full set of that data .

Speaker #11: I think there are multiple answers to this question . So I'll invite Rami and Richie to comment as well . I think you heard us explain on the call here to others that we have been extremely productive and successful at partnering programs that are still in discovery and generating .

Speaker #11: I'm still in discovery or completed discovery , where we're collaborating already with others . And so we think that is a very . High potential model for us to continue without exposing ourselves to having to generate clinical data ourselves .

Speaker #11: So this is really not related . Let me be clear to our assessment of 1505 one inhibitor , which we're very excited about .

Speaker #11: And we've already announced that we plan to progress that in partnership with others or with respect to 3515 , as I just explained to you , the prior on the prior question , we're still gathering that data .

Speaker #11: We expect to have a more complete analysis in the coming months . And you also talk about we're excited about all of these programs .

Speaker #11: We just think that Schrodinger's profile right now , it's much better to advance those molecules in the clinic with others . And expand on what we've done in discovery to create value .

Speaker #8: And I'll just add , as we've been saying , since the IPO , that we're very excited about the synergies between drug discovery business and the software business .

Speaker #8: And we see the height of those synergies in the discovery efforts . And that's why we're really focused on , on , on , on discovery efforts .

Speaker #8: You heard earlier in both in our remarks how successful that is . I think Karen has said this . It it's very obvious that this is something that we should be investing more in .

Speaker #9: Perfect . And then as a follow up , can you just please give an update on the Novartis partnership and the progress that have been made there since ?

Speaker #9: I mean , we've almost anniversary , you know , the announcement of that partnership . Thank you .

Speaker #11: Yeah , you're right . It's about a year since . announced . Excellent progress across the efforts there . Teams are working extremely well together , both on the advancement of the programs but also on the incorporation .

Speaker #11: Obviously . And Schrodinger, Inc. platform into the work that Novartis are doing . You can tell from the revenue update that , you know , a portion of that is related to the Novartis progress .

Speaker #11: And so happy to report all is going well and we're looking forward to another productive year with Novartis .

Speaker #9: Great . Thank you so much .

Speaker #1: Again , if you'd like to ask a question , press Star One on your telephone keypad . Your next question comes from the line of Andrea Newkirk from Goldman Sachs .

Speaker #1: Your line is open .

Speaker #12: Hi , everyone .

Speaker #14: This is Thulani on for Andrea . Thanks for taking our questions . Just a quick one from us . Would you mind elaborating some more on the nature of the ash disclosures for CR 1505 ?

Speaker #14: Will those new data feature the same patients , mostly from the prior analysis , with some additional follow up time ? And what will be the most key takeaways from those data in your view ?

Speaker #14: Thank you .

Speaker #11: Yeah , absolutely . So if I could just take you back a moment to ash . Sorry to Iha . So Iha we provided our first update on Fgfr 1505 .

Speaker #11: At that time we had really only focused a lot of the analysis around the indolent patients with CLL that was based on the FDA recommendation to delay dosing aggressive patients .

Speaker #11: So there's a couple of key updates . I would say , from the abstract that came out yesterday , that will be presenting ash .

Speaker #11: The first is an update on the aggressive patients . If I can remind you , a patients with DLBCL are in that category .

Speaker #11: If you have had a chance to look at the abstract , you will see there . And I can update you now that we now have patient a patient with a complete response in the aggressive space .

Speaker #11: This is let me remind you , monotherapy malt1 inhibition producing a complete response in an aggressive lymphoma patient . We think that's an exciting update .

Speaker #11: And so we'll be providing a fresh cut of the data across those indolent and aggressive patients at the Ash meeting . The other focus of that abstract , which we think is very important , is the concept that patients who are double exposed , who've seen a BCL two inhibitor or a BTK inhibitor , or both , the question was , what is happening with respect to the resistance profile ?

Speaker #11: So we've now done genomic profiling of several of the patients that have that particular profile . And what we're seeing there is that they do indeed have the Sentinel mutations in both BTK and going to pause there , because I think I was about to say something that's in the actual poster , and I won't do that yet , but they do have the Sentinel mutations that you expect to see in patients who have more aggressive disease and more difficult to treat disease .

Speaker #11: We think that is a endorsement of our idea that Malt1 is going to be important medicine for patients with unmet need in lymphoma .

Speaker #11: And so that's the update that we'll be providing at Ash .

Speaker #14: Great . Thank you .

Speaker #1: Your next question comes from the line of Brendan Smith from TD Cowen . Your line is open .

Speaker #15: Great . Thanks for taking the questions everyone . I wanted to ask maybe just another one on the predictive talk software . And really how we should be thinking about the broader commercial rollout for this kind of relative to your existing customer base .

Speaker #15: Fully appreciate it early , but I guess , are you expecting this to be maybe , by and large , additive to people already using your other software , or maybe just given where some of those users sit on different development teams ?

Speaker #15: Would you expect kind of separate customer population , even maybe within the same company ? It's ultimately the prime target . And do you think that would maybe require a separate sales strategy or push just kind of trying to understand assumptions about who's likely to use this really out of the gate ?

Speaker #8: Yeah , that's a great question . We see a sources of growth in both those areas for certainly our existing customer base are interested in this .

Speaker #8: And it would be an add on that this would require them actually spending more money . This is not something that would just get thrown in in the package .

Speaker #8: But you bring up a really good point that we also believe this will allow us to tap into new budgets to the extent that this is obviously a technology that's that's of interest to toxicology groups , and that's not who we're traditionally selling our software to or traditionally selling our software to .

Speaker #8: You know , earlier discovery teams , computational chemistry teams . So we think we'll see growth in both those areas . But .

Speaker #15: Thank you .

Speaker #8: Thank you .

Speaker #1: Your next question comes from the line of Michael Riskin from Bank of America . Your line is open .

Speaker #5: Great . Thanks for taking the question , guys . Apologies if I missed this . I've kind of been bouncing around a couple of calls , but I want to go back to the sort of the phasing out the independent clinical development activities .

Speaker #5: I got some of the notes from you earlier answers on that topic , but I just want to dig into it a little bit deeper .

Speaker #5: One question is , I'm curious of is this something that you , that you came to based on your experience with either Malt1 or Wee1 , where you were trying to monetize those assets and you just kind of , you know , didn't have the interactions with with potential sponsors and partners that you thought you would and you decided it's not worth the risk .

Speaker #5: Is this something is this something based on sort of how much leverage you can have ? How many individual programs you could you could push forward ?

Speaker #5: If you are just doing partnering out at discovery , maybe talk about the bandwidth and the opportunity to just think about a number of programs .

Speaker #5: You can bring forward using this new strategy . Shift . I gotta follow up .

Speaker #11: So I can start and just reiterate that the decision we've made today or that we've announced today is really nothing to do with the experience that we had developing our first three programs .

Speaker #11: The development went well , actually . We moved very quickly from idea to end of phase one with a five year window for discovering the molecule and also doing the development for 1505 .

Speaker #11: So I will say the environment for development of particularly of oncology programs has become quite challenging . And I think some of Richie's remarks about biotech space and , you know , the risk profile of taking programs into the clinic , this is not unique to us .

Speaker #11: And so I think the team has been very productive . You just heard we've got two EGFR and also our Nlrp3 . It's really a sustainability question , right .

Speaker #11: How many things can we put in the clinic one after the other . And also reach the goals that you had ? Richie talking about with respect to operational efficiency and our profitability .

Speaker #11: So the other piece that you asked about is we have been very productive at partnering programs during the discovery phase and in fact , if we can partner programs during early discovery , the bandwidth question you asked is we can work on a lot of programs .

Speaker #11: Obviously , in the early phases of discovery , that that funnel narrows a little bit as you go a little later . But there's only so many things we can put in the clinic .

Speaker #11: And so when we looked at the overall mix of value creation in the last five years , we convinced ourselves that actually discovery Partnerships has been very value creating and we can continue to do that and scale that up .

Speaker #8: Yeah . So this is more about the success of the discovery programs to the extent that we can't do everything , we have to prioritize .

Speaker #8: And it's very clear what we should be prioritizing . So I hope that's clear .

Speaker #5: Okay okay . Yeah . That's helpful . And then maybe if I could .

Speaker #11: Maybe just one other remark .

Speaker #5: Yeah . Go ahead .

Speaker #11: The value with these programs ultimately we have milestones in the clinic when our discovery work is done . We have royalties on sales for those drugs that actually make it .

Speaker #11: And there's 15 of those right now . So the value creation continues , even if we're not the ones doing the clinical development , the opportunity at least .

Speaker #16: To .

Speaker #5: Yeah , yeah . Of course , actually that was that was actually going to be my follow up question was exactly on that .

Speaker #5: When we think about these programs now , you know , okay . So shift to exclusively discovery stage partnerships , things like that .

Speaker #5: When I think about these programs going forward , realizing that each one is going to be a custom , it's going to be very it's going to be very unique in terms of the royalties , the milestones , the economics .

Speaker #5: Are they going to be similar to the ones you're doing already with Novartis and Bristol , or are they is there is there any change to the economic structure there , or is that pretty consistent ?

Speaker #8: Yeah . What I'd say about that is we've talked about this before . We've as you know , we've done quite a number of these collaborations and I think we've said this a number of times before that the economics that we've been able to demand as our track record continues to improve and efficacy of the platform improves and the expertise of the team , the economics continue to get better .

Speaker #8: That's been the case with every program . Now , are we saying , for sure guarantee the next collaboration will have better economics ?

Speaker #8: Of course , we're not saying that , but I think it's noteworthy that the that the terms continue to improve . And that's certainly would be an expectation .

Speaker #5: Okay . That's great . Thanks so much . I really appreciate it .

Speaker #16: Great .