10q10k10q10k.net

What changed in Schrodinger, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Schrodinger, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+935 added−726 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-28)

Top changes in Schrodinger, Inc.'s 2024 10-K

935 paragraphs added · 726 removed · 578 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

272 edited+143 added−86 removed456 unchanged
Biggest changeThe failure of a sponsor to comply with the applicable regulatory requirements at any time during the product development process, including non-clinical testing, clinical testing, the approval process or post-approval process, may result in delays to the conduct of a study, regulatory review and approval, and/or administrative or judicial sanctions. 40 Table of Contents A sponsor seeking approval to market and distribute a new drug in the United States generally must satisfactorily complete each of the following steps before the product candidate will be approved by the FDA: • preclinical testing including laboratory tests, animal studies, and formulation studies, which must be performed in accordance with the FDA’s good laboratory practice, or GLP, regulations and standards; • design of a clinical protocol and submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication, in accordance with current good clinical practices, or GCP; • preparation and submission to the FDA of a new drug application, or NDA, for a drug product which includes not only the results of the clinical trials, but also detailed information on the chemistry, manufacture and quality controls for the product candidate and proposed labeling for one or more proposed indication(s); • review of the product candidate by an FDA advisory committee, where appropriate or if applicable; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities, including those of third parties, at which the product candidate or components thereof are manufactured to assess compliance with current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and purity; • satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP and the integrity of clinical data in support of the NDA; • payment of user fees and securing FDA approval of the NDA to allow marketing of the new drug product; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct any post- approval studies required by the FDA.
Biggest changeA sponsor seeking approval to market and distribute a new drug in the United States generally must satisfactorily complete each of the following steps before the product candidate will be approved by the FDA: • preclinical testing including laboratory tests, animal studies, and formulation studies, which must be performed in accordance with the FDA’s good laboratory practice, or GLP, regulations and standards; • design of a clinical protocol and submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication, in accordance with current good clinical practices, or GCP; • preparation and submission to the FDA of a new drug application, or NDA, for a drug product which includes not only the results of the clinical trials, but also detailed information on the chemistry, manufacture and quality controls for the product candidate and proposed labeling for one or more proposed indication(s); • review of the product candidate by an FDA advisory committee, where appropriate or if applicable; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities, including those of third parties, at which the product candidate or components thereof are manufactured to assess compliance 43 Table of Content s with current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and purity; • satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP and the integrity of clinical data in support of the NDA; • payment of user application and program fees pursuant to the Prescription Drug User Fee Act, or PDUFA; • approval of an NDA for the new drug product authorizing marketing of the new drug product for particular indications in the United States; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct any post- approval studies required by the FDA.
Our Drug Discovery Collaborations Over the last decade, leveraging our platform and expertise, we have steadily developed a portfolio of collaborative programs.
Our Drug Discovery Collaborations Over the last decade, leveraging our platform and expertise, we have steadily developed a portfolio of drug discovery collaborative programs.
In addition, SGR-1505 demonstrated potential in combination with BTK inhibitors to overcome drug-induced resistance to BTK inhibitors in samples derived from patients with relapsed/refractory B-cell lymphomas.
In addition, SGR-1505, in combination with BTK inhibitors, demonstrated potential to overcome drug-induced resistance to BTK inhibitors in samples derived from patients with relapsed/refractory B-cell lymphomas.
Furthermore, we believe that development candidates with more optimized property profiles will have a higher probability of success in clinical development. Additionally, since the physics underlying the properties of drug molecules and materials is the same, we have been able to extend our computational platform to materials science applications in fields such as aerospace, energy, semiconductors, and electronic displays.
Furthermore, we believe that development candidates with more optimized property profiles will have a higher probability of success in clinical development. Additionally, since the physics underlying the properties of drug molecules and materials is the same, we have been able to extend our computational platform to materials science applications in fields such as aerospace, energy, semiconductors, electronic displays, and chemicals.
Our computational platform includes a broad array of capabilities: • Faster Lead Discovery : the ability to rapidly identify potent molecules suitable for hit-to-lead and lead optimization efforts by virtually screening extremely large libraries of molecules, as well as physics-based replacement of the central core of a molecule, known as scaffold hopping, to identify novel, highly potent molecules unavailable in library collections; • Accurate Property Prediction : the ability to assess key properties of drug-like molecules using physics-based calculations with accuracy comparable to that of experimental laboratory assays, to facilitate optimization of drug properties, including drug potency, selectivity, and bioavailability; • Optimizing Protein Structures : the ability to refine and optimize protein structure models to increase the number of targets amenable to structure-based drug design; • Large-Scale Molecule Exploration : the ability to computationally ideate and explore novel, high-quality drug-like molecules for consideration by discovery project teams utilizing computational enumeration and generative machine learning techniques that are trained and constructed to yield molecules that are synthetically feasible; • Large-Scale Molecule Evaluation : the ability to scale our calculations of key drug properties to ultra-large idea sets of billions of molecules to enable more rapid and successful identification of high-quality drug candidate molecules; and 10 Table of Contents • Integrated Data Management and Visualization : the ability to generate, access, and analyze the data derived from complex calculations integrated with assay data through a powerful and user-friendly graphical interface.
Our computational platform includes a broad array of capabilities: • Faster Lead Discovery : the ability to rapidly identify potent molecules suitable for hit-to-lead and lead optimization efforts by virtually screening extremely large libraries of molecules, as well as physics-based replacement of the central core of a molecule, known as scaffold hopping, to identify novel, highly potent molecules unavailable in library collections; • Accurate Property Prediction : the ability to assess key properties of drug-like molecules using physics-based calculations with accuracy comparable to that of experimental laboratory assays, to facilitate optimization of drug properties, including drug potency, selectivity, and bioavailability; • Optimizing Protein Structures : the ability to refine and optimize protein structure models to increase the number of targets amenable to structure-based drug design; • Large-Scale Molecule Exploration : the ability to computationally ideate and explore novel, high-quality drug-like molecules for consideration by discovery project teams utilizing computational enumeration and generative machine learning techniques that are trained and constructed to yield molecules that are synthetically feasible; 10 Table of Content s • Large-Scale Molecule Evaluation : the ability to scale our calculations of key drug properties to ultra-large idea sets of billions of molecules to enable more rapid and successful identification of high-quality drug candidate molecules; and • Integrated Data Management and Visualization : the ability to generate, access, and analyze the data derived from complex calculations integrated with assay data through a powerful and user-friendly graphical interface.
Efforts to optimize initial hit molecules for a drug discovery project involve costly and iterative synthesis and testing of molecules seeking to identify a molecule with the required property profile. The optimal profile has the acceptable balance of properties such as potency, selectivity, solubility, bioavailability, half-life, permeability, drug-drug interaction profile, synthesizability, and toxicity.
Efforts to optimize initial hit molecules for a drug discovery project involve costly and iterative synthesis and testing of molecules seeking to identify a molecule with the required property profile. The optimal profile has an acceptable balance of properties such as potency, selectivity, solubility, bioavailability, half-life, permeability, drug-drug interaction profile, synthesizability, and toxicity.
FDA aims to complete its review of priority review applications within six months as opposed to 10 months for standard review. • Accelerated approval. Drug products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval.
The FDA aims to complete its review of priority review applications within six months as opposed to 10 months for standard review. • Accelerated approval. Drug products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval.
Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, nonclinical, and/or chemistry, manufacturing, and controls. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation.
Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, nonclinical, and/or chemistry, manufacturing, and controls. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical trial or to suspend an ongoing investigation.
When a foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval.
When a foreign clinical trial is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the trial as support for an IND or application for marketing approval.
This and other novel features enable WScore to more reliably find hit molecules for challenging protein targets when screening libraries of molecules. ◦ Shape uses the three-dimensional structure and shape of earlier known hit molecules to find new hits when screening libraries of molecules. ◦ DeepAutoQSAR uses modern machine-learning methods trained to earlier known hit molecules to find novel hits when screening libraries of molecules. ◦ IFD-MD can computationally predict the binding mode of molecules to a binding site of a protein, including predicting how the conformation of the protein binding site may reorganize upon binding the molecule. • Hit to Lead and Lead Optimization: Hit to lead is the stage at which small molecule hits are evaluated and undergo limited optimization to identify promising lead molecules.
This and other novel features enable GlideWS to more reliably find hit molecules for challenging protein targets when screening libraries of molecules. ◦ Shape uses the three-dimensional structure and shape of earlier known hit molecules to find new hits when screening libraries of molecules. ◦ DeepAutoQSAR uses modern machine-learning methods trained to earlier known hit molecules to find novel hits when screening libraries of molecules. ◦ IFD-MD can computationally predict the binding mode of molecules to a binding site of a protein, including predicting how the conformation of the protein binding site may reorganize upon binding the molecule. • Hit to Lead and Lead Optimization: Hit to lead is the stage at which small molecule hits are evaluated and undergo limited optimization to identify promising lead molecules.
The Columbia License Agreements establish our rights and obligations with respect to certain patents, software code, technology, and improvements thereto that we license from Columbia University and that are used in, and integrated into, our software solutions, and our physics-based computational platform.
The Prior Columbia License Agreements establish our rights and obligations with respect to certain patents, software code, technology, and improvements thereto that we license from Columbia University and that are used in, and integrated into, our software solutions, and our physics-based computational platform.
Similarly, the physics underlying the properties of materials is no different than the physics underlying the properties of drug molecules. Therefore, we have applied our computational platform to materials science applications, including in the fields of aerospace, energy, semiconductors, and electronic displays.
Similarly, the physics underlying the properties of materials is no different than the physics underlying the properties of drug molecules. Therefore, we have applied our computational platform to materials science applications, including in the fields of aerospace, energy, semiconductors, electronic displays, and chemicals.
FEP+ can also be used to calculate absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context. ◦ Glide is our virtual screening program that is used to screen libraries of molecules to find hit molecules likely to bind a particular protein target in a specific conformation. ◦ WScore is our next-generation virtual screening program that utilizes a more accurate and robust description of protein-ligand interaction solvation effects.
FEP+ can also be used to calculate absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context. ◦ Glide is our virtual screening program that is used to screen libraries of molecules to find hit molecules likely to bind a particular protein target in a specific conformation. ◦ GlideWS is our next-generation virtual screening program that utilizes a more accurate and robust description of protein-ligand interaction solvation effects.
(3) Represents our equity in the entity, which entity holds the rights to any future payments received in connection with Takeda's acquisition of Nimbus' TYK-2 inhibitor program, on a fully diluted basis.
(2) Represents our equity in the entity, which holds the rights to any future payments received in connection with Takeda's acquisition of Nimbus' TYK-2 inhibitor program, on a fully diluted basis.
We also pay royalties under the Columbia License Agreements on gross revenues generated from the sale, licensing or renting of our Licensed Products, which we calculate on a product-by-product basis.
We also pay royalties under the Prior Columbia License Agreements on gross revenues generated from the sale, licensing or renting of our Licensed Products, which we calculate on a product-by-product basis.
The Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers. New laws also are being considered at both the state and federal levels.
The Federal Trade Commission and state Attorneys General are aggressive in reviewing privacy and data security protections for consumers. New laws also are being considered at both the state and federal levels.
We anticipate enrolling up to 52 patients in the United States and Europe with confirmed mature B-cell lymphomas who are 18 years or older and have a life expectancy of equal to or greater than 12 weeks. SGR-1505 will be administered orally. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose and/or recommended dose of SGR-1505.
We anticipate enrolling up to 52 patients in the United States and Europe with confirmed mature B-cell malignancies who are 18 years or older and have a life expectancy of equal to or greater than 12 weeks. SGR-1505 will be administered orally. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose and/or recommended dose of SGR-1505.
We observed that the cell samples were generally sensitive to SGR-2921, as measured by their IC 50 values, and we observed that patient samples which contained TP53, or p53, mutations demonstrated particular sensitivity to SGR-2921. 24 Table of Contents SGR-2921 showed potent anti-proliferative activity in AML patient-derived samples ex vivo independently of driver mutations, including in p53 mutated AML Furthermore, as shown in the figures below, in preclinical models SGR-2921 showed single-agent activity and activity in combination with decitabine, which is a type of chemotherapy medication used for the treatment of myelodysplastic syndromes, in standard-of-care resistant models representing difficult-to-treat disease.
We observed that the cell samples were generally sensitive to SGR-2921, as measured by their IC 50 values, and we observed that patient samples which contained TP53, or p53, mutations demonstrated particular sensitivity to SGR-2921. 24 Table of Content s SGR-2921 showed potent anti-proliferative activity in AML patient-derived samples ex vivo independently of driver mutations, including in p53 mutated AML Furthermore, as shown in the figures below, in preclinical models SGR-2921 showed single-agent activity and activity in combination with decitabine, which is a type of chemotherapy medication used for the treatment of myelodysplastic syndromes, in standard-of-care resistant models representing difficult-to-treat disease.
In March 2022, the FDA released a final guidance entitled “Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how sponsors can utilize an adaptive trial design in the early stages of oncology product development ( i.e. , the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial.
In March 2022, the FDA released a final guidance entitled "Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics," which outlines how sponsors can utilize an adaptive trial design in the early stages of oncology product development ( i.e. , the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial.
In addition to our equity stakes in certain of our collaborators, we also have rights to various payments on a collaborator-by-collaborator agreement basis including research funding payments, discovery, development, and commercial milestones, and potential royalties in the single-digit range. Under certain of our collaboration agreements, we are also eligible to receive a percentage of our collaborators’ sublicense revenue.
In addition to our equity stakes in certain of our collaborators, we also have rights to various payments on a collaborator-by-collaborator agreement basis including research funding payments, discovery, development, and commercial milestones, option fees, and potential royalties in the single-digit range. Under certain of our collaboration agreements, we are also eligible to receive a percentage of our collaborators’ sublicense revenue.
Restrictions under applicable federal and state healthcare laws and regulations, including certain laws and regulations applicable only if we have marketed products, include the following: • federal false claims, false statements and civil monetary penalties laws prohibiting, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment of government funds or knowingly making, or causing to be made, a false statement to get a false claim paid; • federal healthcare program anti-kickback law, which prohibits, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid; • the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; 51 Table of Contents • federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; • federal Open Payments (or federal “sunshine” law), which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with certain healthcare providers to the Center for Medicare & Medicaid Services, or CMS, within the U.S.
Restrictions under applicable federal and state healthcare laws and regulations, including certain laws and regulations applicable only if we have marketed products, include the following: • federal false claims, false statements and civil monetary penalties laws prohibiting, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment of government funds or knowingly making, or causing to be made, a false statement to get a false claim paid; • federal healthcare program anti-kickback law, which prohibits, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid; • the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; 56 Table of Content s • federal Open Payments (or federal "sunshine" law), which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with certain healthcare providers to the Center for Medicare & Medicaid Services, or CMS, within the U.S.
Inhibition of IL-2 secretion is a marker for target engagement and pathway modulation as it is tightly linked to MALT1 and the downstream NF-κB signaling. The data supported continued evaluation of SGR-1505 in the ongoing Phase 1 clinical trial in patients with relapsed or refractory B-cell lymphomas.
Inhibition of IL-2 secretion is a marker for target engagement and pathway modulation as it is tightly linked to MALT1 and the downstream NF-κB signaling. The data supported continued evaluation of SGR-1505 in the ongoing Phase 1 clinical trial in patients with relapsed or refractory B-cell malignancies.
We have developed a solution to consistently assess all of these contributions to binding with a high degree of accuracy, building on a method called “free energy perturbation.” Free energy perturbation perturbs, or transforms, an initial molecule into another molecule of interest and evaluates how that transformation changes binding affinity to a particular protein target.
We have developed a solution to consistently assess all of these contributions to binding with a high degree of accuracy, building on a method called "free energy perturbation." Free energy perturbation perturbs, or transforms, an initial molecule into another molecule of interest and evaluates how that transformation changes binding affinity to a particular protein target.
From this analysis, one can infer the druggability of a protein, 12 Table of Contents as well as uncover opportunities to significantly increase binding affinity by exploiting the water structure in the binding site. ◦ SiteMap allows binding site identification and evaluation to help locate potential protein binding sites, including allosteric sites, and predict the approximate druggability of those sites. ◦ GlideEM, PrimeX and Phenix/OPLS4 enable optimization of intermediate quality experimental protein structures to a quality sufficient to drive structure-based drug discovery. • Hit Discovery : the identification of hit molecules. ◦ FEP+ is our free energy calculation software.
From this analysis, one can infer the druggability of a protein, as well as uncover opportunities to significantly increase binding affinity by exploiting the water structure in the binding site. ◦ SiteMap allows binding site identification and evaluation to help locate potential protein binding sites, including allosteric sites, and predict the approximate druggability of those sites. ◦ GlideEM, PrimeX and Phenix/OPLS4 enable optimization of intermediate quality experimental protein structures to a quality sufficient to drive structure-based drug discovery. • Hit Discovery : the identification of hit molecules. ◦ FEP+ is our free energy calculation software.
SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed. Adverse events were primarily Grade 1 and not treatment related. Bilirubin elevations occurred in 27% of healthy volunteers but were not deemed to be clinically relevant. These elevations were primarily Grade 1 and none were Grade 3 or 4.
SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed. Adverse events were primarily Grade 1 and not treatment related. Bilirubin elevations occurred in 16% of healthy volunteers but were not deemed to be clinically relevant. These elevations were primarily Grade 1 and none were Grade 3 or 4.
Table 3 In Vitro Cell Based Viability IC 50 Values of SGR-2921 Cell line COLO205 [IC 50 (nM)] MV-4-11 [IC 50 (nM)] MOLM-16 [IC 50 (nM)] Cell viability 9.90±3.72 107.55±12.42 20.81±7.29 23 Table of Contents As shown in the figures below, SGR-2921 showed tumor growth inhibition resulting in tumor regression in the COLO205 colorectal cancer CDX model, which is a colorectal cancer cell line derived xenograft model, at doses that did not result in significant body weight loss.
Table 3 In Vitro Cell Based Viability IC 50 Values of SGR-2921 Cell line COLO205 [IC 50 (nM)] MV-4-11 [IC 50 (nM)] MOLM-16 [IC 50 (nM)] Cell viability 9.90±3.72 107.55±12.42 20.81±7.29 23 Table of Content s As shown in the figures below, SGR-2921 showed tumor growth inhibition resulting in tumor regression in the COLO205 colorectal cancer CDX model, which is a colorectal cancer cell line derived xenograft model, at doses that did not result in significant body weight loss.
Clinical Development of SGR-1505 Phase 1 Clinical Trial of SGR-1505 in Patients with Relapsed or Refractory B-cell Lymphomas The FDA cleared our IND for SGR-1505 in June 2022. We have initiated dosing in a Phase 1 clinical trial of SGR-1505, which is designed as an open-label, multi-center dose escalation clinical trial in patients with relapsed or refractory B-cell lymphomas.
Clinical Development of SGR-1505 Phase 1 Clinical Trial of SGR-1505 in Patients with Relapsed or Refractory B-cell Malignancies The FDA cleared our IND for SGR-1505 in June 2022. We have initiated dosing in a Phase 1 clinical trial of SGR-1505, which is designed as an open-label, multi-center dose escalation clinical trial in patients with relapsed or refractory B-cell malignancies.
Further, to apply such methods to design molecules that will bind with high affinity to a particular protein target, the three-dimensional structure of that protein must be generated with sufficient atomic detail to enable application of these physics-based approaches, which is referred to as being “structurally enabled,” and such structures have been historically difficult to obtain and are only available today for a relatively small subset of the universe of human proteins.
Further, to apply such methods to design molecules that will bind with high affinity to a particular protein target, the three-dimensional structure of that protein must be generated with sufficient atomic detail to enable application of these physics-based approaches, which is referred to as being "structurally enabled," and such structures have been historically difficult to obtain and are only available today for a relatively small subset of the universe of human proteins.
We have received equity consideration in certain of our collaborators, and from time to time, we have also made additional equity investments in certain of these collaborators.
Equity Stakes . We have received equity consideration in certain of our collaborators, and from time to time, we have also made additional equity investments in certain of these collaborators.
The 2003 Columbia Agreement grants us a worldwide, exclusive license to the protein local optimization program software code, or the PLOP Code, developed at Columbia University and the University of California and all software code comprising improvements to the PLOP Code 36 Table of Contents that are developed by Columbia University or the University of California, or the PLOP Improvements, in each case, to reproduce, use, execute, copy, compile, operate, sublicense, and distribute in connection with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
The 2003 Columbia Agreement grants us a worldwide, exclusive license to the protein local optimization program software code, or the PLOP Code, developed at Columbia University and the University of California and all software code comprising improvements to the PLOP Code that are developed by Columbia University or the University of California, or the PLOP Improvements, in each case, to reproduce, use, execute, copy, compile, operate, sublicense, and distribute in connection with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
We evaluate industry and commercial interest as well as the clinical utility with the aim of prioritizing programs with high commercial and therapeutic potential. Using this comprehensive analysis, we have identified a large number of protein targets that we believe are amenable to our technology. We continue to evaluate a number of additional targets using this analysis.
We evaluate industry and commercial interest as well as the clinical utility with the aim of prioritizing programs with high commercial and therapeutic potential. Using this comprehensive analysis, we have identified a large number of protein targets that we believe are amenable to our technology.
Marketing Authorization To obtain a marketing authorization for a product under European Union regulatory systems, a sponsor must submit an MAA either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure).
Marketing Authorization To obtain a marketing authorization for a product under European Union regulatory systems, a sponsor must submit a marketing authorization application, or MAA, either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure).
Traditional drug discovery involves experimental screening of existing libraries of molecules to find molecules with detectable activity, or “hit molecules,” followed by many iterations of chemical synthesis to optimize those hit molecules to a development candidate that can be advanced into human clinical trials.
Traditional drug discovery involves experimental screening of existing libraries of molecules to find molecules with detectable activity, or "hit molecules," followed by many iterations of chemical synthesis to optimize those hit molecules to a development candidate that can be advanced into human clinical trials.
Our platform can explicitly evaluate billions of molecules per day, whereas traditional drug discovery projects only synthesize and evaluate approximately one thousand molecules per year, thereby increasing the probability that we find a novel molecule with the desired property profile. • Quality.
Our platform can explicitly evaluate billions of molecules per day, whereas traditional drug discovery methods only synthesize and evaluate approximately one thousand molecules per year, thereby increasing the probability that we find a novel molecule with the desired property profile. • Quality.
Beyond ABC-DLBCL disease models, as shown in the figures below, SGR-1505 also demonstrated single agent anti-tumor activity in an in vivo mantle cell lymphoma REC-1 CDX model. SGR-1505 also 20 Table of Contents showed strong combination effects with venetoclax (an inhibitor of the anti-apoptotic protein B-cell lymphoma 2 (BCL2)) on inhibition of cancer cell viability in the OCI-LY10 CDX model.
Beyond ABC-DLBCL disease models, as shown in the figures below, SGR-1505 also demonstrated single agent anti-tumor activity in an in vivo mantle cell lymphoma REC-1 CDX model. SGR-1505 also showed strong combination effects with venetoclax (an inhibitor of the anti-apoptotic protein B-cell lymphoma 2 (BCL2)) on inhibition of cancer cell viability in the OCI-LY10 CDX model.
Phase 1 Clinical Trial of SGR-1505 in Healthy Volunteers We also have recently completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability, pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions.
Phase 1 Clinical Trial of SGR-1505 in Healthy Volunteers We also completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability, pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions.
QD = once a day dosing, Q12H = twice a day dosing The data from the healthy volunteer trial support continued evaluation of SGR-1505 in our ongoing Phase 1 clinical trial in patients with relapsed or refractory B-cell lymphomas.
QD = once a day dosing, Q12H = twice a day dosing The data from the healthy volunteer trial support continued evaluation of SGR-1505 in our ongoing Phase 1 clinical trial in patients with relapsed or refractory B-cell malignancies.
The 1994 Columbia Agreement grants us a worldwide, exclusive, license to the software code developed by Columbia University and incorporated into the electronic structure software program PS-GVB v1.0, or the PS-GVB Code, and all improvement to the PS-GVB v1.0 software program and PS-GVB Code developed by Columbia University, or the PS-GVB Improvements, including all PS-GVB Code and PS-GVB Improvements that are incorporated into any new products, new releases, and new versions related to the software, or the New PS-GVB Module Code, in each case, to reproduce, use, execute, copy, operate, sublicense, and distribute in connection with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
The 1994 Columbia Agreement grants us a worldwide, exclusive, license to the software code developed by Columbia University and incorporated into the electronic structure software program PS- 37 Table of Content s GVB v1.0, or the PS-GVB Code, and all improvement to the PS-GVB v1.0 software program and PS-GVB Code developed by Columbia University, or the PS-GVB Improvements, including all PS-GVB Code and PS-GVB Improvements that are incorporated into any new products, new releases, and new versions related to the software, or the New PS-GVB Module Code, in each case, to reproduce, use, execute, copy, operate, sublicense, and distribute in connection with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
In an industry known for its fierce competition for talent, we have been able to maintain high retention and low turnover rates. For the year ended December 31, 2023, our employee retention rate was 93.1%.
In an industry known for its fierce competition for talent, we have been able to maintain high retention and low turnover rates. For the year ended December 31, 2024, our employee retention rate was 93.1%.
In addition, the FDA recently granted orphan drug designation to SGR-1505 for the potential treatment of mantle cell lymphoma. In July 2023, the FDA cleared our IND for our CDC7 inhibitor, which we refer to as SGR-2921.
In addition, in August 2023, the FDA granted orphan drug designation to SGR-1505 for the potential treatment of mantle cell lymphoma. In July 2023, the FDA cleared our IND for our CDC7 inhibitor, which we refer to as SGR-2921.
Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we 53 Table of Contents may develop to other available therapies.
Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the cost effectiveness of any product candidates we may develop to other available therapies.
Finally, the marketing and promotion of authorized products, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union under Directive 2001/83EC, as amended. 59 Table of Contents Pricing Decisions for Approved Products In the European Union, pricing and reimbursement schemes vary widely from country to country.
Finally, the marketing and promotion of authorized products, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union under Directive 2001/83EC, as amended. Pricing Decisions for Approved Products In the European Union, pricing and reimbursement schemes vary widely from country to country.
Furthermore, we are also aware of a WEE1/MYT1 inhibitor in preclinical development being advanced by Acrivon Therapeutics, Inc. 32 Table of Contents Large pharmaceutical and biotechnology companies, in particular, have extensive experience in building and accessing networks of expert investigators, designing and conducting clinical trials, obtaining regulatory approvals, and manufacturing and commercializing biotechnology products.
Furthermore, we are also aware of a Wee1/Myt1 inhibitor in preclinical development being advanced by Acrivon Therapeutics, Inc. Large pharmaceutical and biotechnology companies, in particular, have extensive experience in building and accessing networks of expert investigators, designing and conducting clinical trials, obtaining regulatory approvals, and manufacturing and commercializing biotechnology products.
For a description of the royalties payable by us to Columbia University in connection with our services agreements, see “—Services Royalty Amendment” below. PS-GVB License Agreement On May 5, 1994, we entered into a license agreement, or the 1994 Columbia Agreement, with Columbia University, which was amended on September 9, 2004 and November 1, 2008.
For a description of the royalties payable by us to Columbia University in connection with our services agreements, see "—Services Royalty Amendment" below. PS-GVB License Agreement On May 5, 1994, we entered into a license agreement, or the 1994 Columbia Agreement, with Columbia University, which was amended on September 9, 2004 and November 1, 2008.
Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, the Tax Act repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.
Since enactment of the PPACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, the Tax Act repealed the "individual mandate." The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.
We intend to pursue additional proprietary drug discovery programs as existing programs advance through discovery and into development stages, internally or with partners, and we will continue evaluating new collaborative programs that fit our selection criteria and where the collaborator’s particular expertise, resources or intellectual property has the potential to create substantial value.
We intend to pursue additional proprietary drug discovery programs as our existing programs advance through discovery and development stages, internally or with partners, and we will continue to evaluate new collaborative programs that fit our selection criteria and where the collaborator’s particular expertise, resources or intellectual property has the potential to create substantial value.
The acceptance by the FDA of study data from clinical trials conducted outside the United States in support of US approval may be subject to certain conditions or may not be accepted at all.
The acceptance by the FDA of trial data from clinical trials conducted outside the United States in support of US approval may be subject to certain conditions or may not be accepted at all.
We believe the principal competitive factors in our market include, among other things, accuracy of computations, level of customer satisfaction and functionality, ease of use, breadth and depth of solution and application functionality, brand awareness and reputation, modern and adaptive technology platform, integration, security, scalability and reliability of applications, total cost, ability to innovate and respond to customer needs rapidly, and ability to integrate with legacy enterprise infrastructures and third-party applications.
We believe the principal competitive factors in our market include, among other things, accuracy of computations, level of customer satisfaction and functionality, ease of use, breadth and depth of solution and application functionality, 33 Table of Content s brand awareness and reputation, modern and adaptive technology platform, integration, security, scalability and reliability of applications, total cost, ability to innovate and respond to customer needs rapidly, and ability to integrate with legacy enterprise infrastructures and third-party applications.
Under the terms of the agreement, we received an upfront payment, and we are eligible to receive up to $425.0 million in discovery, development and commercial milestone payments. We are also eligible to receive low single- to low double-digit royalties on net sales of any products emerging from the collaboration in all markets. Otsuka .
Under the terms of the agreement, we received an upfront payment, and we are eligible to receive up to $420.0 million in discovery, development and commercial milestone payments. We are also eligible to receive low single- to low double-digit royalties on net sales of any products emerging from the collaboration in all markets.
We also cannot ensure that patents will issue with respect to any patent applications that we or our licensors may file in the future, nor can we ensure that any of our owned or licensed patents or future patents will be commercially 38 Table of Contents useful in protecting our software, technology, computational platform, and any product candidates we develop.
We also cannot ensure that patents will issue with respect to any patent applications that we or our licensors may file in the future, nor can we ensure that any of our owned or licensed patents or future patents will be commercially useful in protecting our software, technology, computational platform, and any product candidates we develop.
Clinical Studies Outside the United States in Support of FDA Approval In connection with our clinical development program, we are and may in the future conduct trials at sites outside the United States. When a foreign clinical study is conducted under an IND, all IND requirements must be met unless waived.
Clinical Trials Outside the United States in Support of FDA Approval In connection with our clinical development program, we are and may in the future conduct trials at sites outside the United States. When a foreign clinical trial is conducted under an IND, all IND requirements must be met unless waived.
Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, sponsors have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver, or (3) a deferral for one or more of the measures included in the PIP.
Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, sponsors have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation 62 Table of Content s Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver, or (3) a deferral for one or more of the measures included in the PIP.
Our drug discovery group, which we refer to as the Schrödinger therapeutics group, is comprised of a multidisciplinary team of approximately 180 experts in protein science, biochemistry, biophysics, medicinal and computational chemistry, and discovery scientists with expertise in preclinical and 6 Table of Contents early clinical development.
Our drug discovery group, which we refer to as the Schrödinger therapeutics group, is comprised of a multidisciplinary team of approximately 180 experts in protein science, biochemistry, biophysics, medicinal and computational chemistry, and discovery scientists with expertise in preclinical and early clinical development.
In addition, with predictive computational methods, better selections of molecules would be synthesized 8 Table of Contents through exploration of larger portions of chemical space, leading to higher-quality molecules that would in turn have a higher probability of progressing through clinical development and obtaining regulatory approval for commercial sale.
In addition, with predictive computational methods, better selections of molecules would be synthesized through exploration of larger portions of chemical space, leading to higher-quality molecules that would in turn have a higher probability of progressing through clinical development and obtaining regulatory approval for commercial sale.
ABC-DLBCL is associated with a number of mutations that trigger a constitutively active NF-κB signaling pathway, which often is mediated by increased MALT1 protease activity. Among 18 Table of Contents these mutations is a gain of function mutation or amplification of MALT1, which has also been identified in ABC-DLBCL patients.
ABC-DLBCL is associated with a number of mutations that trigger a constitutively active NF-κB signaling pathway, which often is mediated by increased MALT1 protease activity. Among these mutations is a gain of function mutation or amplification of MALT1, which has also been identified in ABC-DLBCL patients.
These contributions include the deformation and/or rigidification of the small molecule into the bound conformation (ΔG(1) in the figure below) and the rigidification of the protein in the bound conformation (ΔG(2)), the removal of waters surrounding the molecule (ΔG(3)) and the removal of 28 Table of Contents waters within the protein binding site (ΔG(4)), and finally the interactions achieved between the molecule and protein when binding to form the protein-molecule complex (ΔG(5)).
These contributions include the deformation and/or rigidification of the small molecule into the bound conformation (ΔG(1) in the figure below) and the rigidification of the protein in the bound conformation (ΔG(2)), the removal of waters surrounding the molecule (ΔG(3)) and the removal of waters within the protein binding site (ΔG(4)), and finally the interactions achieved between the molecule and protein when binding to form the protein-molecule complex (ΔG(5)).
This draft decision must take the opinion and any relevant provisions of European Union law into account. Before arriving at a final decision on an application for centralized authorization of a medicinal product the European Commission must consult the Standing Committee on 57 Table of Contents Medicinal Products for Human Use, or the Standing Committee.
This draft decision must take the opinion and any relevant provisions of European Union law into account. Before arriving at a final decision on an application for centralized authorization of a medicinal product the European Commission must consult the Standing Committee on Medicinal Products for Human Use, or the Standing Committee.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated "maximum fair price" under the law or for taking price increases that exceed inflation.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report or in any other report or document we file with the Securities and Exchange Commission, or SEC, and any reference to our website address is intended to be an inactive textual reference only.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC and any reference to our website address is intended to be an inactive textual reference only.
Our customer retention rate for our customers with an ACV of at least $500,000 was 98% for the year ended December 31, 2023 and 100% for the year ended December 31, 2022.
Our customer retention rate for our customers with an ACV of at least $500,000 was 100% for the year ended December 31, 2024 and 98% for the year ended December 31, 2023.
With passage of FDORA, Congress clarified FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct, or analysis of clinical and non-clinical studies submitted to FDA as well as other persons holding study records or involved in 48 Table of Contents the study process.
With passage of FDORA, Congress clarified FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct, or analysis of clinical and non-clinical studies submitted to FDA as well as other persons holding study records or involved in the study process.
A recommended phase 2 dose will be selected from one of the tolerable dose levels which will not exceed the maximum tolerated dose. The trial is designed to evaluate the safety and tolerability of SGR-2921 as a monotherapy and to identify the recommended phase 2 dose, including the maximum 25 Table of Contents tolerated dose.
A recommended Phase 2 dose will be selected from one of the tolerable dose levels which will not exceed the maximum tolerated dose. The trial is designed to evaluate the safety and tolerability of SGR-2921 as a monotherapy and to identify the recommended Phase 2 dose, including the maximum 25 Table of Content s tolerated dose.
We found that FEP+ succeeded in prioritizing the synthesis of molecules with improved 29 Table of Contents binding affinity with eight times greater success than any other technique tested. This evidence supports the essential role that FEP+ can play in advancing drug discovery programs.
We found that FEP+ succeeded in prioritizing the synthesis of molecules with improved binding affinity with eight times greater success than any other technique tested. This evidence supports the essential role that FEP+ can play in advancing drug discovery programs.
Expanded Access Expanded access, sometimes called “compassionate use,” is the use of investigational new products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options.
Expanded Access Expanded access, sometimes called "compassionate use," is the use of investigational new products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options.
The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and 58 Table of Contents related materials.
The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee. This group provides authorization as to whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data monitoring committee, or DMC. The DMC provides authorization as to whether or not a trial may move forward at designated check points based on access that only the DMC maintains to available data from the study.
In addition, in a series of biochemical and cell-based assays, we compared the potency of SGR-1505 against JNJ-6633, a MALT1 inhibitor advanced into Phase 1 clinical development by Johnson & Johnson, as measured by IC 50 and IC 90 values, which are measures of the potency of a compound in inhibiting specific biological functions.
In addition, in a series of biochemical and cell-based assays, we compared the potency of SGR-1505 against JNJ-6633, a MALT1 inhibitor advanced into Phase 1 clinical development by Johnson & Johnson, as measured by IC 50 and 20 Table of Content s IC 90 values, which are measures of the potency of a compound in inhibiting specific biological functions.
The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
The IRA has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
CDC7 levels are high in certain tumors, including acute myeloid leukemia, or AML, and are thought to be linked to these cancer cells’ proliferative capacity and ability to bypass normal DNA damage responses. 22 Table of Contents CDC7 phosphorylates and activates the enzymes responsible for DNA replication initiation and proteins involved in replication stress response.
CDC7 levels are high in certain tumors, including acute myeloid leukemia, or AML, and are thought to be linked to these cancer cells’ proliferative capacity and ability to bypass normal DNA damage responses. CDC7 phosphorylates and activates the enzymes responsible for DNA replication initiation and proteins involved in replication stress response.
The draft guidance is adopted from the International Council for Harmonisation’s recently updated E6(R3) draft guideline that was developed to enable the incorporation of rapidly developing technological and methodological innovations into the clinical trial enterprise. In addition, the FDA issued draft guidance outlining recommendations for the implementation of decentralized clinical trials.
The draft guidance is adopted from the International Council for Harmonisation’s recently updated E6(R3) draft guideline that was developed to enable the incorporation of rapidly 46 Table of Content s developing technological and methodological innovations into the clinical trial enterprise. In addition, the FDA issued draft guidance outlining recommendations for the implementation of decentralized clinical trials.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance” for additional information regarding ACV and customer retention rate. We also leverage our platform and capabilities across a portfolio of collaborative and proprietary drug discovery programs spanning a wide range of disease targets and indications.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance" for additional information regarding ACV and customer retention rate. We also leverage our platform and capabilities across a portfolio of collaborative and proprietary drug discovery programs spanning a wide range of disease targets and indications.
The other primary computational method that has been explored to improve drug discovery involves using fundamental, “first-principles” physics-based methods, which require a deep and thorough understanding of the specific property to be computed. However, physics-based methods are difficult to develop and can be slow compared to machine learning.
The other primary computational method that has been explored to improve drug discovery involves using fundamental, "first-principles" physics-based methods, which require a deep and thorough understanding of the specific property to be computed. However, physics-based methods are difficult to develop and can be slow compared to machine learning.
Our customer retention rate for our customers with an ACV of at least $500,000 was 98% for the year ended December 31, 2023 and 100% for the year ended December 31, 2022. We believe our high retention rate for our customer base coupled with our ability to expand our customers’ use of our software will continue to drive revenue growth.
Our customer retention rate for our customers with an ACV of at least $500,000 was 100%, 98%, 100% for the years ended December 31, 2024, 2023, and 2022, respectively. We believe our high retention rate for our customer base coupled with our ability to expand our customers’ use of our software will continue to drive revenue growth.
The Standing Committee is composed of representatives of the EU Member States and chaired by a non-voting European Commission representative. The European Parliament also has a related “droit de regard”. The European Parliament’s role is to ensure that the European Commission has not exceeded its powers in deciding to grant or refuse to grant a marketing authorization.
The Standing Committee is composed of representatives of the EU Member States and chaired by a non-voting European Commission representative. The European Parliament also has a related "droit de regard". The European Parliament’s role is to ensure that the European Commission has not exceeded its powers in deciding to grant or refuse to grant a marketing authorization.
In addition to patent protection, as of January 31, 2024, we had approximately 64 copyright registrations covering our proprietary software code, and we rely upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and confidential know-how are difficult to protect.
In addition to patent protection, as of January 24, 2025, we had approximately 64 copyright registrations covering our proprietary software code, and we rely upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and confidential know-how are difficult to protect.
Moreover, any patents that we hold or may hold may be challenged, circumvented or invalidated by third parties. See “Risk Factors—Risks Related to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.
Moreover, any patents that we hold or may hold may be challenged, circumvented or invalidated by third parties. See "Risk Factors—Risks Related to Our Intellectual Property" for a more comprehensive description of risks related to our intellectual property.
The PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture, preparation, propagation, compounding, or processing at a separate establishment outside the United States prior to being imported or offered for import into the United States.
The 48 Table of Content s PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture, preparation, propagation, compounding, or processing at a separate establishment outside the United States prior to being imported or offered for import into the United States.
We have entered into drug discovery collaborations with biopharmaceutical companies under which our collaborators are pursuing research in a number of therapeutic areas, including programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immuno-oncology, cardiopulmonary disease and tuberculosis.
We have entered into drug discovery collaborations with biopharmaceutical companies under 6 Table of Content s which our collaborators are pursuing research in a number of therapeutic areas, including programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immuno-oncology, cardiopulmonary disease and tuberculosis.
Our Software Solutions for Drug Discovery We offer our customers a variety of software solutions that accelerate all stages of molecule discovery, design, and optimization pursuant to agreements with terms typically for one year. Our licenses give our customers the ability to execute a certain number of calculations across specified software solutions.
Our Software Solutions for Drug Discovery We offer our customers a variety of software solutions that accelerate all stages of molecule discovery, design, and optimization pursuant to agreements with terms typically for one year. Our licenses give our customers the ability to 12 Table of Content s execute a certain number of calculations across specified software solutions.
As of December 31, 2023, we had 19 active collaborative drug discovery programs. We define an active collaborative drug discovery program as a program that we are actively progressing for, or together with, a collaborator of ours, or a program that our collaborator is progressing and which we are eligible to receive milestone payments, option fees, and/or future royalties.
As of December 31, 2024, we had 18 active collaborative drug discovery programs. We define an active collaborative drug discovery program as a program that we are actively progressing for, or together with, a collaborator of ours, or a program that our collaborator is progressing and which we are eligible to receive milestone payments, option fees, and/or future royalties.

… 421 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

188 edited+178 added−44 removed536 unchanged
Biggest changeSignificant judgment, assumptions and estimates used in preparing our consolidated financial statements include, with respect to revenue, determining the allocation of the transaction price and measurement of progress, including (1) the constraint on variable consideration, (2) the allocation of the transaction price to the performance obligations using their standalone selling price 67 Table of Contents basis, and (3) the appropriate input or output based method to recognize collaboration revenue and the extent of progress to date.
Biggest changeSignificant judgment, assumptions and estimates used in preparing our consolidated financial statements include, with respect to revenue, determining the allocation of the transaction price and measurement of progress, including (1) the constraint on variable consideration, (2) the identification of performance obligations and the allocation of the transaction price to the performance obligations using their standalone selling price basis, and (3) the appropriate input or output based method to recognize collaboration revenue and the extent of progress to date. 72 Table of Content s Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
Any or all of these issues could adversely affect our ability to attract new customers, cause existing customers to elect to not renew their licenses, result in reputational damage or subject us to third-party lawsuits or other action or liability, which could adversely affect our operating results.
Any or all of these issues could adversely affect our ability to attract new customers, cause existing customers to elect not to renew their licenses, result in reputational damage or subject us to third-party lawsuits or other action or liability, which could adversely affect our operating results.
We rely and expect to continue to rely on third-party contract manufacturers for all of our required raw materials, drug substance, and finished drug product for the preclinical and clinical development of any development candidates we develop ourselves and for any commercial supply of approved products, if any.
We rely and expect to continue to rely on third-party contract manufacturers for all of our required raw materials, drug substance, and finished drug product for the preclinical and clinical development of any product candidates we develop ourselves and for any commercial supply of approved products, if any.
In addition, if we are not able to obtain adequate supplies of our product candidates or the substances used to manufacture them or any of approved drug we may use in combination trials, it will be more difficult for us to develop our product candidates and compete effectively.
In addition, if we are not able to obtain adequate supplies of our product candidates or the substances used to manufacture them or any approved drug we may use in combination trials, it will be more difficult for us to develop our product candidates and compete effectively.
In addition, we face risks in doing business internationally that could adversely affect our business, including: • the need to localize and adapt our solutions for specific countries, including translation into foreign languages; • data privacy laws which require that customer data be stored and processed in a designated territory or handled in a manner that differs significantly from how we typically handle customer data; • difficulties in staffing and managing foreign operations, including employee laws and regulations; • different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues; • differences in healthcare systems, drug regulation and reimbursement, and drug discovery and development practices and technologies; • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors; • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, reimbursement and pricing, privacy and data protection, and anti-bribery laws and regulations; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, and other trade barriers; 85 Table of Contents • changes in social, political, and economic conditions or in laws, regulations, and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions; • adverse tax consequences, including the potential for required withholding taxes; • global health pandemics or epidemics, such as the recent COVID-19 pandemic; and • unstable regional, economic and political conditions.
In addition, we face risks in doing business internationally that could adversely affect our business, including: • the need to localize and adapt our solutions for specific countries, including translation into foreign languages; • data privacy laws which require that customer data be stored and processed in a designated territory or handled in a manner that differs significantly from how we typically handle customer data; • difficulties in staffing and managing foreign operations, including employee laws and regulations; • different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues; • differences in healthcare systems, drug regulation and reimbursement, and drug discovery and development practices and technologies; • new and different sources of competition; • weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; • laws and business practices favoring local competitors; • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, reimbursement and pricing, privacy and data protection, and anti-bribery laws and regulations; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, and other trade barriers; • changes in social, political, and economic conditions or in laws, regulations, and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions; • adverse tax consequences, including the potential for required withholding taxes; • global health pandemics or epidemics, such as the recent COVID-19 pandemic; and • unstable regional, economic and political conditions.
We are still in the early stages of development of our own drug discovery programs. We have no drug products approved or licensed for commercial sale, and as such, have not generated any revenue from our own drug product sales to date. We expect to continue to incur significant expenses and operating losses over the next several years.
We are still in the early stages of development of our own proprietary drug discovery programs. We have no drug products approved or licensed for commercial sale, and as such, have not generated any revenue from our own drug product sales to date. We expect to continue to incur significant expenses and operating losses over the next several years.
In addition, our ability to realize return from our drug discovery collaborations is subject to the following risks: • drug discovery collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as expected; • drug discovery collaborators may not pursue development or commercialization of any product candidates for which we are entitled to option fees, milestone payments, or royalties or may elect not to continue or renew development or commercialization programs based on results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • drug discovery collaborators may delay clinical trials for which we are entitled to milestone payments; • we may not have access to, or may be restricted from disclosing, certain information regarding our collaborators’ product candidates being developed or commercialized and, consequently, may have limited ability to inform our stockholders about the status of, and likelihood of achieving, milestone payments or royalties under such collaborations; • drug discovery collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with any product candidates and products for which we are entitled to milestone payments or royalties if the collaborator believes that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive; • product candidates discovered in drug discovery collaborations with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause our collaborators to cease to devote resources to the commercialization of any such product candidates; • existing drug discovery collaborators and potential future drug discovery collaborators may begin to perceive us to be a competitor more generally, particularly as we advance our proprietary drug discovery programs, and therefore may be unwilling to continue existing collaborations with us or to enter into new collaborations with us; • a drug discovery collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a product candidate or product, which may impact our ability to receive milestone payments; 73 Table of Contents • disagreements with drug discovery collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of product candidates for which we are eligible to receive milestone payments, or might result in litigation or arbitration; • drug discovery collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary information or expose us and them to potential litigation; • drug discovery collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; • drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the recent COVID-19 pandemic; and • drug discovery collaborations may be terminated prior to our receipt of any significant value from the collaboration, which has happened to us in the past and may happen to us again in the future.
In addition, our ability to realize return from our drug discovery collaborations is subject to the following risks: • drug discovery collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as expected; • drug discovery collaborators may not pursue development or commercialization of any product candidates for which we are entitled to option fees, milestone payments, or royalties or may elect not to continue or renew development or commercialization programs based on results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • drug discovery collaborators may delay clinical trials for which we are entitled to milestone payments; • we may not have access to, or may be restricted from disclosing, certain information regarding our collaborators’ product candidates being developed or commercialized and, consequently, may have limited ability to inform our stockholders about the status of, and likelihood of achieving, milestone payments or royalties under such collaborations; • drug discovery collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with any product candidates and products for which we are entitled to milestone payments or royalties if the collaborator believes that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive; • product candidates discovered in drug discovery collaborations with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause our collaborators to cease to devote resources to the commercialization of any such product candidates; • existing drug discovery collaborators and potential future drug discovery collaborators may begin to perceive us to be a competitor more generally, particularly as we advance our proprietary drug discovery programs, and therefore may be unwilling to continue existing collaborations with us or to enter into new collaborations with us; • a drug discovery collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a product candidate or product, which may impact our ability to receive milestone payments; • disagreements with drug discovery collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of product candidates for which we are eligible to receive milestone payments, or might result in litigation or arbitration; • drug discovery collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to 78 Table of Content s disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary information or expose us and them to potential litigation; • drug discovery collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; • drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the recent COVID-19 pandemic; and • drug discovery collaborations may be terminated prior to our receipt of any significant value from the collaboration, which has happened to us in the past and may happen to us again in the future.
We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. For example, third parties have in the past and may in the future illegally pirate our software and make that software publicly available on peer-to-peer file sharing networks or otherwise.
We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures that are effective against all such security threats. For example, third parties have in the past and may in the future illegally pirate our software and make that software publicly available on peer-to-peer file sharing networks or otherwise.
These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA, Chemical Computing Group (US) Inc., Cresset Biomolecular Discovery Limited, Cadence Design Systems, Inc., Optibrium Limited, Cyrus Biotechnology, Inc., Molsoft LLC, Insilico Medicine, Inc., Iktos, XtalPi Inc., Inductive Bio, Inc., Chemaxon, PerkinElmer, Inc., and Simulations Plus, Inc.
These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA, Chemical Computing Group (US) Inc., Cresset Biomolecular Discovery Limited, Cadence Design Systems, Inc., Optibrium Limited, Cyrus Biotechnology, Inc., Molsoft LLC, Insilico Medicine, Inc., Iktos, XtalPi Inc., AbCellera, Inductive Bio, Inc., Chemaxon, PerkinElmer, Inc., and Simulations Plus, Inc.
The success of our and any current or future collaborators’ development and commercialization programs will depend on several factors, including the following: • successful completion of necessary preclinical studies to enable the initiation of clinical trials; • successful enrollment of patients in, and the completion of, the clinical trials; • acceptance by the FDA or other regulatory agencies of regulatory filings for any product candidates we and our current or future collaborators may develop; • expanding and maintaining a workforce of experienced scientists and other technical specialists to continue to develop any product candidates; • obtaining and maintaining intellectual property protection and regulatory exclusivity for any product candidates we and our current or future collaborators may develop; • making arrangements with third-party manufacturers for, or establishing, clinical and commercial manufacturing capabilities; • establishing sales, marketing, and distribution capabilities for drug products and successfully launching commercial sales, if and when approved; • acceptance of any product candidates we and our current or future collaborators may develop, if and when approved, by patients, the medical community, and third-party payors; • effectively competing with other therapies; • obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors; • patients’ willingness to pay out-of-pocket in the absence of coverage and/or adequate reimbursement from third-party payors; 82 Table of Contents • any restrictions resulting from a health epidemic or pandemic and its collateral consequences may result in internal and external operational delays and limitations; and • maintaining a continued acceptable safety profile following receipt of any regulatory approvals.
The success of our and any current or future collaborators’ development and commercialization programs will depend on several factors, including the following: • successful completion of necessary preclinical studies to enable the initiation of clinical trials; • successful enrollment of patients in, and the completion of, the clinical trials; • acceptance by the FDA or other regulatory agencies of regulatory filings for any product candidates we and our current or future collaborators may develop; • expanding and maintaining a workforce of experienced scientists and other technical specialists to continue to develop any product candidates; • obtaining and maintaining intellectual property protection and regulatory exclusivity for any product candidates we and our current or future collaborators may develop; • making arrangements with third-party manufacturers for, or establishing, clinical and commercial manufacturing capabilities; • establishing sales, marketing, and distribution capabilities for drug products and successfully launching commercial sales, if and when approved; • acceptance of any product candidates we and our current or future collaborators may develop, if and when approved, by patients, the medical community, and third-party payors; • effectively competing with other therapies; • obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors; • patients’ willingness to pay out-of-pocket in the absence of coverage and/or adequate reimbursement from third-party payors; • any restrictions resulting from a health epidemic or pandemic and its collateral consequences may result in internal and external operational delays and limitations; and • maintaining a continued acceptable safety profile following receipt of any regulatory approvals.
If we and any current or future collaborators are unable to successfully complete clinical development, obtain regulatory approval for, or commercialize any product candidates, or experience delays in doing so, our business may be materially harmed. We are early in our development efforts for our own drug discovery programs.
If we and any current or future collaborators are unable to successfully complete clinical development, obtain regulatory approval for, or commercialize any product candidates, or experience delays in doing so, our business may be materially harmed. We are early in our development efforts for our own proprietary drug discovery programs.
With respect to our WEE1/MYT1 inhibitor, SGR-3515, which we are advancing for the treatment of solid tumors, we are aware of several WEE1 inhibitors in clinical development, including by Zentalis Pharmaceuticals, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co.
With respect to our Wee1/Myt1 inhibitor, SGR-3515, which we are advancing for the treatment of advanced solid tumors, we are aware of several Wee1 inhibitors in clinical development, including by Zentalis Pharmaceuticals, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co.
There have been several recent Congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.
There have been several Congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.
If these collaboration agreements are terminated, or if the underlying intellectual property, to the extent we have ownership or license of, fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technology identical to ours.
If these collaboration agreements are terminated, or if the underlying intellectual property, to the extent we have ownership or license of such intellectual property, fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technology identical to ours.
We also intend to continue leveraging our solutions for broad application to industrial challenges in molecule design, including in the fields of aerospace, energy, semiconductors, and electronic displays.
We also intend to continue leveraging our solutions for broad application to industrial challenges in molecule design, including in the fields of aerospace, energy, semiconductors, electronic displays, and chemicals.
For example, the FTC has been particularly focused on the unpermitted processing of health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it interprets to be “unfair” under Section 5 of the Federal Trade Commission Act, as well as the types of activities it views to trigger the Health Breach Notification Rule (which the FTC also has the authority to enforce).
For example, the FTC has been particularly focused on the unpermitted processing of health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it interprets to be "unfair" under Section 5 of the Federal Trade Commission Act, as well as the types of activities it views to trigger the Health Breach Notification Rule (which the FTC also has the authority to enforce).
Among other things, these provisions: • establish a classified board of directors such that only one of three classes of directors is elected each year; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from our board of directors; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; • limit who may call stockholder meetings to the board of directors or to the secretary at the request of the holders of at least 25% of the outstanding shares of our common stock and limited common stock; and • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.
Among other things, these provisions: • establish a classified board of directors such that only one of three classes of directors is elected each year; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from our board of directors; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; • limit who may call stockholder meetings to the board of directors or to the secretary at the request of the holders of at least 25% of the outstanding shares of our common stock and limited common stock; and • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.
In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to cGCP regulations; and (iii) the data may be considered valid without the need for 81 Table of Contents an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.
In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to cGCP regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.
As described above in “Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition,” the 2017 Tax Act, as amended by the CARES Act, includes changes to U.S. federal tax rates and rules governing NOL carryforwards that may significantly impact our ability to utilize NOLs to offset taxable income in the future.
As described above in "Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition," the 2017 Tax Act, as amended by the CARES Act, includes changes to U.S. federal tax rates and rules governing NOL carryforwards that may significantly impact our ability to utilize NOLs to offset taxable income in the future.
The occurrence of any of these events could result in diminishing demand for our software, a reduction of our revenues, an increase in collection cycles for accounts receivable, require us to increase our warranty provisions, or incur the expense of litigation or substantial liability. We rely upon third-party providers of cloud-based infrastructure to host our software solutions.
The occurrence of any of these events could result in diminishing demand for our software, a reduction of our revenue, an increase in collection cycles for accounts receivable, require us to increase our warranty provisions, or incur the expense of litigation or substantial liability. We rely upon third-party providers of cloud-based infrastructure to host our software solutions.
Business—License Agreements with Columbia University.” Our license agreements with Columbia University and other licensors impose, and we expect that future licenses will impose, specified royalty and other obligations on us.
Business—License Agreements with Columbia University." Our license agreements with Columbia University and other licensors impose, and we expect that future licenses will impose, specified royalty and other obligations on us.
In addition, if the drug discovery collaborators in which we hold equity raise additional capital, our ownership interest in and degree of control over these drug discovery collaborators will be diluted, unless we have sufficient resources and choose to invest in them further or successfully negotiate contractual anti-dilution protections for our equity investment.
In addition, if the drug discovery collaborators in which we hold equity raise additional capital, our ownership interest in and degree of control over these drug discovery collaborators will be diluted, unless we have sufficient resources and choose to invest in the drug discovery collaborator further or successfully negotiate contractual anti-dilution protections for our equity investment.
We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our proprietary drug discovery programs, initiate or progress preclinical and IND-enabling studies, submit IND applications, initiate and progress clinical trials and invest in the further development of our computational platform.
We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our proprietary drug discovery programs, initiate or progress preclinical and Investigational New Drug, or IND,-enabling studies, submit IND applications, initiate and progress clinical trials and invest in the further development of our computational platform.
The FDA may not accept data from trials conducted in such locations, and the conduct of trials outside the United States could subject us to additional delays and expense. We intend in the future to conduct clinical trials for our product candidates at trial sites that are located outside the United States.
The FDA may not accept data from trials conducted in such locations, and the conduct of trials outside the United States could subject us to additional delays and expense. We conduct, and we intend to continue to conduct, clinical trials for our product candidates at trial sites that are located outside the United States.
Adverse differences between interim data and final data could significantly harm our reputation and business prospects and may cause volatility in the price of our common stock. We intend in the future to conduct clinical trials for our product candidates at sites outside the United States.
Adverse differences between interim data and final data could significantly harm our reputation and business prospects and may cause volatility in the price of our common stock. We conduct, and we intend to continue to conduct, clinical trials for our product candidates at sites outside the United States.
With respect to both owned and in-licensed patent rights, we cannot predict whether the patent applications we, our collaborators, and our licensor are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors.
With respect to both owned and in-licensed patent rights, we cannot predict whether the patent applications we, our collaborators, and our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors.
For example, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, and legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our responsibility to comply with any such standards.
For example, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, and legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our responsibility to comply with any such standards.
Interim, initial, “topline”, and preliminary data from our clinical trials that we announce or publish in the future may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Interim, initial, "topline", and preliminary data from our clinical trials that we announce or publish in the future may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
In particular, the technology that we license from Columbia University pursuant to our license agreements with them are used in and incorporated into a number of our software solutions which we market and license to our customers. For further information regarding our license agreements with Columbia University, see “Item 1.
In particular, the technology that we license from Columbia University pursuant to our license agreements with them are used in and incorporated into a number of our software solutions which we market and license to our customers. For further information regarding our license agreements with Columbia University, see "Item 1.
The facilities of these third parties may also be affected by natural disasters, such as floods or fire, or geopolitical developments or public health pandemics, such as COVID-19, or such facilities could face production issues, such as contamination or regulatory concerns following a regulatory inspection of such facility.
The facilities of these third parties may also be affected by natural disasters, such as floods or fire, or geopolitical developments or public health pandemics or such facilities could face production issues, such as contamination or regulatory concerns following a regulatory inspection of such facility.
In addition, if investment levels and development interest in small molecule therapeutics decreased, it may become more difficult for us to enter into collaborations on commercially acceptable terms, or at all, for our proprietary programs.
In addition, if investment levels and development interest in small molecule therapeutics decreased, it may become more difficult for us to enter into collaborations on commercially acceptable terms, or at all, for our proprietary drug discovery programs.
We are party to a sales agreement with Leerink Partners LLC (formerly SVB Securities LLC), or Leerink Partners, as sales agent, with respect to an "at the market" offering program, or the ATM, under which we could offer and sell, from time to time pursuant to our Form S-3, shares of our common stock having an aggregate offering price of up to $250.0 million, through Leerink Partners.
We are party to an amended and restated sales agreement with Leerink Partners LLC (formerly SVB Securities LLC), or Leerink Partners, as sales agent, with respect to an "at the market" offering program, or the ATM, under which we could offer and sell, from time to time pursuant to our Form S-3, shares of our common stock having an aggregate offering price of up to $250.0 million, through Leerink Partners.
The fair value of our equity interests in public companies, such as Morphic and Structure Therapeutics, may fluctuate significantly in future periods since we determine the fair value of such equity interests based on the market value of such companies’ common stock as of a given reporting date.
The fair value of our equity interests in public companies, such as Structure Therapeutics, may fluctuate significantly in future periods since we determine the fair value of such equity interests based on the market value of such companies’ common stock as of a given reporting date.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal 79 Table of Contents of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.
Moreover, if disputes over intellectual property that we have owned, co-owned, or in-licensed under the collaboration agreements prevent or impair our ability to maintain our current collaboration arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology or product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 91 Table of Contents If we are unable to obtain, maintain, enforce, and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.
Moreover, if disputes over intellectual property that we have owned, co-owned, or in-licensed under the collaboration agreements prevent or impair our ability to maintain our current collaboration arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology or product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 95 Table of Content s If we are unable to obtain, maintain, enforce, and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.
Our scientific approach focuses on using our platform technology to conduct “computational assays” that leverage our deep understanding of physics-based modeling and theoretical chemistry to design molecules and predict their key properties without conducting time-consuming and expensive physical experiments. Our computational platform underpins our software solutions, our drug discovery collaborations and our own proprietary drug discovery programs.
Our scientific approach focuses on using our platform technology to conduct "computational assays" that leverage our deep understanding of physics-based modeling and theoretical chemistry to design molecules and predict their key properties without conducting time-consuming and expensive physical experiments. Our computational platform underpins our software solutions, our drug discovery collaborations and our own proprietary drug discovery programs.
Such healthcare laws and regulations include, but are not limited to, the federal health care Anti-Kickback Statute; federal civil and criminal false 104 Table of Contents claims laws, such as the federal False Claims Act; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA; the Federal Food, Drug, and Cosmetic Act; the federal Physician Payments Sunshine Act; and analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency laws.
Such healthcare laws and regulations include, but are not limited to, the federal health care Anti-Kickback Statute; federal civil and criminal false claims laws, such as the federal False Claims Act; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA; the Federal Food, Drug, and Cosmetic Act; the federal Physician Payments Sunshine Act; and analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency laws.
If these challenges are successful, they may not only impact the EU-U.S. Data Privacy Framework, but also further limit the viability of the standard contractual clauses and other data transfer mechanisms. The uncertainty around this issue has the potential to impact our business internationally.
If these challenges are successful, they may not only impact the EU-U.S. Data Privacy Framework, but also further limit the viability of the 113 Table of Content s standard contractual clauses and other data transfer mechanisms. The uncertainty around this issue has the potential to impact our business internationally.
As a result, capital appreciation of our common stock, if any, will be the sole source of gain for our stockholders for the foreseeable future. 111 Table of Contents Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well.
As a result, capital appreciation of our common stock, if any, will be the sole source of gain for our stockholders for the foreseeable future. Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well.
If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.
If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or 83 Table of Content s may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.
We currently generate revenues from the sales of our software solutions and from achieving milestones under our collaborative drug discovery programs, and we expect to continue to derive most of our revenue from sales of our software and from 64 Table of Contents achieving such milestones until such time as our or our collaborators’ drug development and commercialization efforts are successful, if ever.
We currently generate revenues from the sales of our software solutions and from achieving milestones under our collaborative drug discovery programs, and we expect to continue to derive most of our revenue from sales of our software and from achieving such milestones until such time as our or our collaborators’ drug development and commercialization efforts are successful, if ever.
Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future. 93 Table of Contents A number of cases decided by the U.S.
Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future. A number of cases decided by the U.S.
Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results. 114 Table of Contents Item 1B. Unresolved Staff Comments.
Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results. Item 1B. Unresolved Staff Comments. None.
We also face competition from solutions that biopharmaceutical companies develop internally and from smaller companies that offer products and services directed at more specific markets than we target, enabling these smaller competitors to focus a greater proportion of their efforts and resources on these markets, as well as a large number of companies that have been founded with the goal of applying machine learning technologies to drug discovery. 69 Table of Contents Many of our competitors are able to devote greater resources to the development, promotion, and sale of their software solutions and services.
We also face competition from solutions that biopharmaceutical companies develop internally and from smaller companies that offer products and services directed at more specific markets than we target, enabling these smaller competitors to focus a greater proportion of their efforts and resources on these markets, as well as a large number of companies that have been founded with the goal of applying machine learning technologies to drug discovery. 74 Table of Content s Many of our competitors are able to devote greater resources to the development, promotion, and sale of their software solutions and services.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may experience delays in the development and commercialization of new software solutions and in our ability to market and sell existing software solutions, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 90 Table of Contents Our obligations under our existing or future drug discovery collaboration agreements may limit our intellectual property rights that are important to our business.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may experience delays in the development and commercialization of new software solutions and in our ability to market and sell existing software solutions, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 94 Table of Content s Our obligations under our existing or future drug discovery collaboration agreements may limit our intellectual property rights that are important to our business.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated "maximum fair price" under the law or for taking price increases that exceed inflation.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the 111 Table of Content s Part D coverage gap discount program with a new discounting program (beginning in 2025).
In addition, while we have equity stakes in a number of our collaborators, the value of these equity stakes can vary significantly based on a number of factors beyond our control, and there can be no assurance that we can rely on such 66 Table of Contents equity as capital to fund our operations.
In addition, while we have equity stakes in a number of our collaborators, the value of these equity stakes can vary significantly based on a number of factors beyond our control, and there can be no assurance that we can rely on such equity as capital to fund our operations.
We and they may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve and sustain profitability, or even if our collaborators do, we may not receive option fees, milestone payments, or royalties from them that are significant enough for us to achieve and sustain profitability.
We and our drug discovery collaborators may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve and sustain profitability, or even if our collaborators do, we may not receive option fees, milestone payments, or royalties from them that are significant enough for us to achieve and sustain profitability.
In many countries, including those of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with 102 Table of Contents governmental authorities can take considerable time after the receipt of marketing approval for a product.
In many countries, including those of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.
Any natural disaster or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations. 89 Table of Contents Risks Related to Our Intellectual Property If we fail to comply with our obligations under our existing license agreements with Columbia University, under any of our other intellectual property licenses, or under any future intellectual property licenses, or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.
Any natural disaster or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations. 93 Table of Content s Risks Related to Our Intellectual Property If we fail to comply with our obligations under our existing license agreements with Columbia University, under any of our other intellectual property licenses, or under any future intellectual property licenses, or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.
If we need to enter into alternative arrangements, our product development activities might be delayed. 78 Table of Contents Our reliance on third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities.
If we need to enter into alternative arrangements, our product development activities might be delayed. Our reliance on third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities.
After March 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
After March 2013, under the Leahy-Smith Act, the United States transitioned to a 97 Table of Content s first-to-file system in which, assuming that the other statutory requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in non-U.S. jurisdictions (e.g., opposition proceedings). The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation 99 Table of Content s proceedings, and equivalent proceedings in non-U.S. jurisdictions (e.g., opposition proceedings). The outcome following legal assertions of invalidity and unenforceability is unpredictable.
As a result of all of these factors, our competitors may succeed in obtaining approval from the FDA or other comparable foreign regulatory authorities or in discovering, developing and commercializing products in our field before we do. Risks Related to Our Operations Doing business internationally creates operational and financial risks for our business.
As a result of all of these factors, our competitors may succeed in obtaining approval from the FDA or other comparable foreign regulatory authorities or in discovering, developing and commercializing products in our field before we do. 89 Table of Content s Risks Related to Our Operations Doing business internationally creates operational and financial risks for our business.
The program focuses on medicines that target conditions for which there exists no satisfactory method of treatment in the EU or even if such a method exists, it may offer a major therapeutic advantage over existing treatments.
The program focuses on medicines that target conditions for which there exists no satisfactory method of treatment in the European Union or even if such a method exists, it may offer a major therapeutic advantage over existing treatments.
The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
The IRA has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.
Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that the product candidates that we may identify may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.
Because patent applications can take many years to issue, there may be currently 100 Table of Content s pending patent applications which may later result in issued patents that the product candidates that we may identify may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.
For the fiscal year ended December 31, 2023, sales to customers outside of the United States accounted for approximately 25% of our total revenues. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States.
For the fiscal year ended December 31, 2024, sales to customers outside of the United States accounted for approximately 45% of our total revenues. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States.
If the third parties that we engage to supply any materials or manufacture product for our preclinical tests and clinical trials should cease to continue to do so for any reason, we likely would experience delays in advancing these trials while we identify and qualify replacement suppliers, and we may be unable to obtain replacement supplies on terms that are favorable to us.
If the third parties that we engage to supply any materials or manufacture product for our preclinical tests and clinical trials should cease to continue to do so for any reason, we likely 84 Table of Content s would experience delays in advancing these trials while we identify and qualify replacement suppliers, and we may be unable to obtain replacement supplies on terms that are favorable to us.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our owned, co-owned, or in-licensed current or future patents and our ability to obtain, protect, maintain, defend, and enforce our patent rights, narrow the scope of our patent protection and, more generally, could affect the value of, or narrow the scope of, our patent rights.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our owned, co-owned, or in-licensed current or future patents and our ability to obtain, protect, maintain, defend, and enforce our patent rights, narrow the scope of our patent protection and, more generally, could affect the value of, or narrow the 96 Table of Content s scope of, our patent rights.
PRIME is a voluntary program aimed at enhancing the EMA’s role to reinforce scientific and regulatory support in order to optimize development and enable accelerated assessment of new medicines that are of major public health interest with the potential to address unmet medical needs.
PRIME is a voluntary program aimed at enhancing the EMA’s role to reinforce scientific and regulatory support in order to optimize development and enable accelerated assessment of new medicines that are of major public health interest with the potential 106 Table of Content s to address unmet medical needs.
The benefits of a PRIME designation include the appointment of a CHMP rapporteur to provide continued support and help to build knowledge ahead of a marketing authorization application, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier in the application process.
The benefits of a PRIME designation include the appointment of a Committee for Medicinal Products for Human Use rapporteur to provide continued support and help to build knowledge ahead of a marketing authorization application, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier in the application process.
Factors that may cause fluctuations in our quarterly and annual financial results include, without limitation, those listed elsewhere in this “Risk Factors” section and those listed below: • customer renewal rates and the timing and terms of customer renewals, including the seasonality of customer renewals of our on-premise software arrangements, for which revenue historically has been recognized at a single point in time in the first and fourth quarter of each fiscal year; • our ability to attract new customers for our software; • the addition or loss of large customers, including through acquisitions or consolidations of such customers; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure; • network outages or security breaches; • industry and market conditions, including within the life sciences industry; • general economic conditions, including the impact of increasing or decreasing inflation and interest rates; 65 Table of Contents • our ability to collect receivables from our customers; • the amount of software purchased by our customers, including the mix of on-premise and hosted software sold during a period; • variations in the timing of the sales of our software, which may be difficult to predict; • changes in the pricing of our solutions and in our pricing policies or those of our competitors; • the timing and success of the introduction of new software solutions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic collaborators; • changes in the fair value of or receipt of distributions or proceeds on account of the equity interests we hold in our drug discovery collaborators, such as Morphic Holding, Inc., or Morphic, Structure Therapeutics, and Nimbus; • the success of our drug discovery collaborators in developing and commercializing drug products for which we are entitled to receive milestone payments or royalties; • the timing of the recognition of milestones achieved under our collaborative programs; • variations in the number and size of milestones achieved under our collaborative programs; • the timing of recognition of revenue from any payments from entering into collaborations or out-licensing our proprietary drug discovery programs, such as under our collaboration agreement with Bristol-Myers Squibb Company, or BMS; and • the timing of expenses related to our drug discovery programs, the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
Factors that may cause fluctuations in our quarterly and annual financial results include, without limitation, those listed elsewhere in this "Risk Factors" section and those listed below: • customer renewal rates and the timing and terms of customer renewals, including the seasonality of customer renewals of our on-premise software arrangements, for which revenue historically has been recognized at a single point in time in the first and fourth quarter of each fiscal year; • our ability to attract new customers for our software; • the addition or loss of large customers, including through acquisitions or consolidations of such customers; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure; • network outages or security breaches; • industry and market conditions, including within the life sciences industry; • general economic conditions, including the impact of increasing or decreasing inflation and interest rates; • our ability to collect receivables from our customers; 70 Table of Content s • the amount of software purchased by our customers, including the mix of on-premise and hosted software sold during a period; • variations in the timing of the sales of our software, which may be difficult to predict; • changes in the pricing of our solutions and in our pricing policies or those of our competitors; • the timing and success of the introduction of new software solutions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic collaborators; • changes in the fair value of or receipt of distributions or proceeds on account of the equity interests we hold in our drug discovery collaborators, such as Structure Therapeutics and Nimbus; • the success of our drug discovery collaborators in developing and commercializing drug products for which we are entitled to receive milestone payments or royalties; • the timing of the recognition of milestones achieved under our collaborative programs; • variations in the number and size of milestones achieved under our collaborative programs; • the timing of recognition of revenue of any payments from entering into collaborations or out-licensing our proprietary drug discovery programs, such as under our collaboration agreement with Novartis Pharma AG, or Novartis; and • the timing of expenses related to our drug discovery programs, the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each phase 3 clinical trial or any other “pivotal study” of a new drug or biological product.
For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each phase 3 clinical trial or any other "pivotal study" of a new drug or biological product.
We cannot guarantee that the FDA or comparable foreign regulatory authorities will interpret trial results as we do, and more trials than we anticipated could be required before we are able to submit applications seeking approval of our product candidates.
We cannot guarantee that the FDA or comparable foreign regulatory authorities will interpret trial results as we do, and more trials than we anticipated could 85 Table of Content s be required before we are able to submit applications seeking approval of our product candidates.
Any of these events could create liability for us and damage our reputation, which could have a material adverse effect on our revenue, business, results of operations, and financial condition and the market price of our shares. 72 Table of Contents Risks Related to Drug Discovery We may never realize a return on our investment of resources and cash in our drug discovery collaborations.
Any of these events could create liability for us and damage our reputation, which could have a material adverse effect on our revenue, business, results of operations, and financial condition and the market price of our shares. 77 Table of Content s Risks Related to Drug Discovery We may never realize a return on our investment of resources and cash in our drug discovery collaborations.
Our insurance may not be adequate to cover losses associated with such events, and in any case, such insurance may not cover all of the types of costs, expenses, and losses we could incur to respond to and remediate a security breach. 71 Table of Contents Any failure to offer high-quality technical support services could adversely affect our relationships with our customers and our operating results.
Our insurance may not be adequate to cover losses associated with such events, and in any case, such insurance may not cover all of the types of costs, expenses, and losses we could incur to respond to and remediate a security breach. 76 Table of Content s Any failure to offer high-quality technical support services could adversely affect our relationships with our customers and our operating results.
If a successful clinical trial or product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
If a successful clinical trial or product liability claim or series of claims is brought against us for uninsured liabilities or in 88 Table of Content s excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. 112 Table of Contents As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting.
The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Collaborations are complex and time-consuming to negotiate and document.
The 81 Table of Content s collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Collaborations are complex and time-consuming to negotiate and document.
For example, with respect to our MALT1 inhibitor, SGR-1505, which we are advancing for the treatment of patients with relapsed or refractory B-cell lymphomas, we are aware of several MALT1 inhibitors in clinical development, including by AbbVie Inc., Ono Pharmaceutical Co., Ltd., HotSpot Therapeutics, and Exelixis, Inc.
For example, with respect to our MALT1 inhibitor, SGR-1505, which we are advancing for the treatment of patients with relapsed or refractory B-cell malignancies, we are aware of several MALT1 inhibitors in clinical development, including by AbbVie Inc., Ono Pharmaceutical Co., Ltd., HotSpot Therapeutics, and Recursion Pharmaceuticals, Inc.
PRIME is limited to medicines under development and not authorized in the EU and the applicant intends to apply for an initial marketing authorization application through the centralized procedure.
PRIME is limited to medicines under development and not authorized in the European Union and the applicant intends to apply for an initial marketing authorization application through the centralized procedure.
Any inability to manage our multiple business units and growth could delay the execution of our business plans or disrupt our operations and the synergies we believe currently exist between our business units. In addition, adverse developments in one of these business units may disrupt these synergies.
Any inability to manage our multiple business units and growth could delay the 119 Table of Content s execution of our business plans or disrupt our operations and the synergies we believe currently exist between our business units. In addition, adverse developments in one of these business units may disrupt these synergies.
We have released, and may in the future release, guidance in our annual or quarterly earnings conference calls, annual or quarterly earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of such guidance. Our guidance, which includes forward-looking statements, is based on projections prepared by our management.
We have released, and may in the future release, guidance in our annual or quarterly earnings conference calls or releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of such guidance. Our guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management.
Furthermore, with respect to our proprietary drug discovery programs, the ongoing war between Russia and Ukraine may impact the ability of our contract research organizations, or CROs, in the region to produce materials we require to conduct certain of our preclinical studies.
Furthermore, with respect to our proprietary drug discovery programs, the ongoing war between Russia and Ukraine may impact the ability of our CROs in the region to produce materials we require to conduct certain of our preclinical studies.
The number of shares that are sold by Leerink Partners after we request that sales be made will fluctuate based on the market price of our common stock during the sales period and limits we set with Leerink Partners.
The number of shares that are sold by Leerink Partners after we 122 Table of Content s request that sales be made will fluctuate based on the market price of our common stock during the sales period and limits we set with Leerink Partners.
Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and employees. 96 Table of Contents If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and employees. 101 Table of Content s If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
Sales of medical products depend in part on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost-effective.
Sales of medical products depend in part on the willingness of physicians to prescribe the treatment, which is likely to be based on a 87 Table of Content s determination by these physicians that the products are safe, therapeutically effective and cost-effective.
Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.
Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees.

… 330 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+0 added−1 removed9 unchanged
Biggest changeIn an effort to deter and detect cyber threats, we annually provide all employees, including part-time and temporary employees, with a cybersecurity awareness program, which covers timely and relevant topics, including social engineering and phishing, and educates employees on the importance of reporting all incidents immediately. We also use technology-based tools to mitigate cybersecurity risks throughout our information security systems.
Biggest changePrior to joining our company, our vice president of information security worked at several technology companies and served in roles of increasing responsibility with respect to information security during his tenure. 125 Table of Content s In an effort to deter and detect cyber threats, we annually provide all employees, including part-time and temporary employees, with a cybersecurity awareness program, which covers timely and relevant topics, including social engineering and phishing, and educates employees on the importance of reporting all incidents immediately.
These tools are integrated into our comprehensive security framework, used to bolster our employee-based cybersecurity programs and are regularly updated to respond to evolving threats.
We also use technology-based tools to mitigate cybersecurity risks throughout our information security systems. These tools are integrated into our comprehensive security framework, used to bolster our employee-based cybersecurity programs and are regularly updated to respond to evolving threats.
Removed
Prior to joining our company, our vice president of information security worked at several technology companies and served in roles of increasing responsibility with respect to information security during his tenure.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−0 removed2 unchanged
Biggest changeAdditionally, we lease office space at our other office locations around the world. We believe our facilities are adequate and suitable for our current needs and that should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Biggest changeAdditionally, we lease office space at our other office locations around the world. We believe our facilities are adequate and suitable for our current needs and that should it be needed, suitable additional or alternative space will be available to accommodate our operations. Item 3. Legal Proceedings.
Added
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently subject to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 126 Table of Content s PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed5 unchanged
Biggest changeThe actual number of stockholders is greater than this number of holders of record 117 Table of Contents and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Biggest changeThe actual number of stockholders is greater than this number of holders of record and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other 127 Table of Content s nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been publicly traded on the Nasdaq Global Select Market under the symbol “SDGR” since February 6, 2020. Prior to that date, there was no public market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been publicly traded on the Nasdaq Global Select Market under the symbol "SDGR" since February 6, 2020. Prior to that date, there was no public market for our common stock.
The following graph compares the cumulative total return on our common stock with the cumulative total return of the Nasdaq composite and the Nasdaq Biotechnology Index from February 6, 2020 (the first date that shares of our common stock were publicly traded on the Nasdaq Global Select Market) through December 31, 2023.
The following graph compares the cumulative total return on our common stock with the cumulative total return of the Nasdaq composite and the Nasdaq Biotechnology Index from February 6, 2020 (the first date that shares of our common stock were publicly traded on the Nasdaq Global Select Market) through December 31, 2024.
Performance Graph The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, nor shall such information be incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, or the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
Performance Graph The following performance graph and related information shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, nor shall such information be incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, or the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
The comparisons are not intended to forecast or be indicative of future performance of our common stock. Holders of Record As of February 21, 2024, there were approximately 104 holders of record of our common stock and one holder of record of our limited common stock.
The comparisons are not intended to forecast or be indicative of future performance of our common stock. Holders of Record As of February 19, 2025, there were approximately 87 holders of record of our common stock and one holder of record of our limited common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+35 added−17 removed81 unchanged
Biggest changeThree Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 (in thousands) Revenues: Software products and services $ 68,655 $ 28,904 $ 29,352 $ 32,213 $ 47,819 $ 24,667 $ 30,011 $ 33,081 Drug discovery 5,471 13,665 5,837 32,569 9,024 12,313 8,458 15,582 Total revenues 74,126 42,569 35,189 64,782 56,843 36,980 38,469 48,663 Cost of revenues: Software products and services (1) 8,670 7,034 6,695 7,115 8,098 6,866 7,101 7,511 Drug discovery (1) 7,906 11,896 14,684 11,974 10,041 12,913 14,234 13,169 Total cost of revenues 16,576 18,930 21,379 19,089 18,139 19,779 21,335 20,680 Gross profit 57,550 23,639 13,810 45,693 38,704 17,201 17,134 27,983 Operating expenses: Research and development (1) 51,487 46,833 42,705 40,741 34,542 32,885 31,123 27,822 Sales and marketing (1) 9,950 9,109 9,022 9,145 9,382 7,161 7,428 6,671 General and administrative (1) 25,734 23,890 23,216 26,308 23,318 23,318 22,056 22,133 Total operating expenses 87,171 79,832 74,943 76,194 67,242 63,364 60,607 56,626 Loss from operations (29,621) (56,193) (61,133) (30,501) (28,538) (46,163) (43,473) (28,643) Other (expense) income: (Loss) gain on equity investments (109) — — 147,322 — (3) 11,828 — Change in fair value (8,408) (14,522) 40,654 35,737 (1,493) 5,273 (15,700) (6,164) Other income (expense) 6,626 5,804 4,326 2,937 2,687 1,231 (296) 328 Total other (expense) income (1,891) (8,718) 44,980 185,996 1,194 6,501 (4,168) (5,836) (Loss) income before income taxes (31,512) (64,911) (16,153) 155,495 (27,344) (39,662) (47,641) (34,479) Income tax (benefit) expense (842) (2,887) (20,431) 26,359 (136) 194 33 (28) Net (loss) income (30,670) (62,024) 4,278 129,136 (27,208) (39,856) (47,674) (34,451) Net (loss) income attributable to noncontrolling interest — — — — (1) (3) 12 (11) Net (loss) income attributable to Schrödinger stockholders $ (30,670) $ (62,024) $ 4,278 $ 129,136 $ (27,207) $ (39,853) $ (47,686) $ (34,440) (1) Includes stock-based compensation as indicated in the table located further below. 131 Table of Contents Revenues: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 (in thousands) Revenues: Software On-premise software $ 53,947 $ 13,806 $ 16,814 $ 19,944 $ 33,627 $ 12,579 $ 16,595 $ 21,686 Hosted software 6,016 5,463 4,451 4,451 4,125 3,914 3,596 3,255 Software maintenance 5,687 5,752 5,877 5,750 5,255 5,063 4,952 4,726 Professional services 3,005 2,083 2,210 2,068 4,812 3,111 3,868 3,414 Revenue from contracts with customers 68,655 27,104 29,352 32,213 47,819 24,667 29,011 33,081 Software contribution — 1,800 — — — — 1,000 — Total software products and services revenue 68,655 28,904 29,352 32,213 47,819 24,667 30,011 33,081 Drug discovery Drug discovery services 4,955 12,730 5,232 31,803 8,450 11,717 8,019 15,241 Drug discovery contribution 516 935 605 766 574 596 439 341 Total drug discovery revenue 5,471 13,665 5,837 32,569 9,024 12,313 8,458 15,582 Total revenues $ 74,126 $ 42,569 $ 35,189 $ 64,782 $ 56,843 $ 36,980 $ 38,469 $ 48,663 Deferred Revenue: As of December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 (in thousands) Deferred revenue $ 65,274 $ 55,415 $ 62,294 $ 71,926 $ 83,529 $ 65,897 $ 67,545 $ 78,353 Gross Margin: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 Software products and services gross margin 87 % 76 % 77 % 78 % 83 % 72 % 76 % 77 % Stock-Based Compensation: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 (in thousands) Stock-based compensation: Cost of revenues: Software products and services $ 671 $ 654 $ 625 $ 600 $ 580 $ 596 $ 584 $ 485 Drug discovery $ 585 $ 580 $ 765 $ 699 $ 626 $ 764 $ 944 $ 803 Research and development $ 4,070 $ 4,101 $ 3,807 $ 3,514 $ 3,231 $ 3,026 $ 2,977 $ 2,582 Sales and marketing $ 935 $ 914 $ 941 $ 851 $ 867 $ 728 $ 699 $ 524 General and administrative $ 6,272 $ 6,405 $ 5,635 $ 5,217 $ 4,902 $ 4,750 $ 5,223 $ 4,740 Total stock-based compensation expense $ 12,533 $ 12,654 $ 11,773 $ 10,881 $ 10,206 $ 9,864 $ 10,427 $ 9,134 132 Table of Contents Depreciation and Amortization: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 (in thousands) Depreciation and amortization: Cost of revenues: Software products and services $ 124 $ 109 $ 101 $ 112 $ 113 $ 106 $ 118 $ 99 Drug discovery $ 83 $ 110 $ 130 $ 116 $ 97 $ 117 $ 127 $ 112 Research and development $ 710 $ 591 $ 525 $ 518 $ 425 $ 384 $ 351 $ 308 Sales and marketing $ 151 $ 172 $ 141 $ 140 $ 114 $ 101 $ 118 $ 79 General and administrative $ 286 $ 291 $ 268 $ 874 $ 393 $ 399 $ 412 $ 371 Total depreciation and amortization expense $ 1,354 $ 1,273 $ 1,165 $ 1,760 $ 1,142 $ 1,107 $ 1,126 $ 969 Quarterly Revenue Trends On-premise software revenue is subject to seasonality that generally favors the first and fourth quarter of each year, primarily due to the timing of customer renewals for on-premise software arrangements, for which revenue is recognized at a single point in time.
Biggest changeThree Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 (in thousands) Revenues: Software products and services $ 79,662 $ 31,884 $ 35,404 $ 33,415 $ 68,655 $ 28,904 $ 29,352 $ 32,213 Drug discovery 8,655 3,406 11,930 3,183 5,471 13,665 5,837 32,569 Total revenues 88,317 35,290 47,334 36,598 74,126 42,569 35,189 64,782 Cost of revenues: Software products and services (1) 13,278 8,479 7,167 7,976 8,670 7,034 6,695 7,115 Drug discovery (1) 10,909 9,083 8,832 9,732 7,906 11,896 14,684 11,974 Total cost of revenues 24,187 17,562 15,999 17,708 16,576 18,930 21,379 19,089 Gross profit 64,130 17,728 31,335 18,890 57,550 23,639 13,810 45,693 Operating expenses: Research and development (1) 49,362 50,977 50,835 50,611 51,487 46,833 42,705 40,741 Sales and marketing (1) 9,704 10,349 9,693 10,171 9,950 9,109 9,022 9,145 General and administrative (1) 25,776 24,824 23,536 25,541 25,734 23,890 23,216 26,308 Total operating expenses 84,842 86,150 84,064 86,323 87,171 79,832 74,943 76,194 Loss from operations (20,712) (68,422) (52,729) (67,433) (29,621) (56,193) (61,133) (30,501) Other (expense) income: (Loss) gain on equity investments — — — — (109) — — 147,322 Change in fair value (22,080) 25,459 (5,833) 8,137 (8,408) (14,522) 40,654 35,737 Other income 3,539 4,737 4,598 5,028 6,626 5,804 4,326 2,937 Total other (expense) income (18,541) 30,196 (1,235) 13,165 (1,891) (8,718) 44,980 185,996 (Loss) income before income taxes (39,253) (38,226) (53,964) (54,268) (31,512) (64,911) (16,153) 155,495 Income tax expense (benefit) 963 (90) 83 456 (842) (2,887) (20,431) 26,359 Net (loss) income $ (40,216) $ (38,136) $ (54,047) $ (54,724) $ (30,670) $ (62,024) $ 4,278 $ 129,136 (1) Includes stock-based compensation as indicated in the table located further below. 142 Table of Content s Revenues: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 (in thousands) Revenues: Software On-premise software $ 55,393 $ 12,250 $ 18,758 $ 17,619 $ 53,947 $ 13,806 $ 16,814 $ 19,944 Hosted software 11,176 8,814 8,087 7,176 6,016 5,463 4,451 4,451 Software maintenance 5,886 5,658 5,840 5,895 5,687 5,752 5,877 5,750 Professional services 2,315 2,038 2,719 2,725 3,005 2,083 2,210 2,068 Revenue from contracts with customers 74,770 28,760 35,404 33,415 68,655 27,104 29,352 32,213 Software contribution 4,892 3,124 — — — 1,800 — — Total software products and services revenue 79,662 31,884 35,404 33,415 68,655 28,904 29,352 32,213 Drug discovery Drug discovery services 8,132 2,813 11,506 2,692 4,955 12,730 5,232 31,803 Drug discovery contribution 523 593 424 491 516 935 605 766 Total drug discovery revenue 8,655 3,406 11,930 3,183 5,471 13,665 5,837 32,569 Total revenues $ 88,317 $ 35,290 $ 47,334 $ 36,598 $ 74,126 $ 42,569 $ 35,189 $ 64,782 Deferred Revenue: As of December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 (in thousands) Deferred revenue $ 220,758 $ 46,973 $ 47,879 $ 57,513 $ 65,274 $ 55,415 $ 62,294 $ 71,926 Gross Margin: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 Software products and services gross margin 83 % 73 % 80 % 76 % 87 % 76 % 77 % 78 % Stock-Based Compensation: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 (in thousands) Stock-based compensation: Cost of revenues: Software products and services $ 664 $ 665 $ 669 $ 645 $ 671 $ 654 $ 625 $ 600 Drug discovery $ 538 $ 573 $ 691 $ 490 $ 585 $ 580 $ 765 $ 699 Research and development $ 4,152 $ 4,218 $ 4,228 $ 4,066 $ 4,070 $ 4,101 $ 3,807 $ 3,514 Sales and marketing $ 988 $ 971 $ 968 $ 974 $ 935 $ 914 $ 941 $ 851 General and administrative $ 6,137 $ 5,971 $ 6,252 $ 6,043 $ 6,272 $ 6,405 $ 5,635 $ 5,217 Total stock-based compensation expense $ 12,479 $ 12,398 $ 12,808 $ 12,218 $ 12,533 $ 12,654 $ 11,773 $ 10,881 143 Table of Content s Depreciation and Amortization: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 (in thousands) Depreciation and amortization: Cost of revenues: Software products and services $ 130 $ 135 $ 120 $ 122 $ 124 $ 109 $ 101 $ 112 Drug discovery $ 181 $ 158 $ 108 $ 120 $ 83 $ 110 $ 130 $ 116 Research and development $ 897 $ 878 $ 793 $ 780 $ 710 $ 591 $ 525 $ 518 Sales and marketing $ 159 $ 174 $ 169 $ 165 $ 151 $ 172 $ 141 $ 140 General and administrative $ 266 $ 262 $ 264 $ 278 $ 286 $ 291 $ 268 $ 874 Total depreciation and amortization expense $ 1,633 $ 1,607 $ 1,454 $ 1,465 $ 1,354 $ 1,273 $ 1,165 $ 1,760 Quarterly Revenue Trends On-premise software revenue is subject to seasonality that generally favors the first and fourth quarter of each year, primarily due to the timing of customer renewals for on-premise software arrangements, for which revenue is recognized at a single point in time.
In addition to revenue from our collaborations, we may also derive drug discovery revenue from collaborating on or out-licensing our proprietary drug discovery programs when we believe it will help maximize our clinical and commercial opportunities for the program.
In addition to revenue from our collaborations, we may also derive drug discovery revenue from collaborating on or out-licensing our proprietary drug discovery programs when we believe it will help maximize the clinical and commercial opportunities for the program.
Investing activities During the year ended December 31, 2023, investing activities provided approximately $193.0 million of cash, consisting of $147.2 million cash distributions received, on account of our equity investment in Nimbus, from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and $63.3 million provided by marketable securities, net of purchases.
During the year ended December 31, 2023, investing activities provided approximately $193.0 million of cash, consisting of $147.2 million cash distributions received, on account of our equity investment in Nimbus, from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and $63.3 million provided by marketable securities maturities, net of purchases.
We also completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability and pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions. In the healthy volunteer trial, SGR-1505 was well tolerated with no drug-related serious adverse events or dose limiting toxicities observed.
We also completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability and pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions. In the healthy volunteer trial, SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed.
Significant management judgment is applied to determine the allocation of the transaction price and measurement of progress, including (1) the constraint on variable consideration, (2) the allocation of the transaction price to the performance obligations using their standalone selling price, or SSP, and (3) the appropriate input or output based method to recognize collaboration revenue and the extent of progress to date.
Significant management judgment is applied to determine the allocation of the transaction price and measurement of progress, including (1) the constraint on variable consideration, (2) the identification of performance obligations and allocation of the transaction price to the performance obligations using their standalone selling price, or SSP, and (3) the appropriate input or output based method to recognize collaboration revenue and the extent of progress to date.
Seasonality Generally, the first and fourth quarter of each year have typically been our largest quarters for software products and services revenue, primarily due to the timing of customer renewals of on-premise software arrangements, for which revenue is recognized at a single point in time.
Seasonality Generally, the first and fourth quarter of each year have been our largest quarters for software products and services revenue, primarily due to the timing of customer renewals of on-premise software arrangements, for which revenue is recognized at a single point in time.
If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or that of the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.
If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or that of the licensee, such as certain regulatory approvals, are not considered probable of being achieved until those approvals are received.
The amount to which our research and development expense may increase in the future will also be dependent on our development plans for our proprietary drug discovery programs, including the timing of any partnering or out-licensing decisions.
The amount to which our research and development expense may increase in the future will also be dependent on our development plans for our proprietary drug discovery programs, including the timing of any partnering, collaboration or out-licensing decisions.
Gain on Equity Investments Gain on equity investments consists of realized gains in the form of cash distributions from our equity investments. Change in Fair Value Fair value gains and losses consist of adjustments to the fair value of our equity investments, which may include Nimbus, Structure Therapeutics Inc., or Structure Therapeutics, and Morphic Holding, Inc., or Morphic.
Gain on Equity Investments Gain on equity investments consists of realized gains in the form of cash distributions from our equity investments. Change in Fair Value Fair value gains and losses consist of adjustments to the fair value of our equity investments, which may include Nimbus, Structure Therapeutics Inc., or Structure Therapeutics, and Morphic.
Research and development, regulatory or commercial milestones in our collaboration agreements may include some, but not necessarily all, of the following types of events: • completion of preclinical research and development work leading to selection of product candidates; 137 Table of Contents • initiation of Phase 1, Phase 2, and Phase 3 clinical trials; • filing of regulatory applications for marketing approval in the United States, Europe or Japan; • marketing approval in major markets, such as the United States, Europe, or Japan; • commercial milestones and/or commercial royalties; and • achievement of certain other technical, scientific, or development criteria.
Research and development, regulatory or commercial milestones in our collaboration agreements may include some, but not necessarily all, of the following types of events: • completion of preclinical research and development work leading to selection of product candidates; • initiation of Phase 1, Phase 2, and Phase 3 clinical trials; • filing of regulatory applications for marketing approval in the United States, Europe or Japan; • marketing approval in major markets, such as the United States, Europe, or Japan; • commercial milestones and/or commercial royalties; and • achievement of certain other technical, scientific, or development criteria.
Lilly will be responsible for the completion of preclinical development, clinical development and commercialization. Under the terms of the agreement we received an upfront payment and we are eligible to receive up to $425.0 million in discovery, development and commercial milestone payments.
Lilly will be responsible for the completion of preclinical development, clinical development and commercialization. Under the terms of the agreement, we received an upfront payment and we are eligible to receive up to $420.0 million in discovery, development and commercial milestone payments.
Overall, we expect that our drug discovery revenue will fluctuate from period to period due to the inherently uncertain nature of the timing of milestone achievement and our dependence on the program decisions of our collaborators. Drug discovery contribution revenue.
Overall, we expect that our drug discovery revenue will fluctuate from period to period due to the inherently uncertain nature of the timing of milestone achievements and our dependence on the program decisions of our collaborators. Drug discovery contribution revenue.
We have funded our operations to date principally from the sale of our equity securities, including our initial public offering and our follow-on public offering, and to a lesser extent, from sales of our software solutions and from upfront payments, research funding and milestone payments from our drug discovery collaborations, and from distributions 134 Table of Contents on account of, or proceeds from the sale of, our equity stakes in our collaborators.
We have funded our operations to date principally from the sale of our equity securities, including our initial public offering and our follow-on public offering, and to a lesser extent, from sales of our software solutions and from upfront payments, research funding and milestone payments from our drug discovery collaborations, and from distributions on account of, or proceeds from the sale of, our equity stakes in our collaborators.
The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is a risk that we may not earn all of the milestone payments from each of our collaborators. We recognized $27.7 million and $14.7 million from drug discovery milestones for the years ended December 31, 2023 and 2022, respectively.
The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is a risk that we may not earn all of the milestone payments from each of our collaborators. We recognized $14.1 million and $27.7 million from drug discovery milestones for the years ended December 31, 2024 and 2023, respectively.
For further information regarding our forward-looking statements, see “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this Annual Report. Overview We are transforming the way therapeutics and materials are discovered. Our differentiated, physics-based computational platform enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at a lower cost, compared to traditional methods.
For further information regarding our forward-looking statements, see "Cautionary Note Regarding Forward-Looking Statements and Industry Data" in this Annual Report. Overview We are transforming the way therapeutics and materials are discovered. Our differentiated, physics-based computational platform enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at a lower cost, compared to traditional methods.
Income tax expense for the year ended December 31, 2022 represents our income tax obligations in certain states and taxes in foreign jurisdictions in which we conduct business. As of December 31, 2023, we have a full valuation allowance on our U.S. federal and state deferred tax assets.
Income tax expense for the year ended December 31, 2023 represents our federal and certain state income tax obligations and taxes in foreign jurisdictions for which we conduct business. As of December 31, 2024, we have a full valuation allowance on our U.S. federal and state deferred tax assets.
Our customer retention rate for our customers with an ACV of at least $500,000 was 98% for the year ended December 31, 2023 and 100% for the year ended December 31, 2022.
Our customer retention rate for our customers with an ACV of at least $500,000 was 100% for the year ended December 31, 2024 and 98% for the year ended December 31, 2023.
We calculate year-over-year customer retention for our customers with an ACV of at least $100,000 or $500,000 by starting with the number of such customers we had in the previous fiscal year. We then calculate how many of these customers were active 120 Table of Contents customers in the current fiscal year.
We calculate year-over-year customer retention for our customers with an ACV of at least $100,000 or $500,000 by starting with the number of such customers we had in the previous fiscal year. We then calculate how many of these customers were active customers in the current fiscal year.
As a result of many factors, including those factors set forth in “Risk Factors” of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
As a result of many factors, including those factors set forth in "Risk Factors" of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
There is no annual commitment. 135 Table of Contents We also enter into agreements in the normal course of business with CRO vendors for research, preclinical studies, and clinical trials, professional consultants for expert advice, and other vendors for various products and services.
There is no annual commitment. We also enter into agreements in the normal course of business with CRO vendors for research, preclinical studies, and clinical trials, professional consultants for expert advice, and other vendors for various products and services.
With respect to our proprietary drug discovery programs, as part of our strategy we may choose to advance them into preclinical and clinical development ourselves, enter into collaborations to co-develop them with leading industry partners, or out-license them to maximize their clinical and commercial opportunities. We may be required to seek additional equity or debt financing.
With respect to our proprietary drug discovery programs, as part of our strategy we may choose to advance them into preclinical and clinical development ourselves, enter into collaborations to co-develop them with leading industry partners, or out-license them to maximize their clinical and commercial opportunities. 145 Table of Content s We may be required to seek additional equity or debt financing.
Key Factors Affecting Our Performance Ability to drive additional revenue from our software solutions from existing customers Our large existing base of customers represents a significant opportunity for us to expand our revenue through increased utilization of our software. We had 1,785 and 1,748 active customers for the years ended December 31, 2023 and 2022, respectively.
Key Factors Affecting Our Performance Ability to drive additional revenue from our software solutions from existing customers Our large existing base of customers represents a significant opportunity for us to expand our revenue through increased utilization of our software. We had 1,752 and 1,785 active customers for the years ended December 31, 2024 and 2023, respectively.
The following discussion and analysis of our financial condition and results of operations covers fiscal 2023 and fiscal 2022 items and year-over-year comparisons between fiscal 2023 and fiscal 2022.
The following discussion and analysis of our financial condition and results of operations covers fiscal 2024 and fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023.
While the gross margin of our drug discovery business will fluctuate significantly from period to period depending on factors such as the timing of recognition of milestones, we expect the gross margins to generally trend higher over time as more programs advance to later stages of development, the milestones increase in size and our ongoing research and development obligations to such programs decline in cost.
While the gross margin of our drug discovery business will fluctuate significantly from period to period depending on factors such as the timing of recognition of milestones, the number and mix of collaborative programs, and their respective stages of development, we expect the gross margins to generally trend higher over time as more programs advance to later stages of development, the milestones increase in size and our ongoing research and development obligations to such programs decline in cost.
Ability to retain our customer base for our software solutions Another important driver of our performance is our ability to retain our customer base. We had 222, 227, and 190 customers with an ACV of at least $100,000 for the years ended December 31, 2023, 2022, and 2021, respectively.
Ability to retain our customer base for our software solutions Another important driver of our performance is our ability to retain our customer base. We had 235, 222, and 227 customers with an ACV of at least $100,000 for the years ended December 31, 2024, 2023, and 2022, respectively.
Contribution revenue consists of funds received under agreements with the Bill and Melinda Gates Foundation on a cost reimbursement basis, to perform services aimed at accelerating drug discovery in women’s health. Revenue is recognized as conditions are met in accordance with ASC Topic 958, Not-for-Profit Entities . Cost of Revenues Software products and services.
Contribution revenue consists of funds received under agreements with the Bill & Melinda Gates Foundation on a cost reimbursement basis, to perform services aimed at accelerating drug discovery in women’s health. Revenue is recognized as conditions are met in accordance with Topic 958. Cost of Revenues Software products and services.
CRO cost increases were driven by the expansion and progression of our proprietary drug discovery programs. 133 Table of Contents Quarterly Other (Expense) Income Trends Other (expense) income during the periods presented consisted primarily of fair value gains and losses related to our equity investments in Morphic and Structure Therapeutics, and, to a lesser degree, interest income.
CRO cost increases were driven by the expansion and progression of our proprietary drug discovery programs. 144 Table of Content s Quarterly Other (Expense) Income Trends Other (expense) income during the periods presented consisted primarily of fair value gains and losses related to our equity investments in Morphic and Structure Therapeutics, and, to a lesser degree, interest income.
We believe our sales and marketing approach and the quality of our software solutions result in long-term relationships and high retention with our largest customers. This is demonstrated by the length of our key relationships, with the average tenure of our 10 largest software customers in 2023 being nearly 19 years.
We believe our sales and marketing approach and the quality of our software solutions result in long-term relationships and high retention with our largest customers. This is demonstrated by the length of our key relationships, with the average tenure of our 10 largest software customers in 2024 being nearly 21 years.
When a customer enters into a hosted arrangement for which revenue is recognized over time, the amount paid upfront that is not recognized in the current period is included in deferred revenue in our statement of financial position until the period in which it is recognized. Software maintenance.
When a customer enters into a hosted arrangement for which revenue is recognized over time, the amount paid upfront that is not recognized in the current period is included in deferred revenue in our statement of financial position until the period in which it is recognized. 132 Table of Content s Software maintenance.
Pursuant to various third-party arrangements, we license technology that is used in our software. These arrangements require us to pay royalties based on sales volume, and such royalty payments represented 4.1% and 4.8% of software revenues in the years ended December 31, 2023 and 2022, respectively. Drug discovery.
Pursuant to various third-party arrangements, we license technology that is used in our software. These arrangements require us to pay royalties based on sales volume, and such royalty payments represented 3.5% and 4.1% of software revenues in the years ended December 31, 2024 and 2023, respectively. Drug discovery.
See “Collaboration and License Agreement” in Note 3 to our consolidated financial statements for additional information relating to this agreement. In September 2022, we entered into a collaboration with Eli Lilly and Company, or Lilly, under which we are responsible for the discovery and optimization of small molecule compounds addressing an immunology target.
See "Collaboration and License Agreement" in Note 3 to our consolidated financial statements for additional information relating to this agreement. In September 2022, we entered into a collaboration with Lilly under which we are responsible for the discovery and optimization of small molecule compounds addressing an immunology target.
We have devoted substantially all of our resources to introducing new capabilities and refining our software, conducting research and development activities, recruiting skilled personnel, and providing general and administrative support for these operations. 118 Table of Contents Over the last decade, we have entered into a number of collaborations with leading biopharmaceutical companies that have provided us with significant income and have the potential to produce additional milestone payments, option fees, and future royalties.
We have devoted substantially all of our resources to introducing new capabilities and refining our software, conducting research and development activities, recruiting skilled personnel, and providing general and administrative support for these operations. 128 Table of Content s Over the last decade, we have entered into a number of collaborations with leading biopharmaceutical companies that have provided us with significant revenue and have the potential to produce additional milestone payments, option fees, and future royalties.
We recognize revenue for on-premise software license fees upfront, either upon transfer of control of the license or the effective date of the agreement, whichever is later. 121 Table of Contents Hosted software.
We recognize revenue for on-premise software license fees upfront, either upon transfer of control of the license or the effective date of the agreement, whichever is later. Hosted software.
While we have incurred costs associated with discovery efforts since late 2017, we have recognized and expect to continue to recognize 122 Table of Contents revenues in the future if and when milestones are deemed probable or achieved. Generally, drug discovery costs of revenue for collaborations are incurred in advance of the revenue milestone achievement.
While we have incurred costs associated with discovery efforts since late 2017, we have recognized and expect to continue to recognize 133 Table of Content s revenues in the future if and when milestones are deemed probable or achieved. Generally, drug discovery costs of revenue for collaborations are incurred in advance of the revenue milestone achievement.
Discussions of fiscal 2021 items and year-over-year comparisons between fiscal 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that was filed with the SEC on February 28, 2023.
Discussions of fiscal 2022 items and year-over-year comparisons between fiscal 2023 and 2022 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, that was filed with the SEC on February 28, 2024.
GAAP, on an annualized basis, as it is an operating metric that can be impacted by contract execution start and end dates and renewal rates. ACV is not intended to be a replacement for, or forecast of, revenue. Our ACV was $154.2 million and $140.6 million for the years ended December 31, 2023 and 2022, respectively.
GAAP, on an annualized basis, as it is an operating metric that can be impacted by contract execution start and end dates and renewal rates. ACV is not intended to be a replacement for, or forecast of, revenue. Our ACV was $190.8 million and $154.2 million for the years ended December 31, 2024 and 2023, respectively.
On March 4, 2021, we filed a universal shelf registration statement on Form S-3 which allows us to offer and sell an indeterminate number of shares of common stock, preferred stock, depositary shares or warrants, or an indeterminate principal amount of debt securities, from time to time pursuant to one or more offerings at prices and terms to be determined at the time of the sale.
On February 28, 2024, we filed a universal shelf registration statement on Form S-3 which allows us to offer and sell an indeterminate number of shares of common stock, preferred stock, depositary shares or warrants, or an indeterminate principal amount of debt securities, from time to time pursuant to one or more offerings at prices and terms to be determined at the time of the sale.
Management has determined that it is more likely than not that we will not realize the benefits of our federal and state deferred tax assets and, as a result, a valuation allowance of $136.0 million and $138.0 million has been established at December 31, 2023 and 2022, respectively.
Management has determined that it is more likely than not that we will not realize the benefits of our federal and state deferred tax assets and, as a result, a valuation allowance of $177.2 million and $136.0 million has been established at December 31, 2024 and 2023, respectively.
Gross margin is gross profit expressed as a percentage of revenue. Our software products and services gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of changes in sales mix between on-premise and hosted software solutions due to timing of recognition.
Our software products and services gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of changes in sales mix between on-premise and hosted software solutions due to timing of recognition.
We track the aggregate number of collaborative programs for which we are eligible to receive any amount of royalties on sales and as of December 31, 2023, we had an aggregate of 12 collaborative programs for which we are eligible to receive future royalties compared to 15 collaborative programs as of December 31, 2022.
We track the aggregate number of collaborative programs for which we are eligible to receive any amount of royalties on sales and as of December 31, 2024, we had an aggregate of 13 collaborative programs for which we are eligible to receive future royalties compared to 12 collaborative programs as of December 31, 2023.
We recognized revenue of $52.2 million and $24.3 million related to collaboration agreements with proportional performance measurement for the years ended December 31, 2023 and 2022, respectively. Recent Accounting Pronouncements See Note 2 – Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report for a discussion of recently issued accounting pronouncements.
We recognized revenue of $8.3 million and $25.1 million related to collaboration agreements with proportional performance measurement for the years ended December 31, 2024 and 2023, respectively. Recent Accounting Pronouncements See Note 2 – Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report for a discussion of recently issued accounting pronouncements.
In November 2020, we entered into an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas.
We are party to an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas.
The increase in all other research and development expense during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to increases of approximately $8.4 million in personnel-related expense, approximately $4.1 million in cloud computing expense, approximately $3.4 million related to office rent, approximately $0.6 million in travel and entertainment expenses, approximately $0.3 million related to professional services, and approximately $0.1 million in other expenses.
The increase in all other research and development expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $4.8 million in personnel-related expense, approximately $3.5 million in cloud computing expense, approximately $1.4 million related to office rent, approximately $0.7 million related to professional services, and approximately $0.5 million in other expenses.
In May 2023, we entered into a sales agreement with Leerink Partners LLC (formerly SVB Securities LLC), or Leerink Partners, as sales agent, with respect to an at-the-market offering program, or the ATM, under which we could offer and sell, from time to time pursuant to our Form S-3, shares of common stock, having an aggregate offering price of up to $250.0 million, through Leerink Partners.
In February 2024, we entered into an amended and restated sales agreement with Leerink Partners LLC (formerly SVB Securities LLC), or Leerink Partners, as sales agent, with respect to an at-the-market offering program, or the ATM, under which we could offer and sell, from time to time pursuant to our Registration Statement on Form S-3, shares of common stock, having an aggregate offering price of up to $250.0 million through Leerink Partners.
We allocate the transaction price to each performance obligation based on the relative SSP of each performance obligation at inception, which will be determined based on each performance obligation’s estimated SSP. We determine the SSP at contract inception of the research activities based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin.
We allocate the transaction price to each performance obligation based on the relative SSP of each performance obligation at inception. We determine the SSP at contract inception of the research activities based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin.
Hosted software. The increase in revenues for hosted software during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to increased spend from existing hosted customers, as well as growth in new customers purchasing hosted software subscriptions, for which revenue is recognized ratably over the period of the contract. Software maintenance.
The increase in revenues for hosted software during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to customers switching from on premise to hosted software purchases, as well as increased spend from existing hosted customers and growth in new customers purchasing hosted software subscriptions, for which revenue is recognized ratably over the period of the contract.
The increase in internal costs for programs in clinical and preclinical development of $15.0 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily attributable to an increase in personnel-related expense and rent expense.
The increase in internal costs for programs in discovery, preclinical and clinical development of $8.5 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to an increase in personnel-related expense and rent expense.
Gain on Equity Investments Year Ended December 31, 2023 2022 Change (in thousands) Gain on equity investments $ 147,213 $ 11,825 $ 135,388 The gain on equity investments during the year ended December 31, 2023 was due to the realized gain on our equity investment in Nimbus following the closing of Takeda's acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its tyrosine kinase 2 inhibitor, NDI-034858.
The gain on equity investments during the year ended December 31, 2023 was due to the realized gain on our equity investment in Nimbus following the closing of Takeda's acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its tyrosine kinase 2 inhibitor, NDI-034858.
These items are partially offset by $13.4 million in cash used for purchases of property and equipment, $4.1 million used for purchases of equity investments in Structure Therapeutics.
These items were partially offset by $13.4 million in cash used for purchases of property and equipment, and $4.1 million used for purchases of our equity investment in Structure Therapeutics.
Financing activities During the year ended December 31, 2023, financing activities provided approximately $9.0 million of cash, primarily attributable to proceeds from stock option exercises. 136 Table of Contents During the year ended December 31, 2022, financing activities provided approximately $2.1 million of cash, primarily attributable to proceeds from stock option exercises.
During the year ended December 31, 2023, financing activities provided approximately $9.0 million of cash, primarily attributable to proceeds from stock option exercises.
The transaction price is then allocated to each performance obligation on an SSP basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.
The transaction price is then allocated to each performance obligation on an SSP basis consistent with the allocation objectives of Topic 606, for which we recognize revenue as or when the performance obligations under the contract are satisfied.
For the year ended December 31, 2023, our year-over-year customer retention rate for such customers was 92% and was 96% or higher for each of the previous nine fiscal years.
For the year ended December 31, 2024, our year-over-year customer retention rate for such customers was 95% and was 92% or higher for each of the previous 10 fiscal years.
We recorded income tax expense of $2.2 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively. 130 Table of Contents Quarterly Results of Operations The following tables summarize our selected unaudited quarterly results of operations data for each of the eight quarters in the period ended December 31, 2023.
We recorded income tax expense of $1.4 million and $2.2 million for the years ended December 31, 2024 and 2023, respectively. 141 Table of Content s Quarterly Results of Operations The following tables summarize our selected unaudited quarterly results of operations data for each of the eight quarters in the period ended December 31, 2024.
We also had four customers with an ACV of at least $5.0 million for the year ended December 31, 2023, compared to four and two such customers for the years ended December 31, 2022 and 2021, respectively.
We also had eight customers with an ACV of at least $5.0 million for the year ended December 31, 2024, compared to four customers for each of the years ended December 31, 2023 and 2022.
We determine the SSP using information that includes historical discounting practices, market conditions, cost-plus analysis, and other observable inputs. We typically have more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances.
We allocate the transaction price to each distinct performance obligation on an SSP basis. We determine the SSP using information that includes historical discounting practices, market conditions, cost-plus analysis, and other observable inputs. We typically have more than one SSP for individual software license performance obligations due to the stratification of those items by classes of customers and circumstances.
At December 31, 2023, we had federal and state net operating loss carryforwards of approximately $179.1 million and $98.6 million, respectively. The state net operating loss carryforwards will expire between 2025 and 2042, if not utilized. The federal net operating loss carryforwards are limited to 80% of taxable income generated in a given year and carry forward indefinitely.
At December 31, 2024, we had federal and state net operating loss carryforwards of approximately $204.5 million and $129.5 million, respectively. The state net operating loss carryforwards will expire between 2025 and 2044, if not utilized. The federal net operating loss carryforwards are limited to 80% of taxable income generated in a given year and carry forward indefinitely.
Change in Fair Value Year Ended December 31, 2023 2022 Change (in thousands) Change in fair value $ 53,461 $ (18,084) $ 71,545 The change in fair value during the year ended December 31, 2023 was due to an unrealized gain on our investment in Structure of $49.8 million, an unrealized gain on our investment in Nimbus of $1.9 million, and an unrealized gain on our investment in Morphic of $1.8 million.
The change in fair value during the year ended December 31, 2023 was due to an unrealized gain on our investment in Structure Therapeutics of $49.8 million, an unrealized gain on our investment in Nimbus of $1.9 million, and an unrealized gain on our investment in Morphic of $1.8 million.
We believe our existing cash, cash equivalents, and marketable securities as of December 31, 2023 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months.
We believe our existing cash, cash equivalents, and marketable securities as of December 31, 2024, together with the upfront payment we received from Novartis, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months.
After mutual agreement on the targets(s) of interest, the Schrödinger therapeutics group is responsible for the 119 Table of Contents discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate.
After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate.
Royalty payments to third-parties represented 3.5% and 4.8% of drug discovery revenues in the years ended December 31, 2023 and 2022, respectively. We expect our drug discovery costs of revenue to trend lower over time as we shift our focus to proprietary drug discovery programs. Gross Profit and Gross Margin Gross profit represents revenue less cost of revenues.
Royalty payments to third-parties represented 9.5% and 3.5% of drug discovery revenues in the years ended December 31, 2024 and 2023, respectively. We expect our drug discovery costs of revenue to trend lower over time as we shift our focus to proprietary drug discovery programs.
We continue to advance new programs where we can leverage our computational platform to discover novel molecules, and we have recently announced new discovery-stage programs targeting PRMT5-MTA, EGFR C797S , and NLRP3.
We continue to advance new programs where we can leverage our computational platform to discover novel molecules, including our programs targeting PRMT5-MTA, EGFR C797S , NLRP3, and LRRK2.
We currently generate drug discovery revenue from our collaborations, including upfront payments, research funding and discovery and development milestones. In the future, we may also derive drug discovery revenue from our collaborations from option fees, the achievement of regulatory and commercial milestones, and royalties on commercial drug sales.
In the future, we may also derive drug discovery revenue from our collaborations from option fees, the achievement of regulatory and commercial milestones, and royalties on commercial drug sales.
Contribution revenue during the year ended December 31, 2023 was due to services performed under an agreement with the Bill and Melinda Gates Foundation aimed at accelerating drug discovery in women’s health, which began in November 2021.
Drug discovery contribution revenue. The decrease in drug discovery contribution revenue during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to fluctuation in allotted funds spent under an agreement with the Bill & Melinda Gates Foundation, aimed at accelerating drug discovery in women’s health, which began in November 2021.
The change in the valuation allowance for the years ended December 31, 2023 and 2022 was $1.9 million and $42.7 million, respectively.
The change in the valuation allowance for the years ended December 31, 2024 and 2023 was $41.2 million and $1.9 million, respectively.
Software performance obligations and transaction price allocation : At contract inception, we assess the goods or services promised within each contract that falls under the scope of Topic 606 to identify distinct performance obligations, which requires significant judgment based on the nature of each transaction. We allocate the transaction price to each distinct performance obligation on an SSP basis.
Software performance obligations and transaction price allocation : At contract inception, we assess the goods or services promised within each contract that falls under the scope of Topic 606 to identify distinct performance obligations, which requires the most difficult, subjective, and complex judgments based on the nature of each transaction.
Furthermore, we have significantly penetrated the pharmaceutical industry, with all of the top 20 pharmaceutical companies, measured by 2022 revenue, licensing our software in 2023.
Furthermore, we have significantly penetrated the pharmaceutical industry, with 19 of the top 20 pharmaceutical companies, measured by 2023 131 Table of Content s revenue, licensing our software in 2024.
The revenue we generate through our software solutions from each of our customers varies largely depending on the number of software licenses our customers purchase from us. The licenses that our customers purchase from us provide them the ability to perform a certain number of calculations used in the design of molecules for drug discovery or materials science.
The licenses that our customers purchase from us provide them the ability to perform a certain number of calculations used in the design of molecules for drug discovery or materials science.
We are eligible to receive up to $1.5 billion in total milestone payments across the potential targets currently subject to the collaboration, of which we have received $25.0 million as of December 31, 2023, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions.
We are eligible to receive up to $482.0 million in total milestone payments for the one remaining neurology target currently subject to the collaboration, of which we have recognized $32.0 million as of December 31, 2024, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions.
For the year ended December 31, 2023, we had 54 customers with an ACV of at least $500,000 compared to 52 for the year ended December 31, 2022. Furthermore, we had 27, 18, and 15 customers with an ACV of at least $1.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Furthermore, we had 31, 27, and 18 customers with an ACV of at least $1.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The decrease in cost of revenues for drug discovery during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to decreases of approximately $4.6 million in personnel-related expense reflecting the redeployment of our discovery organization towards proprietary drug discovery programs, approximately $0.5 million in cloud computing expense, and approximately $0.1 million in royalty expense, offset by increases of approximately $1.1 million in third-party CRO costs associated with the expansion and progression of collaborative programs, and approximately $0.2 million in other expenses. 127 Table of Contents Research and Development Expense A significant portion of our research and development costs have been external preclinical and clinical CRO costs, which we track on a program-by-program basis related to a product candidate, once the candidate has been identified.
The decrease in cost of revenues for drug discovery during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to decreases of approximately $7.9 million in third-party CRO costs due to the discontinuation of certain collaboration projects and approximately $0.9 million in personnel-related expense reflecting the redeployment of our discovery organization towards proprietary drug discovery programs, partially offset by approximately $0.6 million in royalty expense and approximately $0.3 million in cloud computing expense. 138 Table of Content s Research and Development Expense A significant portion of our research and development costs have been external preclinical and clinical CRO costs, which we track on a program-by-program basis related to a product candidate, once the candidate has been identified.
To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation.
In accordance with Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. 147 Table of Content s To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation.
The decrease in cost of revenues for software products and services during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to decreases of approximately $0.9 million in personnel-related expense and approximately $0.1 million in other expenses, offset by an increase of approximately $0.9 million in cloud computing expense.
The increase in cost of revenues for software products and services during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $4.3 million in cloud computing expense and approximately $3.3 million in personnel-related expense, partially offset by a decrease of approximately $0.2 million in royalty expense.
On February 13, 2023, April 6, 2023, and November 9, 2023, on account of our equity stake in Nimbus Therapeutics, LLC, or Nimbus, we received cash distributions of $111.3 million, $35.8 million, and $0.1 million, respectively, from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858.
In 2023, on account of our equity stake in Nimbus Therapeutics, LLC, or Nimbus, we received an aggregate of $147.2 million in cash distributions from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858.
Sales and Marketing Expense Year Ended December 31, Change 2023 2022 $ % (in thousands) Sales and marketing $ 37,226 $ 30,642 $ 6,584 21% The increase in sales and marketing expense during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to increases of approximately $4.6 million in personnel-related expense, approximately $0.9 million related to office rent, approximately $0.7 million in travel and entertainment expenses, and approximately $0.4 million in cloud computing expense. 128 Table of Contents General and Administrative Expense Year Ended December 31, Change 2023 2022 $ % (in thousands) General and administrative $ 99,148 $ 90,825 $ 8,323 9% The increase in general and administrative expense during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to increases of approximately $8.5 million of personnel-related expense, approximately $2.2 million in royalties related to cash distributions we received from Nimbus, approximately $0.8 million in cloud computing expense, approximately $0.8 million related to office rent, approximately $0.5 million in travel and entertainment expense, and approximately $0.5 million in amortization related to the acceleration of customer relationship intangible assets, offset by decreases of approximately $2.4 million related to professional services, approximately $1.1 million related to a one-time non-recurring state and local tax item, and approximately $1.5 million in other expenses.
Sales and Marketing Expense Year Ended December 31, Change 2024 2023 $ % (in thousands) Sales and marketing $ 39,917 $ 37,226 $ 2,691 7% The increase in sales and marketing expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $2.1 million in personnel-related expense, approximately $0.6 million in travel and entertainment expense, and approximately $0.3 million in cloud computing expense, partially offset by decreases of approximately $0.1 million related to office facilities and approximately $0.2 million in other expenses. 139 Table of Content s General and Administrative Expense Year Ended December 31, Change 2024 2023 $ % (in thousands) General and administrative $ 99,677 $ 99,148 $ 529 1% The increase in general and administrative expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $5.0 million of personnel-related expense, approximately $2.2 million related to professional services, and approximately $0.4 million in cloud computing expense, partially offset by decreases of approximately $4.3 million in royalties related to cash distributions we received from Nimbus, approximately $0.5 million in amortization related to the acceleration of customer relationship intangible assets, approximately $0.4 million in travel and entertainment expense, approximately $0.1 million related to office facilities, and approximately $1.8 million in other expenses.
At December 31, 2023, we had federal and state research and development tax credit carryforwards of approximately $23.3 million and $1.6 million, respectively. These carryforwards will expire between 2024 and 2043, if not utilized.
At December 31, 2024, we had federal orphan drug credits and federal research and development tax credit carryforwards of approximately $31.3 million and state research and development tax credit carryforwards of approximately $2.7 million. These carryforwards will expire between 2025 and 2044, if not utilized.
We currently generate drug discovery revenue from discovery collaboration arrangements, including upfront payments, research and development payments, and discovery and development milestones. The majority of our current collaborations are in the discovery and preclinical development stages. Milestone payments typically increase in magnitude as a program advances.
The majority of our current collaborations are in the discovery and preclinical development stages. Milestone payments typically increase in magnitude as a program advances.
We establish SSP ranges for our products and services and reassesses them periodically. The determination of SSP required significant management judgment. Collaboration agreement transaction price allocation and measurement of progress: At the inception of each arrangement, we utilize judgment to assess the nature of the performance obligations to determine whether they are distinct or a single combined performance obligation.
Collaboration agreement performance obligations, transaction price allocation, and measurement of progress: At the inception of each arrangement, we utilize judgment to assess the nature of the performance obligations to determine 148 Table of Content s whether they are distinct or a single combined performance obligation.
Cash Flows The following table presents a summary of our cash flows for the periods shown: Year Ended December 31, 2023 2022 (in thousands) Net cash used in operating activities $ (136,733) $ (119,683) Net cash provided by investing activities 193,034 90,023 Net cash provided by financing activities 9,048 2,110 Net increase (decrease) in cash and cash equivalents and restricted cash $ 65,349 $ (27,550) Operating activities During the year ended December 31, 2023, operating activities used approximately $136.7 million in cash, due to a $147.2 million gain from equity investments, of which the cash received is included in investing activities , $53.5 million of non-cash gain on changes in fair value, $22.4 million in changes in our operating assets and liabilities, and $2.1 million of non-cash operating expenses.
Cash Flows The following table presents a summary of our cash flows for the periods shown: Year Ended December 31, 2024 2023 (in thousands) Net cash used in operating activities $ (157,368) $ (136,733) Net cash provided by investing activities 148,836 193,034 Net cash provided by financing activities 10,123 9,048 Net increase in cash and cash equivalents and restricted cash $ 1,591 $ 65,349 Operating activities During the year ended December 31, 2024, operating activities used approximately $157.4 million of cash, primarily due to a net loss of $187.1 million, which included changes to our operating assets and liabilities of $13.1 million, a $5.7 million non-cash gain on changes in fair value, and $1.4 million of non-cash operating expenses, depreciation and investment accretion costs.
In addition, see Note 7 – Commitments and Contingencies to our consolidated financial statements appearing in Item 8 of this Annual Report for more information relating to our operating lease obligations. In December 2020, we entered into a five-year agreement with a third-party cloud provider for compute power.
In addition, see Note 6 – Commitments and Contingencies to our consolidated financial statements appearing in Item 8 of this Annual Report for more information relating to our operating lease obligations. In December 2022, we entered into an agreement with a third-party to establish an exclusive integrated drug discovery dedicated facility in Hyderabad, India.
In the trial, we observed that SGR-1505 achieved greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay, confirming target engagement and meeting the pharmacodynamic goals for the trial. Inhibition of IL-2 secretion is a marker for target engagement and pathway modulation as it is tightly linked to MALT1 and the downstream NF-κB signaling.
In the trial, we observed that SGR-1505 achieved greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay at 100mg twice a day (n=4), confirming target engagement and meeting the pharmacodynamic goals for the trial.

… 80 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed3 unchanged
Biggest changeOur cash balances and outstanding vendor invoices denominated in foreign currencies were not material as of December 31, 2023 and 2022, and our market risk associated with foreign currency exchange rates was deemed insignificant. An immediate 10% change in foreign exchange rates would not have a material effect on our consolidated financial statements. 139 Table of Contents
Biggest changeOur cash balances and outstanding vendor invoices denominated in foreign currencies were not material as of December 31, 2024 and 2023, and our market risk associated with foreign currency exchange rates was deemed insignificant. An immediate 10% change in foreign exchange rates would not have a material effect on our consolidated financial statements. 149 Table of Content s
Treasury and corporate bonds and a money market fund that is invested in U.S. Treasury and corporate bonds. 138 Table of Contents Due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of this investment portfolio.
Treasury and corporate bonds and a money market fund that is invested in U.S. Treasury and corporate bonds. Due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of this investment portfolio.

Other SDGR 10-K year-over-year comparisons