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What changed in Schrodinger, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Schrodinger, Inc.'s 2024 and 2025 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 2025 report.

+753 added−680 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-26)

Top changes in Schrodinger, Inc.'s 2025 10-K

753 paragraphs added · 680 removed · 533 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

200 edited+74 added−71 removed600 unchanged
Biggest changeIn September 2021, the Court of Appeals for the 11th Circuit held that, for the purpose of determining the scope of exclusivity, the term "same disease or condition" in the statute means the designated "rare disease or condition" and could not be interpreted by the FDA to mean the "indication or use." Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the "indication or use." Although there have been legislative proposals to overrule this decision, they have not been enacted into law.
Biggest changeIn February 2025, in a case challenging the scope of orphan drug exclusivity, a federal district court in Washington, D.C. fully embraced the reasoning of a prior decision from the Court of Appeals for the 11th Circuit holding that the term “same disease or condition” in the statute means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” In April 2025, the FDA appealed this decision to the U.S.
In 2018, we began to develop a pipeline of proprietary drug discovery programs with the goal of using our platform to produce a portfolio of novel, high value therapeutics. In June 2022, the U.S. Food and Drug Administration, or FDA, cleared our first investigational new drug application, or IND, for our MALT1 inhibitor, which we refer to as SGR-1505.
In 2018, we began to develop a pipeline of proprietary drug discovery programs with the goal of using our platform to produce a portfolio of novel, high value therapeutics. In June 2022, the U.S. Food and Drug Administration, or the FDA, cleared our first investigational new drug application, or IND, for our MALT1 inhibitor, which we refer to as SGR-1505.
We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements.
We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements.
For example, in 2024, we received $47.6 million for the equity stake that we owned in Morphic Holding, Inc., or Morphic, one of our drug discovery collaborators and co-founded companies, in connection with Morphic's acquisition by Eli Lilly and Company, or Lilly, for approximately $3.2 billion. ▪ Progressing our proprietary drug discovery programs : We plan to progress the development of our proprietary drug discovery programs, including SGR-1505, SGR-2921 and SGR-3515, and continue to advance new programs where we can leverage our computational platform to identify novel molecules.
For example, in 2024, we received $47.6 million for the equity stake that we owned in Morphic Holding, Inc., or Morphic, one of our drug discovery collaborators and co-founded companies, in connection with Morphic's acquisition by Eli Lilly and Company, or Lilly, for approximately $3.2 billion. ▪ Progressing our proprietary drug discovery programs : We plan to progress the development of our proprietary drug discovery programs, including SGR-1505 and SGR-3515, and continue to advance new programs where we can leverage our computational platform to identify novel molecules.
Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although the FDA has recently taken steps to limit what it considers abuse of this statutory exemption in the PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although the FDA has taken steps to limit what it considers abuse of this statutory exemption in the PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
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, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co. Ltd., BioCity Biopharma, and Aprea Therapeutics, Inc., as well as a Myt1 inhibitor in clinical development being advanced by Repare.
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, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co. Ltd., BioCity Biopharma, and Aprea Therapeutics, Inc., as well as a Myt1 inhibitor in clinical development being advanced by Debiopharm.
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.
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.
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.
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; • 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.
In 2022, we completed a "double materiality assessment," where we worked to determine the ESG-related topics most important to both our company and our stakeholders. The assessment was informed by both internal and external stakeholders and by key ESG standards and frameworks such as the Global Reporting Initiative, Sustainability Accounting Standards Board and United Nations Sustainable Development Goals.
In 2022, we completed a "double materiality assessment," where we worked to determine the sustainability-related topics most important to both our company and our stakeholders. The assessment was informed by both internal and external stakeholders and by key standards and frameworks such as the Global Reporting Initiative, Sustainability Accounting Standards Board and United Nations Sustainable Development Goals.
We have initiated dosing in a Phase 1 clinical trial of SGR-1505, which is designed as an open-label, multi-center dose escalation trial in patients with relapsed or refractory B-cell malignancies. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose and/or recommended dose of SGR-1505.
We have initiated dosing in a Phase 1 clinical trial of SGR-1505, which is designed as an open-label, multi-center dose escalation trial in patients with relapsed or refractory B-cell malignancies. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose, maximum administered dose and/or recommended dose of SGR-1505.
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 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.
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 38 Table of Contents 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 approval or 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.
We have entered into a number of collaborations with leading biopharmaceutical companies under which our collaborators are pursuing research in a number of therapeutics areas, including without limitation, various programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immuno-oncology, cardiopulmonary disease and tuberculosis.
We have entered into a number of collaborations with leading biopharmaceutical companies under which our collaborators are pursuing research in a number of therapeutics areas, including without limitation, various programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immuno-oncology, cardiopulmonary disease, CNS diseases, and tuberculosis.
Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future revenue growth. ▪ Advancing our collaborative programs: We intend to continue to work with our collaborators on advancing our collaborative programs through discovery research stages.
Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future growth. ▪ Advancing our collaborative programs: We intend to continue to work with our collaborators on advancing our collaborative programs through discovery research stages.
Under the terms of the agreement, we received a $150.0 million upfront payment from Novartis in January 2025. As of December 31, 2024, we are eligible to receive up to $2.272 billion from Novartis in total milestone payments across the initial programs.
Under the terms of the agreement, we received a $150.0 million upfront payment from Novartis in January 2025. As of December 31, 2025, we are eligible to receive up to $2.272 billion from Novartis in total milestone payments across the initial programs.
Consequently, marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the following: • the sponsor must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile; • the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person; and • the package leaflet and any medical information must draw the attention of the medical practitioner to the fact that the particulars available concerning the medicinal product in question are as yet inadequate in certain specified respects.
Consequently, marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the following: • the sponsor must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile; 59 Table of Contents • the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person; and • the package leaflet and any medical information must draw the attention of the medical practitioner to the fact that the particulars available concerning the medicinal product in question are as yet inadequate in certain specified respects.
We are eligible to receive up to $2.272 billion in total milestones across the initial programs, of which no milestone revenue has been recognized as revenue as of December 31, 2024, as well as a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid-single-digits to low double-digits, subject to certain specified reductions.
We are eligible to receive up to $2.272 billion in total milestones across the initial programs, of which no milestone revenue has been recognized as revenue as of December 31, 2025, as well as a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid-single-digits to low double-digits, subject to certain specified reductions.
If we or our affiliates receive consideration for specified services provided using Licensed Products in the form of equity securities, or Services Project Securities, then (1) if and when such securities may be transferred to Columbia University under applicable state and federal securities laws, we have agreed to transfer, assign or otherwise cause to be delivered to Columbia University a number of such Services Project Securities equal to the applicable royalty rate multiplied by the total number of Services Project Securities, or the Columbia Securities, and (2) until such time as the Columbia Securities are transferred, assigned or delivered to Columbia University, at the time we receive cash consideration as a result of owning Services Project Securities, whether on account of a dividend, distribution, sale or otherwise, we have agreed to pay Columbia University a portion of such proceeds that is equal to the applicable royalty rate multiplied by such amount received in cash.
If we or our affiliates receive consideration for specified services provided using 31 Table of Contents Licensed Products in the form of equity securities, or Services Project Securities, then (1) if and when such securities may be transferred to Columbia University under applicable state and federal securities laws, we have agreed to transfer, assign or otherwise cause to be delivered to Columbia University a number of such Services Project Securities equal to the applicable royalty rate multiplied by the total number of Services Project Securities, or the Columbia Securities, and (2) until such time as the Columbia Securities are transferred, assigned or delivered to Columbia University, at the time we receive cash consideration as a result of owning Services Project Securities, whether on account of a dividend, distribution, sale or otherwise, we have agreed to pay Columbia University a portion of such proceeds that is equal to the applicable royalty rate multiplied by such amount received in cash.
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.
This and other novel features enable 12 Table of Contents 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.
Specifically, the new legislation authorized the FDA to: require a sponsor to have its confirmatory clinical trial underway before accelerated approval is awarded, require a sponsor of a product granted accelerated approval to submit progress reports on its post-approval studies to FDA every six months until the study is completed; and use expedited procedures to withdraw accelerated approval of an NDA or BLA if certain conditions are not met, including where a confirmatory trial fails to verify the product’s clinical benefit or where evidence demonstrates the product is not shown to be safe or effective under the conditions of use.
Specifically, the new legislation authorized the FDA to: require a sponsor to have its confirmatory clinical trial underway before accelerated approval is awarded, require a sponsor of a product granted accelerated approval to submit progress reports on its post-approval studies to FDA every six months until the study is completed; and use expedited procedures to withdraw accelerated approval of an NDA or BLA if certain conditions are not met, including where a confirmatory trial fails to verify the product’s clinical benefit or where evidence demonstrates the product is not shown to be safe or 45 Table of Contents effective under the conditions of use.
Unless otherwise noted, the following table presents our equity stakes in collaborators on an issued and outstanding basis as of December 31, 2024: Company Ownership % Ajax Therapeutics, Inc. 5.8% Apollo, LLC (1) 7.9% Bright Angel Therapeutics Inc. 31.5% Lakshmi, LLC (2) 5.3% Nimbus Therapeutics, LLC (3) 1.2% Structure Therapeutics Inc.
Unless otherwise noted, the following table presents our equity stakes in collaborators on an issued and outstanding basis as of December 31, 2025: Company Ownership % Ajax Therapeutics, Inc. 5.8% Apollo, LLC (1) 7.9% Bright Angel Therapeutics Inc. 31.5% Lakshmi, LLC (2) 5.3% Nimbus Therapeutics, LLC (3) 1.1% Structure Therapeutics Inc.
The 2001 Columbia Agreement grants us a worldwide, exclusive license to the protein folding code developed by Columbia University, or the Folding Code; all improvements to the Folding Code and to any of our products, software, or code that incorporates any part of the Folding Code, including any improvements thereto and new versions or new releases thereof, that are developed by Columbia University, or the Folding Code Improvements; and the issued patent covering the Folding Code, or the Folding Code Patent, 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 2001 Columbia Agreement grants us a worldwide, exclusive license to the 33 Table of Contents protein folding code developed by Columbia University, or the Folding Code; all improvements to the Folding Code and to any of our products, software, or code that incorporates any part of the Folding Code, including any improvements thereto and new versions or new releases thereof, that are developed by Columbia University, or the Folding Code Improvements; and the issued patent covering the Folding Code, or the Folding Code Patent, 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.
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.
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, Revvity, Inc., and Simulations Plus, Inc.
In 2023, we also entered into a research collaboration with Copernic Catalysts, Inc. to help accelerate the discovery and development of sustainable catalysts for applications in e-fuels and bulk chemicals. Drug Discovery Business Overview We are using our computational platform in both our collaborative and proprietary drug discovery programs.
For example, in 2023, we entered into a research collaboration with Copernic Catalysts, Inc. to help accelerate the discovery and development of sustainable catalysts for applications in e-fuels and bulk chemicals. Drug Discovery Business Overview We are using our computational platform in both our collaborative and proprietary drug discovery programs.
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 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.
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.
Our drug discovery group, which we refer to as the Schrödinger therapeutics group, is comprised of a multidisciplinary team of experts in protein science, biochemistry, biophysics, medicinal and computational chemistry, and discovery scientists with expertise in preclinical and early clinical development.
We determine whether there are property profile challenges that could be solved by the application of our computational platform and provide a clinically meaningful differentiated, novel, high value product opportunity. • Assessment of potential value of pathways and mechanisms.
We determine whether there are property profile challenges that could be solved by the application of our computational platform and provide a well-timed and clinically meaningful differentiated, novel, high value product opportunity. • Assessment of potential value of pathways and mechanisms.
Our employees are our greatest asset and we strive to create a work environment that is inclusive, challenging and rewarding. We are committed to embedding a long-term, formal Environmental, Social, and Governance, or ESG, strategy within our business, a commitment we refer to as Corporate Sustainability.
Our employees are our greatest asset and we strive to create a work environment that is inclusive, challenging and rewarding. We are committed to embedding a long-term, formal environmental, social, and governance strategy within our business, a commitment we refer to as Corporate Sustainability.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; 48 Table of Contents • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
As of January 1, 2021, the Medicines and Healthcare Products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law, whereas Northern Ireland continues to be subject to EU rules under the Northern Ireland Protocol, as amended by the so called Windsor Framework agreed in February 2023.
As of January 1, 2021, the Medicines and Healthcare Products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain, comprising 62 Table of Contents England, Scotland and Wales under domestic law, whereas Northern Ireland continues to be subject to EU rules under the Northern Ireland Protocol, as amended by the so called Windsor Framework agreed in February 2023.
Our strategy is to file patent applications directed to our key software and our key programs in an effort to secure our intellectual property positions vis-a-vis this software and these programs. The patent portfolio for our software business includes at least 12 published patent families.
Our strategy is to file patent applications directed to our key software and our key programs in an effort to secure our intellectual property positions vis-a-vis this software and these programs. The patent portfolio for our software business includes at least 13 published patent families.
For example, in February 2023, Nimbus announced the closing of the acquisition by Takeda of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 program, which includes the TYK2 inhibitor, NDI-034858, which is being evaluated for the treatment of multiple immune-mediated diseases following positive results from the Phase 2b clinical trial in psoriasis.
For example, in February 2023, Nimbus Therapeutics, LLC, or Nimbus, announced the closing of the acquisition by Takeda of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 program, which includes the TYK2 inhibitor, NDI-034858, which is being evaluated for the treatment of multiple immune-mediated diseases following positive results from the Phase 2b clinical trial in psoriasis.
Generally, our collaborators are not contractually required to provide us with, nor do we expect generally to receive, access to nonpublic information regarding key developments related to the advancement of these collaboration programs, such as clinical trial results, including safety and efficacy data, regulatory communications, or commercialization plans and strategies.
Generally, our collaborators are not contractually required to provide us with, nor do we expect generally to receive, access to nonpublic information regarding key developments related to the advancement of these collaboration programs, such as clinical trial results, including safety and efficacy data, regulatory communications, or commercialization plans and 16 Table of Contents strategies.
Third-party payers are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payers may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
Third-party payers are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. 53 Table of Contents Third-party payers may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
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.
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. 61 Table of Contents Pricing Decisions for Approved Products In the European Union, pricing and reimbursement schemes vary widely from country to country.
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.
Efforts to optimize initial hit molecules for a drug discovery project involve costly and iterative synthesis and testing of molecules seeking to identify a 8 Table of Contents 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.
Manufacturers were required by November 2023 to have such systems and processes in place to comply with the DSCSA, but, so as not to disrupt supply chains, the FDA has granted certain exemptions from enhanced drug distribution security requirements for eligible trading partners for particular periods of time.
Manufacturers were required by November 2023 to have such systems and processes in place to comply with the DSCSA, but, so as not to 49 Table of Contents disrupt supply chains, the FDA has granted certain exemptions from enhanced drug distribution security requirements for eligible trading partners for particular periods of time.
Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. No revenue had been recognized related to milestones under this agreement as of December 31, 2024.
Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. No revenue had been recognized related to milestones under this agreement as of December 31, 2025.
It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be marketed and sold in the European Union. Preclinical Studies Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances.
It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be marketed and sold in the European Union. 57 Table of Contents Preclinical Studies Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances.
Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has been submitted.
Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing 58 Table of Contents authorization application assessment once a dossier has been submitted.
Pursuant to the Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, the FDA must send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation.
Pursuant to the Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, the FDA must send a PREA Non-Compliance letter to sponsors who have failed to submit their 44 Table of Contents pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation.
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.
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 32 Table of Contents 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 second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.
The second cycle of negotiations with participating drug companies occurred during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.
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.
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.
There is no obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right to Try Act. 45 Table of Content s Human Clinical Trials in Support of an NDA Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a qualified investigator in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial.
There is no obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right to Try Act. 40 Table of Contents Human Clinical Trials in Support of an NDA Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a qualified investigator in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial.
As of December 31, 2024, we are eligible to receive up to $482.0 million from BMS in total milestone payments for the one remaining neurology target currently subject to the collaboration. As of December 31, 2024, we have recognized $32.0 million in revenue related to milestones under this agreement.
As of December 31, 2025, we are eligible to receive from BMS up to $482.0 million in total milestone payments for the one neurology target currently subject to the collaboration. As of December 31, 2025, we have recognized $32.0 million in revenue related to milestones under this agreement.
We have sales operations in the United States, Europe, Japan, India, and South Korea and we also have established distribution channels in other important markets, including China. These efforts are led by our approximately 240-person global team of sales, technical, and scientific personnel.
We have sales operations in the United States, Europe, Japan, India, and South Korea and we also have established distribution channels in other important markets, including China. These efforts are led by our global team of sales, technical, and scientific personnel.
All bilirubin elevations reversed upon discontinuation of SGR-1505. 21 Table of Content s As shown in the figure below, we observed greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay in the cohort of healthy volunteers who received doses of SGR-1505 at 100 mg twice a day for 10 days (n=4), confirming target engagement and meeting the pharmacodynamic goals for the study.
All bilirubin elevations reversed upon discontinuation of SGR-1505. 20 Table of Contents As shown in the figure below, we observed greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay in the cohort of healthy volunteers who received doses of SGR-1505 at 100 mg twice a day for 10 days (n=4), confirming target engagement and meeting the pharmacodynamic goals for the study.
This list may be updated from time to time. • For information concerning our software, drug discovery programs, computational platform, please visit: www.schrodinger.com. • For information provided to the investment community, including news releases, events and presentations, and filings with the SEC, please visit ir.schrodinger.com. • For additional information, please follow us on LinkedIn and Instagram, or visit our blog, Extrapolations.com.
This list may be updated from time to time. 64 Table of Contents • For information concerning our software, drug discovery programs, and computational platform, please visit: www.schrodinger.com. • For information provided to the investment community, including news releases, events and presentations, and filings with the SEC, please visit ir.schrodinger.com. • For additional information, please follow us on LinkedIn and Instagram, or visit our blog, Extrapolations.com.
See “—Collaboration Agreement with Novartis Pharma AG” for additional information relating to this agreement. We also entered into a three-year software agreement with Novartis that substantially increased Novartis' access to our computational predictive modeling technology and enterprise informatics platform.
See "—Collaboration Agreement with Novartis Pharma AG" for additional information relating to this agreement. We also entered into a three-year software agreement with Novartis that substantially increased Novartis' access to our computational predictive modeling technology and enterprise informatics platform.
Tumor PD samples are tissue samples that are collected for measuring target engagement in vivo by determining percent inhibition of CDK1-Y15 and CDK1-T14 phosphorylation by Wee1 and Myt1 respectively. ****P 28 Table of Content s As shown in the figures below, we observed that SGR-3515 sustained strong anti-tumor activity in vivo leading to full tumor regression at the 40 mpk and 60 mpk dose levels with an intermittent dosing schedule.
Tumor PD samples are tissue samples that are collected for measuring target engagement in vivo by determining percent inhibition of CDK1-Y15 and CDK1-T14 phosphorylation by Wee1 and Myt1 respectively. ****P 23 Table of Contents As shown in the figures below, we observed that SGR-3515 sustained strong anti-tumor activity in vivo leading to full tumor regression at the 40 mpk and 60 mpk dose levels with an intermittent dosing schedule.
As a result, our FEP+ solution can be used to explore very large numbers of molecules to identify drug candidates much more rapidly than would be possible solely using experimental approaches. 31 Table of Content s In a peer-reviewed article published in collaboration with a large biopharmaceutical company, the ability of FEP+ to prioritize molecules for synthesis expected to bind more tightly than an initial hit was compared with several other industry-standard approaches.
As a result, our FEP+ solution can be used to explore very large numbers of molecules to identify drug candidates much more rapidly than would be possible solely using experimental approaches. 26 Table of Contents In a peer-reviewed article published in collaboration with a large biopharmaceutical company, the ability of FEP+ to prioritize molecules for synthesis expected to bind more tightly than an initial hit was compared with several other industry-standard approaches.
(4) 2.3% (1) Represents our equity in the entity, which holds the rights to any future payments received in connection with Gilead Sciences, Inc.’s acquisition of Nimbus’ ACC inhibitor program, on a fully diluted basis.
(4) 1.6% (1) Represents our equity in the entity, which holds the rights to any future payments received in connection with Gilead Sciences, Inc.’s acquisition of Nimbus’ ACC inhibitor program, on a fully diluted basis.
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.
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, 28 Table of Contents 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.
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.
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 55 Table of Contents prescription drug coverage.
We are also entitled to a tiered percentage royalty on annual net sales of each product commercialized by Novartis under the agreement ranging 17 Table of Content s from mid single-digits to low double-digits, subject to certain specified reductions. See "—Collaboration Agreement with Novartis Pharma AG" for additional information relating to this agreement.
We are also entitled to a tiered percentage royalty on annual net sales of each product commercialized by Novartis under the agreement ranging from mid single-digits to low double-digits, subject to certain specified reductions. See "—Collaboration Agreement with Novartis Pharma AG" for additional information relating to this agreement.
In 55 Table of Content s cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the sponsor may submit its application four years following the original product approval.
In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the sponsor may submit its application four years following the original product approval.
(formerly ShouTi, Inc.). Our opportunity to receive further potential revenues from any of the programs under these collaborations is generally limited to research funding payments, development, regulatory, and commercial milestones, option fees, and royalties on commercial sales, if any.
Our opportunity to receive further potential revenues from any of the programs under these collaborations is generally limited to research funding payments, development, regulatory, and commercial milestones, option fees, and royalties on commercial sales, if any.
(3) On a fully diluted basis (4) Based on the number of ordinary shares outstanding as of October 31, 2024, as reported on Structure Therapeutics Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission, or SEC, on November 13, 2024.
(3) On a fully diluted basis (4) Based on the number of ordinary shares outstanding as of October 31, 2025, as reported on Structure Therapeutics Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, as filed with the Securities and Exchange Commission, or SEC, on November 6, 2025.
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.
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.
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.
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.
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.
As of December 31, 2025, we had 20 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.
For a 16 Table of Content s further discussion of the risks we face with respect to receipt of any of these payments, please refer to "Risk Factors—Risks Related to Drug Discovery—We may never realize a return on our investment of resources and cash in our drug discovery collaborations". How We Work with Our Collaborators.
For a further discussion of the risks we face with respect to receipt of any of these payments, please refer to "Risk Factors—Risks Related to Drug Discovery—We may never realize a return on our investment of resources and cash in our drug discovery collaborations". How We Work with Our Collaborators.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. The FDA’s regulations require that pharmaceutical products be manufactured in approved facilities and in accordance with cGMPs.
Additionally, appropriate packaging 43 Table of Contents must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. The FDA’s regulations require that pharmaceutical products be manufactured in approved facilities and in accordance with cGMPs.
Prospective employees are identified by leveraging our current employee network and our existing and growing relationships with computational chemistry professors and labs, and by hosting networking events. We maintain a strong presence at industry conferences and post job openings to industry-specific online career forums.
Prospective employees are identified by leveraging our current employee network and our existing and growing relationships with computational chemistry professors and labs, 63 Table of Contents and by hosting networking events. We maintain a strong presence at industry conferences and post job openings to industry-specific online career forums.
The figure below illustrates the advantages in time, cost, and molecule quality of our computational drug design approach over traditional drug discovery approaches. 14 Table of Content s Our collaboration agreements typically include upfront consideration, discovery, development, commercial and regulatory milestones, and royalties from future sales of commercialized products.
The figure below illustrates the advantages in time, cost, and molecule quality of our computational drug design approach over traditional drug discovery approaches. Our collaboration agreements typically include upfront consideration, discovery, development, commercial and regulatory milestones, and royalties from future sales of commercialized products.
The trial is a dose-escalation trial designed to evaluate the safety, tolerability, and recommended Phase 2 dose of SGR-3515. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and preliminary anti-tumor activity of SGR-3515. We anticipate reporting initial data from the trial in the second half of 2025.
The trial is a dose-escalation trial designed to evaluate the safety, tolerability, and recommended Phase 2 dose of SGR-3515. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and preliminary anti-tumor activity of SGR-3515. We anticipate reporting initial data from the trial in the second quarter of 2026.
Our marketing strategy leverages our strong base of scientific publications to support the continued growth of our computational platform into computational chemistry markets across industries and academia worldwide. 42 Table of Content s Drug Discovery Business We have not established a commercial organization or developed distribution capabilities given the current stage of development of our proprietary drug discovery programs.
Our marketing strategy leverages our strong base of scientific publications to support the continued growth of our computational platform into computational chemistry markets across industries and academia worldwide. 37 Table of Contents Drug Discovery Business We have not established a commercial organization or developed distribution capabilities given the current stage of development of our proprietary drug discovery programs.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified 47 Table of Content s period, or at all. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
ND = not determined; K i was measured in kinase activity assay. 27 Table of Content s As shown in the first figure below, in cell line derived xenograft models, SGR-3515 demonstrated superior in vivo anti-tumor activity related to single inhibition of Wee1 or My1 as compared to ZN-c3 and RP-6306.
ND = not determined; K i was measured in kinase activity assay. 22 Table of Contents As shown in the first figure below, in cell line derived xenograft models, SGR-3515 demonstrated superior in vivo anti-tumor activity related to single inhibition of Wee1 or My1 as compared to ZN-c3 and RP-6306.
By further combining this functionality with our ability to enumerate large sets of molecules provided by PathFinder and our ability to build and manage complex workflows utilizing cloud resources, we are able to deploy these capabilities at scale to advance projects. 32 Table of Content s Active Learning FEP+ is depicted in the figure below.
By further combining this functionality with our ability to enumerate large sets of molecules provided by PathFinder and our ability to build and manage complex workflows utilizing cloud resources, we are able to deploy these capabilities at scale to advance projects. 27 Table of Contents Active Learning FEP+ is depicted in the figure below.
The restoration period granted on a patent covering a product is typically one-half the time between the effective date of the IND and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date.
The restoration period granted on a patent covering a product is typically one-half the time between the effective date of the 51 Table of Contents IND and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date.
Moreover, with passage of the Pre-Approval Information Exchange Act in December 2022, sponsors of products that have not been approved may proactively communicate to 53 Table of Content s payors certain information about products in development to help expedite patient access upon product approval.
Moreover, with passage of the Pre-Approval Information Exchange Act in December 2022, sponsors of products that have not been approved may proactively communicate to payors certain information about products in development to help expedite patient access upon product approval.
We have demonstrated that our software platform can have a transformative impact on the drug discovery process by: • reducing the average time and cost required to identify a development candidate; and 9 Table of Content s • increasing the probability of drug discovery programs entering clinical development.
We have demonstrated that our software platform can have a transformative impact on the drug discovery process by: • reducing the average time and cost required to identify a development candidate; and • increasing the probability of drug discovery programs entering clinical development.
To that end, the FDA outlined considerations for designing, conducting, and analyzing data for trials intended to 50 Table of Content s support accelerated approvals of oncology therapeutics. Subsequently, in December 2024 and January 2025, the FDA issued additional draft guidance relating to accelerated approval.
To that end, the FDA outlined considerations for designing, conducting, and analyzing data for trials intended to support accelerated approvals of oncology therapeutics. Subsequently, in December 2024 and January 2025, the FDA issued additional draft guidance relating to accelerated approval.
The European Commission’s proposal for revision of several legislative instruments related to medicinal products was published in April 2023 and includes, among other things, provisions that would potentially reduce the duration of regulatory data protection. The European Parliament requested several amendments in April 2024.
The European Commission’s proposal for revision of several legislative instruments related to medicinal products was published in April 2023 and includes, among other things, provisions that would potentially reduce the duration of regulatory data protection.
We are also entitled to a tiered percentage royalty ranging from mid-single-digits 35 Table of Content s to low double-digits on products commercialized by Novartis under the agreement, subject to certain specified reductions. To date we have not received any milestone payments under our agreement with Novartis.
We are also entitled to a tiered percentage royalty ranging from mid-single-digits 30 Table of Contents to low double-digits on products commercialized by Novartis under the agreement, subject to certain specified reductions. To date, we have not received any milestone payments under our agreement with Novartis.
Upon termination, any third party that has licensed a Water Site Product from us will retain the right to use such 40 Table of Content s product, subject to the terms of their existing license agreement with us, and we will have the right to continue to provide support to any such third parties for the duration of their license agreement.
Upon termination, any third party that has licensed a Water Site Product from us will retain the right to use such 35 Table of Contents product, subject to the terms of their existing license agreement with us, and we will have the right to continue to provide support to any such third parties for the duration of their license agreement.
Participation in such programs may require us to track and report certain drug prices. We may be subject to fines and other penalties if we fail to report such prices accurately. 58 Table of Content s Outside the United States, ensuring adequate coverage and payment for any product candidates we may develop will face challenges.
Participation in such programs may require us to track and report certain drug prices. We may be subject to fines and other penalties if we fail to report such prices accurately. Outside the United States, ensuring adequate coverage and payment for any product candidates we may develop will face challenges.
This allows our employees to develop a work schedule that best suits their individual needs. 67 Table of Content s Our company culture encourages engagement, both among our employees and within the communities we live and work. Internally, we have a well-regarded mentorship program and learning opportunities for hard and soft skills.
This allows our employees to develop a work schedule that best suits their individual needs. Our company culture encourages engagement, both among our employees and within the communities we live and work. Internally, we have a well-regarded mentorship program and learning opportunities for hard and soft skills.
Our Platform Over the past several decades and with the concerted effort of hundreds of our scientists and software engineers, we have developed a computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.
Our Platform Over the past several decades since our founding in 1990, and with the concerted effort of hundreds of our scientists and software engineers, we have developed a computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, 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.
Biggest changeMoreover, 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.
Our solutions include software licensed by third parties under any one or more open-source licenses, including the GNU General Public License, the GNU Lesser General Public License, the Affero General Public License, the BSD License, the MIT License, the Apache License, and others, and we expect to continue to incorporate open-source software in our solutions in the future.
Our solutions include software licensed by third parties under any one or more open-source licenses, including the GNU General Public License, the GNU Lesser General Public License, the GNU Affero General Public License, the BSD License, the MIT License, the Apache License, and others, and we expect to continue to incorporate open-source software in our solutions in the future.
We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our product candidates in any jurisdiction, which would materially impair our ability to generate revenue.
We may not be able to file for marketing approvals and we may not receive necessary approvals to commercialize our product candidates in any jurisdiction, which would materially impair our ability to generate revenue.
Additionally, we could face heightened risks with respect to obtaining marketing authorization in the UK as a result of the withdrawal of the UK from the EU, commonly referred to as Brexit. The UK is no longer part of the European Single Market and EU Customs Union.
Additionally, we could face heightened risks with respect to obtaining marketing authorization in the UK as a result of the withdrawal of the UK from the European Union, commonly referred to as Brexit. The UK is no longer part of the European Single Market and EU Customs Union.
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.
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 COVID-19 pandemic; and • unstable regional, economic and political conditions.
Our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely and jointly with others or may license from others, particularly patents, in the United States and other countries with respect to any proprietary technology and product candidates we develop, including SGR-1505, SGR-2921, and SGR-3515, and any trade secrets and know-how relevant to our product candidates.
Our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely and jointly with others or may license from others, particularly patents, in the United States and other countries with respect to any proprietary technology and product candidates we develop, including SGR-1505 and SGR-3515, and any trade secrets and know-how relevant to our product candidates.
Foreign CMOs may be subject to U.S. legislation, including sanctions, trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies.
Foreign CMOs may be subject to U.S. legislation, including sanctions, tariffs and trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies.
If such organizations do not meet our supply requirements, or if such organizations do not otherwise perform satisfactorily, development of any product candidate we may develop may be delayed. We rely and expect to continue to rely on third parties to synthesize any molecules with therapeutic potential that we discover, including SGR-1505, SGR-2921 and SGR-3515.
If such organizations do not meet our supply requirements, or if such organizations do not otherwise perform satisfactorily, development of any product candidate we may develop may be delayed. We rely and expect to continue to rely on third parties to synthesize any molecules with therapeutic potential that we discover, including SGR-1505 and SGR-3515.
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, or DAP, for each phase 3 clinical trial or any other "pivotal study" of a new drug or biological product.
Several states have passed laws allowing for the importation of drugs from Canada and a few states have passed legislation establishing working groups to examine the impact of a state importation program. Several states have submitted Section 804 Importation Program proposals to the FDA. In January 2024, the FDA approved Florida's plan for Canadian drug importation.
Several states have passed laws allowing for the importation of drugs from Canada and a few states have passed legislation establishing working groups to examine the impact of a state importation program. Several of these states have submitted Section 804 Importation Program proposals to the FDA. In January 2024, the FDA approved Florida's plan for Canadian drug importation.
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.
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; 74 Table of Contents • 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 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 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.
The net income we generated in the year ended December 31, 2023 was primarily due to the $147.2 million cash distributions we received from Nimbus Therapeutics, LLC, or Nimbus, on account of our equity stake in Nimbus, following the acquisition by Takeda Pharmaceuticals Company, Limited, or Takeda, of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and the non-cash gain on our investment in Structure Therapeutics Inc., or Structure Therapeutics, which, following Structure Therapeutics' initial public offering in February 2023, we valued based on the closing price of its American Depositary Shares as of December 31, 2023.
The net income we generated in the year ended December 31, 2023 was primarily due to the gain recorded on the $147.2 million cash distributions we received from Nimbus on account of our equity stake in Nimbus, following the acquisition by Takeda Pharmaceuticals Company, Limited, or Takeda, of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and the non-cash gain on our investment in Structure Therapeutics Inc., or Structure Therapeutics, which, following Structure Therapeutics' initial public offering in February 2023, we valued based on the closing price of its American Depositary Shares as of December 31, 2023.
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 123 Table of Contents • 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.
We cannot assure you that following any acquisition we would achieve the expected synergies to justify the transaction, due to a number of factors, including: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • acquisition-related costs; • difficulty integrating the accounting systems, operations, and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support, or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
We cannot assure you that following any acquisition we would achieve the expected synergies to justify the transaction, due to a number of factors, including: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • acquisition-related costs; • difficulty integrating the accounting systems, operations, and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support, or professional services model of the acquired company; • diversion of management’s attention from other business concerns; 89 Table of Contents • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
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.
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; 66 Table of Contents • 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 and the impact of tariffs and trade restrictions; • 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 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 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.
As of December 31, 2024, we have sold 323,085 shares of common stock for total net proceeds of $8.7 million, and have $241.1 million of common stock remaining available for sale under the ATM. We also have filed registration statements on Form S-8 to register shares of common stock that we may issue under our equity compensation plans.
As of December 31, 2025, we have sold 323,085 shares of common stock for total net proceeds of $8.7 million, and have $241.1 million of common stock remaining available for sale under the ATM. We also have filed registration statements on Form S-8 to register shares of common stock that we may issue under our equity compensation plans.
The market price for our common stock may be influenced by many factors, including: • our investment in, and the success of, our software solutions; • the success of our research and development efforts for our proprietary drug discovery programs; • initiation and progress of preclinical studies and clinical trials for any product candidates that we may develop; • results of or developments in preclinical studies and clinical trials of any product candidates we may develop or those of our competitors or potential collaborators; • the success of our drug discovery collaborators and any milestone or other payments we receive from such collaborators; • the success of competitive products or technologies; • regulatory or legal developments in the United States and other countries; • the recruitment or departure of key personnel; • variations in our financial results or the financial results of companies that are perceived to be similar to us; 120 Table of Content s • guidance or announcements by us with respect to our anticipated financial or operational performance; • sales of common stock by us, our executive officers, directors or principal stockholders, or others, or the anticipation of such sales; • equity or debt financing; • market conditions in the biopharmaceutical sector; • general economic, industry, and market conditions; • the societal and economic impact of public health epidemics; and • the other factors described in this "Risk Factors" section.
The market price for our common stock may be influenced by many factors, including: • our investment in, and the success of, our software solutions; • the success of our research and development efforts for our proprietary drug discovery programs; • initiation and progress of preclinical studies and clinical trials for any product candidates that we may develop; • results of or developments in preclinical studies and clinical trials of any product candidates we may develop or those of our competitors or potential collaborators; 119 Table of Contents • the success of our drug discovery collaborators and any milestone or other payments we receive from such collaborators; • the success of competitive products or technologies; • regulatory or legal developments in the United States and other countries; • the recruitment or departure of key personnel; • variations in our financial results or the financial results of companies that are perceived to be similar to us; • guidance or announcements by us with respect to our anticipated financial or operational performance; • sales of common stock by us, our executive officers, directors or principal stockholders, or others, or the anticipation of such sales; • equity or debt financing; • market conditions in the biopharmaceutical sector; • general economic, industry, and market conditions; • the societal and economic impact of public health epidemics; and • the other factors described in this "Risk Factors" section.
In order to market and sell any product candidates we may develop in the European Union and many other foreign jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying local regulatory requirements. The approval procedure varies among countries and can involve additional testing.
In order to market and sell any product candidate we may develop in the European Union and many other foreign jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying local regulatory requirements. The approval procedure varies among countries and can involve additional testing.
We may seek certain designations for our product candidates, including Breakthrough Therapy, Fast Track and Priority Review designations in the United States, and PRIME Designation in the European Union, but we might not receive such designations, and even if we do, such designations may not lead to a faster development or regulatory review or approval process.
We have and may continue to seek certain designations for our product candidates, including Breakthrough Therapy, Fast Track and Priority Review designations in the United States, and PRIME Designation in the European Union, but we might not receive such designations, and even if we do, such designations may not lead to a faster development or regulatory review or approval process.
Trade tensions and conflicts between the United States and China have been escalating in recent years and, as such, we are exposed to the possibility of product supply disruption and increased costs and expenses in the event of changes to the laws, rules, regulations and policies of the governments of the United States or China, or due to geopolitical unrest and unstable economic conditions.
Trade tensions and conflicts between the United States and China have been escalated in recent years and, as such, we are exposed to the possibility of product supply disruption and increased costs and expenses in the event of changes to the laws, rules, regulations and policies of the governments of the United States or China, or due to geopolitical unrest and unstable economic conditions.
Despite the implementation of security measures, given the size and complexity of our internal information technology systems and those of our third-party vendors and other contractors and consultants, and the increasing amounts of confidential information that they maintain, our information technology systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information), which may compromise our system infrastructure, or that of our third-party vendors and other contractors and 117 Table of Content s consultants or lead to data leakage.
Despite the implementation of security measures, given the size and complexity of our internal information technology systems and those of our third-party vendors and other contractors and consultants, and the increasing amounts of confidential information that they maintain, our information technology systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information), which may compromise our system infrastructure, or that of our third-party vendors and other contractors and consultants or lead to data leakage.
Disputes may arise regarding intellectual property subject to a licensing agreement, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under any collaborative development relationships; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our current or future licensors and us and our collaborators; and • the priority of invention of patented technology.
Disputes may arise regarding intellectual property subject to a licensing agreement, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under any collaborative development relationships; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our current or future licensors and us and our collaborators; and 90 Table of Contents • the priority of invention of patented technology.
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.
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, Revvity, Inc., and Simulations Plus, Inc.
In the event that we submit a BLA or NDA on the basis of one clinical trial and confirmatory evidence, the FDA could determine that such information is not sufficient to support approval of the application and the agency could require us to conduct an additional trial in support of a BLA or NDA In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application.
In the event that we submit a BLA or NDA on the basis of one clinical trial and confirmatory evidence, the FDA could determine that such information is not sufficient to support approval of the application and the agency could require us to conduct an additional trial in support of a BLA or NDA. 99 Table of Contents In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application.
We rely on, and plan to continue to rely on, third-party contract research organizations, or CROs, in addition to other third parties such as research collaboratives and consortia, clinical data management organizations, medical institutions and clinical investigators, to conduct our ongoing, planned and future clinical trials, including for SGR-1505, SGR-2921 and SGR-3515.
We rely on, and plan to continue to rely on, third-party contract research organizations, or CROs, in addition to other third parties such as research collaboratives and consortia, clinical data management organizations, medical institutions and clinical investigators, to conduct our ongoing and future clinical trials, including for SGR-1505 and SGR-3515.
In addition, later discovery of previously unknown problems with our medicines, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: • restrictions on such medicines, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a medicine; • restrictions on the distribution or use of a medicine; • requirements to conduct post-marketing clinical trials; • receipt of warning or untitled letters; • withdrawal of the medicines from the market; • refusal to approve pending applications or supplements to approved applications that we submit; • recall of medicines; • fines, restitution or disgorgement of profits or revenue; • suspension or withdrawal of marketing approvals; • suspension of any ongoing clinical trials; 108 Table of Content s • refusal to permit the import or export of our medicines; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
In addition, later discovery of previously unknown problems with our medicines, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: • restrictions on such medicines, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a medicine; • restrictions on the distribution or use of a medicine; • requirements to conduct post-marketing clinical trials; • receipt of warning or untitled letters; • withdrawal of the medicines from the market; • refusal to approve pending applications or supplements to approved applications that we submit; • recall of medicines; • fines, restitution or disgorgement of profits or revenue; • suspension or withdrawal of marketing approvals; • suspension of any ongoing clinical trials; • refusal to permit the import or export of our medicines; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
Our current drug discovery collaborators, from whom we are entitled to receive milestone payments upon achievement of various development, regulatory, and commercial milestones as well as royalties on commercial sales, if any, under the collaboration agreements that we have entered into with them, face numerous risks in the development of drugs, including the conduct of preclinical and clinical testing, obtaining regulatory approval, and achieving product sales.
Our current drug discovery collaborators, from whom we are entitled to receive milestone payments upon achievement of various development, regulatory, and commercial milestones as well as royalties on commercial sales, if 67 Table of Contents any, under the collaboration agreements that we have entered into with them, face numerous risks in the development of drugs, including the conduct of preclinical and clinical testing, obtaining regulatory approval, and achieving product sales.
For example, in February 2024, U.S. lawmakers called for investigations into and the imposition of possible economic sanctions against Chinese biotechnology companies WuXi AppTec and WuXi Biologics, or collectively WuXi, over alleged ties to the Chinese military. In addition, in September 2024, the U.S.
For example, in February 2024, U.S. lawmakers called for investigations into and the imposition of possible economic sanctions against Chinese biotechnology companies WuXi AppTec and WuXi Biologics, or collectively WuXi, over alleged ties to the Chinese military.
Our internal information technology systems, or those of our third-party vendors, contractors, or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of our services, compromise sensitive information related to our business, or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.
Our internal information technology systems, or those of our third-party vendors, contractors, or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of 116 Table of Contents our services, compromise sensitive information related to our business, or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.
Risks inherent in conducting international clinical trials include: clinical practice patterns and standards of care that vary widely among countries; non-U.S. regulatory authority requirements that could restrict or limit our ability to conduct our clinical trials; administrative burdens of conducting clinical trials under multiple non-U.S. regulatory authority schema; foreign exchange rate fluctuations; and diminished protection of intellectual property in some countries.
Risks inherent in conducting international clinical trials include: clinical practice patterns and standards of care that vary widely among countries; non-U.S. regulatory authority requirements that could restrict or limit our ability to conduct our 83 Table of Contents clinical trials; administrative burdens of conducting clinical trials under multiple non-U.S. regulatory authority schema; foreign exchange rate fluctuations; and diminished protection of intellectual property in some countries.
In such an event, our competitors might be able to enter the market with similar or identical products or platforms, which could have a material adverse effect on our business prospects and financial condition. Intellectual property rights do not guarantee commercial success of current or future product candidates or other business activities.
In such 94 Table of Contents an event, our competitors might be able to enter the market with similar or identical products or platforms, which could have a material adverse effect on our business prospects and financial condition. Intellectual property rights do not guarantee commercial success of current or future product candidates or other business activities.
Although we have experienced revenue growth in certain periods, we have also experienced revenue loss in certain periods, and we may not be able to sustain revenue growth and we may experience certain periods of revenue decline. You should not consider our revenue growth in prior periods as indicative of our future performance.
Although we have experienced revenue growth in certain periods, we have also experienced a decline in revenue in certain periods, and we may not be able to sustain revenue growth and we may experience certain periods of revenue decline. You should not consider our revenue growth in prior periods as indicative of our future performance.
In addition, under Sections 382 and 383 of the Code, and corresponding provisions of state law, a corporation that undergoes an "ownership change," generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and research and development tax credit carryforwards to offset future taxable income.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, a corporation that undergoes an "ownership change," generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and research and development tax credit carryforwards to offset future taxable income.
Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more product candidates we may develop, we, and such collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.
Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more product candidates we may develop, we, and such collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product 104 Table of Contents surveillance and quality control.
In some cases, these competitors are well-established providers of these solutions and have long-standing relationships with many of our current and potential customers, including large biopharmaceutical companies. In addition, there are academic consortia that develop physics-based simulation programs for life sciences and materials applications.
In some cases, these competitors are well-established providers of these solutions and have long-standing relationships with many 70 Table of Contents of our current and potential customers, including large biopharmaceutical companies. In addition, there are academic consortia that develop physics-based simulation programs for life sciences and materials applications.
Such claims could have a material adverse effect on our business, financial condition, results of operations, and prospects. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our competitive business position and prospects.
Such claims could have a material adverse effect on our business, financial condition, results of operations, and prospects. 97 Table of Contents If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our competitive business position and prospects.
As we grow our business, our revenue growth rates may decrease in future periods. Our quarterly and annual results may fluctuate significantly, which could adversely impact the value of our common stock.
As we grow our business, our revenue growth rates may slow in future periods. Our quarterly and annual results may fluctuate significantly, which could adversely impact the value of our common stock.
We cannot predict whether physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that any of our product candidates, if approved for commercial sale, is safe, therapeutically effective and cost-effective as compared with competing treatments.
We cannot predict whether 84 Table of Contents physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that any of our product candidates, if approved for commercial sale, is safe, therapeutically effective and cost-effective as compared with competing treatments.
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.
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.
We therefore expect that gain on equity investments and fair value gains and losses will fluctuate significantly in future periods. We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest in our proprietary drug discovery programs, sales and marketing infrastructure, and our computational platform.
We therefore expect that gain or loss on equity investments and fair value gains and losses will fluctuate significantly in future periods. We anticipate that our operating expenses will increase in the foreseeable future as we continue to invest in our proprietary drug discovery programs, sales and marketing infrastructure, and our computational platform.
If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business. We rely on contract research organizations to synthesize any molecules with therapeutic potential that we discover.
If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business. 77 Table of Contents We rely on contract research organizations to synthesize any molecules with therapeutic potential that we discover.
To the extent that the results of the trials are not satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.
To the extent that the results of the trials are not satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional 82 Table of Contents trials in support of potential approval of our product candidates.
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.
We expect our expenses to increase 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, progress clinical trials and invest in the further development of our computational platform.
In addition, we are also aware of other therapeutics, such as bi-specifics and CAR-Ts, both approved and in clinical development, for the treatment of B-cell lymphomas.
In addition, we are also aware of other therapeutics, such as bi-specifics and CAR-Ts, both approved and in clinical development, for the treatment of B-cell malignancies.
The capital markets for public offerings and acquisitions are dynamic, and the likelihood of liquidity events for the companies in which we hold equity interests could significantly worsen. Further, valuations of privately held companies are inherently complex due to the lack of readily available market data.
The capital markets for public offerings and acquisitions are dynamic, and the likelihood of liquidity events for the companies in which we hold equity interests could significantly worsen. Further, valuations of privately held companies are inherently complex 75 Table of Contents due to the lack of readily available market data.
For instance, our customers may reduce the number of their employees who are engaged in research and who would have use of our software, which would result in a corresponding reduction in the number of user licenses needed for some of our solutions and thus a lower aggregate renewal fee.
For instance, our customers may reduce the number of their employees who are engaged in research and 69 Table of Contents who would have use of our software, which would result in a corresponding reduction in the number of user licenses needed for some of our solutions and thus a lower aggregate renewal fee.
Use of open-source software may entail greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code, including with respect to security vulnerabilities.
Use of open-source software may entail greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality 73 Table of Contents of the code, including with respect to security vulnerabilities.
In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing of the priority application, or in some cases not published at all.
In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other 92 Table of Contents jurisdictions are typically not published until 18 months after filing of the priority application, or in some cases not published at all.
In addition, these third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs.
In addition, these third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs.
For example, Structure Therapeutics has also made public statements regarding its expectations for the development of programs under collaboration with us, and Structure Therapeutics and other collaborators may in the future make additional statements about their goals and expectations related to collaborations with us.
For example, Structure Therapeutics has also made public statements regarding its expectations for the development of programs under collaboration with us, and Structure Therapeutics and other collaborators may in the 120 Table of Contents future make additional statements about their goals and expectations related to collaborations with us.
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.
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. Risks Related to Drug Discovery We may never realize a return on our investment of resources and cash in our drug discovery collaborations.
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.
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.
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.
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.
Notice of the certification must be given to the patent owner and NDA holder and if, within 45 days of receiving notice, either the patent owner or NDA holder sues for patent infringement, approval of the ANDA or 505(b)(2) NDA is stayed for up to 30 months.
Notice of the certification must be given to the patent owner and NDA holder and if, within 45 days of receiving notice, either the 98 Table of Contents patent owner or NDA holder sues for patent infringement, approval of the ANDA or 505(b)(2) NDA is stayed for up to 30 months.
If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements. States are also active in creating specific rules relating to the processing of personal information.
If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements. 112 Table of Contents States are also active in creating specific rules relating to the processing of personal information.
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.
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.
The adequacy decision permits companies in the United States who self-certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the European Union to the United States. However, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S. Data Privacy Framework.
The adequacy decision permits companies in the United States who self-certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the European Union to the United States. However, some privacy advocacy 111 Table of Contents groups have already suggested that they will be challenging the EU-U.S. Data Privacy Framework.
For example, attackers have used artificial intelligence and machine learning to launch more automated, targeted and coordinated attacks against targets. Additionally, actual, potential, or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
For example, attackers have used artificial intelligence and machine learning to launch more automated, targeted and coordinated attacks against 117 Table of Contents targets. Additionally, actual, potential, or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
We may not be aware of all such intellectual property rights potentially relating to our technology and product candidates and their uses, or we may incorrectly conclude that third-party intellectual property is invalid or that our activities and product candidates do not infringe such intellectual property.
We may not be aware of all such intellectual property rights potentially relating to our technology and product candidates and their uses, or we may 96 Table of Contents incorrectly conclude that third-party intellectual property is invalid or that our activities and product candidates do not infringe such intellectual property.
For example, in connection with the audit of our consolidated financial statements for the year ended December 31, 2022, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting.
For example, in connection with 122 Table of Contents the audit of our consolidated financial statements for the year ended December 31, 2022, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting.
Per the Executive Order, this review will result in new DOJ FCPA guidelines intended to enhance American economic competitiveness and to safeguard national security interests. During the 180-day review period, any new FCPA investigations and enforcement actions are to be suspended absent authorization from the Attorney General, and all existing FCPA investigations and enforcement actions will be reviewed.
Per the executive order, this review will result in new Department of Justice FCPA guidelines intended to enhance American economic competitiveness and to safeguard national security interests. During the 180-day review period, any new FCPA investigations and enforcement actions are to be suspended absent authorization from the Attorney General, and all existing FCPA investigations and enforcement actions will be reviewed.
Certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, 116 Table of Content s thereby potentially disrupting their supply of material to us.
Certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, 115 Table of Contents thereby potentially disrupting their supply of material to us.
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.
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 80 Table of Contents 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.
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.
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.
Under the Hatch-Waxman Amendments, a company may also submit an NDA under section 505(b)(2) of the FDCA that references the FDA’s prior approval of the innovator product or preclinical studies and/or clinical trials that were not conducted by, or for, the sponsor and for which the sponsor has not obtained a right of reference.
Under the Hatch-Waxman Amendments, a company may also submit a new drug application, or NDA, under section 505(b)(2) of the FDCA that references the FDA’s prior approval of the innovator product or preclinical studies and/or clinical trials that were not conducted by, or for, the sponsor and for which the sponsor has not obtained a right of reference.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of 103 Table of Content s these relationships to the FDA or comparable foreign regulatory authorities.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities.
Our future capital requirements will depend on many factors, including: • the growth of our software revenue; • the timing and extent of spending to support research and development efforts; • the continued expansion of software sales and marketing activities; • the timing and receipt of payments from our drug discovery collaborations; • spending to support, advance, and broaden our proprietary drug discovery programs; and • the timing and receipt of any distributions or proceeds we may receive from our equity stakes in our drug discovery collaborators.
Our future capital requirements will depend on many factors, including: • the growth of our software revenue; • the timing and extent of spending to support research and development efforts; • the continued expansion of software sales and marketing activities; • the timing and receipt of payments from our drug discovery collaborations; • spending to support, advance, and broaden our proprietary drug discovery programs, including the impact of tariffs and trade restrictions on such spending; and • the timing and receipt of any distributions or proceeds we may receive from our equity stakes in our drug discovery collaborators.
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.
For the fiscal year ended December 31, 2025, sales to customers outside of the United States accounted for approximately 40% 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.
Any claims we assert against perceived infringers could provoke such parties to assert counterclaims against us alleging that we infringe, misappropriate, or otherwise violate their intellectual property. In addition, in a patent infringement proceeding, such parties could assert that the patents we, our collaborators, or our licensors have asserted are invalid or unenforceable.
Any claims we assert against 95 Table of Contents perceived infringers could provoke such parties to assert counterclaims against us alleging that we infringe, misappropriate, or otherwise violate their intellectual property. In addition, in a patent infringement proceeding, such parties could assert that the patents we, our collaborators, or our licensors have asserted are invalid or unenforceable.
In 2017, the Congress passed the FDARA, which, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity.
In 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA, which, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity.
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.
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., HotSpot Therapeutics, and Recursion Pharmaceuticals, Inc.
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.
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.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or synthesize molecules in accordance with regulatory requirements, if there are disagreements between us and such parties or if such parties are unable to expand capacities, we may not be able to fulfill, or may be delayed in producing sufficient product candidates to meet, our supply requirements, and we may not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us to progress viable product candidates for IND submissions or the necessary clinical trials and we will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or synthesize molecules in accordance with regulatory requirements, if there are disagreements between us and such parties or if such parties are unable to expand capacities, we may not be able to fulfill, or may be delayed in producing sufficient product candidates to meet, our supply requirements, and we may not be able to complete, or may be delayed in completing, the necessary preclinical studies or the necessary clinical trials and we will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.
In addition, even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
In addition, even after an 103 Table of Contents orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
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.
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.
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.
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. If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
The risk of errors is particularly significant when a new software solution is first introduced or when new versions or enhancements of existing software solutions are 75 Table of Content s released. We have from time to time found defects in our software, and new errors in our existing software may be detected in the future.
The risk of errors is particularly significant when a new software solution is first introduced or when new versions or enhancements of existing software solutions are released. We have from time to time found defects in our software, and new errors in our existing software may be detected in the future.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. 92 Table of Content s In addition, we have limited experience in acquiring other businesses.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. In addition, we have limited experience in acquiring other businesses.
Additionally, if any product candidates we may develop receive marketing approval, the FDA could require us to adopt a REMS to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to healthcare practitioners.
Additionally, if any product candidates we may develop receive marketing approval, the FDA could require us to adopt risk evaluation and mitigation strategies, or REMS, to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to healthcare practitioners.
In addition, if we decide to complete clinical development and seek regulatory approval on our own, we expect to incur significant additional expenses. Furthermore, we incur additional costs associated with operating as a public company, as compared to when we were a private company.
In addition, though not our current strategy, if we decide to complete clinical development and seek regulatory approval on our own, we expect to incur significant additional expenses. Furthermore, we incur additional costs associated with operating as a public company, as compared to when we were a private company.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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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.
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.
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.
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.
Our vice president of information security leads the operational oversight of company-wide cybersecurity strategy, policy, standards and processes and works across relevant departments to assess and help prepare our company and our employees to address cybersecurity risks, including phishing attacks, ransomware, data breaches, and insider threats.
The audit committee receives periodic updates from management regarding cybersecurity matters and is notified between such updates regarding significant new cybersecurity threats or incidents. 124 Table of Contents Our vice president of information security leads the operational oversight of company-wide cybersecurity strategy, policy, standards and processes and works across relevant departments to assess and help prepare our company and our employees to address cybersecurity risks, including phishing attacks, ransomware, data breaches, and insider threats.
Removed
The audit committee receives periodic updates from management regarding cybersecurity matters and is notified between such updates regarding significant new cybersecurity threats or incidents.
Added
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+0 added−0 removed3 unchanged
Biggest changeFrom 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
Biggest changeFrom 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. 125 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed5 unchanged
Biggest changeThe graph assumes an investment of $100 on February 6, 2020, in each of the foregoing indices and in our common stock. Data for each of the indices and our common stock assumes that all dividends were reinvested on the day of issuance, if any.
Biggest changeData for each of the indices and our common stock assumes that all dividends were reinvested on the day of issuance, if any. The comparisons are not intended to forecast or be indicative of future performance of our common stock.
Dividends We have never declared or paid cash dividends on our common stock or our limited common stock. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
The 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.
The 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 nominees.
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.
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 December 31, 2020 through December 31, 2025. The graph assumes an investment of $100 on December 31, 2020, in each of the foregoing indices and in our 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.
Holders of Record As of February 18, 2026, there were approximately 77 holders of record of our common stock and one holder of record of our limited common stock.
Added
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. 126 Table of Contents Dividends We have never declared or paid cash dividends on our common stock or our limited common stock.

Item 7. Management's Discussion & Analysis

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

116 edited+51 added−33 removed75 unchanged
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.
Biggest changeThree Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 (in thousands) Revenues: Software products and services $ 69,282 $ 40,858 $ 40,544 $ 48,816 $ 79,662 $ 31,884 $ 35,404 $ 33,415 Drug discovery 17,953 13,466 14,215 10,735 8,655 3,406 11,930 3,183 Total revenues 87,235 54,324 54,759 59,551 88,317 35,290 47,334 36,598 Cost of revenues: Software products and services (1) 13,339 11,111 13,029 13,522 13,278 8,479 7,167 7,976 Drug discovery (1) 16,603 15,174 15,572 14,905 10,909 9,083 8,832 9,732 Total cost of revenues 29,942 26,285 28,601 28,427 24,187 17,562 15,999 17,708 Gross profit 57,293 28,039 26,158 31,124 64,130 17,728 31,335 18,890 Operating expenses: Research and development (1) 41,399 42,757 43,138 45,844 49,362 50,977 50,835 50,611 Sales and marketing (1) 10,338 9,524 10,734 10,367 9,704 10,349 9,693 10,171 General and administrative (1) 22,713 21,705 25,189 25,802 25,776 24,824 23,536 25,541 Total operating expenses 74,450 73,986 79,061 82,013 84,842 86,150 84,064 86,323 Loss from operations (17,157) (45,947) (52,903) (50,889) (20,712) (68,422) (52,729) (67,433) Other income (expense): Gain (loss) on equity investments — — — — — — — — Change in fair value of equity investments 46,999 9,691 4,579 (13,095) (22,080) 25,459 (5,833) 8,137 Other income 3,131 3,623 5,438 4,204 3,539 4,737 4,598 5,028 Total other income (expense) 50,130 13,314 10,017 (8,891) (18,541) 30,196 (1,235) 13,165 Income (loss) before income taxes 32,973 (32,633) (42,886) (59,780) (39,253) (38,226) (53,964) (54,268) Income tax expense (benefit) 462 162 287 28 963 (90) 83 456 Net income (loss) $ 32,511 $ (32,795) $ (43,173) $ (59,808) $ (40,216) $ (38,136) $ (54,047) $ (54,724) (1) Includes stock-based compensation as indicated in the table located further below. 144 Table of Contents Revenues: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 (in thousands) Revenues: Software On-premise software $ 44,354 $ 15,928 $ 15,743 $ 25,423 $ 55,393 $ 12,250 $ 18,758 $ 17,619 Hosted software 11,538 11,585 11,128 10,872 11,176 8,814 8,087 7,176 Software maintenance 6,893 6,826 6,778 6,796 5,886 5,658 5,840 5,895 Professional services 3,796 1,589 2,382 1,881 2,315 2,038 2,719 2,725 Revenue from contracts with customers 66,581 35,928 36,031 44,972 74,770 28,760 35,404 33,415 Software contribution 2,701 4,930 4,513 3,844 4,892 3,124 — — Total software products and services revenue 69,282 40,858 40,544 48,816 79,662 31,884 35,404 33,415 Drug discovery Drug discovery services 17,576 13,008 13,940 10,236 8,132 2,813 11,506 2,692 Drug discovery contribution 377 458 275 499 523 593 424 491 Total drug discovery revenue 17,953 13,466 14,215 10,735 8,655 3,406 11,930 3,183 Total revenues $ 87,235 $ 54,324 $ 54,759 $ 59,551 $ 88,317 $ 35,290 $ 47,334 $ 36,598 Deferred Revenue: As of December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 (in thousands) Deferred revenue $ 191,730 $ 174,673 $ 186,538 $ 209,954 $ 220,758 $ 46,973 $ 47,879 $ 57,513 Gross Margin: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 Software products and services gross margin 81 % 73 % 68 % 72 % 83 % 73 % 80 % 76 % 145 Table of Contents Stock-Based Compensation: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 (in thousands) Stock-based compensation: Cost of revenues: Software products and services $ 601 $ 604 $ 582 $ 611 $ 664 $ 665 $ 669 $ 645 Drug discovery 747 802 839 792 538 573 691 490 Research and development 3,173 3,256 3,339 3,507 4,152 4,218 4,228 4,066 Sales and marketing 932 927 968 920 988 971 968 974 General and administrative 4,497 5,257 4,899 5,744 6,137 5,971 6,252 6,043 Total stock-based compensation expense $ 9,950 $ 10,846 $ 10,627 $ 11,574 $ 12,479 $ 12,398 $ 12,808 $ 12,218 Depreciation and Amortization: Three Months Ended December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2025 2025 2025 2025 2024 2024 2024 2024 (in thousands) Depreciation and amortization: Cost of revenues: Software products and services $ 117 $ 121 $ 122 $ 127 $ 130 $ 135 $ 120 $ 122 Drug discovery 326 329 336 339 181 158 108 120 Research and development 652 662 695 735 897 878 793 780 Sales and marketing 134 142 148 144 159 174 169 165 General and administrative 208 211 230 244 266 262 264 278 Total depreciation and amortization expense $ 1,437 $ 1,465 $ 1,531 $ 1,589 $ 1,633 $ 1,607 $ 1,454 $ 1,465 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.
Our on-premise software license arrangements grant customers the right to use our software on their own in-house servers or their own cloud instances for a specified term, typically for one year, though in recent years, we have entered into a small number of large multi-year on-premise software license agreements.
On-premise software. Our on-premise software license arrangements grant customers the right to use our software on their own in-house servers or their own cloud instances for a specified term, typically for one year, though in recent years, we have entered into a small number of large multi-year on-premise software license agreements.
We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements.
We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of specified discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements.
Financing activities During the year ended December 31, 2024, financing activities provided approximately $10.1 million of cash, consisting of $8.7 million attributable to net proceeds received from the ATM and $1.4 million attributable to proceeds received from stock option exercises.
During the year ended December 31, 2024, financing activities provided approximately $10.1 million of cash, consisting of $8.7 million attributable to net proceeds received from the ATM and $1.4 million attributable to proceeds received from stock option exercises.
The agreement with Gates Ventures, LLC was originally entered into in June 2020 and further extended through August 2026. The agreement is an unconditional non-exchange contribution without restrictions. Revenue is recognized annually, when invoiced, in accordance with Accounting Standard Codification, or ASC, Topic 958 , Not-for-Profit Entities, or Topic 958, as the agreement is not an exchange transaction.
The agreement with Gates Ventures, LLC was originally entered into in June 2020 and further extended through August 13, 2026. The agreement is an unconditional non-exchange contribution without restrictions. Revenue is recognized annually, when invoiced, in accordance with Accounting Standard Codification, or ASC, Topic 958 , Not-for-Profit Entities, or Topic 958, as the agreement is not an exchange transaction.
Cost of revenues for software includes personnel-related expenses (comprised of salaries, benefits, and stock-based compensation) for employees directly involved in the delivery of software solutions, maintenance and professional services, royalties paid for products sold and services performed using third-party licensed software functionality, and allocated overhead (facilities and information technology support) costs.
Cost of revenues for software includes personnel-related expenses (comprised of salaries, benefits, and stock-based compensation) for employees directly involved in the development and delivery of software solutions, maintenance and professional services, royalties paid for products sold and services performed using third-party licensed software functionality, and allocated overhead (facilities and information technology support) costs.
Accordingly, we work with our customers to improve their experience and increase the utility of our platform in order to expand the scale at which they deploy our platform in their business. Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future revenue growth.
Accordingly, we work with our customers to improve their experience and increase the utility of our platform in order to expand the scale at which they deploy our platform in their business. Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future growth.
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.
See "Collaboration and License Agreements" 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.
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.
Gain (Loss) on Equity Investments Gain (loss) on equity investments consists of realized gains in the form of cash distributions from our equity investments. Change in Fair Value of Equity Investments 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.
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.
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, 2025, 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.
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 revenues for hosted software during the year ended December 31, 2025 as compared to the year ended December 31, 2024 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.
Currently, gross margin is less meaningful for measuring the operating results of our drug discovery business. Quarterly Operating Expense Trends Operating expenses generally increased during the periods presented due to increased headcount and personnel-related expenses involved in research and development, sales and marketing, general and administrative activities, and CRO costs related to our proprietary drug discovery programs.
Currently, gross margin is less meaningful for measuring the operating results of our drug discovery business. Quarterly Operating Expense Trends Operating expenses generally decreased during the periods presented due to decreased headcount and personnel-related expenses involved in research and development, sales and marketing, and general and administrative activities, and CRO costs related to our proprietary drug discovery programs.
The decrease in software gross margin during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to an increase in expenses related to our agreement with the Bill & Melinda Gates Foundation to accelerate the expansion of our computational software platform, partially offset by an increase in revenue. Drug discovery.
The decrease in software gross margin during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to an increase in expenses related to our agreement with the Bill & Melinda Gates Foundation to accelerate the expansion of our computational software platform, partially offset by an increase in revenue. Drug discovery.
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.
In February 2024, we entered into an amended and restated sales agreement with Leerink Partners LLC (formerly 147 Table of Contents 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.
The increase in software contribution revenues during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to the agreements with the Bill & Melinda Gates Foundation entered into during the year ended December 31, 2024, aimed to accelerate the expansion of our computational software platform, and the extension of the agreement with Gates Ventures, LLC.
The increase in software contribution revenues during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to the agreements with the Bill & Melinda Gates Foundation entered into during the year ended December 31, 2024, aimed to accelerate the expansion of our computational software platform, and the extension of the agreement with Gates Ventures, LLC.
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.
Income tax expense for the year ended December 31, 2024 represents certain state income tax obligations and taxes in foreign jurisdictions for which we conduct business. As of December 31, 2025, we have a full valuation allowance on our U.S. federal and state deferred tax assets.
Since each professional services agreement represents a unique, ad hoc engagement, professional services revenue may fluctuate from period to period. Software contribution revenue . Software contribution revenue consists of funds received under non-reciprocal agreements with Gates Ventures, LLC and the Bill & Melinda Gates Foundation.
Since each professional services agreement represents a unique, ad hoc engagement, professional services revenue may fluctuate from period to period. Software contribution revenue . Software contribution revenue consists of funds received under non-reciprocal agreements, as amended, with Gates Ventures, LLC and the Bill & Melinda Gates Foundation.
Research and development expense consists of drug discovery and development program costs and costs incurred for continuous development of the technology and science that supports our computational platform, primarily: • personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation for employees engaged in research and development functions; • expenses incurred under agreements with third-party CROs and consultants involved in our proprietary drug discovery programs; and • allocated compute capacity on our proprietary drug discovery programs and overhead (facilities and information technology support) costs.
Research and development expense consists of drug discovery and development program costs and costs incurred for continuous development of the technology and science that supports our computational platform, primarily: • personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation for employees engaged in research and development functions; 135 Table of Contents • expenses incurred under agreements with third-party CROs and consultants involved in our proprietary drug discovery programs; and • allocated compute capacity on our proprietary drug discovery programs and overhead (facilities and information technology support) costs.
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.
The amount to which our research and development expense may fluctuate 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.
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.
Contribution revenue primarily 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 costs are incurred and conditions are met in accordance with Topic 958. Cost of Revenues Software products and services.
Segment Information See Note 14 – Segment Reporting in our audited consolidated financial statements for additional information regarding our segments. Liquidity, Capital Resources and Funding Requirements We have a history of significant operating losses and have incurred negative cash flows from operations from inception through the year ended December 31, 2024.
Segment Information See Note 14 – Segment Reporting in our audited consolidated financial statements for additional information regarding our segments. Liquidity, Capital Resources and Funding Requirements We have a history of significant operating losses and have primarily incurred negative cash flows from operations from inception through the year ended December 31, 2025.
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.
Financial Overview; Software Revenue and Collaborations 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.
We recently initiated dosing in a Phase 1 clinical trial of SGR-3515 in patients with advanced solid tumors. The trial is a dose-escalation trial designed to evaluate the safety, tolerability and recommended Phase 2 dose of SGR-3515. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and preliminary anti-tumor activity of SGR-3515.
In July 2024, we initiated dosing in a Phase 1 clinical trial of SGR-3515 in patients with advanced solid tumors. The trial is a dose-escalation trial designed to evaluate the safety, tolerability and recommended Phase 2 dose of SGR-3515. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and preliminary anti-tumor activity of SGR-3515.
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.
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 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.
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.
Discussions of fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023 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, 2024, that was filed with the SEC on February 26, 2025.
Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we will be eligible to receive up to $2.272 billion in total milestone payments across the initial programs.
Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we are eligible to receive up to $2.272 billion in total milestone payments across the initial programs.
The revenue that we generate through our software solutions from each of our customers varies depending on the number of licenses for each software solution that each customer purchases from us.
The ACV that we generate through our software solutions from each of our customers varies depending on the number of licenses for each software solution that each customer purchases from us.
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.
The transaction price is then allocated to each performance obligation on a relative 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.
Seasonality has been a less significant factor for our hosted software arrangements, for which revenue is recognized ratably over time. Seasonality has not been a factor for our drug discovery revenues. Historical seasonality may not be indicative of future periods.
Seasonality has been a less significant factor for our hosted software 149 Table of Contents arrangements, for which revenue is recognized ratably over time. Seasonality has not been a factor for our drug discovery revenues. Historical seasonality may not be indicative of future periods.
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.
The following discussion and analysis of our financial condition and results of operations covers fiscal 2025 and fiscal 2024 items and year-over-year comparisons between fiscal 2025 and fiscal 2024.
We establish SSP ranges for our products and services and reassess them periodically. The determination of SSP required significant management judgment.
We establish SSP ranges for our products and services and reassess them periodically. The determination of SSP requires significant management judgment.
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 Part 1, Item 1A. "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.
Our future capital requirements will depend on many factors, including the growth of our software revenue, the timing and extent of spending to support research and development efforts, the continued expansion of software sales and marketing activities, the timing and receipt of milestone payments from our collaborations, as well as spending to support, advance, and broaden our proprietary drug discovery programs.
Our future capital requirements will depend on many factors, including the growth of our software revenue, the timing and extent of spending to support research and development efforts, the continued expansion of software sales and marketing activities, the timing and receipt of milestone payments from our collaborations, as well as spending to support, advance, and broaden our proprietary drug discovery programs, including the impact of tariffs and trade restrictions on such spending.
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.
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 $198.5 million and $190.8 million for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2024, 323,085 shares of common stock, were sold under the ATM for total net proceeds of $8.7 million and gross proceeds of $8.9 million, before deducting sales agent commissions. As of December 31, 2024, we had $241.1 million of common stock remaining available for sale under the ATM.
During the year ended December 31, 2024, 323,085 shares of common stock were sold under the ATM for total net proceeds of $8.7 million and gross proceeds of $8.9 million, before deducting sales agent commissions. As of both December 31, 2025 and 2024, we had $241.1 million of common stock remaining available for sale under the ATM.
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 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, 2025, we had an aggregate of 16 collaborative programs for which we are eligible to receive future royalties compared to 13 collaborative programs as of December 31, 2024.
The agreement contains a minimum payment obligation, which totals $21.8 million over five years after the date of first occupancy. In December 2020, we entered into a five-year agreement with a third-party cloud provider for compute power. The agreement contains a minimum payment obligation, which totals $60.0 million over the five years after the date we entered into the agreement.
The agreement contains a minimum payment obligation, which totals $21.8 million over five years after the date of first occupancy. In December 2025, we entered into a three-year agreement with a third-party cloud provider for compute power. The agreement contains a minimum payment obligation, which totals $82.0 million over the three years after the date we entered into the agreement.
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.
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% of software revenues in both the years ended December 31, 2025 and 2024. Drug discovery.
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.
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 $12.8 million and $14.1 million from drug discovery milestones for the years ended December 31, 2025 and 2024, respectively.
We are also entitled to low single-digit royalties on our clinical development programs under our collaboration agreement with Morphic, including MORF-057. 129 Table of Content s We currently conduct our operations through two reportable segments: software and drug discovery.
We are also entitled to low single-digit royalties on our clinical development programs under our collaboration agreement with Morphic, including MORF-057. We currently conduct our operations through two reportable segments: software and drug discovery.
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.
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 $211.9 million and $177.2 million has been established at December 31, 2025 and 2024, respectively.
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.
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.
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.
We recognized revenue of $38.4 million and $8.3 million related to collaboration agreements with proportional performance measurement for the years ended December 31, 2025 and 2024, respectively. Recent Accounting Pronouncements See Note 2 – Significant Accounting Policies to our consolidated financial statements appearing in Item 8 of this Annual Report for a discussion of recently issued accounting pronouncements.
For contracts with a duration of more than one year that are billed upfront, ACV in each period represents the total billed contract value divided by the term. ACV should be viewed independently of revenue and does not represent revenue calculated in accordance with generally accepted accounting principles in the United States, or U.S.
For contracts with a duration of more than one year that are billed upfront, ACV in each period represents the total billed contract value divided by the term. ACV should be viewed independently of revenue and does not represent revenue calculated in accordance with U.S.
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.
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.
In July 2024, we entered into a one-year agreement with the Bill & Melinda Gates Foundation to initially fund our initiative to accelerate the expansion of our computational platform to predict toxicity associated with binding to off-target proteins.
In July 2024, we entered into a one-year agreement with the Bill & Melinda Gates Foundation, that was further extended through April 2026, to initially fund our initiative to accelerate the expansion of our computational platform to predict toxicity associated with binding to off-target proteins.
The decrease in revenues for on-premise software during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to a decrease in multi-year customer contracts with upfront revenue recognition in the current period versus the comparable period. Hosted software.
The decrease in revenues for on-premise software during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to the timing and size of multi-year customer contracts with upfront revenue recognition in the comparable period versus the current period. Hosted software.
Our professional services arrangements are typically project-based and, therefore, fluctuated based on individual customer needs and ongoing project support. Drug discovery revenue fluctuated from period to period based on the achievement of specific collaboration milestones, as well as advancements of collaborative services. Milestone payments typically increase in magnitude as a program advances.
Our professional services arrangements are typically project-based and, therefore, fluctuated based on individual customer needs and ongoing project support. Drug discovery revenue fluctuated from period to period based on the achievement of specific collaboration milestones, as well as advancements of collaborative services.
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.
At December 31, 2025, we had federal and state net operating loss carryforwards of approximately $208.5 million and $119.3 million, respectively. The state net operating loss carryforwards will expire between 2025 and 2055, if not utilized. The post-2017 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, 2024 2023 Change (in thousands) Change in fair value $ 5,683 $ 53,461 $ (47,778) The change in fair value during the year ended December 31, 2024 was primarily due to an unrealized gain on our investment in Morphic of $23.5 million, partially offset by an unrealized loss on our investment in Structure Therapeutics of $18.1 million.
The change in fair value of equity investments during the year ended December 31, 2024 was primarily due to an unrealized gain on our investment in Morphic of $23.5 million, partially offset by an unrealized loss on our investment in Structure Therapeutics of $18.1 million.
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.
The decrease in internal costs for programs in discovery, preclinical and clinical development of $8.9 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to a decrease in personnel-related expense and rent expense.
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.
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 whether they are distinct or a single combined performance obligation. We allocate the transaction price to each performance obligation based on the relative SSP of each performance obligation at inception.
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 recorded income tax expense of $0.9 million and $1.4 million for the years ended December 31, 2025 and 2024, respectively. 143 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, 2025.
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.
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.
Our contractual obligations as of December 31, 2024 include lease obligations of $177.5 million, consisting of our continuing rent obligations through December 2037, primarily for our office located in New York, New York for $136.0 million, which expires in December 2037.
Our contractual obligations as of December 31, 2025 include lease obligations of $160.2 million, consisting of our continuing rent obligations through December 2037, primarily for our office located in New York, New York for $126.5 million, which expires in December 2037.
Software maintenance revenue is recognized ratably over the period of the contract. Professional services. Professional services revenues remained consistent during the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to the progress and completion of technology and modeling service projects. Software contribution revenue .
Professional services revenues remained consistent during the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to the progress and completion of technology and modeling service projects. Software contribution revenue .
No milestone revenue has been recognized as of December 31, 2024. In November 2024, we also entered into an expanded three-year software agreement with Novartis that substantially increases Novartis' access to our computational predictive modeling technology and enterprise informatics platform. See "Collaboration and License Agreement" in Note 3 to our consolidated financial statements for additional information relating to this agreement.
In November 2024, we also entered into an expanded three-year software agreement with Novartis that substantially increases Novartis' access to our computational predictive modeling technology and enterprise informatics platform. See "Collaboration and License Agreements" in Note 3 to our consolidated financial statements for additional information relating to the research collaboration and license agreement.
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.
The decrease in all other research and development expense during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to decreases of approximately $4.8 million in personnel-related expense, approximately $1.9 million in cloud computing expense, approximately $1.1 million related to office rent, approximately $0.8 million related to professional services, approximately $0.6 million in travel and entertainment expense, and approximately $0.5 million in other expenses.
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.
We are party to an exclusive, worldwide collaboration and license agreement with 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. After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates.
The change in the valuation allowance for the years ended December 31, 2024 and 2023 was $41.2 million and $1.9 million, respectively.
The change in the valuation allowance for the years ended December 31, 2025 and 2024 was $34.7 million and $41.2 million, respectively.
The goal of this initiative is to develop a computational solution to improve the properties of drug development candidates and reduce the risk of development failure. The project is being funded initially by $19.5 million in grants from the Bill & Melinda Gates Foundation.
The goal of this initiative is to develop a computational solution designed to improve the properties of drug development candidates and reduce the risk of development failure associated with binding to off-target proteins, which can be associated with serious side effects. The project is being funded initially by $19.5 million in grants from the Bill & Melinda Gates Foundation.
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.
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.
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.
As of December 31, 2025, we had federal orphan drug credits and federal research and development tax credit carryforwards of approximately $44.0 million and various state tax credit carryforwards of approximately $4.7 million. These carryforwards will expire between 2033 and 2045, if not utilized.
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 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. In February 2025, we expanded our research collaboration with Lilly to add an undisclosed target to the collaboration.
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 revenue we generate through our software solutions from each of our customers varies largely depending on the type and 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.
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.
As of December 31, 2025, we had cash, cash equivalents, restricted cash, and marketable securities of $402.3 million. We believe our existing cash, cash equivalents, and marketable securities as of December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months.
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.
The increase in cost of revenues for software products and services during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to increases of approximately $5.0 million in third-party CRO costs related to development, approximately $4.9 million in personnel-related expense, approximately $3.4 million in cloud computing expense, and approximately $0.8 million in royalty expense.
Gain on Equity Investments Year Ended December 31, 2024 2023 Change (in thousands) Gain on equity investments $ — $ 147,213 $ (147,213) There was no gain on equity investments during the year ended December 31, 2024.
Gain (Loss) on Equity Investments Year Ended December 31, 2025 2024 Change (in thousands) Gain (loss) on equity investments $ — $ — $ — There was no gain or loss on equity investments during the years ended December 31, 2025 and 2024.
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.
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.
The amended and restated sales agreement amends and restates the original sales agreement that we entered into with Leerink Partners with respect to the ATM in May 2023, which is no longer in effect.
The amended and restated sales agreement amends and restates the original sales agreement that we entered into with Leerink Partners with respect to the ATM in May 2023, which is no longer in effect. During the year ended December 31, 2025, no shares of common stock were sold under the ATM.
As we progress and expand our pipeline of proprietary programs, we will strategically evaluate on a program-by-program basis advancing them ourselves, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their probability of clinical and commercial success.
With respect to our proprietary drug discovery programs, we plan to strategically evaluate on a program-by-program basis advancing them into and through preclinical development ourselves, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their development, clinical and commercial potential.
We expect our research and development expense to increase in absolute dollars as we continue to invest in activities related to discovery and development of our proprietary drug discovery programs, in advancing our computational platform, and as we incur expenses associated with hiring additional personnel directly involved in such efforts.
We expect our research and development expense to stabilize in regards to our investment in activities related to discovery and development of our proprietary drug discovery programs, in advancing our computational platform, and in hiring additional personnel directly involved in such efforts.
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.
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. 150 Table of Contents At the inception of each arrangement that includes research, development, or regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method.
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.
The increase in cost of revenues for drug discovery during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to increases of approximately $13.2 million in third-party CRO costs associated with the expansion and progression of collaborative programs, approximately $7.3 million in personnel-related expense due to proprietary programs moving to partnered programs, approximately $2.4 million in cloud computing expense, and approximately $2.0 million in other expenses, partially offset by a decrease of approximately $1.2 million in royalty expense. 140 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.
In addition to revenue from our collaborations, we may also derive drug discovery revenue from out-licensing our proprietary drug discovery programs when we believe it will help maximize the probability of clinical and commercial success of the program.
Milestone payments typically increase in magnitude as a program advances. 134 Table of Contents In addition to revenue from our collaborations, we may also derive drug discovery revenue from out-licensing our proprietary drug discovery programs when we believe it will help maximize the development, clinical and commercial potential of the program.
Quarterly Deferred Revenue Trends Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy, as well as the unearned portion of unbilled collaboration milestones that are deemed probable in advance of actual achievement.
Quarterly Deferred Revenue Trends Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy.
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.
Cash Flows The following table presents a summary of our cash flows for the periods shown: Year Ended December 31, 2025 2024 (in thousands) Net cash provided by (used in) operating activities $ 13,899 $ (157,368) Net cash provided by investing activities 57,898 148,836 Net cash provided by financing activities 2,931 10,123 Net increase in cash and cash equivalents and restricted cash $ 74,728 $ 1,591 Operating activities During the year ended December 31, 2025, operating activities provided approximately $13.9 million of cash, primarily due to changes to our operating assets and liabilities of $118.2 million, $43.0 million of stock-based compensation, and $4.2 million of non-cash operating expenses, depreciation and investment accretion costs.
These contracts do not contain any minimum purchase commitments and are cancellable at any time by us, generally upon 30 days prior written notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. We have also agreed to pay volume-based royalties to third-parties for use of software functionality under various licensing and related agreements.
These contracts do not contain any minimum purchase commitments and are cancellable at any time by us, generally upon 148 Table of Contents 30 days prior written notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.
As of December 31, 2024, we had an accumulated deficit of $525.5 million.
As of December 31, 2025, we had an accumulated deficit of $628.8 million.
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.
While we have incurred costs associated with discovery efforts since late 2017, we have recognized and expect to continue to recognize revenues in the future if and when milestones are considered probable of achievement and there is not a risk of significant revenue reversal, or when they are achieved.

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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, 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
Biggest changeOur cash balances and outstanding vendor invoices denominated in foreign currencies were not material as of December 31, 2025 and 2024, 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. 152 Table of Contents
We also contract with certain vendors that are located outside of the United States whose invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Our hedging activity related to our foreign currency exchange rate risk is immaterial.
We also contract with certain vendors that are located outside of the United States whose invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Our hedging activity related to our foreign currency 151 Table of Contents exchange rate risk is immaterial.

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