Schrödinger, Inc. (SDGR) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed mixed sentiments. While there is optimism about long-term profitability and strategic partnerships, challenges such as delayed software growth and uncertain monetization timelines for new projects persist. The company's focus on discovery partnerships and reduced expenses are positive, but the lack of concrete guidance on key initiatives tempers enthusiasm. Given the market cap, the stock price is likely to remain stable in the short term, with a neutral prediction.
Key Financial Performance
Total Revenue $54 million, a 54% increase from the third quarter of 2024, reflecting strong execution across the business.
Software Revenue $40.9 million, representing 28% year-over-year growth, driven by higher revenue from hosted contracts, on-premise renewals, and contribution revenue from the grant related to the predictive toxicology initiative.
Drug Discovery Revenue $13.5 million compared to $3.4 million in Q3 2024, reflecting continued successful execution across the expanded portfolio of collaborations.
Software Gross Margin 73% for both Q3 2025 and Q3 2024, indicating stable profitability in the software segment.
R&D Expenses $42.8 million in Q3 2025, a 16% decrease from $51 million in Q3 2024, primarily due to lower employee-related expenses and the shift of predictive toxicology expenses into software cost of goods sold.
Sales and Marketing Expense $9.5 million, an 8% decrease compared to Q3 2024, primarily due to lower employee-related expenses.
G&A Expenses $21.7 million, a 13% decrease compared to Q3 2024, primarily due to lower employee-related expenses.
Total Operating Expenses $74 million, a decrease of 14% compared to Q3 2024, driven by reductions in R&D, sales and marketing, and G&A expenses.
Total Other Income $13 million compared to $30 million in Q3 2024, due to mark-to-market changes in equity investments and currency fluctuations.
Net Loss $33 million or $0.45 per diluted share versus a net loss of $38 million or $0.52 per diluted share in Q3 2024, reflecting improved financial performance.
Cash and Equivalents $401 million as of September 30, 2025, indicating strong liquidity.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
SGR-1505 (MALT1 inhibitor): Progress in Phase I package completion and clinical updates presented at the American Society of Hematology Conference. Demonstrated potential as a best-in-class treatment for relapsed/refractory B-cell malignancies.
SGR-3515 (Wee1/Myt1 co-inhibitor): Phase I dose escalation study ongoing for advanced solid tumors. Initial clinical data expected in H1 2026.
SGR-5573 (EGFR inhibitor): Pre-clinical data presented, showing potency against resistant EGFR variants and robust antitumor activity in brain metastases models.
SGR-6016 (NLRP3 inhibitor): Development candidate selected with potential best-in-class attributes, including brain penetrance and strong pre-clinical profile.
Software Revenue Growth: Updated guidance to 8%-13% for 2025 due to delays in pharma scale-up opportunities. Strong demand for computational solutions and AI integration in drug discovery.
Drug Discovery Revenue: Increased guidance to $49M-$52M for 2025, reflecting successful execution in collaborative programs.
Expense Management: Achieved $30M expense reduction in May, with additional savings expected in 2026. Total operating expenses decreased by 14% YoY in Q3 2025.
Platform Advancements: Released 2025-4 software update with enhancements for bifunctional degraders and predictive toxicology solutions. Expanded off-target support in the platform.
Shift in Clinical Development Strategy: Decision to not independently advance internal discovery programs into the clinic, focusing instead on strategic partnerships.
Focus on AI and Computational Drug Discovery: Positioned at the forefront of integrating computational physics and AI for molecular discovery, leveraging high-quality simulated data.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Software revenue growth guidance update: The company revised its software revenue growth guidance for 2025 to 8%-13% from 10%-15%, citing delays in pharma scale-up opportunities and a slowdown in pharma discussions due to industry pressures.
Macroeconomic pressures: Macroeconomic pressures have impacted the industry, leading to delays in customer engagements and affecting the timing of revenue realization.
Long sales cycle for scale-up opportunities: The relatively long sales cycle for pharma scale-up opportunities is causing delays in revenue growth.
Reduction in internal discovery programs: The company decided not to advance internal discovery programs into the clinic independently, which could limit its ability to capitalize on certain opportunities.
Expense reduction and operational efficiency: While the $30 million expense reduction improves operational efficiency, it also reflects a scaling back of certain activities, which may impact growth potential.
Dependence on strategic partnerships: The company is focusing on securing strategic partnerships for mid and late-stage development of its programs, which introduces dependency on external entities for success.
Industry pressures on biotech sector: The biotech sector is experiencing pressures, including challenges in capital markets, M&A, and new capital formation, which could impact the company's growth opportunities.
Regulatory and clinical trial risks: The company faces risks related to the timing and outcomes of clinical trials, as well as regulatory approvals for its drug candidates.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Software Revenue Growth Guidance for 2025: Updated to 8% to 13% from the previous 10% to 15%, reflecting current expectations regarding the timing of certain pharma scale-up opportunities.
Drug Discovery Revenue Guidance for 2025: Increased to $49 million to $52 million, slightly exceeding the prior expectation of $45 million to $50 million.
Software Gross Margin Guidance for 2025: Expected to be 73% to 75%, adjusted from the previous 74% to 75%, reflecting changes in software revenue expectations and a relatively fixed cost structure.
Expense Guidance for 2025: Operating expenses are expected to be lower than 2024, with cash used in operating activities significantly reduced compared to 2024.
Clinical Data for SGR-3515: Initial clinical data for the Wee1/Myt1 co-inhibitor is now expected in the first half of 2026, allowing more time for analysis and assembly of Phase I data.
Strategic Partnership for SGR-1505: Focus on securing a strategic partnership to ensure dedicated resources for mid and late-stage development of the MALT1 inhibitor.
NLRP3 Program Development: SGR-6016 selected as a development candidate, with potential best-in-class attributes, including brain penetrance and an encouraging pre-clinical profile.
Long-term Growth Outlook: Optimistic about long-term growth potential as industry pressures stabilize, with early signals of recovery in the biotech sector, including capital markets and M&A activities.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What are the implications of the guidance regarding reduced spend year-over-year and trimming of OpEx?
A:The company announced a $30 million expense reduction in May, achieving more than half of that goal and expecting to achieve the full amount by next year. Additionally, clinical intentions will result in another $40 million reduction, improving the profitability profile. However, no specific guidance on long-term OpEx trajectory was provided.
Q:Do you think of formal profitability either in GAAP or cash terms as a meaningful milestone to pursue?
A:Yes, formal profitability is a meaningful milestone. The company has not raised external capital since 2020 and has generated $600 million in cash over the last 5 years through software and drug discovery revenue. They are focused on long-term profitability and improving their profile.
Q:What has changed regarding the slowdown in software growth and customer discussions?
A:The company lowered software guidance by 2% due to delays in pharma scale-up opportunities and challenges in the biotech sector. Conversations with customers about scale-up opportunities have been delayed, and challenges in the biotech sector, such as layoffs and company shutdowns, have been greater than expected. However, there are early signs of recovery and new customer formation.
Q:How is the customer response to predictive toxicology, and when can monetization be expected?
A:The predictive toxicology project, funded by the Gates Foundation, is still in beta. There is significant interest and progress, but it is too early to discuss feedback or provide a timeline for monetization.
Q:What are the expectations regarding no longer advancing discovery into the clinic?
A:The company will continue working on discovery-stage programs and seek partnerships pre-clinic. This approach has been successful, as evidenced by a $150 million upfront deal with Novartis last year. The company has generated $600 million over the last 5 years from this model and is confident in its ability to create value through discovery partnerships.
Q:What is needed to sign new contracts with new customers and drive incremental growth?
A:Growth has been driven by existing customers, but there are encouraging signs in the biotech market. The company is having conversations around new capital formation opportunities and needs to advance these to close deals for greater visibility into growth opportunities.
Q:Can you expand on the delay announced for 3515 and when data can be expected?
A:The company decided to complete data collection and analysis related to PK safety, PD, and preliminary activity before providing an update. This has moved the timeline to the first half of 2026, potentially at a medical meeting.
Q:What are the plans for the SGR-6016 NLRP3 inhibitor?
A:The company has selected a development candidate with impressive properties, including brain penetration optimized using their Esol capability. Preliminary talks with potential partners are underway, and the program will be advanced in the context of a partnership.
Q:Why has the company decided not to do more clinical work on its own?
A:The decision is based on the success of discovery partnerships and the challenging environment for oncology program development. The company aims to focus on discovery efforts, which have been highly productive and value-creating, while advancing clinical programs in partnership with others.
Q:What is the update on the Novartis partnership?
A:The partnership has made excellent progress, with teams working well together on program advancement and incorporating Schrodinger's platform into Novartis' work. A portion of the company's revenue update is related to this progress.
Q:What are the key takeaways from the ASH disclosures for SGR-1505?
A:The ASH disclosures will provide updates on aggressive patients, including complete responses in aggressive lymphoma patients treated with monotherapy MALT1 inhibition. Genomic profiling of patients with sentinel mutations will also be presented, supporting the potential of MALT1 as an important medicine for lymphoma patients.
Q:How should the broader commercial rollout for predictive toxicology be viewed?
A:The rollout is expected to be additive for existing customers and tap into new budgets, particularly toxicology groups. This may require a separate sales strategy, but growth is anticipated from both existing and new customer bases.
Q:What is the rationale behind the shift to exclusively discovery-stage partnerships?
A:The shift is driven by the success of discovery partnerships, the challenging environment for clinical development, and the need to prioritize resources. Discovery partnerships allow the company to work on more programs and create value without the risks of clinical development.
Q:Will the economic structure of future discovery-stage partnerships be similar to existing ones?
A:The economics of partnerships have improved over time due to the company's track record and platform efficacy. While future terms are not guaranteed to improve, the expectation is that they will continue to be favorable.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on the long-term OpEx trajectory and the exact timeline for monetizing predictive toxicology. Additionally, they did not confirm the venue or exact timing for the 3515 data update in 2026.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI machine
Affairs Officer
Chief Corporate
Chief Partnerships
Head Investor
Head Therapeutics
Myt co
NLRP
Officer Head
President Head
RD Chief
Richie
Software margin
Therapeutics RD
Wee Myt
afternoon
biology
brain
class
conversation
cost good
discovery development
domain applicability
efficiency
expense reduction
machine learning
model
physic
product profile
profitability profile
progress date
quality
reduction saving
remainder
scale opportunity
scale use
selectivity
software expectation
term potential
term profitability
variant
SDGR Transcript
Schrödinger, Inc. (SDGR) Presents at Bank of America Global Healthcare Conference 2026 Transcript
Neutral5-13
Schrödinger, Inc. (SDGR) Q1 2026 Earnings Call Transcript
Positive5-5
The company reported strong financial metrics, with a 20% YoY revenue increase and a 25% rise in net income, driven by demand for software solutions. Despite regulatory and competitive risks, the strategic focus on software growth and therapeutics advancement is promising. The positive cash flow and effective cost management further support a positive outlook. However, lack of detailed guidance and unclear Q&A responses slightly temper the enthusiasm, keeping the sentiment from reaching 'Strong positive.' Given the market cap, the stock is likely to see a moderate positive reaction.
Schrödinger, Inc. (SDGR) Presents at TD Cowen 46th Annual Health Care Conference Transcript
Neutral3-6
Schrödinger, Inc. (SDGR) Q4 2025 Earnings Call Transcript
Positive2-25
The earnings call summary shows solid financial performance with growth in software and materials science revenue, positive customer feedback on new products, and strategic partnerships. The Q&A section highlights ongoing collaborations, AI integration, and a positive outlook on hosted solutions. Despite some unclear responses, the overall sentiment is positive due to revenue growth, strategic initiatives, and optimistic guidance, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
SDGR Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
