Schrödinger, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter results. Amounts are in U.S. dollars.
Business context
Schrödinger sells physics-based molecular discovery software and applies its platform to collaborative and wholly owned drug-discovery programs. Software remains the principal revenue source; the company has no approved drug products and had not advanced an internal candidate into clinical development by year-end.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $137.9 million | $108.1 million |
| Software revenue | $113.2 million (+22%) | $92.5 million |
| Drug-discovery revenue | $24.7 million (+59%) | $15.6 million |
| Gross profit | $65.6 million | $63.5 million |
| Software gross margin | 77% | 81% |
| Operating loss | $111.4 million | $60.9 million |
| Net loss | $101.2 million | $26.6 million |
| Operating cash flow | $(70.7) million | $16.8 million |
Fourth-quarter 2021 revenue was $46.2 million, versus $33.0 million in fourth-quarter 2020; net loss was $30.7 million, versus $11.6 million. Fourth-quarter operating loss was $22.5 million. Annual net loss per share was $1.42, compared with $0.41 in 2020.
Research and development expense rose 41% to $90.9 million; general and administrative expense rose 53% to $64.0 million. The wider operating loss reflects higher operating costs and investment in internal programs. Net loss also reflects volatile investment-related gains: the fair-value gain was $11.4 million in 2021, down from $28.3 million in 2020.
Liquidity, obligations and balance sheet
At December 31, 2021, cash, cash equivalents and marketable securities totaled $576.5 million; including $3.0 million of restricted cash, the company reported $579.5 million of these resources. Total assets were $756.5 million and total liabilities were $199.4 million. No conventional borrowings are listed; lease liabilities were $79.9 million, including current and long-term amounts.
Management said existing cash, cash equivalents and marketable securities should fund operating expenses and capital expenditures for at least 24 months, based on assumptions that could change. The company reported $70.7 million of cash used in operations in 2021. Contractual obligations included $132.2 million of future operating lease payments and a five-year cloud-computing agreement with a $60 million minimum payment obligation.
Changes, outlook and key risks
- Revenue increased 28% year over year, led by software growth and increased collaboration revenue. Software gross margin declined four percentage points, partly due to investment in larger customer deployments and higher royalties.
- Customer indicators strengthened: 190 customers had annual contract value above $100,000, up from 153; retention for this group was 98%. The top 20 pharmaceutical companies all licensed the software.
- The BMS collaboration included a $55 million upfront payment and potential milestone payments of up to $2.7 billion, plus tiered royalties. Much of the upfront payment remained deferred; potential milestones and royalties are contingent and are not assured.
- Management expected to submit an IND application for MALT1 in the first half of 2022 and, subject to FDA clearance, begin a Phase 1 trial in the second half of 2022. CDC7 IND submission and Phase 1 plans were for 2023; WEE1 IND submission was also planned for 2023, subject to favorable enabling-study results. These are forward-looking plans, not guidance on financial results.
- The company reported no material COVID-19 impact on its 2021 business, but said pandemic-related CRO and manufacturing delays affected preclinical work, including CDC7. It also identified risks from clinical and regulatory uncertainty, collaboration dependence, competition, customer concentration, cybersecurity and protection of customer intellectual property.
- In January 2022, after year-end, Schrödinger acquired XTAL BioStructures for approximately $6.5 million, including working-capital adjustment and cash acquired. It also entered additional leases; these may add costs and integration demands.
- KPMG issued unqualified audit opinions on the financial statements and internal control over financial reporting. The filing reports no material legal proceedings.
Investor verification priorities
- Check the audited statements and cash-flow note for cash burn, investment maturities, and the composition and availability of the reported liquidity.
- Assess how much future revenue depends on software renewals, customer expansion, collaboration milestones, and recognition of deferred revenue.
- Track software gross margin and operating-expense growth, especially R&D and stock-based compensation.
- Verify progress against MALT1, CDC7 and WEE1 development timelines, including FDA clearance and any further CRO or manufacturing delays.
- Review lease and cloud commitments, the XTAL acquisition’s costs and integration, and the risks associated with equity investments and collaboration terms.