10-K: Schrodinger Reports Strong Revenue Growth, Narrows Losses in 2025

Schrodinger, Inc. reported a 23% increase in total revenue to $255.9 million and significantly reduced its net loss to $103.3 million in 2025, driven by robust software sales and drug discovery collaborations, despite discontinuing a key clinical program.

Summary

• Total revenue for the year ended December 31, 2025, increased by 23% to $255.9 million, up from $207.5 million in 2024.
• Net loss for 2025 was $103.3 million, a significant improvement from a net loss of $187.1 million in 2024.
• Software products and services revenue grew by 11% to $199.5 million in 2025, compared to $180.3 million in 2024.
• Drug discovery revenue surged by 107% to $56.4 million in 2025, up from $27.2 million in 2024.
• Annual Contract Value (ACV) for the top 20 pharmaceutical companies increased to $80.8 million in 2025 from $70.0 million in 2024.
• The average ACV for commercial customers with over $1.0 million ACV grew to $3.9 million in 2025, from $3.3 million in 2024.
• Gross dollar retention rate for commercial customers remained high at 96% for both 2025 and 2024.
• Net dollar retention rate for commercial customers was 100% in 2025, compared to 113% in 2024.
• The company initiated dosing in a Phase 1 clinical trial for SGR-3515 (Wee1/Myt1 inhibitor) in patients with advanced solid tumors in July 2024, with initial data anticipated in Q2 2026.
• SGR-1505 (MALT1 inhibitor) Phase 1 clinical trial in B-cell malignancies reported initial data in June 2025 and additional data in December 2025, showing it was generally well-tolerated with preliminary clinical activity.
• The clinical development program for SGR-2921 (CDC7 inhibitor) was discontinued in August 2025 due to safety concerns, including two emergent deaths in AML patients.
• A research collaboration and license agreement with Novartis Pharma AG was entered into in November 2024, including a $150.0 million upfront payment received in January 2025 and potential milestones up to $2.272 billion.
• The company restructured operations in May 2025, reducing headcount by approximately 60 employees (7% of full-time employees) and implementing cost reductions expected to save $30 million annually.
• A predictive toxicology initiative, funded by $19.5 million in grants from the Bill & Melinda Gates Foundation, is advancing, with a beta version available to customers and commercial launch expected in 2026.
• Cash, cash equivalents, restricted cash, and marketable securities totaled $402.3 million as of December 31, 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive development, with strong revenue growth and a significant reduction in net loss. While the discontinuation of SGR-2921 is a setback, the strategic shift towards partnerships for clinical programs and the substantial Novartis collaboration provide a clear path forward and de-risk proprietary development.

Positives

• Total revenue increased by 23% to $255.9 million in 2025, demonstrating strong top-line growth.
• Net loss significantly narrowed to $103.3 million in 2025 from $187.1 million in 2024, indicating improved financial efficiency.
• Software products and services revenue grew by 11% to $199.5 million, reflecting continued adoption of the computational platform.
• Drug discovery revenue more than doubled, increasing by 107% to $56.4 million, driven by new and existing collaborations.
• Annual Contract Value (ACV) from top 20 pharmaceutical companies increased to $80.8 million, showing deeper penetration within key accounts.
• The average ACV for commercial customers with over $1.0 million ACV grew to $3.9 million, indicating successful expansion within larger customer accounts.
• High gross dollar retention rate of 96% for commercial customers highlights the stickiness and value of software solutions.
• The Novartis collaboration includes a $150.0 million upfront payment and potential milestones up to $2.272 billion, providing substantial future revenue potential.
• SGR-1505 received Fast Track designation from the FDA in June 2025 for Waldenström macroglobulinemia and Orphan Drug Designation in August and October 2023/2025 for mantle cell lymphoma and WM, respectively.
• Initial clinical data for SGR-1505 showed it was generally well-tolerated with preliminary anti-tumor activity, including objective responses in WM and a complete response in ABC-DLBCL.
• The predictive toxicology initiative, supported by $19.5 million in grants from the Bill & Melinda Gates Foundation, is progressing towards a commercial launch in 2026, expanding platform capabilities.
• The company's cash, cash equivalents, restricted cash, and marketable securities of $402.3 million are projected to fund operations for at least the next 24 months.

Negatives

• The company reported a net loss of $103.3 million in 2025, continuing a history of significant operating losses.
• The clinical development program for SGR-2921 (CDC7 inhibitor) was discontinued in August 2025 due to safety concerns, including two emergent deaths in AML patients, representing a setback in the proprietary pipeline.
• Net dollar retention rate for commercial customers decreased to 100% in 2025 from 113% in 2024, indicating less expansion from existing customers compared to the prior year.
• On-premise software revenue decreased by 2% to $101.4 million, primarily due to timing of multi-year contracts and the ongoing transition to hosted software.
• The restructuring in May 2025, while aimed at efficiency, involved a reduction of approximately 60 employees (7% of full-time employees), which could impact morale or operational continuity.
• The company has very limited experience in clinical development, which poses a risk to the successful advancement of its proprietary drug programs.
• The company relies heavily on third-party CROs and manufacturers, which reduces control and introduces risks of delays or unsatisfactory performance.

Risks

• Continued significant operating losses are expected over the next several years, and profitability is not assured.
• Inability to increase software sales, grow drug discovery collaboration revenue, or successfully develop and commercialize drug products could prevent sustained profitability.
• Quarterly and annual results may fluctuate significantly due to factors like customer renewal rates, timing of large contracts, operating expenses, and success of drug discovery collaborations.
• Reliance on existing customers for software renewals and additional purchases, with no obligation for customers to renew after license terms expire.
• High competition in molecular discovery and design software market, including from well-established providers and companies utilizing AI, could adversely affect software sales.
• Uncertainty of return on investment in drug discovery collaborations, as collaborators have discretion over development and commercialization efforts, and milestone payments are not guaranteed.
• Failure to successfully identify, discover, or develop product candidates, or to capitalize on programs with greater commercial opportunity, could harm business prospects.
• Limited experience in clinical development may adversely impact the success rate of advancing proprietary drug programs.
• Need for additional capital to fund operations; inability to raise capital on acceptable terms or generate sufficient cash flows could harm the business.
• Challenges in patient enrollment for clinical trials, which could lead to significant delays or abandonment of trials.
• Reliance on third parties (CROs, CMOs) for clinical trials and manufacturing, which may not perform satisfactorily or meet deadlines, leading to delays or increased costs.
• Preclinical and early clinical trial outcomes may not predict success in later-stage trials, and results may not satisfy regulatory requirements.
• Risk of losing intellectual property rights if obligations under license agreements (e.g., with Columbia University) are not met, or due to disputes over intellectual property.
• Breaches of security measures or unauthorized access to customer data could lead to loss of information, litigation, reputational damage, and significant liabilities.
• Inability to retain key executives and attract/retain qualified personnel, especially in a competitive talent market, could limit growth.
• Managing multiple business strategies (software, collaborative drug discovery, proprietary drug discovery) and growth may lead to operational difficulties and disrupt synergies.
• Executive officers, directors, and principal stockholders have significant influence over matters submitted to stockholders for approval.
• Volatility in the company's stock price due to various factors, including clinical trial results, competitive developments, and financial performance.
• Actual operating results may differ significantly from management guidance.
• Failure to achieve projected discovery and development milestones and other key events in announced timeframes could adversely impact the business and stock price.
• Changes in tax laws or their interpretation could adversely affect business and financial condition, including limitations on NOLs and tax credit carryforwards.
• International operations expose the company to regulatory, economic, and political risks, including data privacy laws, trade policies, and geopolitical instability.
• Disruptions at the FDA and other government agencies (e.g., funding cuts, personnel losses, regulatory reform, government shutdowns) could delay product development and approvals.
• Current and future legislation regarding pharmaceutical prices and healthcare reform (e.g., IRA, MFN pricing proposals) could increase costs, reduce reimbursement, and impact demand for products.
• Compliance with global privacy and data security requirements (e.g., GDPR, CCPA, CPRA) could result in additional costs, liabilities, and restrictions on data processing.

Future Outlook

Schrodinger plans to continue advancing its physics-based computational platform, growing its software business, and progressing collaborative drug discovery programs. For proprietary drug discovery, the company intends to explore strategic partnerships for SGR-1505 and SGR-3515 beyond Phase 1 clinical trials, and does not plan to independently initiate additional clinical trials for other preclinical programs. The predictive toxicology solution is expected to launch commercially in 2026. The restructuring in May 2025 is anticipated to result in annualized operating expense savings of approximately $30 million. The company believes its current cash and marketable securities are sufficient to fund operations for at least the next 24 months.

Management Comments

• We believe that our computational platform is far ahead of that of our nearest competitors and we intend to maintain our industry-leading position by introducing new capabilities and refining our software.
• Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future growth.
• We plan to explore strategic partnerships for the SGR-1505 and SGR-3515 programs to advance the development of these programs beyond our ongoing Phase 1 clinical trials.
• Beyond our planned investments to complete our ongoing Phase 1 dose-escalation clinical trials of SGR-1505 and SGR-3515, we do not intend to initiate additional clinical trials or advance our other proprietary preclinical programs into clinical trials independently.
• The phasing out of independent clinical development activities and associated cost reductions, together with the restructuring of our operations we announced in May 2025, are expected to result in total savings of approximately $70 million and further improve and enhance our operational efficiency.
• We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months.

Industry Context

StockSavvy.ai notes that Schrodinger's continued growth in software revenue, particularly from top pharmaceutical companies, indicates a strong market demand for advanced computational platforms in drug discovery. The emphasis on physics-based methods combined with machine learning positions Schrodinger uniquely against competitors primarily focused on AI. The discontinuation of SGR-2921 highlights the inherent high-risk nature of drug development, even with advanced computational tools, a common challenge across the biopharmaceutical industry. The strategic shift to seek partnerships for proprietary clinical programs beyond Phase 1 aligns with a trend among smaller biotech firms to de-risk and leverage larger pharmaceutical companies' resources for late-stage development and commercialization. The predictive toxicology initiative addresses a critical industry need to reduce late-stage development failures, a significant cost driver in drug discovery.

Comparison to Industry Standards

• Schrodinger's platform was tested against traditional methods for selecting tight-binding molecules and resulted in an eight-fold increase in the number of molecules with desired affinity, demonstrating superior efficiency compared to conventional approaches.
• FEP+ calculations approach the accuracy of experimental laboratory assays for predicting binding affinity, offering a significant advantage in speed (hours vs. weeks) over traditional experimental synthesis and testing.
• The ability to computationally evaluate billions of molecules per day far exceeds traditional drug discovery methods that typically synthesize and evaluate approximately one thousand molecules per year, indicating a substantial scale advantage.
• SGR-3515 demonstrated an improved selectivity profile and better target engagement activity against Wee1 and Myt1 in preclinical studies compared to competitor Wee1 inhibitors like ZN-c3 (Zentalis Pharmaceuticals) and RP-6306 (Debiopharm International S.A.), suggesting a potentially differentiated product candidate in a competitive oncology space.
• The company's gross dollar retention rate of 96% for commercial customers is strong, indicating high customer satisfaction and loyalty, which is competitive within the enterprise software sector.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently subject to any material legal proceedings.

Related Party Transactions

• Consulting fees of $437,000 were paid to a member of the board of directors (Richard Friesner) in 2025.
• Revenue of $20,000 was recognized from the Bill & Melinda Gates Foundation for licenses and services provided to third-party organizations in 2025.
• Drug discovery contribution revenue of $1,281,000 was recognized from the Bill & Melinda Gates Foundation for accelerating drug discovery in women's health in 2025.
• Software contribution revenue of $13,788,000 was recognized from the Bill & Melinda Gates Foundation for the predictive toxicology initiative in 2025.
• Contribution revenue of $2,200,000 was recognized from Gates Ventures, LLC (an entity under common control with a significant stockholder) in 2025.
• Revenue of $88,000 was recognized from Columbia University for additional license agreements in 2025, with $100,000 outstanding receivables as of December 31, 2025.

Stakeholder Impact

• Shareholders: Potential for increased value due to revenue growth, reduced losses, and strategic collaborations, but also risk from clinical program discontinuation and stock price volatility.
• Employees: Impacted by restructuring and headcount reduction (approximately 60 employees), but also benefit from continued investment in the computational platform and potential for new drug discovery programs.
• Customers (Software): Benefit from enhanced software solutions, new capabilities like predictive toxicology, and continued support, driving increased adoption and ACV.
• Collaborators (Drug Discovery): Benefit from Schrodinger's platform and expertise, with potential for significant milestone payments and royalties from successful drug development.
• Patients: Potential for new, high-quality therapeutics from successful drug discovery programs, but also disappointment from program discontinuations like SGR-2921.
• Regulatory Authorities: Ongoing engagement with FDA and other agencies for clinical trial approvals, designations, and compliance with evolving regulations.

Next Steps

• Continue to invest in and develop the computational platform and software solutions.
• Advance research and development efforts for proprietary drug discovery programs.
• Conduct preclinical studies and clinical trials for product candidates, including ongoing Phase 1 trials for SGR-1505 and SGR-3515.
• Explore strategic partnerships for SGR-1505 and SGR-3515 programs to advance development beyond Phase 1 clinical trials.
• Launch the predictive toxicology solution commercially in 2026.
• Seek additional collaboration agreements to advance drug discovery programs.
• Progress other proprietary programs in oncology, immunology, inflammation, and neurology through discovery or IND-enabling studies.
• Evaluate new collaborative programs that fit selection criteria and leverage complementary capabilities.
• Monitor and comply with evolving regulatory requirements, including those related to diversity action plans in clinical trials and pharmaceutical pricing legislation.

Key Dates

Recommendation

Schrodinger's 2025 results show significant progress in revenue growth and loss reduction, driven by strong software adoption and a major collaboration with Novartis. The strategic pivot to partner proprietary clinical programs beyond Phase 1, while prudent for risk management, indicates a more capital-efficient but potentially slower path to market for internal assets. The discontinuation of SGR-2921 is a notable setback, highlighting the inherent risks in drug development. While the company's computational platform is highly differentiated and gaining traction, the stock's valuation likely already reflects much of this potential. Given the mixed bag of strong operational improvements and strategic de-risking alongside the inherent uncertainties of drug development and the recent clinical setback, a 'hold' recommendation is appropriate for seasoned investors awaiting further clarity on the clinical pipeline's progression through partnerships and sustained profitability.

Keywords

Computational Drug Discovery, Molecular Modeling, Software Solutions, Drug Development, Materials Science, Biopharmaceutical Industry, Artificial Intelligence, Machine Learning, Physics-Based Platform, Clinical Trials, Preclinical Development, MALT1 Inhibitor, Wee1/Myt1 Inhibitor, SGR-1505, SGR-3515, Novartis Collaboration, Eli Lilly Collaboration, Orphan Drug Designation, Fast Track Designation, SEC Filing, 10-K, Financial Performance, Revenue Growth, Net Loss, Annual Contract Value, Intellectual Property, Biotechnology, Pharmaceuticals