Profile

The drug discovery process takes about $1 billion dollars to develop a new drug. This can take years and still 90% of the drugs that enter the clinic fail. This company is combining physics based computer modeling with Machine Learning. They use the physics modeling software to create the data to teach the machine learning algorithms. This allows them to design and predict molecules for drug discovery. They expanding this by adding other software to help improve the drug development process. This can help improve the success rates of drugs that enter the clinic while reducing the amount of cost it takes to validate drug targets before entering the clinic. They currently license this software to other companies across several industries to develop chemical compounds. Now they are using it to develop their own pipeline of wholly owned drugs.

Management

I have been following Schrodinger for about a year now. I think Ramy Farid is a solid CEO. He is focused on the tech and software side of the company. He seems like a good business person with running software sales. They hired Karen Akinsanya to run the biotech side of the business for drug discovery. I think she does a great job on science and drug discovery. I just wish they focused more on the biotech side as it's where the biggest potential exists.

Science

SGR-1505 is their first drug for MALT1. This is a Caspase Activation and Recruitment Domain (CARD). This plays a role in B cell activation and cytokine production. This plays a role in some B cell related cancers which are driven by this signaling pathway. There is no data yet from this program, but it is opening sites now for the dose escalation study.

SGR-2291 is their second drug for CDC7. This plays a role in the cell cycle and the initiation of DNA replication. It could partner with current CDK4/6 inhibitors which do about $5 billion a year in sales. This is IND enabling studies now.

SGR-3515 is their Wee1 drug. This target is one that has been attempted before by other companies, and it hasn't done so well. Those companies did not have this level of software assisted engineering. We will have to wait and see the data, but there is always room for this to succeed where others have failed. This plays a role in the cell cycle. This comes in during the last cell checkpoint before moving into mitosis. They have finally selected a lead drug and will move it into IND enabling studies.

LRRK is a drug target for Parkinson's Disease. They plan to advance a target for this program in 2024.

Valuation

Cash $567 million with Nimbus Distribution of $111 million

Sales are projected to be $250 million in revenues for 2023 with their software side of the business. The classic Price to Sales for this space is around 10x. That gets you $2.5 billion valuations on the forward sales.

SGR-1505 could be upward of $750 million for B cell related cancers. It won't work in all B cell cancers. It will be a subset that is driven by MALT1 signaling. Even so, there are limited targeted therapies for those patients. If I give it a .1 multiplier since it has no data, I would get $75 million value.

SGR-2291 could do well over $1 billion in sales if it works well with CDK4/6 inhibitors which earn about $5 billion a year. Even if it is only used in a small percentage of those patients, it could reach that $1 billion sales potential. This is still in development so I would only give it a .1 multiplier. That puts it at about $100 million in value.

SGR-3515 will highly depend on how this drug works out as many other drugs have failed in Wee1. I won't give any value to this program until we see some data to validate the drug they picked.

All in, that is a $3.242 billion market cap. Based on the 71.5 million shares outstanding, that comes to $45.34.

Partnerships

BMS partnership for oncology, immunology and neurology. They can receive up to $2.7 billion in milestones under these programs. They also get royalties in the mid single digits to low double digits.

Zai Labs has collaboration for world wide drug discovery in Oncology and DNA damage response. Schrodinger can elect to participate in 50% of the US if they opt in. They get up to $338 million in milestones and royalties on sales outside the US.

Lilly partnership for drugs against a specific target that is not disclosed. They can get up to $425 million in milestones. They can get low single digit to low double digit royalties on these programs.

Takeda has an option to license oncology products. They can opt to acquire a program during development, but details are not disclosed.

Events

SGR-1505 Phase 1 Enrolling for Dose Escalation

SGR-2291 IND Enabling Studies

SGR-3515 Undergoing Target Selection

Data Readouts

No Clinical Data Yet.

Company Website Links

Press Releases

Events & Presentations

SEC Filings