Schrödinger Stock

Schrodinger, Inc. develops a differentiated, physics-based computational platform that enables discovery of high-quality, novel molecules for drug development and materials applications.

The company’s software platform is licensed by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. The company is applying its computational platform to advance a broad pipeline of drug discovery programs in collaboration with leading biopharmaceutical companies. In addition, the company uses its computational platform to discover novel molecules for its pipeline of proprietary drug discovery programs, which it is advancing through preclinical and clinical development.

The company offers its customers a variety of software solutions that accelerate all stages of molecule discovery, design, and optimization. The company had 222 customers, which represented 83% of its total ACV, for the years ended December 31, 2023. The widespread adoption of the company’s software, supported by its global team of sales, technical, and scientific personnel, has driven steady growth in its software revenue.

For the year ended December 31, 2023, the company had 54 customers. The company also leverages its platform and capabilities across a portfolio of collaborative and proprietary drug discovery programs spanning a wide range of disease targets and indications. The company’s drug discovery group, which it refers to as the Schrödinger therapeutics group, consists 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. The company has entered into drug discovery collaborations with biopharmaceutical companies under which its collaborators are pursuing research in a number of therapeutic areas, including programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immuno-oncology, cardiopulmonary disease and tuberculosis. When the company engages in drug discovery with these collaborators, it typically provides access to its platform and platform experts who assist the drug discovery collaborator in identifying molecules that have activity against one or more specified protein targets. The company’s collaborative programs generate drug discovery revenue, including upfront payments, research funding payments, and discovery and development milestones, and has the potential to produce additional commercial milestone payments, option fees, and royalties.

The company has an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which it 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.

In June 2022, the U.S. Food and Drug Administration, or FDA, cleared the company’s first investigational new drug application, or IND, for its MALT1 inhibitor, which it refers to as SGR-1505. The company has initiated dosing in a Phase 1 clinical trial of SGR-1505 in patients with relapsed or refractory B-cell lymphomas and it anticipates reporting initial data from the trial in late 2024 or 2025. The company also completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability and pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions. In the healthy volunteer trial, SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed. In the trial, the company observed that SGR-1505 achieved greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay at 100 mg twice a day (n=4), confirming target engagement and meeting the pharmacodynamic goals for the trial. Inhibition of IL-2 secretion is a marker for target engagement and pathway modulation as it is tightly linked to MALT1 and the downstream nuclear factor-kappa B signaling.

In July 2023, the FDA cleared the company’s IND for its CDC7 inhibitor, which it refers to as SGR-2921. We have initiated dosing in a Phase 1 clinical trial of SGR-2921 in patients with relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome, and it anticipates reporting initial data from the trial in late 2024 or 2025. The company is also advancing SGR-3515, its novel WEE1/MYT1 inhibitor for the treatment of solid tumors. The company expects to submit an IND to the FDA for SGR-3515 in the first half of 2024, subject to favorable data from ongoing IND-enabling studies, and it plans to initiate a Phase 1 clinical trial of SGR-3515 by the end of 2024, subject to receipt of regulatory clearance.

Strategy

The key elements of the company’s strategy include advancing the science that underlies its computational platform; growing and expanding its software business; advancing its collaborative programs; progressing its proprietary drug discovery programs; and leveraging the synergies between its businesses.

Platform

The company has developed a computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy. The company has built its platform on a foundation of rigorous, physics-based methods, combined with the rapid data processing and scaling advantages of machine learning, that together provide a significant advantage over traditional methods.

Recognition of the company’s scientific advances has come through customer adoption, in citations of publications in peer reviewed journals and in the progress of its collaborative and proprietary drug discovery programs. For example, the initial paper describing its ligand-protein docking program, Glide, published in 2004 is one of the most cited papers in the history of the Journal of Medicinal Chemistry, a premier journal in its field. The company’s computational platform is also applicable to new problems of interest and new fields of study.

Software Business

Overview

The company is the leading provider of computational software solutions for drug discovery to the biopharmaceutical industry. The widespread adoption of the company’s software is supported by an approximately 240-person global team of sales, technical, and scientific personnel. The company’s direct sales operations span across the United States, the European Union, United Kingdom, Japan, India, and South Korea, and it has sales distributors in other important markets, including China.

The company has a diverse and large existing customer base, ranging from startup biotechnology companies to the largest global pharmaceutical companies, as well as an increasing number of materials science customers. The company’s ten largest software customers represented approximately 42% of its software revenue in 2023, including one customer that makes up 14% of total software revenue. The company continues to expand its customer base as it provides education and information to increase the awareness of the potential of its computational platform across different industries. As of December 31, 2023, the company had 1,785 active customers, which it defines as the number of customers who had an ACV of at least $1,000 in a given fiscal year.

For example, in November 2023, the company entered into an expanded, three-year, software agreement with Eli Lilly and Company, or Lilly. The company provides advanced support to ensure full integration and optimization of the platform across Lilly’s research sites.

Software Solutions for Drug Discovery

The company offers its 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. The company’s licenses give its customers the ability to execute a certain number of calculations across specified software solutions. Certain of the company’s key software solutions are highlighted below, along with the particular stage of drug discovery in which they are employed.

Target Identification and Validation: the identification and evaluation of a protein target that might be worthwhile to pursue as the subject of a drug discovery campaign.

WaterMap characterizes the locations and energetics of water molecules occupying the binding site of, or solvating, a target protein. From this analysis, one can infer the druggability of a protein, as well as uncover opportunities to significantly increase binding affinity by exploiting the water structure in the binding site.

SiteMap allows binding site identification and evaluation to help locate potential protein binding sites, including allosteric sites, and predict the approximate druggability of those sites.

GlideEM, PrimeX and Phenix/OPLS4 enable optimization of intermediate quality experimental protein structures to a quality sufficient to drive structure-based drug discovery.

Hit Discovery: the identification of hit molecules.

FEP+ is the company’s free energy calculation software. In hit discovery, this software can be used to replace the central core of earlier known tight binding molecules to identify novel, highly potent molecules unavailable in library collections. Often these molecules have much higher binding affinity and have a better property profile than typical hit molecules. FEP+ can also be used to calculate absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context.

Glide is the company’s virtual screening program that is used to screen libraries of molecules to find hit molecules likely to bind a particular protein target in a specific conformation.

WScore is the company’s next-generation virtual screening program that utilizes a more accurate and robust description of protein-ligand interaction solvation effects. This and other novel features enable WScore 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. Lead optimization improves on the property profile of lead molecules by designing new analogs with improved potency, reduced off-target activities, and favorable physicochemical/metabolic properties.

FEP+ is the company’s free energy calculation software. In the hit to lead and lead optimization phases of drug discovery, FEP+ is used to predict the binding affinity of ligands to proteins with accuracy approaching that of physical experiments. It allows precise rank-ordering of large libraries of virtual molecules so that only the most potent molecules are synthesized in a program, which can save time and reduce cost. FEP+ can also be used to calculate the binding selectivity, solubility, and mutational resistance profiles of molecules, which are key properties for the optimization of bioavailability, toxicology, and efficacy.

DeepAutoQSAR uses modern machine-learning methods to produce predictive quantitative structure-activity relationship, or QSAR, models. This allows more accurate methods, such as FEP+, to be applied at a much greater scale but with less accuracy to much larger sets of molecules than would otherwise be possible and enables predictive QSAR models of other properties to be developed and deployed on drug discovery projects.

AutoDesigner is an enumeration tool that enables the rapid exploration of synthetically tractable ligands. When AutoDesigner is deployed in conjunction with multiparameter optimization, machine learning, and FEP+ simulations, it provides a streamlined approach to create and evaluate large sets of synthetically tractable, lead-like, potent ligands.

Software Solutions Used Throughout the Drug Discovery Process

LiveDesign is the company’s user-friendly enterprise informatics solution that enables interactive and collaborative molecule design, aggregation and sharing of data, and end-to-end discovery project coordination between chemists, modelers, and biologists.

Maestro is the company’s user-friendly modeling environment, which allows expert modelers to utilize its advanced modeling solutions.

Software Solutions for Materials Science

The company also sells software licenses to customers engaged in molecule design for industrial purposes. The software solutions for the company’s materials science customers leverage much of the same technology as its software for biopharmaceutical companies. In addition, similar to traditional drug discovery efforts, traditional approaches to discovering new molecules in these fields also suffer from long timelines, and it can take as long as 10 to 20 years to bring new materials to the market. The company focuses on leveraging its technology to transform the way new materials are discovered, and that materials science industries are only beginning to recognize the potential of computational methods. The company is continuing to build a team of subject matter experts to further drive adoption of its computational platform in each of the following areas in which it operates: mobile electronics and displays—organic electronics (OLED); aerospace and defense—polymers, composites; microelectronics—semiconductors, thin film processing; oil and gas—catalysis, reactivity; energy—alternative energy, batteries; and consumer packaged goods—soft matter, formulations.

As part of its ongoing efforts to further advance its software solutions for materials science applications, in June 2020, the company entered into a three-year agreement with Gates Ventures, LLC, or Gates Ventures, to develop and apply atomistic simulations methods to improve battery performance. In August 2023, the company extended the agreement with Gates Ventures for an additional three-year term at an increased scale. Furthermore, in March 2022, the company entered into a three-year collaboration with Eonix LLC, or Eonix, to accelerate the discovery and design of materials for safer, energy dense lithium ion batteries. Under the terms of this collaboration, the company received an equity stake in Eonix, and will be eligible to receive additional equity upon the successful completion of certain technical milestones.

Drug Discovery Business

Overview

The company is using its computational platform in both its collaborative and proprietary drug discovery programs. The company’s collaborative programs generate drug discovery revenue, including upfront payments, research funding payments, and discovery and development milestones, and has the potential to produce additional milestone payments, option fees, and future royalties. As of December 31, 2023, the company had 19 active collaborative drug discovery programs. The company defines an active collaborative drug discovery program as a program that it is actively progressing for, or together with, a collaborator of its, or a program that its collaborator is progressing and which it is eligible to receive milestone payments, option fees, and/or future royalties. Furthermore, as of December 31, 2023, the company had an aggregate of 12 collaborative programs for which it was eligible to receive future royalties on commercial sales.

The company tracks the aggregate number of collaborators which it has collaborated with, or partnered with, for drug discovery and development since 2018, and as of December 31, 2023, it had 17 collaborators.

Collaboration Agreement with Bristol-Myers Squibb Company (BMS)

In November 2020, the company entered into an exclusive, worldwide collaboration and license agreement with BMS, pursuant to which it and BMS agreed to collaborate in the discovery, research and preclinical development of small molecule compounds (other than protein-degrader compounds) for biological targets in the oncology, neurology and immunology therapeutic areas.

Proprietary Drug Discovery Programs

In 2018, the company began to develop a pipeline of proprietary drug discovery programs with the goal of using its platform to produce a portfolio of novel, high value therapeutics. The company’s initial programs were focused on discovering and developing inhibitors for targets in DNA damage response pathways and genetically defined cancers. Since then, the company has expanded into other therapeutic areas, including immunology and neurology. The company’s strategy is to pursue a number of proprietary programs and strategically evaluate on a program-by-program basis advancing them into preclinical and clinical development itself, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their clinical and commercial opportunities.

Approach to Target Selection

The company’s selection of targets is based on an extensive analysis of human targets and drug discovery programs. The company analyzes targets using automated methods at scale. Using this comprehensive analysis, the company has identified a large number of protein targets that are amenable to its technology. The company continues to evaluate a number of additional targets using this analysis.

SGR-1505: MALT1 Inhibitor

The company is advancing SGR-1505, its novel MALT1 inhibitor, for the treatment of patients with relapsed or refractory B-cell lymphomas. Constant activation of nuclear factor-kappa B, a key signaling molecule in B cells, is a hallmark of several subtypes of lymphoma. MALT1 is a key mediator of the nuclear factor-kappa B signaling pathway, the main driver of a subset of B-cell lymphomas, and functions by forming a complex with CARMA1 (Caspase recruitment domain-containing protein 11 also known as CARD-containing MAGUK protein 1) and BCL10 (B-cell lymphoma/leukemia 10) to mediate antigen receptor-induced lymphocyte activation. MALT1 is considered a potential therapeutic target for several subtypes of lymphomas and leukemias.

The company utilized its physics-based computational platform to enable the identification and advancement of multiple novel series of MALT1 inhibitors from hit finding to lead optimization. Combining multi-parameter optimization, FEP+, and machine learning, it was able to prioritize tight-binding compounds with drug-like properties, and identified multiple novel and distinct chemical series which showed strong anti-tumor activity, ultimately enabling it to select SGR-1505 as its development candidate in under two years.

Preclinical Development of SGR-1505

In preclinical studies, SGR-1505 showed anti-tumor activity in a MALT1 enzymatic assay and strong anti-proliferative effect on cell viability in a Bruton's tyrosine kinase, or BTK, inhibitor resistant OCI-LY3 B-cell non-Hodgkin’s lymphoma cell line, when compared to ibrutinib, a covalent BTK inhibitor.

In preclinical studies, SGR-1505 also demonstrated strong anti-tumor activities as a single agent in BTK inhibitor resistant OCI-LY3 cells and in BTK sensitive OCI-LY10 B-cell non-Hodgkin’s lymphoma in vivo cell-line derived xenograft (CDX) models.

SGR-1505 demonstrated strong anti-tumor activity in combination with ibrutinib in BTK inhibitor sensitive in vivo models, such as the ABC-DLBCL patient-derived xenograft (PDX) model LY2298 and the OCI-LY10 CDX model.

Clinical Development of SGR-1505

Phase 1 Clinical Trial of SGR-1505 in Patients with Relapsed or Refractory B-cell Lymphomas

The FDA cleared the company’s IND for SGR-1505 in June 2022. The company has initiated dosing in a Phase 1 clinical trial of SGR-1505, which is designed as an open-label, multi-center dose escalation clinical trial in patients with relapsed or refractory B-cell lymphomas. The company anticipates enrolling up to 52 patients in the United States and Europe with confirmed mature B-cell lymphomas who are 18 years or older and have a life expectancy of equal to or greater than 12 weeks. SGR-1505 will be administered orally. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose and/or recommended dose of SGR-1505. As of February 14, 2024, all patients dosed in the company’s Phase 1 clinical trial of SGR-1505 remained on study drug, and based on the adverse events reported to date, the safety and tolerability profile of SGR-1505 in patients appears to be consistent with the safety and tolerability profile observed in its Phase 1 clinical trial of SGR-1505 in healthy volunteers. The company anticipates reporting initial data from the trial in late 2024 or 2025.

Phase 1 Clinical Trial of SGR-1505 in Healthy Volunteers

The company completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability, pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions. SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed. Adverse events were primarily Grade 1 and not treatment related. Bilirubin elevations occurred in 27% of healthy volunteers but were not deemed to be clinically relevant.

SGR-2921: CDC7 Inhibitor

The company is advancing SGR-2921, its novel CDC7 inhibitor, for the treatment of relapsed or refractory acute myeloid leukemia or high risk myelodysplastic syndrome. CDC7 is a serine/threonine protein kinase that has been shown to play important roles in DNA replication initiation and in response to replication stress and DNA damage. CDC7 levels are high in certain tumors, including acute myeloid leukemia, or AML, and are thought to be linked to these cancer cells’ proliferative capacity and ability to bypass normal DNA damage responses. CDC7 phosphorylates and activates the enzymes responsible for DNA replication initiation and proteins involved in replication stress response.

Preclinical Development of SGR-2921

SGR-2921 demonstrated inhibition of recombinant human CDC7 in a biochemical kinase assay and in a biophysical assay, as measured by the average IC50 value, which is a measure of the potency of a compound in inhibiting specific biological functions. Further, SGR-2921 showed inhibition of the phosphorylation of the serine in position 53, or S53, of the protein MCM2, or pMCM2, a downstream substrate of CDC7, in COLO205, a colorectal cancer cell line, and in two acute myeloid leukemia cell lines, MV-4-11 and MOLM-16.

Clinical Development of SGR-2921

The FDA cleared the company’s IND for SGR-2921 in July 2023. The company has initiated dosing in its Phase 1 clinical trial of SGR-2921, which is designed as an open-label, multi-center dose escalation clinical trial in patients with relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome. The company anticipates enrolling up to 144 patients in the United States and Europe with a confirmed diagnosis of refractory acute myeloid leukemia or high-risk myelodysplastic syndrome who are 18 years or older and has a life expectancy equal to or greater than 8 weeks. SGR-2921 will be administered orally. To evaluate the effect of CYP3A4 inhibition on SGR-2921 exposure, patients will be enrolled into one of two staggered, parallel study treatment arms. Treatment Arm A will evaluate increasing dose levels of SGR-2921. Treatment Arm B will evaluate increasing dose levels of SGR-2921 with the concomitant administration of azole antifungals that are strong CYP3A4 inhibitors. Safety and tolerability must be demonstrated in treatment Arm A, at the first two dose levels before initiating treatment Arm B.

Patients will be treated at increasing doses of SGR-2921 until all dose levels have been investigated or any dose level is found to exceed the maximum tolerated dose. A recommended phase 2 dose will be selected from one of the tolerable dose levels which will not exceed the maximum tolerated dose. The trial is designed to evaluate the safety and tolerability of SGR-2921 as a monotherapy and to identify the recommended phase 2 dose, including the maximum tolerated dose. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and pharmacodynamics of SGR-2921 and investigating preliminary anti-tumor activity. The company anticipates reporting initial data from the Phase 1 clinical trial of SGR-2921 in late 2024 or 2025.

SGR-3515: WEE1/MYT1 Inhibitor

The company is advancing SGR-3515, its novel WEE1/MYT1 inhibitor for the treatment of solid tumors. WEE1 is a gatekeeper checkpoint kinase that prevents cellular progression through the cell cycle allowing time for DNA repair before cell division takes place. Inhibition of WEE1 allows for accumulation of DNA damage, triggering DNA breakage and apoptosis in tumor cells. Third party WEE1 inhibitors have shown clinically meaningful tumor regression with partial responses and stable disease in ovarian and uterine cancer in clinical trials. A third party WEE1 inhibitor is being studied in combinations with chemotherapy, PARP inhibitors, and immunotherapy. MYT1 inhibition is a potential cancer therapy as inhibition of MYT1 forces cells into premature unchecked mitosis resulting in cell death.

The company identified a number of tight-binding, selective WEE1/MYT1 inhibitor series using its computational platform and ultimately selected SGR-3515 as its development candidate. SGR-3515's physicochemical properties make it well suited for combinations with DNA damage response inhibitors, such as PARP and ATR inhibitors and other targeted therapies for the treatment of ovarian, colorectal, breast, and other solid tumors.

The company has benchmarked SGR-3515 against AZD1775, a WEE1 inhibitor from AstraZeneca, and ZN-c3, a WEE1 inhibitor being advanced by Zentalis Pharmaceuticals, Inc., or Zentalis, and SGR-3515 demonstrated an improved selectivity profile.

SGR-3515 has also shown comparable or better effects on the viability of tumor cells in the A427 non-small cell lung cancer cell line compared to AZD1775 and ZN-c3 in the company’s preclinical studies. SGR-3515 also demonstrated robust and sustainable anti-tumor activity in vivo in A427 and OVCAR3 tumor models.

The company plans to submit an IND application to the FDA for SGR-3515 in the first half of 2024, subject to favorable data from IND-enabling studies, and it plans to initiate a Phase 1 clinical trial of SGR-3515 by the end of 2024, subject to receipt of regulatory clearance.

Discovery Programs

The company is also progressing a number of other programs in the areas of oncology, immunology, and neurology and a number of undisclosed programs in multiple therapeutic areas.

PRMT5-MTA: PRMT5-MTA inhibition has demonstrated clinical responses in both hematologic and solid tumors with improved safety versus PRMT5 inhibitors due to a synthetic lethal targeting of cancer cells with MTAP-deletions. The company has identified selective, potent PRMT5-MTA inhibitors with potential applications in solid tumors, brain metastases and primary CNS tumors.

EGFRC797S: EGFR inhibitors are first-line standard of care agents for advanced non-small cell lung cancer patients with activating EGFR mutations. The company has identified multiple EGFRC797S inhibitors with potential to treat patients whose disease progressed following first-line treatment, potentially achieving deeper, more durable responses through new combination regimens.

NLRP3: NLRP3 is a validated target, and mutations in the NLRP3 gene are associated with a broad spectrum of inflammatory and auto-immune diseases. The company has identified structurally distinct, selective, NLRP3 inhibitors with anti-inflammatory activity in preclinical models, and it is continuing to optimize peripheral and brain-penetrant lead molecules.

LRRK2: LRRK2, a genetically validated target, is a large multifunctional kinase enzyme and mutations in the LRRK2 gene have been shown to be associated with the development of Parkinson’s disease. In 2022, the company generated cryo-electron microscopy structures of LRRK2, which have helped it to accelerate the identification of novel LRRK2 inhibitors.

In January 2022, the company acquired XTAL BioStructures, Inc., a company that provides structural biology services, including biophysical methods, protein production and purification, and X-ray crystallography, which have augmented its ability to produce high quality target structures for its proprietary drug discovery programs.

License Agreements with Columbia University

The company has entered into several license agreements with Columbia University, or the Columbia License Agreements. The Columbia License Agreements establish the company’s rights and obligations with respect to certain patents, software code, technology, and improvements thereto that it licenses from Columbia University and that are used in, and integrated into, its software solutions, and its physics-based computational platform.

PS-GVB License Agreement

On May 5, 1994, the company entered into a license agreement, or the 1994 Columbia Agreement, with Columbia University, which was amended on September 9, 2004 and November 1, 2008. The technology licensed under the 1994 Columbia Agreement is incorporated into the company’s Jaguar quantum mechanical program, which it markets and distributes as part of its physics-based computational platform. The 1994 Columbia Agreement grants the company 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 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 its products and services, to develop improvements thereto, and to conduct research and backup disaster recovery. Under the 1994 Columbia Agreement, Columbia University retains the right to conduct, and to permit other academic and non-profit research institutions to conduct, research using the Licensed PS-GVB Software.

Fast Multipole RESPA License Agreement

On July 15, 1998, the company entered into a license agreement, or the 1998 Columbia Agreement, with Columbia University, which was amended on September 4, 2004, and November 1, 2008. The 1998 Columbia Agreement grants the company a worldwide, non-exclusive, license to the Fast Multipole RESPA code developed at Columbia University, or the RESPA Code, which was incorporated into the IMPACT software program used in its Glide ligand-protein docking program, PrimeX protein modelling program, QSite QM/MM program, and Combglide automated library generation program, and all improvements to the IMPACT software program, including any new versions and new releases thereof, that are developed by Columbia University, or the IMPACT Improvements, in each case, to reproduce, use, execute, copy, compile, operate, sublicense, and distribute in connection with the marketing and sale of its products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.

Protein Folding License Agreement

In 2001, the company entered into a license agreement, or the 2001 Columbia Agreement, with Columbia University, which was amended on September 9, 2004 and November 1, 2008. The technology licensed under the 2001 Columbia Agreement is incorporated into the company’s Prime protein modelling program, which it markets and distributes as part of its physics-based computational platform. The 2001 Columbia Agreement grants the company 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 the company’s 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 its products and services, to develop improvements thereto, and to conduct research and backup disaster recovery. Under the 2001 Columbia Agreement, Columbia University retains the right to conduct, and to permit other academic and non-profit research institutions to conduct, research using the Licensed Folding Code Software.

Water Site Analysis License

On May 27, 2008, the company entered into a software and patent license agreement, or the 2008 Columbia Agreement, with Columbia University, which was amended on November 1, 2008. The 2008 Columbia Agreement grants the company a worldwide license, exclusive in the field of computational chemistry software and related services, to certain software that implements the water site analysis method, or the Water Site Software; all patent rights covering the Water Site Software, or the Water Site Patents; and any products that incorporate or include the Water Site Software, or that is covered by the Water Site Patents, or the Water Site Products, in each case, to reproduce, modify, distribute, and perform and display in connection with the development, marketing, and sale of its products and services, to conduct research using the Water Site Software, and to conduct backup disaster recovery. The company’s Water Site Products include its WaterMap Core program, which it markets and distributes as part of its physics-based computational platform. The company is restricted from distributing the Water Site Software source code without the prior written consent of Columbia University. Under the 2008 Columbia Agreement, Columbia University retains the right to use, and to permit other entities and individuals to use, the Water Site Software and Water Site Patents for academic and non-commercial educational purposes in the field of computational chemistry software and related services.

In the event that the company takes action against Columbia University with respect to the validity or enforceability of any Water Site Patents, excluding any defensive actions or claims, the royalties paid under the 2008 Columbia Agreement will increase by a specified amount. The company’s obligation to pay any royalty under the 2008 Columbia Agreement, including any royalty paid pursuant to the Royalty Amendment, will terminate on May 27, 2028.

Services Royalty Amendment

On November 1, 2008, the company entered into the Royalty Amendment with Columbia University, which amended and simplified its royalty obligations under each of the Columbia License Agreements described in each of the foregoing sections.

Intellectual Property

The company’s strategy is to file patent applications directed to its key software and its key programs in an effort to secure its intellectual property positions vis-a-vis this software and these programs. The patent portfolio for the company’s software business includes at least 12 published patent families. As of January 31, 2024, the company owned or held exclusive license rights to approximately 40 patents and patent applications, including at least 14 issued or allowed U.S. cases, five pending U.S. non-provisional patent applications, 15 issued or allowed non-U.S. cases, including seven granted European patents which have been validated among multiple individual European Patent Convention nations and eight non-European patents, and six pending foreign patent applications relating to its computational platform. Any patents that are issued or that may issue from these families are expected to expire between 2026 and 2038, absent any adjustments or extensions.

As of January 31, 2024, there were approximately 10 published patent families related to the company’s proprietary drug discovery business, and several of its drug discovery collaborators have filed patent applications related to its collaborations that include employees of its as inventors, including over 100 compound patents and patent applications since 2010. As of January 31, 2024, the company wholly-owned approximately 12 pending U.S. patent applications, including U.S. provisional and U.S. non-provisional patent applications, and approximately 75 pending non-U.S. patent applications, including international patent applications filed under the Patent Cooperation Treaty, related to its proprietary drug discovery business.

In addition to patent protection, as of January 31, 2024, the company had approximately 64 copyright registrations covering its proprietary software code, and it relies upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain its competitive position. The company also owns numerous trademarks registered in the United States and foreign jurisdictions, including Schrödinger and LiveDesign.

Sales and Marketing

Software Business

The company commercializes its software solutions in various jurisdictions around the world through its software sales organization. The company has sales operations in the United States, Europe, Japan, India, and South Korea and it also has established distribution channels in other important markets, including China. These efforts are led by the company’s approximately 240 person global team of sales, technical, and scientific personnel. The company’s marketing strategy leverages its strong base of scientific publications to support the continued growth of its computational platform into computational chemistry markets across industries and academia worldwide.

Drug Discovery Business

The company plans to enter into agreements with biopharmaceutical companies that contribute to its ability to efficiently advance development candidates that it discovers internally using its computational platform through to commercialization. The company expects to utilize a variety of types of collaboration, distribution, and other arrangements with one or more of these third parties to develop and ultimately commercialize its development candidates. Over time, the company may also create a commercial organization for drug product sales if and as it advances the development of any product candidates that it determines to commercialize itself.

Government Regulation and Product Approvals

Restrictions under applicable federal and state healthcare laws and regulations, including certain laws and regulations applicable only if the company has 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. Department of Health and Human Services for re-disclosure to the public, as well as ownership and investment interests held by certain healthcare providers and their immediate family members;

Federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

Analogous state laws and regulations, including state anti-kickback and false claims laws; state laws requiring pharmaceutical companies to comply with specific compliance standards, restrict financial interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments to health care providers or marketing expenditures; and state laws governing privacy, security and breaches of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and

Laws and regulations prohibiting bribery and corruption, such as the FCPA, which, among other things, prohibits the U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations or foreign government-owned or affiliated entities, candidates for foreign public office, and foreign political parties or officials thereof.

Competition

Software Business

The company’s software solutions face competition from competitors in the business of selling or providing simulation and modeling software to biopharmaceutical companies. 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., Inductive Bio, Inc., Chemaxon, PerkinElmer, Inc., and Simulations Plus, Inc.

The company also has competitors in materials science, such as BIOVIA and Materials Design, Inc., and in enterprise software for the life sciences, such as BIOVIA, Certara USA, Inc., ChemAxon, Revvity, Inc. and Dotmatics, Inc.

Drug Discovery Business

For example, with respect to its MALT1 inhibitor, SGR-1505, which the company is advancing for the treatment of patients with relapsed or refractory B-cell lymphomas, it is aware of several MALT1 inhibitors in clinical development, including by AbbVie Inc., Ono Pharmaceutical Co., Ltd., HotSpot Therapeutics, and Exelixis, Inc. In addition, the company is 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.

With respect to its CDC7 inhibitor, SGR-2921, which the company is advancing for the treatment of relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome, it is aware of several CDC7 inhibitors in Phase 1 clinical development, including by Chia Tai Tianqing Pharmaceutical Group Co., Ltd., Lin BioScience, Inc., and Cancer Research UK.

With respect to its WEE1/MYT1 inhibitor, SGR-3515, which it is advancing for the treatment of solid tumors, the company is 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 Therapeutics Inc. Furthermore, the company is also aware of a WEE1/MYT1 inhibitor in preclinical development being advanced by Acrivon Therapeutics, Inc.

History

Schrödinger, Inc. was founded in 1990. The company was incorporated in 1990.