New York-based Schrödinger first made its name as a software developer. Software sales remain key to Schrödinger’s business but in recent years the company has expanded into in-house and partnered drug discovery, landing alliances with companies including Sanofi and Takeda in the process.
Now, Schrödinger is seeking to list its shares on Nasdaq through an initial public offering (IPO). The paperwork filed to date puts the maximum size of the IPO at $100m (€90m), although that figure could change as Schrödinger gets deeper into the fundraising process.
As a well-established company, Schrödinger has no specific need for the $100m. Rather, the company wants to list on Nasdaq to gain financial flexibility and establish a public market for its stock.
In the longer term, the financial flexibility and public market for the stock could help Schrödinger as it develops a pipeline of internal candidates that it is working on alongside projects for partners.
The drug discovery service unit is a relatively small but fast-growing part of Schrödinger’s business. In 2018, drug discovery revenues rose 39% to nearly $7m, a little more than 10% of the company’s total sales that year.
Over the first nine months of 2019, drug discovery revenues came in above $10m, more than across all of the prior year. The increase put the unit on track to account for more than 15% of total sales at Schrödinger in 2019.
Whether that upward trend continues will depend on the progress of drug development projects supported by Schrödinger, which is in line to receive milestones based on the success of candidates it helped to discover. The size of the milestones may increase as the projects advance closer to market, but the periodic nature of the success-based payments means quarterly revenues may fluctuate.
While drug discovery is the fastest growing part of Schrödinger’s business, other units continue to generate most of the company’s revenues.
Sales of on-premise software accounted for 60% of Schrödinger’s revenues in 2018, while hosted software and maintenance of existing systems accounted for another 19%.
Professional services and drug discovery accounted for the other 21%. Revenues from professional services, such as assistance with modelling, totaled close to $7m, up 37% over the prior year.