Schrodinger, Inc.

Thank you for standing by, and welcome to Schrodinger's Conference Call for the fourth quarter and four-year 2020 financial results. My name is Sarah, and I'll be your conference operator today. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded at the company's request. Now I'd like to introduce your host for today's conference, Ms. Jaryn Madden, Senior Vice President of Investor Relations and Communications. Please go ahead.

Thank you, and good morning, everyone. Welcome to today's call during which we will provide an update on the company and review our fourth quarter and full year 2020 financial results. Earlier this morning, we issued a press release summarizing our financial results and progress across the company, which is available on our website at www.schrodinger.com. Here with me on our call today is Rami Fareed. President and Chief Executive Officer, Karen Akinsanya, Executive Vice President, Chief Biomedical Scientist and Head of Discovery R&D, and Joel Lebowitz, Executive Vice President and Chief Financial Officer. Following our remarks, we'll open up the call for Q&A. I'd like to remind you that during today's call, management will make statements related to our business that are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. including without limitation statements related to our future financial performance, including our outlook for the full year 2021, the potential advantages of our platform, our strategic plans to accelerate the growth of our software business and advance our collaborative and internal drug discovery programs, risks related to the COVID-19 pandemic, our expectations related to the use of our cash, cash equivalents, and marketable securities, as well as our future operating expenses. These forward looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward looking statements and are subject to a variety of assumptions, uncertainties, risks, and factors that are beyond our control, including the demand for our software solutions, our ability to develop our computational platform, our reliance upon drug discovery collaborators and other risks detailed under the caption risk factors and elsewhere in our most recent securities and exchange commission filings and reports. Except as required by law, we undertake no duty or obligation to update any forward-looking statements discussed on this call as a result of new information, future events, changes in expectations, or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. During this call, we will also discuss certain financial and operating metrics, which are further described in our financial results press release and SEC filings. With that, I'd like to turn the call over to Rami.

Thanks, Sharon, and thank you, everyone, for joining us this morning. At Schrodinger, we have developed a world-class computational platform that is accelerating drug discovery and materials design by predicting key molecular properties with very high accuracy. We license our software to biopharma and industrial companies worldwide, and we are also leveraging our platform to advance a pipeline of collaborative and internal drug discovery programs with the aim of bringing new medicines to patients. We are extremely pleased with our execution across our business in 2020. Total revenue was $108.1 million, a 26% increase over the prior year. As you'll hear from Karen shortly, We also made excellent progress on our discovery pipeline and expect to initiate IND-enabling studies later this year for multiple programs. We also achieved important milestones in several of our collaborative programs, with three moving into the clinic in 2020. Additionally, we entered into a strategic collaboration with Bristol Myers Squibb to discover, develop, and commercialize therapeutics in multiple disease areas. The agreement provided $55 million to Schrodinger up front, and we are eligible to receive up to $2.7 billion in preclinical development, regulatory, and commercial milestones, in addition to royalties on net sales of each product commercialized by Bristol-Myers Squibb. We are very pleased to be working with BMS, a proven leader in the areas of oncology and immunology. Turning to our software business, we saw very strong revenue growth in 2020. Software revenue was $92.5 million, a 39% increase over 2019, and we expect continued growth this year. We continue to receive excellent feedback from customers on the impact our platform is having on their discovery programs from both biopharma and materials companies. We are also continuing to advance the science underlying our platform. We extended FEP plus to more accurately model binding affinities of metalloprotein inhibitors, an important class of inhibitors, better support macrocycle design and optimization, and more accurately predict binding selectivity, which is a major way of reducing potential toxicity of drug molecules. We also released a new active learning workflow for structure-based hit discovery, which can screen massive libraries of compounds with greatly improved computational efficiency. We plan to continue to invest heavily in the underlying science of our platform with a focus on increasing accuracy of the predictions and expanding the domain of applicability to a wider range of targets. As you'll hear shortly from Joel, we ended 2020 in a strong financial position with cash resources of $643 million. In addition to the continued investment in our computational platform, we are investing in our internal discovery programs to key value inflection points. We are adding new talent to support our R&D initiatives, and we recently hired our first head of early development. Our large number of drug discovery collaborations will continue to play a strategically important role for us as well. We believe having a mix of partnered and wholly owned programs provides us with the flexibility to create long-term value for our shareholders. We're excited by the many advances we've made, and we expect continued progress across all aspects of our business, our internal pipeline, our collaborative and partner programs, and our software business to support both drug discovery and materials design. We continue to navigate the challenges of COVID-19 and working remotely, and we're extremely appreciative of the dedication and resilience of our employees at Schrodinger. I'll now turn the call over to Karen for an update on our drug discovery programs.