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Date
Wednesday, August 6, 2025 at 8:30 p.m. ET
Call participants
Chief Executive Officer — Ramy Farid
Chief Financial Officer — Richie Jain
President, Head of Therapeutics R&D, and Chief Strategy Officer, Partnerships — Karen Akinsanya
Vice President, Investor Relations and Corporate Communications — Jaren Madden
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Takeaways
Total revenue-- $54.8 million in total revenue (GAAP) for the second quarter of fiscal 2025, representing a 16% year-over-year increase compared to the second quarter of fiscal 2024, driven by gains in both software and drug discovery segments.
Software revenue-- $40.5 million in the second quarter of fiscal 2025, up 15% year-over-year, supported by growth in hosted contracts and contributions from a Gates Foundation grant related to predictive toxicology.
Drug discovery revenue-- $14.2 million in drug discovery revenue for the second quarter of fiscal 2025, reflecting 19% year-over-year growth due to continued recognition of the $150 million Novartis collaboration upfront payment and portfolio execution.
Software gross margin-- 68%, down from 80% in the same quarter in 2024, attributed to a shift in revenue mix and new investments in the predictive toxicology initiative.
R&D expense-- $43.1 million in the second quarter of fiscal 2025, representing a more than 15% decrease from the prior year, driven by shifting expenses to collaborations and the impact of recent cost reductions.
Total operating expenses-- $79 million in total operating expenses for the second quarter of fiscal 2025, down 6% year-over-year, mainly due to lower R&D spend.
Net loss-- Net loss (GAAP) was $43 million, or 59¢ per share, for the second quarter of fiscal 2025, compared to a net loss of $54 million, or 74¢ per share, in the second quarter of fiscal 2024.
Cash and equivalents-- $462 million in cash and equivalents as of June 30, 2025.
2025 guidance-- Software revenue growth is forecasted at 10%-15% for the full year 2025, and drug discovery revenue is expected in the range of $45 million-$50 million for fiscal 2025.
Third quarter software revenue outlook-- Software revenue is anticipated to be between $36 million and $40 million for the third quarter of fiscal 2025.
SGR1505 clinical data-- Initial Phase I results for the proprietary MALT1 inhibitor showed "a well-tolerated profile with clear monotherapy signals" in heavily pretreated chronic lymphocytic leukemia and Waldenstrom's macroglobulinemia patients, as reported in the second quarter of fiscal 2025.
Strategic options for SGR1505-- Management is "exploring a range of strategic opportunities" to advance mid- and late-stage development through partnerships rather than pursuing these stages independently.
Additional clinical programs-- Initial Phase I data for SGR2921 and SGR3515 are planned to be reported in the fourth quarter.
Beta release of predictive toxicology module-- The company launched a beta version of its virtual kinase panel supporting off-target prediction, with management noting "a lot of excitement around this technology" from users and collaborators.
Expense reduction-- The $30 million reduction program, announced in May, is reflected in lower R&D and operating expenses in the second quarter of fiscal 2025, with management expecting full-year operating expenses to be lower in 2025 than in 2024.
Collaboration updates-- Expanded partnerships with Eli Lilly, Novartis, Ajax Therapeutics, and the Novo Nordisk Foundation Centre, adding new assets and targets to the collaborative portfolio.
Customer retention-- CEO Ramy Farid stated, "we have a 100% retention rate with customers traded at half a million dollars."
Cloud vs. on-premises revenue-- Hosted (cloud) contracts showed strong growth in the second quarter of fiscal 2025, while on-premises revenue declined slightly year-over-year, mainly due to the timing and size of renewals.
Software adoption-- Growth in the second quarter of fiscal 2025 was primarily driven by increased utilization at existing accounts, with minimal impact from new customers due to persistent biotech sector challenges.
Summary
Schrödinger(SDGR 0.72%) reported double-digit year-over-year revenue growth in the second quarter of fiscal 2025, driven by expansion in both the software and drug discovery segments. The company delivered initial Phase I clinical data for SGR1505, demonstrating notable responses in challenging patient populations and prompting the pursuit of strategic development partnerships. Management reaffirmed full-year revenue guidance, with an emphasis on further expense discipline and substantial cash reserves supporting ongoing innovation. Investors also heard about multiple collaboration expansions, the release of new predictive toxicology software, and a continued focus on leveraging existing customer relationships for growth in a competitive landscape.
CFO Richie Jain said, "We are maintaining our software and drug discovery revenue guidance for the year," indicating no downward adjustments despite ongoing macroeconomic and sector-specific challenges.
The timing of that grant began in the third quarter of fiscal 2024 and is expected to last approximately two years.
President Akinsanya highlighted that, to date, 15 development candidates from collaborative and proprietary programs have advanced to Phase I clinical development, with six in Phase II and one in Phase III, supporting expectations for multiple future milestones, royalties, and cash distributions from partnerships.
CEO Farid clarified that customer renewals and scale-ups are the primary drivers of software revenue growth, as discussed by management in the second quarter of fiscal 2025, noting, "adoption within our largest customers, and our focus is to grow customers from our smaller and medium tiers into the larger tiers."
Management explained that the May restructuring and headcount reduction were broad-based, non-strategic in focus, and designed to better align the organization for growth and cost efficiency.
Industry glossary
MALT1 inhibitor: A molecule designed to inhibit the Mucosa-Associated Lymphoid Tissue Lymphoma Translocation Protein 1, often targeted in hematologic malignancies.
PKPD: Pharmacokinetics and pharmacodynamics; measures that assess how a drug is processed by the body and the biological effect it produces.
Wee1MIT1 inhibitor: A co-inhibitor targeting Wee1 and MIT1 pathways, used in cancer therapy, particularly for solid tumors.
HERG, PXR, SIPs: Off-target proteins where binding prediction is relevant for drug safety profiles; HERG relates to cardiac risk, PXR affects drug metabolism, and SIPs are common cytochrome P450 isoforms involved in drug metabolism.
AJ1 11095: A clinical-stage drug candidate co-developed with Ajax Therapeutics, currently in Phase I for myelofibrosis.
CDC7 inhibitor: A drug targeting Cell Division Cycle 7 kinase, pursued for acute myeloid leukemia and myelodysplastic syndrome.
Full Conference Call Transcript
Jaren Madden: Thank you, and good afternoon, everyone. Welcome to today's call during which we will provide an update on the company and review our second quarter 2025 financial results. Earlier today, we issued a press release summarizing our financial results and progress across the company which is available on our website at schrodinger.com. With me on our call today are Ramy Farid, Chief Executive Officer, Richie Jain, Chief Financial Officer, and Karen Akinsanya, President, Head of Therapeutics R&D, and Chief Strategy Officer, Partnerships. Following our prepared remarks, we will open the call for Q&A.
During today's call, management will make statements that are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including without limitation, statements related to our financial outlook for the full year 2025 and third quarter 2025, plans to accelerate the growth of our software business and advance our collaborative and proprietary drug discovery programs, the timing of initiation of and readouts from our clinical trials, the clinical potential and properties of our compounds, the use of our cash resources, as well as our future expenses.
These forward-looking statements represent our current views and reflect 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 due to a number of important factors, including the considerations described in the Risk Factors section and elsewhere in the filings we make with the SEC including our Form 10-Q for the quarter ended 06/30/2025. These forward-looking statements represent our views only as of today, and we caution you that, except as required by law, we may not update them in the future, whether as a result of new information, future events, or otherwise.
Also included in today's call are certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and should be considered only in addition to and not a substitute for or superior to, GAAP measures. Please refer to the tables at the end of our press release, which is available on our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. And with that, I would like to turn the call over to Ramy.
Ramy Farid: Thanks, Jaren, and thank you, everyone, for joining us today. We made very solid progress in 2025. Total revenue was $54.8 million in the second quarter, a 16% increase from 2024. Software revenue was $40.5 million representing 15% year-over-year growth. Drug Discovery revenue was $14.2 million highlighting the progress and growth of our collaborative portfolio. While the macroeconomic environment has been highly uncertain, we continue to see demand for our software platform driven by the industry's need for validated computational approaches that are critical for innovation and efficient R&D. We believe we are uniquely positioned at the forefront of the ongoing transformation of integrating predictive methods into all stages of molecular discovery.
We are maintaining our full-year software revenue growth guidance reflecting the productive conversations we are having with our software customers around renewals and scale-ups in the second half of the year. As you will hear from Karen, we continue to make progress across our pipeline and recently presented encouraging Phase I data from SGR1505, our proprietary MALT1 inhibitor. The emerging profile of SGR1505 shows best-in-class potential and we are exploring strategic opportunities to accelerate clinical development and maximize the potential of this program. We expect to report initial Phase I data from our other two clinical programs, SGR2921 and SGR3515, in the fourth quarter.
We are continuing to make significant improvements to the performance and usability of our software platform and continue to add streamlined workflows to enhance the user experience and make our software more accessible to scientists without a computational chemistry background. We are also advancing our predictive toxicology initiative in support of the FDA's efforts to modernize drug discovery, through its new alternative methods program to reduce reliance on animal models, including through the development and deployment of predictive computational models. To this end, we recently released the beta version of a virtual kinase panel to prospectively identify potential liabilities for an initial set of approximately 50 representative kinases.
Our platform now also supports prediction of binding to the known off-targets HERG, PXR, and three common SIPs. We expect to expand the number of supported off-targets as we continue to advance the technology. Overall, we have made considerable progress during the quarter and we are excited about the opportunities ahead. I want to thank our employees who are critical to achieving our goals, their hard work, and dedication. I will now turn the call over to Richie Jain, who was appointed Chief Financial Officer in May. Richie has made significant contributions during his tenure at Schrödinger, including working across the company to pursue strategic initiatives, and secure and expand strategic collaborations.
And I am very pleased to have him on the call today.
Richie Jain: Thank you, Ramy, and good afternoon, everyone. I am happy to join my first earnings call as Schrödinger's CFO. Broadly, the industry is navigating a complex macroeconomic landscape including regulatory and tariff uncertainties, challenging capital markets, and drug pricing pressures, such as most favored nation provisions. Total revenue for the quarter was $54.8 million. The increase was driven by both higher software and drug discovery revenue. Software revenue was $40.5 million, an increase of 15% compared to Q2 2024, and in line with our expectations for the quarter. The increase was primarily driven by higher revenue from hosted contracts, and contribution revenue from the Gates Foundation grant related to our predictive toxic initiative.
Revenue from on-prem contracts was slightly lower year-over-year primarily due to the timing and size of renewals. Consistent with prior periods, our growth primarily reflects increasing utilization and adoption at existing accounts with minimal contribution from new customers given the persistent biotech environment challenges. Discovery revenue was $14.2 million, an increase of 19% compared to Q2 2024. The increase reflects continued recognition of the $150 million upfront payment from the Novartis collaboration that began in late 2024 and execution across the collaboration portfolio that we continue to expand. Software gross margin was 68%, compared to 80% in 2024. This lower margin reflects the change in revenue mix and investment associated with the predictive toxicology initiative which began in 2024.
R&D expenses were $43.1 million in Q2 2025, a greater than 15% decrease from the $50.8 million in 2024. The decrease was primarily due to the continued shift in expenses from the predictive toxicology initiative into software cost of goods sold, from proprietary R&D programs into collaborations, and lower CRO and FTE spend following the $30 million expense reduction initiatives announced in May. Sales and marketing expense was $10.7 million, an increase of approximately 11%, primarily due to higher FTE expenses. G&A increased by 7% to $25.2 million driven by higher professional services. Total operating expenses were $79 million in the quarter, a decrease of 6% compared to Q2 2024 largely due to lower R&D expenses.
Total other income was a gain of $10 million, compared to a loss of $1.2 million in Q2 last year due to mark-to-market changes in our equity investments. Taxes were minimal, resulting in a net loss of $43 million or 59¢ per share versus a net loss of $54 million or 74¢ per diluted share in Q2 2024. The fully diluted share count for Q2 was 73.4 million compared to 72.7 million in Q2 2024. We remain well capitalized with $462 million in cash and equivalents as of June 30. We are maintaining our software and drug discovery revenue guidance for the year of software revenue growth of 10% to 15%, and drug discovery revenue of $45 to $50 million.
We continue to have encouraging discussions with customers about scale-ups at renewal, most of which take place in the fourth quarter. Shifting to operating expenses, we now expect them to be lower in 2025 than in 2024 driven primarily by our $30 million expense reduction initiative that we announced in May. Cash used in operating activities in 2025 is still expected to be significantly lower than in 2024. For the third quarter, we expect software revenue to be in the range of $36 million to $40 million. We continue to expect the balance of drug discovery revenue to be approximately evenly distributed through the third and fourth quarters.
With that, I will turn the call over to Karen to discuss our therapeutics R&D and pipeline updates.
Karen Akinsanya: Thank you, Richie, and good afternoon, everyone. We achieved strong pipeline progress during the quarter, reporting our first clinical data and advancing our portfolio of collaborative and proprietary programs. Our platform empowers our scientists to discover differentiated molecules with remarkable efficiency. To date, 15 development candidates from our collaborative and proprietary have entered Phase I clinical development. Six of these have advanced to Phase II and one is currently in Phase III. These programs represent distinct value creation opportunities for Schrödinger offering the potential for additional future milestones, royalties, and cash distributions from equity. Turning now to our proprietary pipeline. I will begin with SGR1505, our MALT1 inhibitor.
The presentation of initial Phase I clinical data was an important milestone for the program and our conversations at EHA and ICML reaffirmed our belief that MORT1 inhibition represents a promising novel therapeutic strategy in the hematology armamentarium beyond BTK, BCL2, and standard of care agents. The initial Phase I dose escalation data were highly encouraging showing a well-tolerated profile with clear monotherapy signals in heavily pretreated chronic lymphocytic leukemia where three of seventeen patients responded and in Waldenstrom's macroglobulinemia where all five patients responded.
Importantly, two of the three CLL responders were double exposed to BTK and CL2 inhibitors and all five Waldenstrom patients were last treated with a BTK inhibitor providing early evidence supporting an opportunity for SGR1505 in patients with refractory disease. The FDA Fast Track designation for SGR1505 for the treatment of adult patients with relapsed/refractory WM that have failed at least two lines of therapy including a BTK inhibitor also reflects the medical need. The emerging best-in-class profile of SGR1505 and preliminary activity in indolent and aggressive lymphoma solidifies our conviction in the potential of MORT1 inhibition as a well-tolerated oral approach to treat patients with limited options.
The strength of the early development package, including current PKPD, safety, and efficacy data supports our plans to align with the FDA on the recommended Phase II dose. To ensure SGR1505 receives the dedicated focus and resources required to pursue mid and late-stage development we are exploring a range of strategic opportunities for this program rather than initiating these studies independently. In the meantime, we expect to provide an update on the complete dose escalation study, translational data, and feedback from the regulatory interactions later this year. We are also advancing Phase I dose escalation studies for SGR2921, our CDC7 inhibitor, and SGR3515, our V1MT1 co-inhibitor. We expect to share initial Phase I data from both programs in 2025.
SGR2921 is being evaluated in patients with acute myeloid leukemia and myelodysplastic syndrome while SGR3515 is being evaluated in patients with advanced solid tumors predicted to be sensitive to Wee1MIT1 inhibition including ovarian, uterine, and breast cancer in addition to other solid tumors. The primary goal of both studies is to evaluate the safety, tolerability, and preliminary clinical activity. Both studies are progressing with multiple dose escalation steps completed. Turning to our advancing portfolio of discovery stage assets. In 2024, we licensed an undisclosed early-stage program to Novartis, which continues to advance. Earlier this year, we expanded our collaborations with Lilly and we recently announced the expansion of our relationship with Ajax Therapeutics, a company we co-founded.
The expansion builds on our joint success with AJ1 11095 which is in Phase I for myelofibrosis and adds another JAK family target for autoimmune and disease to the collaboration. We also recently established a collaboration with the Novo Nordisk Foundation Centre for Basic Metabolic Research at the University of Copenhagen. We have a strong track record for delivering differentiated clinic-ready molecules, which underpins the growing number of new collaboration programs across a range of therapeutic areas and target classes working on high potential targets. In summary, we are pleased with the progress we have made this quarter and expect continued advancements in our proprietary and collaboration pipelines over the remainder of 2025.
We look forward to updating you on our progress. I will now turn the call back to Ramy.
Ramy Farid: Thank you, Karen. We are pleased with the advancements we have made across all aspects of our business. We have reported very promising data for SGR1505 and are exploring strategic opportunities to expand and accelerate clinical development for this potentially best-in-class molecule. We expect to report data from our other two clinical programs, SGR2921 and SGR3515, in the fourth quarter. We continue to invest in our platform to strengthen our leading position in computational molecular discovery. And we are encouraged by the tenor of conversations we are having with customers, collaborators, and partners. We look forward to updating you on our progress in the coming months. At this time, we are happy to take your questions.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. Your first question comes from the line of Evan Seigerman from BMO Capital Markets. Your line is open.
Evan Seigerman: Hi, guys. Thank you so much for taking my question. Two from me. One, as you think about kind of your conversations with your customers, how has the tone and tenor changed with regard to investments kind of in your platform? I have a follow-up to a question that I had on a prior quarter just seeing how that's changed. And secondarily, as you think about kind of out-licensing, why did you decide to out-license the product kind of at this stage of development versus stage doing an early stage two trial? Thank you so much.
Ramy Farid: Okay. I think we picked up on that. It's a little hard here, but I think got it. Yeah. As far as the tenor of the discussions with customers, it's a good question because you know, of course, there's concern about sort of macroeconomic conditions. And what we can tell you right now is that the discussions are quite positive. There is a clear demand for advanced technology predictive technologies and so far, we're really pleased with the discussions.
Karen Akinsanya: And if I heard you correctly, Evan, the question I think was about the potential to out-license, our phase one program at this stage.
Evan Seigerman: Yeah.
Karen Akinsanya: Right. Thank you. Yeah. We so we have been discussing this program with partners for a very long time. Obviously, it's really important that we align with companies around the strategy for further development of these assets and with respect to SGR1505, we believe that this program is best developed in mid and late-stage development by a partner who has expertise in development and commercialization in hematology. And that includes the opportunity to expand into different indications, and so we think that partnership, as we have said in the past, is probably the best approach to accelerate the program and realize the full potential.
Operator: Great. Thank you so much. Your next question comes from the line of Scott Schoenhaus from KeyBanc Capital Markets. Your line is open.
Scott Schoenhaus: Hey team, thanks for taking my question. It seems like your model is resilient on the software side despite the macro uncertainties and what's going on regulatory wise. But my question, I guess, is on the back half setup. And the demand that you're currently seeing now by cohort? Is it pretty consistent with what you saw ninety days ago across, you know, from large pharma all the way to down to biotech? Has things changed? And then you mentioned in your prepared remarks about encouraging discussions on renewal season in the fourth quarter. Just wanted more color there and maybe on the cohort of clients for renewal.
Ramy Farid: Thanks. Yeah. Richie, wanted to
Richie Jain: Scott, thanks for your call. I think demand for our technology remains strong, and it delivers proven value, lowers cost for our customers, and drives efficiency. If you break that down by cohort, we continue to have really good conversations with our customers about the renewals and potential for scale-ups. Most of those, as you noted, take place in the fourth quarter. The biotech segment of the market has been more challenging for us. That's not anything new. We've seen that the last couple of quarters. I think some of the macroeconomic landscape has impacted that cohort more than the others. Within pharma, you know, there's obviously a lot of uncertainty between policy and tariffs and drug pricing.
We're obviously monitoring all that very carefully. But the conversations continue to be constructive. Heading into year-end around some of the big renewals that we're expecting.
Operator: Great. Thanks. And as my follow-up, more of a housekeeping question, but you mentioned that the quarter, I think so on-prem was down year over year. That implies that your cloud is now is probably a bigger percentage. Just kind of housekeeping on where we stand on the cloud versus on-prem as a percentage of the software revenue book? Thanks.
Richie Jain: Yeah. I think on-prem being lower year over year, this was really due to some of the deals we signed last year in Q2 that were just multiple-year deals. So the comparison year over year looks lower there, but in this quarter, we had strong growth in hosted revenue, and are continuing to grow those relationships with our existing customers. These are things that you'll see quarter over quarter bounce around, but overall, we're happy with the trend of increased growth when you look across both hosted and on-prem revenue.
Operator: Great. Thanks. Your next question from the line of Mani Foroohar from Leerink Partners. Your line is open.
Lillian Fongo: Hi, good afternoon. This is Lillian Fongo on for Mani. Thank you for taking our question. Staying on the software side of things, can you so two questions there. Can you give us a little bit on, how the predictive tox feature how much adoption you've seen there, and how much growth you expect from it in the mid to short term? And then secondly, you mentioned that most of most of the growth on the software side come from existing customers. I was wondering, how much, if you could quantify that, how much more room is there for increased usage among, the average customer?
Ramy Farid: Yeah. So with regard to predictive tox, as we said, we're very pleased that we had the beta release which was pretty recent. We have users now and it's very clear that there's a lot of excitement around this technology, a lot of demand for it, what of course, very pleased to see the FDA sort of insisting that the industry develop predictive technologies to lower or reduce the use of animal models. So that's progressing. We'll get the feedback. That's how beta releases work. And, you know, look forward to reacting to that feedback. Second question, I think, was yeah. I think about just the growth within the existing customers.
I think a lot of excitement about computational drug discovery. We are central to that theme, and, you know, there's a lot of excitement about the solutions that we're developing. You know, the has been a focus of ours. It is growing within existing customers. We continue to see kind of different levels of adoption within our largest customers. And our focus is to grow customers from our smaller and medium tiers into the larger tiers.
Operator: Thank you. Your next question comes from the line of David Lebowitz from Citi. Your line is open.
Ike Lee: Hi guys. Thank you for taking our question. This is Ike Lee on for David Lebowitz. We have one regarding your predictive toxicology solution. There's a few parts to this. So wondering how many clients overall have access to the beta version? How do you think about pricing this product? In relation to your currently existing software? Is it bundled? Is there discounts? What is the setup like? And then you mentioned getting feedback from the beta version as how it goes. What's the timeline for doing that and potentially rolling out the full version as well? Thank you.
Ramy Farid: Yeah. Thanks for the questions. With regard to how many clients that's really not something that we disclose. What we can tell you, though, and we said this before, is there all of our collaborators have access to the technology through the collaboration we've been using it internally. And as we said before, we can share with you the it's having an impact. It works. There's still a lot of work to be done. To expand the number of targets that are supported. But yeah, so sorry. We can't tell you about the number of clients. Now with regard to pricing, what we can tell you without obviously getting into the details, is that it will be separately priced.
This is not this is an add-on module. It would not be it won't just be that customers will automatically get access to it. I think there was a third question about the beta feedback on the beta test. Feedback on the bay if there is feedback, is that what the yeah. No. Not yet. Other than what I just mentioned earlier about the feedback sort of from collaborators. But it's a little early for that. You know, it was really released very recently in the beta form.
Ike Lee: Got it. This the last part was mostly about the timeline. Just the timeline for getting the feedback and rolling out the full version. I think especially as it pertains to the gross margins, you're saying your gross margins are being impacted by the spend. Right? So just wondering, you know, how long should we look for those gross margins to remain depressed because of that algorithm?
Ramy Farid: Two separate concepts here. Yeah. So with regard to beta feedback, really, you know, we don't know. That will happen at the pace that it happens. Now with regard to the margins, that's tied really to the grant and the time period of the grant. So maybe, Richie, you can comment on.
Richie Jain: Yeah. So as we've said before, I think the grant from the Gates. Yeah. Our efforts around predictive toxicology that are related to the Gates and Gates grant, those expenses have are realized within cost of goods sold. Timing of that grant started in Q3 of last year, and it was roughly about two years. So you can model that out on the gross margin impact, right, from that grant.
Ike Lee: Got it. Thank you.
Operator: Your next question comes from the line of Michael Ryskin from Bank of America. Your line is open.
Michael Ryskin: I want to go back a little bit to your announcement from May, late to mid-May, the restructuring, the headcount reductions just kind of thinking of that in context of the quarter you just reported. You're having steady results. You reiterated all the key components of the full-year guide. It sounds like you're more resilient on the pharma, customer front than a lot of your peers and a lot of what we expect. Just put the headcount reduction in that context of, you know, you've got a strong balance sheet. You don't really need to implement cost savings to save cash. So just what's the you know, walk us through the rationale and the thought process there.
Ramy Farid: Yeah. I'll take a crack at that, and then I'll hand it over to Richie if there's something more to add. As we said when we announced this, the reduction force didn't have it wasn't focused on a particular project. It was sort of across the board, and it didn't have an impact on our strategic initiatives and strategic direction. And we said this at the time too. We felt that we had after the RIF, the right team to deliver on the software growth to advance the software and the platform and to advance the collaborative and proprietary programs. So I think I might be answering your question, but if it's not, let us know.
Richie, do you want to add?
Richie Jain: I'll just add. I think we've been really disciplined on cost management. You're starting to see the impact of those expense reductions in your financials that we just reported and some of the reductions in operating expenses and R&D. It's also one of the main drivers behind the change in guidance. For 2025 in reducing our expectation and operating expenses to now be lower than 2024.
Michael Ryskin: Okay. And for my just real quick, apologies if I missed it in the prepared remarks. But for SGR2921 and SGR3515, the CDC7 and Wee1MIT1. I know it's not, you know, it's not per se a delay, but it feels a little bit of a delay. So just wondering anything, you know, anything specific going on there? I know there's been a lot of concerns on FDA ability to sort of process data or if there's anything going on the regulator front? Just talk about the refinement of the timeline there.
Karen Akinsanya: Yeah. Thanks, Mike. These are ongoing phase one dose escalation studies, whereas you may recall where collecting safety, PKPD, efficacy data, that continues to progress. We just provide a little bit more clarity that we expect now based on where we are with the collection of data, for that to be shared in the fourth quarter, really because of where we are in the development of these Phase I trials, while we are obviously guiding to discussions with the FDA on SGR1505, which is a completed dose escalation study. We're not in that position yet. For these other two programs. So nothing about the FDA, I think, is impacting SGR2921 or SGR3515 at this time.
Michael Ryskin: Okay. Thanks. I'll leave it there.
Operator: Your next question comes from the line of Sean Lehman from Morgan Stanley. Your line is open.
Sean Lehman: Good afternoon. Hope everyone is well. Thanks for taking my question. On the proprietary pipeline, so is there a bit more granularity kind of data you are going to present in 4Q? And you know, can we expect at some point that, these molecules might go the same way as the program for SGR1505, and you're going to look for strategic partners or strategic opportunities on those two programs?
Karen Akinsanya: Yeah. So just in a way, let's think about where we were in May once we finished the dose escalation study for SGR1505. We provided a precomped update on the results that we had from that trial. Those two programs, SGR2921 and SGR3515, are behind SGR1505. And so we're still assessing the extent to which we'll be able to share complete data, but do plan on providing an update on the data that we've collected so far by the end of the year. And as we just said on the previous question, that's likely to be mostly safety tape and really very preliminary data around clinical activity.
The second part of your question was about these strategic opportunities that were pursuing from SGR1505 and whether that is something that we will be pursuing also for SGR2921 and SGR3515. First, let me take the opportunity just to say that we are looking at a range of transactions and collaboration arrangements with SGR1505, and so that span a number of different approaches. But I will just reiterate that we've been consistent, I think, since the initiation of these programs. But because of the combination opportunity with venetoclax and with other standard of care agents, all three of these programs, we believe, are best accelerated in further mid to late-stage development by working with partners.
And so I think we still have that view. Obviously, we need to look at all the data, but I think that consistent view that we aim to work with other companies around, you know, further development of these assets.
Sean Lehman: Great. Thank you. And a quick follow-up, if I may. Just the expanded collaboration with Ajax. How might that impact future milestones and revenue, if you can say?
Richie Jain: Yeah. Sean, thanks for the question. I think, you know, we're going to just the way these collaborations work is as we execute against the project that is recognized as revenue. So there will be some impact of that into our discovery revenue. The impact of that in 2025 is very modest. Over time, there will be milestones. And then in this program that we've added, there's also the opportunity for later stage commercial milestones and royalties, but those are all further out of time.
Operator: Your next question comes from the line of Matt Hewitt from Craig Hallum. Your line is open.
Taltz: Hello. Thanks for taking the question. This is Taltz on for Matt. So are you guys still seeing what you called it last quarter as level pegging with customers where some customers will increase spending and others will decrease, kind of just netting it all out. Thank you.
Ramy Farid: Yeah. It's very unusual for a customer to decrease spend to be clear. We generally see increases of different amounts. But very, very, very rare for there to be a decrease. And we have a 100% retention rate with customers traded at half a million dollars.
Taltz: Alright. Thank you.
Operator: Again, if you'd like to ask a question, press 1 on your telephone keypad. Your next question comes from the line of Brendan Smith from TD Cowen. Your line is open.
Brendan Smith: Great. Thanks for taking the questions and congrats on the quarter. I actually wanted to ask just a follow-up on the predictive tox conversation from earlier and really in the context of FDA's push on animal testing. And sorry if I missed it, but have you all been in touch with the agency at all about their proposed pilot study that they're looking to initiate? And I know just kind of comparing some of the computational modeling approaches with actual animal testing data. I'm just wondering if that's something you all could or would be involved with and maybe what's kind of the potential timing for any of that might look like. Thanks.
Ramy Farid: Yeah. The intention, of course, is to engage with the FDA at the appropriate time when the technology is in the state where we feel that's appropriate. And we have had I would say, sort of informal discussions as probably the way to say it. Right? You know? And they're aware of the work that we're doing. But it's premature, of course, to talk about the FDA adopting the technology, obviously, until maybe after we get feedback from example, from beta testers.
Brendan Smith: Yep. Okay. Got it. Fair enough. Thanks, guys.
Operator: And I'm showing no further questions in queue. That concludes today's call. You may now disconnect.