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01/11 11:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals. Strong software revenue growth and a promising predictive toxicology initiative are positive. However, the cautious guidance and shift in clinical data timeline could dampen enthusiasm. The Q&A highlights demand consistency and constructive renewal discussions but lacks clarity on key metrics. The market cap suggests moderate reactions, leading to a neutral sentiment.
Total Revenue $54.8 million in Q2 2025, a 16% increase from Q2 2024. The increase was driven by higher software and drug discovery revenue.
Software Revenue $40.5 million in Q2 2025, representing 15% year-over-year growth. The increase was primarily driven by higher revenue from hosted contracts and contribution revenue from the Gates Foundation grant related to the predictive toxicology initiative.
Drug Discovery Revenue $14.2 million in Q2 2025, a 19% increase compared to Q2 2024. The increase reflects continued recognition of the $150 million upfront payment from the Novartis collaboration and execution across the collaboration portfolio.
Software Gross Margin 68% in Q2 2025 compared to 80% in Q2 2024. The lower margin reflects the change in revenue mix and investment associated with the predictive toxicology initiative.
R&D Expenses $43.1 million in Q2 2025, a greater than 15% decrease from $50.8 million in Q2 2024. The decrease was primarily due to the 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.
Sales and Marketing Expense $10.7 million in Q2 2025, an increase of approximately 11% year-over-year, primarily due to higher FTE expenses.
G&A Expenses $25.2 million in Q2 2025, a 7% increase year-over-year, driven by higher professional services.
Total Operating Expenses $79 million in Q2 2025, a decrease of 6% compared to Q2 2024, largely due to lower R&D expenses.
Total Other Income A gain of $10 million in Q2 2025 compared to a loss of $1.2 million in Q2 2024. The gain was due to mark-to-market changes in equity investments.
Net Loss $43 million or $0.59 per share in Q2 2025 versus a net loss of $54 million or $0.74 per diluted share in Q2 2024. The improvement was driven by higher revenue and lower operating expenses.
Cash and Equivalents $462 million as of June 30, 2025.
SGR-1505 (MALT1 inhibitor): Presented initial Phase I data showing a well-tolerated profile with clear monotherapy signals in heavily pretreated chronic lymphocytic leukemia and Waldenstrom's macroglobulinemia. Received FDA Fast Track designation for relapsed/refractory WM. Exploring strategic opportunities for mid- and late-stage development.
SGR-2921 (CDC7 inhibitor): Advancing Phase I dose escalation studies in patients with acute myeloid leukemia and myelodysplastic syndrome. Initial Phase I data expected in Q4 2025.
SGR-3515 (Wee1/Myt1 co-inhibitor): Advancing Phase I dose escalation studies in patients with advanced solid tumors, including ovarian, uterine, and breast cancer. Initial Phase I data expected in Q4 2025.
Predictive toxicology initiative: Released beta version of a virtual kinase panel to identify potential liabilities for approximately 50 representative kinases. Expanded platform to support prediction of binding to known off-targets like hERG, PXR, and 3 common SIPs.
Collaborations and partnerships: Expanded collaborations with Lilly, Otsuka, and Ajax Therapeutics. Established a new collaboration with the Novo Nordisk Foundation Center for Basic Metabolic Research.
Drug discovery revenue: Increased by 19% year-over-year to $14.2 million, driven by the Novartis collaboration and execution across the collaboration portfolio.
Software revenue: Increased by 15% year-over-year to $40.5 million, driven by higher revenue from hosted contracts and contributions from the Gates Foundation grant.
Expense reduction: Achieved a greater than 15% decrease in R&D expenses and a 6% decrease in total operating expenses compared to Q2 2024, following a $30 million expense reduction initiative.
Strategic opportunities for SGR-1505: Exploring options to ensure dedicated focus and resources for mid- and late-stage development of the MALT1 inhibitor.
Focus on computational molecular discovery: Continued investment in platform improvements to strengthen position in computational molecular discovery, including enhancing usability for non-computational scientists.
Macroeconomic Environment: The company is navigating a highly uncertain macroeconomic environment, which could impact demand for its software platform and overall business performance.
Regulatory and Tariff Uncertainties: The industry faces regulatory and tariff uncertainties, which could pose challenges to the company's operations and strategic objectives.
Drug Pricing Pressures: Drug pricing pressures, including most favored nation provisions, could adversely affect the company's financial performance and strategic plans.
Revenue Mix and Margins: A shift in revenue mix and investments in predictive toxicology initiatives have led to lower software gross margins, which could impact profitability.
Biotech Environment Challenges: Persistent challenges in the biotech environment have resulted in minimal contribution from new customers, potentially limiting growth opportunities.
Expense Reduction Initiatives: The company has implemented a $30 million expense reduction initiative, which could impact R&D and operational capabilities.
Strategic Development of SGR-1505: The company is exploring strategic opportunities for the mid- and late-stage development of SGR-1505, which could delay or complicate its clinical advancement.
Full Year 2025 Software Revenue Growth: The company is maintaining its guidance for full-year software revenue growth, reflecting productive conversations with software customers about renewals and scale-ups in the second half of the year.
Clinical Data Reporting: Initial Phase I data from clinical programs SGR-2921 and SGR-3515 are expected in the fourth quarter of 2025.
Strategic Opportunities for SGR-1505: The company is exploring strategic opportunities to accelerate clinical development and maximize the potential of SGR-1505, a proprietary MALT1 inhibitor.
Predictive Toxicology Initiative: The company is advancing its predictive toxicology initiative, including the development and deployment of predictive computational models to support the FDA's modernization efforts in drug discovery.
Third Quarter 2025 Software Revenue: Software revenue for the third quarter is expected to be in the range of $36 million to $40 million.
Drug Discovery Revenue Guidance: The company is maintaining its guidance for drug discovery revenue of $45 million to $50 million for the year.
Operating Expenses for 2025: Operating expenses for 2025 are expected to be lower than in 2024, driven by a $30 million expense reduction initiative.
Cash Usage in 2025: Cash used in operating activities in 2025 is expected to be significantly lower than in 2024.
The selected topic was not discussed during the call.
The earnings call revealed mixed sentiments. While there is optimism about long-term profitability and strategic partnerships, challenges such as delayed software growth and uncertain monetization timelines for new projects persist. The company's focus on discovery partnerships and reduced expenses are positive, but the lack of concrete guidance on key initiatives tempers enthusiasm. Given the market cap, the stock price is likely to remain stable in the short term, with a neutral prediction.
The earnings call reveals mixed signals. Strong software revenue growth and a promising predictive toxicology initiative are positive. However, the cautious guidance and shift in clinical data timeline could dampen enthusiasm. The Q&A highlights demand consistency and constructive renewal discussions but lacks clarity on key metrics. The market cap suggests moderate reactions, leading to a neutral sentiment.
The earnings call shows strong financial performance with a 63% increase in total revenue and a significant increase in software and drug discovery revenues. Despite a net loss, the company has a strong cash position and reduced operating expenses. The Q&A section reveals confidence in their R&D and software offerings, with no immediate threats from competitors. The lack of a shareholder return plan is a minor downside. Overall, the positive revenue growth and strategic collaborations are likely to result in a positive stock price movement.
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