Thank you for standing by. Welcome to Schrödinger's conference call to review the company's first quarter financial results. My name is Kevin and I'll be your operator for today's call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one on your telephone. If you require any further assistance, please press star then zero. Please be advised that this call is being recorded at the company's request. Now I would like to introduce your host for today's conference call, Jaren Madden, Senior Vice President of Investor Relations and Corporate Communications. Please go ahead. Thank you, hello everyone. Welcome to today's call during which we provide an update on the company and review our financial results for the first quarter of 2021. 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 are Ramy Farid, 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 prepared remarks, we'll open 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 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 relating to the COVID-19 pandemic, our expectations related to the use of our cash equivalents, marketable securities, as well as our other 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 further develop our computational platform, our reliance upon our 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. With that, I'd like to turn the call over to Ramy. Thanks, Jaren, and thank you everyone for joining us today. At Schrödinger, we have developed a computational platform that is transforming the way therapeutics and materials are discovered. The platform is enabling our customers and our internal drug discovery team to discover high quality molecules for drug development and materials applications faster, at lower cost, and with, we believe, a higher probability of success compared to traditional methods. We license our platform to pharmaceutical, biotech, and materials companies and universities and government labs worldwide. We are also leveraging our platform in a number of drug discovery programs in collaboration with pharmaceutical and biotech companies. We are advancing an internal drug discovery pipeline, which Karen will review shortly. As we look out at the next decade, we believe the increasing speed of computing, expanding access to high resolution three-dimensional protein structures, coupled with our platform's ability to predict molecular properties with a high degree of accuracy will allow us to broadly explore even greater chemical space and ultimately enable us to identify novel high quality development candidates for a broad range of targets within as little as one year from program launch. Beyond the progress we are making across our internal drug discovery pipeline, we are continuing to see exciting examples of the power of our platform and the potential for continued scale-up by the industry. In March, our collaborator Morphic Therapeutic reported promising clinical results from one of their integrin programs for the treatment of inflammatory bowel disease. We also recently expanded our collaboration with AstraZeneca to fully deploy our platform across all their structurally enabled discovery programs. We are making continued investments in the science underlying our platform to maintain our leadership position in physics-based computation and machine learning, with a focus on increasing accuracy of the predictions and expanding the domain of applicability to wider range of therapeutic targets and industrial applications. We also continue to look for opportunities to make supercomputing even more accessible for our customers. Last month, we established a strategic collaboration with NVIDIA to further optimize our platform for one of NVIDIA's key enterprise systems designed to enable companies to reach supercomputing power. As you'll hear shortly from Joel, we are in a strong financial position ending the quarter with cash resources of $649 million. This allows us to continue to invest in our science, invest in growing our software business, advance our internal pipeline, and add new talent to support our strategic initiatives. We're excited by the progress we've made so far this year across all aspects of our business. We are continuing to navigate the challenges of COVID-19 and are planning for a return to several of our offices in the fourth quarter. We appreciate the dedication of all our employees, and we are optimistic about the ability to return to working together in person again. I'll now turn the call over to Karen for an update on our drug discovery programs Thank you, Ramy, and good morning, everyone. We are continuing to make important advances on many fronts across our internal pipeline and portfolio of collaborative programs. We have collaborations with both small biotech and large pharmaceutical companies spanning a broad range of target classes. And in these collaborations, we are leveraging our platform at the same scale we do internally. We believe this level of large-scale deployment enables us to more rapidly identify high-quality development candidates. We expect several collaborative programs to continue to advance in the clinic and new programs to enter the clinic this year. We have also made significant progress in our own internal oncology programs targeting solid tumors and hematological malignancies. Today, I will highlight three of our most advanced programs, MALT1, CDC7, and Wee1. Based on the strong data we have generated to date, we plan to move forward with IND-enabling studies for these programs. Subject to completion of the preclinical data packages, we expect to submit up to three IND applications in 2022, with our first submission expected in the first half of next year. Starting with our MALT1 inhibitor program, today we announced we have selected a development candidate. To give you a sense of how we explored chemical space to identify a novel potent selective MALT1 inhibitor with favorable drug-like properties, our team triaged over eight billion compounds, scored approximately 12,000 compounds using our most advanced multi-parameter optimization methods, and synthesized just 78 molecules to identify those suitable for development candidate nomination within 10 months of program initiation. MALT1 has emerged as an interesting target because it is downstream of BTK in the NF-κB signaling pathway. Constant activation of NF-κB is a hallmark of several subtypes of lymphoma. We believe that inhibiting MALT1 could be an effective therapeutic strategy to treat certain relapsed or resistant B-cell lymphomas and chronic lymphocytic leukemia. In December, we presented preclinical data from our MALT1 inhibitor program at the American Society of Hematology Annual Meeting. We reported potent in vitro inhibition of MALT1 enzymatic activity and in vivo anti-tumor activity in mouse xenograft models of diffuse large B-cell lymphoma. Additionally, in in vivo mouse models, our MALT1 inhibitors demonstrated dose-dependent anti-proliferative effects in combination with ibrutinib and venetoclax, which are approved BTK and BCL-2 inhibitors respectively. We are excited about evaluating the potential of combining our MALT1 development candidate with BTK or BCL-2 inhibitors in the clinic. Our GLP tox studies are expected to begin shortly, and we are beginning to make plans for Phase I studies in patients with hematological malignancies. We expect to share more details about the clinical study after the Phase I protocol is finalized. Now I'll turn to CDC7 and Wee1, two programs that target cancer through replication stress and DNA repair mechanisms. CDC7 is a protein kinase that has been shown to be required in DNA replication initiation. CDC7 is thought to be linked to cancer cells' proliferative capacity and ability to bypass normal DNA damage responses. Targeting proteins that play important roles in DNA replication and replication stress is gaining momentum as a new therapeutic approach for cancer. Last month, we presented preclinical data from our CDC7 inhibitor program at the AACR Annual Meeting. Our compounds demonstrated dose-dependent picomolar potency and were highly selective. They also showed synergy with several approved and investigational cancer therapies that modulate apoptosis, DNA repair mechanisms, and DNA checkpoints. These compounds significantly inhibited tumor growth in mouse models of both acute myeloid leukemia and colorectal cancer. The data we have generated to date suggest that we have an opportunity to develop a best-in-class inhibitor with a very favorable pharmacokinetic profile. Our other DNA damage repair program targets Wee1, a tyrosine kinase regulator of the G2-M cell cycle checkpoint. The therapeutic objective of targeting Wee1 is to reduce cell viability by inducing G2-M phase arrest and apoptosis of cancer cells. Others have shown clinically meaningful tumor regression in uterine serous carcinoma, ovarian, and other solid tumors through Wee1 inhibition. However, existing inhibitors have profiles that may make dosing and combination therapy more difficult. The design challenge in our program was to develop highly selective molecules in an effort to minimize off-target effects, limit drug-drug interactions, and maximize the potential for combinations. We have identified multiple potent molecules that are highly selective for Wee1 and show strong pharmacodynamic responses and anti-tumor activity in vivo. Our molecules also have optimized drug-like properties, including no observable inactivation of CYP3A4, a key liver enzyme. We believe this profile limits the potential for accumulation and the need for dose adjustment of combination products. As these programs advance and transition into development, we expect to initiate new programs. We have prioritized several new program opportunities with human genetic support and emerging pharmacology data in oncology and immunology. We expect to launch these programs during the year. In summary, we have multiple programs advancing into GLP toxicology studies to enable IND submissions and the initiation of Phase I clinical studies next year. Activities to support expansion of our pipeline into additional disease areas are well underway. We look forward to updating you on our R&D activities throughout the year. I will now turn the call over to Joel to review our financial results. Thank you, Karen, and hello, everyone. This morning, I am pleased to discuss our financial results for the first quarter of 2021, and I will also review our outlook for the year. We reported total revenue of $32.1 million for the first quarter, up 23% compared to the first quarter of 2020. Software revenue was $26.3 million, representing 11% growth compared to the first quarter of 2020. The growth in software revenue was driven by increased deployment of our solutions, including FEP+ and LiveDesign, as well as growth in new customers. Drug discovery revenue was $5.8 million for the first quarter, compared to $2.4 million in the first quarter of 2020. Of note, drug discovery revenue this quarter included recognition of $2.2 million from a collaboration milestone related to the advancement of a preclinical program. We recognized this revenue one quarter earlier than anticipated. First quarter drug discovery revenue also included $2.4 million recognized from our collaboration with Bristol Myers Squibb. As a reminder, the BMS agreement, which we signed in November 2020, included a $55 million upfront cash payment, which we expect to recognize over a four-year period as we progress the BMS programs to development candidates. Gross profit was $16.2 million in the first quarter of 2021, up 3% over the first quarter of 2020. Software gross margin was 78% in the first quarter of 2021, compared to 83% for the same period in the prior year, reflecting our investment to support the rollout of large-scale deployments of our platform. Operating expense was $40.1 million, compared to $27.4 million in the first quarter of 2020, reflecting our investment in R&D to advance our technology and our pipeline, the addition of staff to drive long-term software sales growth, and expenses required to support a public company infrastructure. Other income was $23.5 million versus a loss of $2.4 million in Q1 2020. During the quarter, we recorded $24.8 million of income from the mark to market of our shares in Morphic Therapeutic. As we mark to market our shares each quarter, we can experience significant fluctuations in the value of our holdings, depending on stock price movements. We recorded a net loss after adjusting for non-controlling interests of approximately $29,000, compared to a loss of $13.8 million for the same period in the prior year. We ended the first quarter with cash, equivalents, marketable securities, and restricted cash balances of $649 million, up from $643.2 million at the end of the fourth quarter of 2020. In March, we provided our financial outlook for the full year, and today we are reaffirming that guidance. We expect total annual revenue in 2021 to be in the range of $124 million-$142 million, which includes software revenue of $102 million-$110 million, and discovery revenue of $22 million-$32 million. We continue to expect software revenue growth to be higher in the second half of the year, with the majority of second half growth in the fourth quarter. Drug discovery revenue is expected to be highly variable based on the timing of potential milestones related to collaboration agreements. As we said before, we anticipate that operating expense growth will be higher than the 42% annual growth rate we saw in 2020, primarily driven by our commitment to fund R&D to advance our technology and our internal drug discovery pipeline. We also anticipate that software gross margin will be lower than the 81% reported in 2020, reflecting investment to drive and support large-scale adoption by our customers. We are pleased with the progress we have made so far this year, particularly the advances we have seen across our collaborative programs and internal pipeline. We are also excited about the potential for large-scale utilization of our software in drug discovery and materials science applications. Finally, we have the resources to invest in our growth strategy across our business. I'll now turn the call back over to Ramy. Thanks, Joel. We are excited about the significant impact our technology is having on our internal and collaborative drug discovery programs. It is exciting to see the power our platform has to advance the discovery of new therapeutics with the potential to improve treatment paradigms across a broad range of disease areas. We are also excited about the potential of our platform to impact sustainability initiatives across multiple industries. We have an exceptional team committed to advancing our vision, and we look forward to providing updates on our progress throughout the year. At this time, we'd be happy to take your questions. Operator? Ladies and gentlemen, if you have a question or a comment at this time, please press the star then the one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Michael Yee with Jefferies. Hey, guys. Good morning, and thanks for the update. Maybe two questions for us. First, I guess, on software. I noticed that you maintained the guidance. We're sort of into May now. You gave an update, I think, March 23rd and also in January. Do you get the sense that things are picking up, you feel more confident about the range of the guidance or the higher end? As it relates to either people getting back to work, COVID, the adoption, just all of those things, do you have any sense of how things are going, whether better or not? Here we are into the midpoint of the year. That's question one on software as it relates to the guidance. Then question two may be for Karen or the team. You have a candidate now for MALT1. That's fantastic. Do you feel you'd like to get these things into IND before you consider partnering? Is that kind of a, I won't say a line in the sand, but kind of a good place to think about where it's most optimal, IND and greater? Maybe just talk to that for MALT1 or something else. Thank you. Joel, do you want to take Mike's first question? Sure. Thanks, Ramy. Thanks, Mike. Good morning. Yeah, of course, we did maintain our guidance for the full year. If you look at the quarter, we came in slightly above what we had guided to back in March, at 11% versus high single digit. As we look out over the rest of the year, we also reaffirmed the color around the pacing, and it's important to keep in mind. We see the second half unfolding to be higher growth than the first half, and most of that growth in the fourth quarter. The way we look at the year is we look at the customers that we are interacting with, the renewal timing, whether those renewals are on-premise or hosted. That determines whether revenue is recognized in a particular quarter or over time, whether there are upsizing opportunities within those renewals, and also the prospect for new customers. At this time, we feel comfortable with the guidance that we provided for the full year. We're maintaining it. Karen? Yes. Good morning, Mike. On our MALT1 program and others, as we've discussed in the past, we do plan to move these programs forward ourselves. At this moment, we are looking towards IND opening studies next year, as we discussed in the call. However, we do stay very cognizant of the landscape. Each of these mechanisms, as you're aware, from AACR and ACS, a lot of information coming out, and we stay in contact with potential partners. As you know, each of these mechanisms has the potential to combine with existing marketed agents. We expect to see combination trials be a part of the clinical development program. We remain interested in the potential to benefit from those combination compounds. There's a number of ways to accomplish that. At this point, we are planning to open those IND studies ourselves and stay in touch with potential partners. Great. Thank you, guys. Appreciate that. Thanks, Mike. Our next question comes from Michael Ryskin with Bank of America. Hey, guys. Thanks for taking the question. I want to follow up on the last one just real quick on the software pacing through the year. I want to make sure we're thinking about this correctly, because I know this was a big point of debate last quarter, and that's what sort of as we started the year. Typically, there is a little bit of seasonality where 1Q tends to be a little bit stronger than 2Q as far as software revenues goes. Is that a fair way to think about that? Just because I know that some of the comps last year with COVID could have been a little bit messed up. I just want to confirm that a mild step down 1Q to 2Q software is appropriate. I got a follow-up for Karen. Sure, Mike. Good morning. You're right. We have seen that kind of seasonality in the past, and I think the other thing is that we have guided to back half being higher growth than the first half and fourth quarter being the majority of that growth. I think as you think about the pacing of the year, I think it's important to keep that in mind. Also, if you look at the performance in the first quarter, as I mentioned, it's just slightly above what we had guided to in the first quarter in terms of high single digits. I think that hopefully that's helpful in thinking about the pacing throughout the year. Okay, thanks. Karen, for you, it sounds like you can seem to emphasize that beyond the three lead compounds in the internal pipeline, you've got more and more potential candidates ramping up that you're sort of finding some early hits for. I'm just wondering how should we think about the breadth of that early pipeline? How many assets do you currently have the headcount and the ability to run at the same time? Sort of how should we think about that going forward? Yeah, thanks, Mike. As we've described in the past, we can run around 20, 25 of these programs. Those are both in collaboration and our wholly-owned pipeline. This year, we've been really ramping up the team that's looking at these earlier-stage programs, where we're able to initiate a hit ID and hit to lead. I would say that right now we have the capacity for around five steady-state programs that are wholly owned, and we intend to maintain that steady state over the next couple of years. As the team grows, that gives us the ability to further expand our internal pipeline. Obviously, as these candidates move forward and into development, clinical development, our plan is to replace them. The team are very busy right now working on additional programs that you'll be hearing more about in the future. Okay. One last quick one for Joel, if I could squeeze it in. You had some comments in the prepared remarks on sort of going back to the office post-COVID and returning to normal operations. Should we be assuming any significant impact to the operating expense line as we go into 4Q from those activities, or is it going to be a more gradual transition? Thanks, Mike. Sure. We are planning to be back in the office in the fourth quarter. We, of course, had these plans in place not knowing the exact timing at the beginning of the year, but as we planned out the whole year expenditures. I think it is more of a gradual thing as we get back to the office. Obviously, other than being in the office, we're operating at full strength, so there really shouldn't be much change in the way we are supporting our operations. Just the fact that we're able to collaborate together will be kind of a welcome change. The other thing is, the thing that will drive variability in expense to a greater degree is really our R&D side and pacing and timing of our programs as they move towards the clinic, hiring throughout the year as we build up our capabilities for our early clinical operations, and also the timing of CRO expenses as we advance our internal programs in that regard. I think those core operating metrics have more of an impact than perhaps a return to the office at the end of the year. Great. Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. Our next question comes from Do Kim with BMO Capital Markets. Hi, good morning, everyone. Just wanted to ask about the expanded AstraZeneca collaboration. Could you provide a little more detail on that? How much of a step-up in usage would AstraZeneca be involved in the platform, and what does the expansion mean in terms of economics for Schrödinger? Yeah. First of all, thanks, Do, for the question. This was a really highly successful pilot program, if you will, and it was really great to see how successful it was and the rollout to the entire company. We're of course not revealing the details of the agreement, but I think it speaks very well to not just the short-term impact of the expansion, but really the long-term expansion. As you know, we've talked a lot about the relative usage of our software at pharma companies relative to what we're using, as Karen said, in our collaborations and internal program. Seeing this kind of transition to a much larger scale deployment is a very good indicator of us achieving that, as we've talked about, sort of, in some sense, the TAM of the software. We're really very excited about that transition from a sort of pilot program to a real broad deployment across their whole set of programs. Great. You've talked previously about how Schrödinger has the ability to use their own software platform in an unlimited fashion. Could you quantify for us how much it would cost an external company to construct the internal program that you have currently, just like in terms of dollar figures, the number of licenses Schrödinger theoretically used? Absolutely. That's a good question. As Karen said, we're running around 20-25 programs. At the moment, and this is going to increase, by the way, with time, I'll explain that in a second, but at the moment, that turns out the usage of the software to support that number of programs is around $30 million-$40 million of software. That doesn't include the compute cost, just the software licenses. Couple of things that's important to keep in mind. One is that's just 20-25 structure programs. Of course, pharma companies typically have more than that number of programs, certainly the bigger companies. The incredible thing is that this keeps increasing at a pretty rapid pace. As we've discussed before, the performance of computers, the availability of computers, availability of structures of proteins, which is a key input to these methods, are increasing exponentially and continue to, and have been for a long time and still continue today to increase exponentially. That's what it is right now. As we see, we've talked about this before, a year ago or so, we were exploring around single-digit billion number of molecules. Now we're exploring hundreds of billions of molecules. Of course, as computer performance goes up, as the number of structure-enabled programs goes up, that $30 million-$40 million will continue to increase. That's what the value is right now. Great. That's very helpful. For Karen, you previously said that you expect a number of your collaborations that are in lead optimization to move into GLP tox studies. Is that still your expectation over the next few quarters? The milestones that you expect to achieve, will they be cash payments or just recognition of prior payments? I'll say that, first of all, we don't have full visibility into everything going on in all of our collaborations. However, we have seen, and I think you've also seen, the progress that's being made in the programs that are described publicly. You've seen progress, for example, with Morphic, and we know that these programs that we're working on with a variety of different partners are meeting their scientific milestones, moving forward with regard to the data packages. We continue to be very confident that these programs are going to move forward through the various stage gates, GLP tox, and including a number that are in IND-enabling studies, actually moving into the clinic with the data packages supporting that. I would say that we remain confident about a number of these programs, not just moving into lead op, but to further milestones and gates. I would, though, turn over the question on the financials to Joel, if that's okay. Sure. Do, if I misinterpreted your question, please just clarify. I think with regard to our discovery revenue, what we have signaled this year is growth in a full-year guidance. It's growth in our discovery revenue versus prior year. What we've also said is that as we continue to advance our collaboration programs, generally speaking, milestones get larger. That's certainly the case on the BMS side, as we've talked about the potential to earn up to well over $2 billion in milestones, with 2/3 of it roughly being pre-commercial. We're really excited about investing in advancing those programs towards these very significant step-ups in milestones in the future. I think we continue to see, as Karen mentioned, advancement in the pipeline in that regard. We're confident really across that pipeline that over time, we're going to continue to see opportunities for significant growth on the discovery side coming out of the collaborations. We did see a signal in the first quarter where we were able to recognize $2.2 million related to a single milestone, early preclinical stage milestone, one quarter earlier than anticipated, which I think is a nice signal in that particular case of the continued advancement of a specific program. We're seeing broad advancement as we've talked about, and so we're excited to continue to grow that side of the business. Great. Thanks for taking my questions. Thanks, Do. Our next question comes from David Lebowitz with Morgan Stanley. Thank you very much for taking my question. Could you run us through the purchasing dynamics for a pharmaceutical company? What's the typical cycle for making decisions? Obviously, they tend to make decisions on an annualized basis, but do they ever make incremental decisions throughout the year? Is it really on a one-time basis on an annual, each year, and then they tend to make the decision to upgrade at the end of a cycle? Yeah. It's typically that most of our contracts are one-year contracts, so the decisions are made on an annual basis. There's certainly examples of cases where companies have essentially recognized in the middle of the year that they're running out of licenses and we've done contracts in the middle of the year. That does sometimes happen, but typically it's every year. Now, the interesting thing about that is that in 2020, as you know, there was quite a large increase. I think this was at a time where the validation of the technology was coming from sort of external sources. It was coming from the success of Nimbus and Morphic and our internal programs, and that was catalyzing a broad adoption of the whole platform by quite a number, a very large number of companies. Even though the decisions then are made on an annual basis of the renewals, the decision to scale up in a very significant way can actually take longer than a year because the validation switches over to sort of internal validation. What does that mean? First of all, you have to deploy the technology at a much larger scale than they're used to. This involves obviously running the calculations on the cloud. Then you have to go through these design test make cycles, where you're determining whether the technology's really having the kind of impact that we're seeing and that they've seen from other collaborations. That can sometimes take a little bit longer than a year, and that's how we've talked about sort of the growth in the business. It's not necessarily completely linear. We know where it's headed, as we talked about before in response to other questions. It can take a sort of lumpy course to get there. That make sense? Yes, it does. Yeah. Great. On the occasion when a customer does add on incrementally during the year. would that add-on be a year-long contract, or would it be to, I guess, to fit into the current contract and then conclude in the fourth quarter, so if that's when the contracts currently end? Yeah That they're basically incorporated into the current cycle? It really varies. That's a really good question. It varies. Sometimes the contract is starting to end so that it's coincident with the earlier contract, but actually, just as often, it's a contract now where there are two renewals in the year, and then later on, they're merged. It's really every different possible way of doing it has occurred. Sometimes it's six months, sometimes three months, nine months, sometimes a little bit over a year. There's quite a bit of variability. Thank you very much for taking my questions. Sure. Thank you. There are no further questions. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.