Thank you for standing by. Welcome to Schrödinger's conference call to review fourth quarter and full year 2022 financial results. My name is Liz, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that this call is being recorded at the company's request. I would now like to introduce your host for today's conference is Jerron Madden, Senior Vice President of Investor Relations and Corporate Affairs. Please go ahead. Thank you, good afternoon, everyone. Welcome to today's call, during which we will provide an update on the company and review our fourth quarter and full year 2022 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. Here with me on our call today are Ramy Farid, Chief Executive Officer, Geoff Porges, Chief Financial Officer, and Karen Akinsanya, President of R&D, Therapeutics. 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 made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including without limitation, statements related to our outlook for the full year 2023 and for the first quarter ending March 31, 2023, our strategic plans to accelerate the growth of our software business and advance our collaborative and proprietary drug discovery programs, the timing of potential IND submissions and the initiation of clinical trials for our proprietary drug discovery programs, the clinical potential and favorable properties of our compounds, our expectations related to the use of cash resources, as well as our future operating expenses. These forward-looking statements reflect our 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 what we project today 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-K for the year ended December 31, 2022. These forward-looking statements represent our views only as of today, and we caution you that we may not update them in the future, whether as a result of new information, future events, or otherwise. With that, I'd like to turn the call over to Ramy. Thanks, Jaren, and thank you everyone for joining us today. Our strong fourth quarter performance exceeded our revenue expectations and capped a tremendous year at Schrödinger. In 2022, we continued to expand and enhance the capabilities of our computational platform, made strong progress in our existing collaborations, entered into new collaborations, and advanced our first internal development candidate, SGR-1505, to the clinic. Total revenue for the year was $181 million, a 31% increase over 2021. Software revenue grew by 20% year-over-year as we successfully implemented a number of commercial initiatives for facilitating broader adoption and scale-up of our platform. We are also seeing an inflection in drug discovery revenue, with drug discovery revenue of $45.4 million in 2022, which is nearly double that of the prior year. Progress at collaborator companies in which we hold equity stakes further validates our platform and underscores the strength of our business model. Earlier this month, we received a $111.3 million cash distribution from Nimbus following Takeda's acquisition of Nimbus's TYK2 inhibitor following positive results from a phase 2B trial in psoriasis. We began working with Nimbus in 2009. We are delighted to see this program partner with Takeda in advancing toward pivotal trials. We are also co-founders of Structure Therapeutics, a clinical-stage company that successfully completed an IPO earlier this month. As you'll hear from Karen, our pipeline continues to progress and has expanded into neurology. We now have 15 collaborative projects and 18 proprietary programs. We expect to provide additional details around some of our undisclosed programs later this year. Our computational platform is the foundation of our company and a key driver for continued success. We have world-class computational chemistry, computer science, and machine learning development teams that continue to push the boundaries of molecular design to advance our platform. This includes advances to increase hit rates in hit discovery, to enhance the predictive accuracy of a wide range of key drug-like properties, and to broaden our exploration of available chemical space. We are also advancing technology to further enable the discovery of novel biologics. Looking ahead, we are very excited about the opportunities we have this year. We believe we can continue to grow our software business by increasing adoption among the largest companies in the pharmaceutical and materials industries, as well as increasing the adoption by emerging biotech companies. We also have a growing number of both collaborative and proprietary programs and expect continued progress across the pipeline this year. Before turning the call over to Geoff to review our fourth quarter and full year 2022 financial results, I'd like to take the opportunity to express my deep gratitude to our exceptionally talented and dedicated employees who are absolutely critical to our overall success. Geoff? Thanks, Ramy, and good afternoon, everyone. As Ramy explained, we had a great fourth quarter and excellent year in 2022. Revenue growth was strong and ultimately exceeded our expectations. Software profitability increased. Drug discovery revenue almost doubled. Our portfolio expanded and advanced, and we added 2 new collaborations. Our operating expense growth was lower than we forecast at the start of the year, and our cash burn was towards the low end of the range of our expectations for the year. Our balance sheet remains strong, and with the addition of the cash distributions from Nimbus and our expectations for declining cash burn in the future, we believe that we have sufficient capital to fund our operations for the foreseeable future. I'll start off by outlining our Q4 results and will then take you through the highlights of our full year 2022 results and conclude with our initial financial guidance for 2023. Software revenue for Q4 was $47.8 million, an increase of 24% compared to Q4 2021. This increase reflects significant step-ups in adoption of our technology by existing customers, as well as the effect of combined collaboration software agreements and other new commercial strategies implemented during the quarter. Increases in adoption and multi-year contract renewals late in the quarter were significantly above our expectations at the start of the period and more than offset the previously expected headwind to revenue growth from multi-year contracts signed in Q4 2021. Drug discovery revenue for the quarter was $9 million, compared to $7.6 million in the same quarter of 2021. Revenue increased in the quarter compared to the prior year due to the progress of projects and recognition of revenue for new collaborations found in the period. Total revenue was $56.8 million in the quarter, an increase of 23%, which was driven by both software and discovery revenue growth. Moving now to expenses. During the quarter, the gross margin on our software revenue was 83%. We have seen improvements in our gross margin on software due to changes in our royalty obligations this year, as well as the positive impact of accelerated purchases by existing customers during the quarter. The cost of delivering our drug discovery revenue was $10 million in Q4 2022, and declined compared to the $11.5 million in Q4 2021. The loss ratio for our discovery revenue was 11%, which was significantly lower than the 51% loss ratio in Q4 of 2021. The improving cost ratio of our discovery revenue mainly reflects the shift of our activities and staff to proprietary programs from collaborations, the progress and percentage completion during the period of existing collaborations, and the timing during the quarter for the initiation of new collaboration programs. While the profitability of our discovery revenue is likely to fluctuate from quarter to quarter, we do expect the profitability of our discovery revenue to continue to improve as more programs advance to later stages of development, the milestones increase in size, and our ongoing research and development obligations to such programs decline in cost. Overall gross margin was 68% compared to 57% in Q4 2021, based on improved profitability for software and a reduced loss ratio in the drug discovery business. R&D expenses were $34.5 million in Q4 2023 compared to $25.1 million in Q4 2021. The main drivers of the increase were increased headcount, increased CRO expenses, and increased technology investments. Compared to Q3, R&D expenses were 5% higher based on increased headcount and increases in technology expenses. Sales and marketing expenses for Q4 were $9.4 million compared to $6 million in Q4 2021. The increase was mainly due to higher staffing and increases in associated expenses as travel resumed compared to 2021. Compared to Q3, sales and marketing expense increased by 31% based on headcount and year-end incentive compensation allowances. G&A expense for Q4 was $23.3 million compared to $17.8 million in Q4 2021. The increase was mainly due to higher headcount as well as increases in professional services, software, and facilities. G&A expense was flat between Q3 and Q4 2022. For Q4, total operating expense was $67.2 million compared to $48.9 million in Q4 2021. The increase was due to increases in R&D and, to a lesser extent, increases in sales and marketing in G&A. Our operating loss for Q4 was $28.5 million compared to $22.5 million in Q4 2021. Other income and expenses were $1.2 million in Q4 2022 compared to an expense of $7.9 million in Q4 2021. Our reported net loss was $27.2 million in Q4 2022 compared to a loss of $30.7 million in Q4 2021. The net loss per share in Q4 was $0.38 compared to a net loss of $0.43 per share in Q4 2021, and a net loss of $0.56 per share in Q3 2022. During Q4, our operating cash use was $25 million, and our cash and cash resources declined by $23 million during the quarter. Our share count for the purposes of reporting was 71.3 million. I'll now summarize our full year financial results. For the full year, software revenue was $135.6 million, an increase of 20% compared to the prior year. The increase was driven by significant increases in sales to our existing customers, including but not exclusively our big pharma clients. For the full year, drug discovery revenue was $45.4 million compared to $24.7 million in 2021. This 84% increase was driven by the progress we are making in existing collaborations and the initial revenue recognized for new collaborations during the year. In 2022, drug discovery revenue associated with our collaboration with BMS was just under half of our drug discovery revenue, compared to slightly more than half in 2021. Going forward, revenue from this collaboration will transition from the amortization of the upfront milestones to the recognition of revenue associated with downstream development milestones. Total revenue for the year was $180.9 million compared to $137.9 million in 2021. The 31% increase in total revenue was driven by both software and discovery revenue growth. For the full year, our software gross margin was 78% compared to 76% for 2021. Our software gross margin for the year improved due to lower royalty obligations and favorable operating leverage on our fixed costs. Our drug discovery loss ratio was 11% for 2022 compared to 85% in 2021, as collaboration revenue increased faster than the cost of delivery. Our overall gross margin for 2022 was 56% compared to 48% in 2021. The increase was due to the improvement in software gross margin and lower losses on our drug discovery revenue. For the full year, R&D expense was $126.4 million, an increase of 39% compared to $91 million reported in 2021. The increase was mainly driven by higher headcount and increases in CRO expenses and technology. As in recent years, our R&D investment is approximately balanced between our technology platform and our proprietary drug portfolio. For the full year, sales and marketing expense was $30.6 million compared to $22.1 million in 2021. This increase of 38% was driven by higher headcount and associated costs. For 2022, GNA expense was $91 million compared to $64 million in 2021. The increase was largely due to increased headcount and associated costs, higher professional services costs, and increases in lease costs associated with new facilities in the U.S. and certain international locations. Travel costs have also increased compared to 2021. For the year, total operating expenses increased to $248 million compared to $177 million in 2021. The increase is driven by increases in R&D, sales and marketing, and GNA, and was mostly associated with increased headcount and higher professional services costs, including CRO expenses. For the full year, our net loss was $149 million, compared to a net loss of $100 million in 2021. For the full year, our net loss per share was $2.10, compared to $1.42 for 2021. For the year, our operating cash use was $120 million, and our cash and short-term investments declined by $123 million to $456 million at year-end. We expect our cash position to be significantly increased by the distributions from Nimbus in the first half of 2023. Given the trajectory of our cash burn and our available resources, we believe that our cash reserves are sufficient to fund our operations for the foreseeable future. I'll now share our initial financial guidance for the full year in Q1 of 2023. We expect software revenue growth for 2023 to be in the range of 13%-17%. As in 2022, we expect this growth to be skewed towards Q4 and to come predominantly from existing customers, where we continue to see strong demand for increased adoption of our technology. We are very confident about the long-term growth outlook and opportunities for our software business, which is why we are providing annual growth rate guidance going forward. While our largest customers are now purchasing over $5 million of software each year, this high level of adoption has only been reached by a handful of global biopharmaceutical companies that have embraced digital technologies in their discovery efforts. Most of the industry is still deploying our technology at only modest scale. Biotech companies are still among our leading customers, although there are very few such companies joining their ranks through IPOs, some are being acquired and thus disappearing, our biotech customers are generally maintaining or increasing their purchases. Given the timing of renewals and the strength of our contracting in Q4, our best estimate today is that software revenue in Q1, 2023 will be in the range of $31 million-$35 million. We expect drug discovery revenue to be in the range of $70 million-$90 million for 2023. We continue to have the goal of achieving discovery revenue of $100 million or greater in 2023. However, our guidance reflects uncertainty about the timing of achieving major milestones in existing collaborations and caution about counting on new deals and collaborations and the revenue they can generate at this stage in the year. For Q1, we expect discovery revenue to be in the range of $30 million-$34 million based on the expected achievement of development milestones in our existing collaborations. We expect our software gross margin to be similar to our reported gross margin in 2022 and believe that this outlook is likely to be sustainable beyond 2023. Our improved gross margin outlook is based on favorable trends in our royalty obligations and operating leverage as we increase the scale of our technology deployments. Operating expense growth in 2023 is likely to be significantly lower than the 40% growth in 2022 and similar to expected revenue growth in 2023. Based on the expected timing and amount of cash distributions from Nimbus and the outlook for other events, we anticipate that our cash position at the end of 2023 will be more favorable than our cash position at the end of 2022. We expect to report a GAAP profit in Q1 2023 based on the positive contributions to other income during the period from the Nimbus distributions. We expect our current balance of tax credits and NOLs to be sufficient to cover the tax liabilities for this period and do not anticipate having cash tax obligations this year. We also anticipate that while we may report a positive net profit in 2023, our current forecast reverts to operating losses in 2024. Our goal is to substantially reduce our operating losses between 2022 and 2025, and we believe this goal is achievable even as we continue to invest in our platform and our portfolio of proprietary and collaborative programs. I'll now turn the call over to Karen for an update on our drug discovery programs. Thank you, Geoff, good afternoon, everyone. We continued to make important progress across our pipeline throughout the year. We ended 2022 with 15 ongoing programs eligible for royalties, up from 13 the previous year. The number of collaborators since 2018 has increased to 17, up from 15 the prior year. Our strategy is to have a mix of collaborative projects and proprietary programs, some of which are wholly owned and some of which are partnered, to create a balanced portfolio and help manage R&D risk across the pipeline. I'll start with an update on our most advanced wholly-owned programs, beginning with SGR-1505, our MALT1 inhibitor. A phase I dose escalation study is open to patient enrollment across multiple sites in the U.S., and the team expects to open additional sites globally in the coming months. This study is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and early signs of clinical activity of SGR-1505 as a monotherapy in patients with relapsed or refractory B-cell malignancies. Once the recommended dose is determined, an expansion cohort is planned to evaluate SGR-1505 in combination with other therapies such as BTK and BCL-2 inhibitors. As a result of the significant number of investigational drugs for advanced B-cell malignancies, recruiting relapsed refractory patients into our phase I trial is challenging. Our sites are working hard on screening patients, and we are looking forward to the initiation of dosing. Our team is actively evaluating opportunities to accelerate gathering safety and pharmacology data for SGR-1505. Moving to our CDC7 program, a target in the DNA repair pathway, we presented new preclinical data at the American Society of Hematology, or ASH, annual meeting in December. The data demonstrated that SGR-2921 exhibits strong antitumor activity in vivo across multiple preclinical tumor models, including cell-derived xenograft models as a monotherapy and in combination with standard of care. We are advancing SGR-2921 through IND-enabling studies and are on track for an IND submission to the FDA this year. Turning to our Wee1 program, we are pleased to announce that we have selected SGR-3515 as our development candidate. SGR-3515 demonstrates strong antitumor activity with limited off-target effects in preclinical models. We look forward to further characterizing SGR-3515 as we move through IND-enabling studies. Clinical data from other companies' Wee1 programs has provided evidence of clinical activity in several forms of cancer with high unmet need, including proof of concept in uterine and ovarian cancers. Our pipeline extends beyond oncology and includes programs in immunology and neurology. The development of neuroscience therapeutics has been incredibly challenging and therefore has lagged behind oncology for many years. We believe this is an area where our platform can provide a significant competitive advantage. Our scientists are making important computational advances in the ability to make accurate predictions about key properties required for successful drug development in this area, such as the ability to penetrate the blood-brain barrier. This new method is now being leveraged internally as we expand our portfolio in neurology and has resulted in the addition of both collaborative and wholly-owned programs in neuroscience. We recently announced that we are advancing a LRRK2 program, which is a promising target with disease-modifying potential in Parkinson's disease. This program meets all the criteria we use for target selection. It is genetically validated with biomarker proof of concept achieved by others in the clinic. We have generated multiple proprietary cryo-EM structures of LRRK2 that are providing insight into overcoming drug design challenges. Our structural biology insights provide an opportunity to improve on the profiles of other LRRK2 inhibitors by enhancing selectivity and minimizing drug-drug interactions. We also recently announced a multicomponent agreement with Otsuka Pharmaceutical that includes a collaboration to discover small molecules for an emerging CNS disease target, as well as knowledge transfer and an expanded licensing agreement. For the CNS program, Schrödinger will be responsible for drug design through lead optimization, and Otsuka will be responsible for all other drug discovery and clinical development activities. Finally, on the neuroscience front, we recently added a new program in neurology to our existing collaboration with BMS. Our multi-target collaboration with BMS is proceeding very well. We expect our first program within this partnership to advance to development candidate status soon, which is included in the first quarter 2023 drug discovery guidance Geoff provided. We are proud to be delivering a development candidate approximately 2 years after beginning our partnership together. We continue to focus on initiating new programs that we may elect to partner or advance independently to key inflection points. We have several undisclosed programs at various discovery stages up through lead optimization in the areas of oncology, immunology, and neurology. We expect to share more details about these programs later this year. In summary, we are pleased with the progress we have made over the past year and expect continued advancement in 2023 across our pipeline of collaborative and proprietary programs. We are excited about the work we are doing to bring new medicines to patients more efficiently, and we look forward to updating you on our R&D activities throughout the year. I will now turn it back over to Ramy. Thanks, Karen. As you can hear, we are very excited about the year ahead. At this time, we'd be happy to take your questions. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Do Kim with Piper Sandler. Great. Good afternoon, and thanks for taking my questions. First, on the fourth quarter software sales and 2023 guidance, looking at the renewals and the multiyear agreements that drove fourth quarter upside, how should we think about the range of years for these multi-year agreements and the dynamics of those renewals? Was the interest driven by the customer in renewing early? Should we assume that the renewals for next year would be lower? Hi, Doe. This is Ramy. Thanks for the question. First, the beginning part of your question, the typical multi-year deals are 2-3 years. While it is the case that some of the growth in Q4, the sort of extraordinary growth that we saw in Q4, came from some multi-year deals, it's important to understand that actually, that wasn't all of them, all of the source of the growth. We had a number of opportunities, and believe me, it was hard work. It wasn't easy. We think that the strength of the business, the strength of the technology, sort of allowed us to close a number of deals you know, before the end of the year that you know, were took quite a bit of work. Let me emphasize also, these multi-year deals have been going on. You know, we've been doing them for a while. We do them for strategic reasons. It's, it's often something of mutual interest for us and the customer. We still feel very confident that despite the lumpiness that the multi-year deals cause, we still feel very good about the guidance that we're giving, the 13%-17% growth for the year, you know, despite some of the lumpiness, maybe you can call it headwinds that some of the multi-year deals give. The reason is because we've been doing them for a while, right? As some multi-year deals may be happening in 2022, there were some in 2020 and 2021 that of course now come up for renewal in 2023. Hope that makes sense. Yep, that's helpful. Geoff's gonna add something. Sorry. Yep. Yeah. Sorry, Do. First thing is we signaled that the multi-year deals were something of a headwind coming into the fourth quarter compared to the fourth quarter of 2021. I think you can see that we more than overcame those, that particular headwind, and indeed some of the others we flagged up at the start of the quarter. As Ramy pointed out, we did sign some multi-year deals in the fourth quarter of 2022 that I've indicated, you know, more or less very broad boundaries, offset the multi-year deal contribution in the fourth quarter of 2021. Obviously, there was significantly more growth than that in what we reported in the fourth quarter. That was very much from existing customers, and those customers believe that they indicated interest in stepping up their deployment of our software. This is very important. They, in all cases, went from being significant customers to being, I would say, significantly larger customers. I don't wanna specifically identify them, but we've indicated for the first time that we have four customers with annual contract value over $5 million in 2022 and had two in 2021. That trend is headed in the right direction and is consistent with what I've alluded to in the fourth quarter, which is existing customers having positive experiences with the technology and stepping up their purchases. Now, in a fraction of those cases, they elected to implement multi-year agreements. The biggest driver of the step-up in the fourth quarter was customers saying, "We want to step up our purchase of software and the scale of deployment of the technology." I hope that gives you a little bit more color. Quickly for a commentary on 2023, clearly, we are going to have to, once more, overcome the effects of the multi-year contracts in 2022 when we get to the end of 2023. Indeed, we have some multi-year contracts from 2021, obviously, given what Ramy said about 2 years and even from 2020, given 3 years. I think you can see that the trends in the business are sufficiently strong that we're confident that we can overcome those contracts. In many cases, to be, you know, candid, our expectation is that those customers will renew their multi-year agreements, and we're optimistic that they'll renew their multi-year agreements at a higher level, because clearly, once they've been using our technology for 3 years on a pretty expansive basis, it will be quite disruptive for them to, you know, stop using the technology at the end of the calendar year. I hope that gives you more color. Yeah, that's definitely helpful to make things a lot more clear. I just wanna follow up on the drug discovery side of the guidance. It sounds like the guidance. Is more of a probability adjusted range and the goal remains at $100 million. Does that unadjusted, if you hit on all these milestones, come to $100 million or more? Yeah, that's clearly an important question, though. There are multiple paths to the greater than $100 million, and we knew that at the start of 2022, and those paths still exist now in 2023. If we are successful with both the execution of projects within our control and if our partners complete projects in their control, and we're successful with business development initiatives, then yes, we would achieve that objective. At this stage of the year, we think it's sensible to be giving guidance about what we really know and have a high degree of certainty about, and that's the basis for the guidance that we've provided today. Great. Perfect. Congrats on all the progress, thanks for taking my questions. Thanks, Phil. Our next question comes from the line of David Lebowitz with Citi. Thank you very much for taking my question. I guess first, on the TYK2 asset, that was licensed and, you receiving the equity payments and gains for, how would the guidance for drug discovery have been different, if at all, had that deal not occurred? Hi, David. The TYK2 distribution doesn't have any effect on the drug discovery revenue, so, you know, our cash outlook would be quite different had the TYK2 distribution not occurred. That is, you know, not reported through our discovery revenue line. As I indicated in my prepared remarks, it'll be reported through our other income line. What I meant to say was, had it been kept by Nimbus and the deal never occurred, would the guidance for drug discovery have been potentially different? No. No. That's the answer. Sorry. Yeah. Yeah. I I mean, yes, it's no. Yeah. Okay. Now we understand your question. Yeah, yeah. Back on the multi-year partnerships. I know the dynamic of a lot of these partnerships is tend to be a larger upfront payment, and over time, it's more steady beyond that. Is it the same dynamic with the multi-year versus the single year? Is there a mechanism for the customers to, I guess, upsize mid-contract, if so? I just trying to figure how to look at this and impact going forward. Yeah. Absolutely. That's a great question because it may not seem obvious that if you sign a multi-year deal, let's say it's a 3-year deal, that, you know, we're sort of, there's no more interaction with the customer for 3 years. That's absolutely not the case, and we have many, many examples of customers in the middle of that term recognizing what essentially every customer is recognizing at some point, which is that they don't have access to enough licenses. This is what's happening. This is where the growth is coming from, that remember, this is what Geoff said in his prepared remarks, the majority of our customers are underutilizing the software. They Once they start using it at a sufficient scale, and they're trying to get the kind of results that they're seeing some of their colleagues that are using it at a high. Not colleagues, but you know, their peer companies and us, then there's a need to increase the number of licenses to the software so they get access to more of the technology. Those discussions are happening continuously. It's not. They can happen in the middle of the year in the middle of the term, even if it's a multi-year term and we have examples of that actually happening. Got it. Yep. Last question on enrollment in your study. Do you have any thoughts on when we might actually be able to see data based on what you've seen thus far? Hi, David. As we've described in our remarks, the enrollment is ongoing, sites are being activated, and we are working hard with our sites and investigators to bring in patients and gather the data that we've described, safety, pharmacology, and preliminary efficacy data. I suspect that by the end of this year into next year, we'll be in a position to talk more about the data that's available to us that we'll be able to describe in more detail, with you and others. We're working on it and, yeah, we look forward to sharing updates in the future. Thank you for taking the question. Thanks a lot, David. Our next question comes from the line of Michael Yee with Geofferies. Hey, guys. Thanks for taking my question. Congrats on the quarter. This is Wolf Chanoff for Mike. Wanna ask on the pipeline assets two related questions. I guess, does the new guidance for drug discovery include, is it consistent with the previous $100 million? You know, you said that doesn't include out licensing the three lead oncology assets. Is that still the case here with the new drug discovery guidance? On the MALT1, it'd be really nice if you could talk about ultimately how you think about development of the drug moving forward. Are you expecting single agent activity, or is this more of a combination with existing drugs sort of play you guys are going for? Thank you. Go ahead, Karen. Thanks a lot. As you pointed out, the guidance that we've given to drug discovery does not include revenue from out-licensing any of our mature assets. As Geoff described, it's from a range of ongoing discovery collaborations as well as completed collaborations where we're eligible for future milestones. On your second question with regard to MALT1, as you know, we're pretty excited about this target. We believe that based on our preclinical data as well as what we're understanding is occurring in the clinic in other programs, we do expect to see some monotherapy activity from MALT1. We do also believe that based on data in the public domain, and work that we're doing, that there is a substantial opportunity for MALT1 in combination with BTK inhibitors, with BCL-2 inhibitors, and potentially other agents that are being improved for the treatment of B-cell malignancy. We remain very enthusiastic about MALT1 and look forward to sharing more about our program in the future. Got it. Got it. Thank you. Just one quick follow-up. Has the thinking of around the strategy of out-licensing the mature assets changed at all? Are you still thinking of out-licensing after obtaining some initial human data? As we, as we've shared in the past, you know, we think this is very asset and landscape dependent. I think in general, we view ourselves as very capable of generating early clinical data. We also believe that some of our assets will do very well in partnership with other companies who have combination agents. However, I do want to emphasize that on an asset by asset basis, we will continue to evaluate whether it makes sense for Schrödinger to continue investing in these programs through development or whether it makes sense to partner them. I think we'll obviously have an opportunity to review that as these assets continue to progress in the clinic. Understood. Thank you. Our next question comes from the line of Gary Nachman with BMO Capital Markets. Hi, guys. Good afternoon. First, just following up on the multiyear deals. I just wanna be clear, is that pulling forward some revenue and weighing a little bit on the 2023 software growth of 13%-17%? Did you offer any discounts and rebates to encourage closing those agreements maybe in the latter part of the year? With respect to the 13%-17% growth, Geoff, you said most of that is expected to be from existing customers, but could you potentially have some new customers as well that would help, you know, drive some of that growth? Just comment, you know, how much is out there in terms of some of the new customers potentially. Thanks. Okay. Let me start off with the question about the multi-year deals. You know, in a certain way, a multi-year deal does pull revenue forward compared to annual deals because it's depending on the nature of the deals, but in most of the cases, you do get a more than one-third, let's say, of a 3-year deal gets to be recognized in the period in which you sign the deal. There's a greater than one-third contribution in the first year or a greater than pro rata contribution in the first year. I mentioned that a proportion of the revenue upside in the fourth quarter, but by no means the majority of it, came from multi-year deals. The majority of the revenue upside came from existing customers. Bear in mind that we've said, and we continue to say, about all of the top 20 pharmaceutical companies are our customers. We've confirmed a very high level of customer retention. Our total customer number went from 1,600 to 1,750. That's customers with over more than $1,000 a year in annual contract value. You know, the universe of biopharma is our customer base. Mathematically, if we... All the big pharmas are our customers, so if we add, like, 20 more customers and they're small customers, it's really not going to move the needle. Moving the needle has to be increasing the adoption of our technology in those large customers, and that's why I flagged up that there are a handful who are at that $5 million-plus annual contract value, but that is a relatively small minority of the global pharma landscape. We see opportunities for those largest customers to still increase their use, but also to move their peers towards that range as really the principal drivers. To sort of summarize the long-winded answer, a small contribution to Q4 from revenue that might otherwise have been reported in future periods had they been annual contracts, and lots of opportunity to continue to grow, that's encompassed within our guidance. And we are very confident that we'll be able to overcome, you know, the effects of the multi-year deals that were signed in 2022. The last part of your question about, sort of rebates and discounts and all that sort of thing, we don't want to be commenting publicly about our commercial strategies, but suffice to say that we are very excited about the interest in our customers in ramping up the scale of deployment of that technology. We think they'll see advantages to that, and we think that that's beneficial for us as well. Of course, we're going to be working pretty diligently to try and facilitate that. We think that's in everybody's interest to be getting the benefit of large-scale deployment of the technology. I'll just add, that's perfect, and I'll just add one extra thing just to remind you, and we've talked a lot about this before. Of course, we have the material science business, and there, the growth really does come mostly, of course, given that's a, you know, a younger business from adding new customers. We continue to see that happening. We continue to expect, you know, we expect that to continue to happen this year and beyond. Okay, great. That's helpful. Just one other follow-up, Ramy. Mm-hmm. Talk a little bit more about the initiatives, you know, that have been progressing to accelerate the software utilization and adoption, with your existing customers, and just how much more that's gonna continue in 2023 and, you know, how much spend is associated with that, if that's gonna be ramping up as well, in order to push some of those initiatives forward. Yeah. Here's what the challenge we have, which we've talked about before. Our customers, of course, will scale up when they see impact it has on their programs. In order to see the impact, you have to use the software at a high scale. We have this kind of chicken and egg cycle, right, that we have to break into. What we have found is incredibly effective. There are two things. One is they're starting to become really overwhelming validation or data to show that this using the software at this really high scale has a profound impact on the timelines of projects, on the likelihood of their success, on the quality of the molecules. That's happening from our own programs. You heard Karen talk about, you know, speed. We talk a lot about the quality molecules. You see the success of Nimbus and Morphic and Structure and other companies we've been involved in. It's becoming sort of overwhelming and a little hard to ignore, right? I mean, the validation is very clear. That's become a very, very effective way to convince customers that they have to scale up. Now, the other strategy involves making sure that our customers, once they get access to it, remember this is somewhat of a transformation of the way drug discovery is done, right? That's what this is about. This is about shifting chemistry resources to relying more on computation. It's making it so that smaller teams can work on more programs 'cause so many more calculations are running. Where are they gonna learn all of that? That's by us engaging with them in a little bit, and transferring that know-how and how we do things. We've been very successful in doing that. All that validation, that training. I have to tell you that what we're seeing, and Geoff talked about this, is we don't think this requires very significant extra resources. A customer scaling up their usage of the software by a factor of 10 doesn't require us to spend that, you know, anywhere near that amount of increase in effort, if that makes sense. We continue to be able to see this kind of operational leverage, and we are coming up with pretty clever ways, we think, of breaking into that sort of chicken and egg problem, which is clearly working, as you heard from some of the, you know, the new KPIs that we've reported. Yep. No, that's great. Thank you. Good. Good. Our next question comes from the line of Vikram Purohit with Morgan Stanley. Hey, guys, this is Will on for Vikram. Thanks for taking our question, and congrats on the quarter. Just one from us on the new development candidate, 3515. Could you walk us through, how you believe the candidate is differentiated at all or, what aspects in particular the molecule you've been working to optimize? Yes, happy to. SGR-3515 is a very potent Wee1 inhibitor, so it has similar characteristics to other Wee1 inhibitors. We believe, and this is what we've been working on for the past few years, is that it has a optimized selectivity profile. As you're well aware, the previous Wee1 inhibitors had off-target kinase activities. We believe we've optimized that kinase profile, and that correlates very nicely with the in vivo data that we're seeing that really, I think, validates the profile and replicates what's been seen all the way through phase two in terms of the activity and efficacy of Wee1 inhibitors in the clinic. Furthermore, we believe that Wee1 inhibition is going to be used in the clinic and on the marketplace eventually in combination with other agents.As a result of that, we think the drug-like properties, including things like drug-drug interactions, other physical chemical properties, are really important to maximize the potential opportunity for Wee1 inhibitors. We've been working on all of those aspects using the platform, and, we're very happy with the profile of this compound. We look forward to moving this forward, and studying its profile in the clinic. Okay, that's great. Thanks very much, and congrats again. Thanks. Thanks. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Hi, everyone. This is Charlie in for Chris. Thank you so much for taking our questions, and congrats on the great quarter and year. Just regarding the guidance, we had one quick one, regarding the expected reduction in year-over-year operating expenses. Just wondering what the drivers are there and where you where you see yourself saving on the spend during the course of the year there? Charlie, let me be clear. What we've said is the growth rate will be significantly lower. We reported 40% OpEx growth in 2022, 42% in 2021. We think in 2023 it will be significantly lower than that 40%, and we expect it to be in line with revenue growth. We do think that we have opportunities to continue to deliver more operating leverage going forward. It's not an absolute reduction, it's a reduction in growth. Let me just address your question about where that reduction in growth is. I think the greatest reduction in growth will be in the G&A line. The least reduction in growth, I mean, the most growth will be... continue to be in R&D as we support the platform and the portfolio, that Karen has described. Somewhere in between will be the sales and marketing expense growth, and of course, that's going to be most closely tied to the revenue growth result. Got it. That's really helpful. Thank you so much for the clarification there. I guess regarding the R&D spend and, you know, moving forward with the Wee1 inhibitors, happy and excited to hear about the progress there. Just wondering and piggybacking off of the last question, just curious how you're thinking about the indications that you might pursue, whether you think, you know, the proof of concept that we've seen from competitors in the Wee1 space is kind of the way to think about it in terms of indications like uterine serous carcinoma, or should we expect to be pressing into maybe some newer indications? Regarding the potency of Wee1, just on a relative basis, is the 3515 kind of... Should we be thinking about it in terms of like a higher potency versus the competitors that are out there? Is it really more of like a comparable potency, but it's more selective so that you might be able to achieve higher doses and not be limited by toxicities? Thank you so much for taking our questions. On SGR-3515 and Wee1 inhibition, you're correct, quite correct that there has been really impressive data in uterine serous carcinoma, in ovarian cancer, as well as a number of other solid tumors. We've been working with MD Anderson over the last two years, we've basically launched that collaboration to understand more about the potential for sensitive population, sensitive tumor types. That collaboration is going very well. While we do believe that there is enough data in the public domain to enrich our phase I trial with patients that we know respond based on existing clinical data, we're also excited to test some of the opportunities coming out of that collaboration. With respect to the potency, we do believe our compound is more potent. More importantly, we think the combination of the on target binding as well as some of the optimized selectivity is leading to the profile that we actually presented at ACR, where we are seeing an ability to dose this compound intermittently and maintain efficacy while being able to stop dosing. We think that actually this dosing regimen, as well as the characteristics of this molecule, have the potential to be quite interesting in the clinic. Of course, we need to test this in the clinic to see if that's the case. It does have a differentiated profile relative to existing compounds, as well as being able to replicate what's already been seen in the clinic. I think he might have said thank you. Yeah. I think we're going to the next one, right? Our next question comes from Michael Radkin with Bank of America. Great. Hi, this is Wolf Chen, I'll follow from Mike. Thanks for taking the questions. I wanted to ask more of a higher level market one. I know that you'd signaled recently that you've seen trends with large pharma customers stabilize a bit, while biotechs remain under pressure due to the capital market environment. I'm wondering if you can provide a little more color on each cohort and how they trended both in 4Q and how you expect them to perform throughout 2023. I have a quick follow-up. Sure. I think we've been clear in the commentary and in the prepared remarks that existing customers really stepped up their purchases and drove the revenue upside in the fourth quarter. The continuation of those trends is captured in our guidance. Now, I also indicated that they are mostly, but not exclusively, pharmaceutical companies. Of course, there are significant biotech companies in that universe as well. The reason that I like to point that out, to be honest, is because companies that are really committed to using our technology, even with a relatively small number of projects, can achieve annual contract value or purchase annual use that is in the same range as very large companies that have dozens, if not 100 or more development projects. That's what gives us the conviction that many, perhaps most large companies still have a long way to go in terms of the step up in the deployment of our technology as they attempt to become increasingly digital in their approach to drug discovery. I think that there's some color there, mostly pharma, some biotech. To go back to your question about the issues that we saw. We flagged up 3 issues going into the beginning of the quarter. One was international, the sort of temporary effects of exchange. I think you see that if you look in our K, the contribution from international markets was slightly less in 2022 than it had been in 2021. We think that that is at least going to stabilize, if not start to reverse itself in 2022 because those those customers in those locations won't face the headwind of our technology becoming materially price, more expensive, higher priced as a result of exchange. We've said before, we don't think that's going to be an issue. We think that we should be in good shape there. Secondly, we flagged up the lack of emerging biotech companies, and that continues to be the case. We are seeing new customers, but they are purchasing at a relatively small level, particularly in the back half of 2022. Clearly, our number went from 1,600 to 1,750, so by definition, new customers, but not new, very large customers, who, you know, not brand new to Nova, very large customers. I think that the thesis about, you know, the challenging capital markets for biotech companies and limited number of new companies being created, caution about the use of capital, I think that that's playing out and that continues to be the case. The last thing that I identified at the beginning of the quarter, in my remarks then was the issue, the uncertainty in big pharma companies. You know, there have been some interesting things that have occurred across pharma coming to the end of the year and the beginning of the year. You know, they've signaled some caution about pricing, about their portfolios, some sort of changes in their hiring, et cetera. That didn't really materialize at the end of the quarter. At the end of the quarter, those customers stepped up and indicated that our technology was a high priority for them, and for a number of them, stepped up materially in terms of the scale of their deployment and even the pre-purchasing. They indicated with that purchase that we are core to their drug discovery enterprises for a number of years, in which case the multi-year contract, and are core to their drug discovery activities by virtue of the scale of deployment of technology. The uncertainty that we had about the pharma purchases, I think, you know, clarified itself as we went through the quarter and got to the very end of the quarter. I think that's behind the optimism we have, and you hear from us about the outlook for 2023. I hope that answers the question. It does. Just on a related note, I was wondering if you've seen any shift in client behavior or spending tied to the Inflation Reduction Act. Has it changed your longer-term internal pipeline strategy? I know you've spoken about this a bit, but, we've heard some mixed messaging from across the industry recently. Yes. Look, again, if you look at the 10-K we filed today, we definitely flagged this up as something that we hear as well. It's not something that we hear in our direct discussions with our customers. It's something we hear through the same channels that you hear, conference calls like this, you know, investor events, you know, press releases, things coming out of trade groups, et cetera. It's not something that we are seeing to a significant degree from our customers. Now, I will add that adapting our technology and expanding its capabilities to biologics is a strategic priority for us. As you've heard from Ramy, and maybe he can comment on this now, we've made a lot of progress there. There's no doubt that companies are adding to the biologics component of their portfolios. There are companies that are saying, "No small molecules." You know, we think that our technology has a lot of utility there. Ramy, do you want to add to that? Yeah, no, I think you said it perfectly. You know, we're looking forward to continuing to report on progress we're making on extending the technology to biologics. We've been in that space for a long time. We continue to invest in it. These physics-based methods are agnostic to the modality and we're starting to leverage that fact. I think you'll be hearing from us in the coming years on pretty significant progress in the ability to use the software to design better biologics. Great. Thank you, guys. Yeah. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from the line of Jack Seto with Craig-Hallum. Hi, this is Jack on for Matt. Thanks for taking our question. I was curious, last quarter you discussed your cash burn moderating a bit as revenues continue to grow, and at that time, you had probably about 4 years of cash on the balance sheet. With the infusion you are receiving from the TYK2 sale, it puts you closer to 5 years of cash on hand. Does that increase your interest in M&A opportunities of funding additional internal candidates or your plans for the new infusion of cash? I apologize, Jack, I didn't hear you terribly well, but I think what you're asking is that, our capital allocation priorities changing as a result of the additional capital that we're receiving from Members? Is that? In particular, M&A. Yeah. Is that the right? Yeah, that's correct. Great. Look, I think that we're very happy about the cash distribution. I think that with both our cash burn moderating, and with the additional distribution, you know, I think your math is not incorrect, but at a certain point, whether 5 years, we've got 6 years, it's a long time, right? A lot of things are going to happen between now and then. Our highest priorities for our capital allocation are continuing to innovate in the platform and add to the capabilities of our technology, which we think is highly proprietary and highly differentiated and value creating. Secondly, to continue to invest in the opportunities that emerge from the deployment of the technology, both in our own portfolio and in the portfolios of companies that we have partnered with or been co-founders of, in the case of, for example, Structure. Those are the highest priorities. Now, we're certainly going to be curious and open-minded and opportunistic if opportunities emerge that bring us technology that we think is highly complementary to our current technologies or accelerate our path forward as a clinical development organization or add very exciting targets that we can deploy our technology against. We're certainly going to be receptive to that, but that's not the primary direction of our capital allocation strategy. That's very helpful. Thank you. I'm showing no further questions at this time. That concludes today's call. You may now disconnect.