Schrödinger (SDGR), a New York-based developer of a physics-based drug discovery platform that combines machine learning and AI, said its cloud migration is accelerating. The company, in business since 1990, presented at Morgan Stanley's 24th Annual Global Healthcare Conference on Monday, September 14, 2026. The session was moderated by Morgan Stanley analyst Craig Hettenbach, with participation from CEO Ramy Farid, CFO Richie Jain, CTO of Software Pat Lorton and President of R&D Karen Akinsanya.
In the second quarter, annual contract value rose 27% year over year. Hosted software revenue reached 47% of total software revenue, ahead of internal expectations and the company's three-year target. First-half revenue increased 19% compared with the same period in 2023, while operating expenses fell 6% year over year. Schrödinger raised software revenue guidance by $10 million after a strong drug discovery quarter and expects full-year operating expenses to be lower than in 2023. It targeted adjusted EBITDA breakeven in 2028 and a three-year migration target of 75% hosted software revenue by 2027, up from an initial 25%.
Schrödinger reported revenue of $259 million over the last twelve months and a gross profit margin of 57%. The company said cumulative monetization from therapeutics and business development, including upfront payments, milestones, royalties and equity distributions, has reached $750 million, helping fund operations since its 2020 initial public offering. Shares delivered a 52% return over the preceding six months, and the stock had a beta of 1.69.
Management said all top 20 global pharmaceutical companies are Schrödinger customers, and its largest collaboration partners are also its largest software clients. Named among its pharmaceutical customers and partners are Bristol Myers Squibb, Eli Lilly and Novartis. The company highlighted Bunsen, an agent-based workflow orchestration tool designed to help pharma companies run complex computational processes at scale, which management said has attracted the strongest customer interest in the company's history. It also cited Predictive Tox, a structure-based toxicology module intended to de-risk drug candidates earlier in discovery; LiveDesign for Biologics, extending the platform beyond small molecules; Crystal Structure Prediction, released as a new software product; and Esol, a module initially used in a brain-penetrant drug collaboration and now applied more broadly.
The company also discussed its spinout ecosystem, including Tectora, its eighth spinout, which raised $55 million in external funding and includes two immunology programs, along with Nimbus, Morphic, Petra and Ajax-related assets. Management said the platform is developed through real-world drug discovery work rather than in isolation, and that Bunsen emerged after earlier agent efforts and the maturation of large language models.
