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Schrodinger Shares Have More Than Tripled Since IPO

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GuruFocus.com
·3 min read
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A company that can speed up drug discovery; one that is already partnering with the world's 20 biggest drug companies and appears to be just scratching the surface of its potential. Sounds like a winner.

Shareholders would agree wholeheartedly. Since going public in early February with an offering price of $17, Schrodinger Inc.'s (NASDAQ:SDGR) stock has more than tripled to $57.


Is it too late for investors to hop aboard? It might be. Four analysts have set a median 12-month price target of $56, according to CNN Money. However, the high target is $67 with the low at $50.

With its Germanic sounding name, you might think that Schrodinger would be based in Dusseldorf rather than New York City. There's a good explanation for the moniker. The company takes its name from Erwin Schrodinger, a Nobel Prize-winning physicist born in 1887.

If he were alive, Schrodinger would likely be proud to be associated with the company, given its expertise in developing software to make the process of discovering and developing drugs faster and more efficient.

Schrodinger describes its technology as "physics based," explaining that it predicts critical properties of molecules with accuracy, according to an article in Xconomy. This allows drug researchers to design and synthesize molecules that have the properties they want in a drug. In traditional drug discovery, thousands of molecules have to be synthesized to develop even one viable drug. That takes anywhere from four to six years. Schrodinger says it can pare that down to two to three years.

Few doubt there is a vital need for the type of artificial intelligence Schrodinger provides. In fact, Boston Consulting Group said that biotech and pharma will need to employ digital services to remain competitive, according to a Forbes article. It read, "Future sector winners will be those businesses that digitize the core of the enterprise. If they can't reduce discovery costs while expediting development, they are going to be disrupted."

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Schrodinger says it's outpacing the competition by a wide margin, and the numbers back it up. In its prospecturs, the company said its software is used by 1,250 academic institutions worldwide, in addition to the pharmaceutical industry. The customer retention rate for all its 1,150 customers is 96%.

Schrodinger has a strategic collaboration with Twist Bioscience Corp. (NASDAQ:TWST). It's also working on more than 25 programs with upwards of 10 companies, including a number of firms it co-founded. Other publicly disclosed partners include Sanofi (NASDAQ:SNY), Takeda Pharmaceutical Co. (NYSE:TAK) and Bayer (BAYRY).

In addition to serving others, Schrodinger has its own drug discovery program, which includes molecules targeting ovarian, pancreatic, breast and lung cancers. Its investors include the Bill and Melinda Gates Foundation, WuXi App Tech, Deerfield and GV.

Disclosure: The author has a position in Takeda Pharmaceutical Co.



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This article first appeared on GuruFocus.