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Why did I invest in $SDGR? (Thread)
Business model:
Software: 1,300+ customers - enables rapid discovery of new molecules for drug development & materials
Drug discover: >25 collab programs AND a wholly-owned pipeline
Equity in other biz
Business model:
Software: 1,300+ customers - enables rapid discovery of new molecules for drug development & materialsDrug discover: >25 collab programs AND a wholly-owned pipeline Equity in other biz
Software biz:Use software to create new compounds
237 BILLION compounds explored in software in 1h 2020
Uses AI to drive faster, cheaper, higher quality molecules/drugs
35% rev growth in 1h 2020
82% gross margin
Top 20 pharma cos use software, average of 15 years
Drug discoveryLots of drugs in development w/ partners
Milestone/royalty payments
Drug discoveryUsing software to develop its own drugs, too
EquityHistory of creating new companies and spinning off
Retain equity
History of success w/ equityCo-founded Nimbus in 2009
Spun off, yet retained equity
In 2016, Nimbus sold a drug to Gilead Sciences for $1.2 billion
Financial:
Software profits fund R&D programs
Net loss only $17 MM 1H 2020, mostly due to huge growth in R&D spending
FCF -$16 MM in 1H 2020
~$631 MM in cash -- TONS of liquidity
Software profits fund R&D programs
Net loss only $17 MM 1H 2020, mostly due to huge growth in R&D spending
FCF -$16 MM in 1H 2020
~$631 MM in cash -- TONS of liquidity
Employees:
Half have PhDs
Good place to work
Half have PhDs
Good place to work
Ownership:
Bill & Melinda Gates foundation 13%
D.E. Shaw 30%
CEO 1%
Co-Founder Richard Friesner 3%
Bill & Melinda Gates foundation 13%
D.E. Shaw 30%
CEO 1%
Co-Founder Richard Friesner 3%
Valuation:
Winner since IPO (+70%)
But down ~50% from July high
Valuation still high (39x sales), but high-quality companies deserve premiums
Winner since IPO (+70%)
But down ~50% from July high
Valuation still high (39x sales), but high-quality companies deserve premiums
Risks:
Valuation still too high
Pipeline falls apart
Software growth slows to a crawl
Valuation still too high
Pipeline falls apart
Software growth slows to a crawl
I like the one-two-three punch here
Software biz is a high-quality asset that should continue to grow and pump out profits
Drug discovery & equity business provides TONS of optionality
Going to be a bumpy ride, but I bet this stock is higher in 2030 than it is today
Software biz is a high-quality asset that should continue to grow and pump out profits
Drug discovery & equity business provides TONS of optionality
Going to be a bumpy ride, but I bet this stock is higher in 2030 than it is today
Score on my checklist:
Financials: 8/17
Moat: 20/20
Potential: 17/18
Customers: 7/10
Revenue: 8/10
Mgmt/Culture: 10/14
Stock: 3/11
Gauntlet: 0
Total Score: 73 (investable)
85 possible in time
Financials: 8/17
Moat: 20/20
Potential: 17/18
Customers: 7/10
Revenue: 8/10
Mgmt/Culture: 10/14
Stock: 3/11
Gauntlet: 0
Total Score: 73 (investable)
85 possible in time
Recent presentation: https://ir.schrodinger.com/static-files/afed9256-e98b-403f-bb38-e88393f46336
