March 30, 2021

On Schrodinger

 From the Fool (recommends and owns shares):

Unless you work in the biopharmaceutical industry, you've probably never heard of Schrodinger (NASDAQ:SDGR). The company provides a platform that helps biopharmaceutical companies discover new treatments more quickly than traditional methods. The company's software-as-a-service platform, which incorporates physics, data analytics, predictive analysis, and artificial intelligence, performs state-of-the-art simulations that lead to quicker and cheaper drug development and the discovery of novel treatment options. 

Backed by Bill Gates, Schrodinger went public early last year, and the small company has had an impressive start. In 2020, revenue grew 26% year over year, driven by software revenue that increased 39%. Gross profit grew 29%, which helps illustrate the scalability of the company's model, though it's currently still unprofitable. 

Its customer metrics are equally impressive. Last year, the number of customers with $1,000 in annual contract value (ACV) grew 16%, while those with ACV of $100,000 grew at 17%. More importantly, however, is that large customers with ACV of more than $1 million grew by 60%, and customer retention clocked in a 99%. If these trends continue, the company has a bright future.

Wood has been consistently adding to the ARK Genomic Revolution (NYSEMKT:ARKG) ETF's position in Schrodinger. With last week's purchases, the company has become a Top 20 position, representing nearly 2% of the $7.67 billion in assets under management.

Schrodinger is sitting in the catbird seat, at the heart of the digital transformation of drug discovery, and with a market cap of just $5 billion, it's easy to envision a path where Schrödinger could grow tenfold.


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