In a report released yesterday, Michael Ryskin from Bank of America Securities maintained a Hold rating on Schrodinger (SDGR – Research Report), with a price target of $38.00.
Geoff Meacham has given his Hold rating due to a combination of factors impacting Schrodinger’s financial outlook and strategic direction. The company’s recent strategic update indicated a surprising shift in its revenue projections for its Drug Discovery (D.D.) segment, predicting numbers similar to or even lower than the previous year’s, which falls significantly short of both internal and Street expectations. This conservative forecast is attributed to Schrodinger’s increased focus on its internal pipeline development, a more selective approach to forming new collaborations, and the termination of certain partnerships, most notably with Bristol Myers Squibb. Despite recognizing the distinct value of Schrodinger’s proprietary technology, the Hold rating reflects a balanced view that accounts for the inherent uncertainties and long-term horizons associated with drug discovery ventures.
Additionally, Schrodinger has affirmed an extended software agreement with Eli Lilly, which suggests a steady adoption of Schrodinger’s technology by major pharmaceutical companies. The deal, which scales up Eli Lilly’s access to Schrodinger’s comprehensive suite of drug discovery technologies, aligns with Schrodinger’s long-term software business strategy. However, the lack of transparent financial details around this expansion and the absence of a forecast for the Software segment in 2024 contribute to a cautious outlook. Consequently, while there are positive aspects to Schrodinger’s strategy, the Hold rating by Meacham reflects a perspective that the stock is currently appropriately valued when considering the long development timelines and unpredictable nature of drug discovery results.
According to TipRanks, Ryskin is a 3-star analyst with an average return of 4.9% and a 54.43% success rate. Ryskin covers the Healthcare sector, focusing on stocks such as Illumina, 10x Genomics, and Danaher.
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Schrodinger (SDGR) Company Description:
Schrödinger, Inc. provides chemical simulation software solutions to pharmaceutical industry. It operates through the Software and Drug Discovery business segments. The Software segment sells software to transform drug discovery across the life sciences industry, as well as to customers in materials science industries. The Drug Discovery segment offers diverse portfolio of preclinical and clinical programs, internally and through collaborations, that have advanced to various stages of discovery and development. Schrödinger was founded by Richard A. Friesner, William A. Goddard, III and Murco Ringnalda in August 1990 and is headquartered in New York, NY.
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