Schrodinger, Inc. (SDGR)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part II, Item 1A. “Risk Factors” of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For further information regarding our forward-looking statements, see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report.

Overview

We are transforming the way therapeutics and materials are discovered. Our differentiated, physics-based computational platform enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at a lower cost, compared to traditional methods. Our software platform is licensed by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. We are applying our computational platform to advance a broad pipeline of drug discovery programs in collaboration with leading biopharmaceutical companies. In addition, we use our computational platform to discover novel molecules for our pipeline of proprietary drug discovery programs, which we are advancing through preclinical and clinical development.

We offer our customers a variety of software solutions that accelerate all stages of molecule discovery, design, and optimization. Since our founding, we have been primarily focused on developing our computational platform, which is capable of predicting critical properties of molecules with a high degree of accuracy, as well as advancing drug discovery programs both with our collaborators and on our own. We have devoted substantially all of our resources to introducing new capabilities and refining our software, conducting research and development activities, recruiting skilled personnel, and providing general and administrative support for these operations.

Over the last decade, we have entered into a number of collaborations with leading biopharmaceutical companies that have provided us with significant revenue and have the potential to produce additional milestone payments, option fees, and future royalties. In 2018, we began to develop a pipeline of proprietary drug discovery programs with the goal of using our platform to produce a portfolio of novel, high value therapeutics.

Financial Overview; Software Revenue and Collaborations

We have funded our operations to date from the sale of our equity securities, including our initial public offering and our follow-on public offering, from sales of our software solutions and from upfront payments, research funding and milestone payments from our drug discovery collaborations, and from distributions on account of, or proceeds from the sale of, our equity stakes in our collaborators.

On April 27, 2026, Eli Lilly and Company, or Lilly, and Ajax Therapeutics, Inc., or Ajax, a company co-founded by us, jointly announced Lilly's planned acquisition of Ajax. Under the terms of the agreement, Ajax shareholders could receive up to $2.3 billion in cash, inclusive of an upfront payment and subsequent payments upon the achievement of certain clinical and regulatory milestones. The transaction is subject to customary closing conditions. As of December 31, 2025, we held a 5.8% equity position in Ajax on an issued and outstanding basis.

We currently conduct our operations through two reportable segments: software and drug discovery. The software segment is focused on selling our software to transform drug discovery across the life sciences industry, as well as to customers in materials science industries. The drug discovery segment is focused on generating revenue from a diverse portfolio of preclinical and clinical programs, internally and through collaborations, that have advanced to various stages of discovery and development.

Our software segment generates revenue from software product licenses, hosted software subscriptions, software maintenance, professional services, and contributions. The revenue we generate through our software solutions from each of our customers varies largely depending on the type and number of software licenses our customers purchase from us. The licenses that our customers purchase from us provide them the ability to perform a certain number of calculations used in the design of molecules for drug discovery or materials science. The amount we charge per license depends on the specific software products our customers purchase from us, and the number of licenses needed to perform calculations per

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software product varies. With the exception of certain limited products, the number of licenses a customer requires is typically based on the scale at which they are running our software products and is not based on how many users have access to the software. As customers increase the number of licenses they purchase from us, they will typically be able to run a greater number of simultaneous instances of our products, thereby increasing the number of calculations they will be able to perform in parallel, subject to having enough computational capacity. We deliver our software through either (i) a product license that permits our customers to install the software solution directly on their own in-house hardware and use it for a specified term, or (ii) a subscription that allows our customers to access our cloud-based software solution on their own hardware without taking control of licenses.

Our collaboration agreements typically include upfront consideration, discovery, development, commercial and regulatory milestones, and royalties from future sales of commercialized products. We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of specified discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements. In the future, we may also derive drug discovery revenue from our collaborations from option fees, the achievement of regulatory and commercial milestones, and royalties on commercial drug sales. In addition to revenue from our collaborations, we may also derive drug discovery revenue from collaborating on or out-licensing our proprietary drug discovery programs when we believe it will help maximize the clinical and commercial opportunities for the program.

We are party to an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas. After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate. We are eligible to receive up to $482.0 million in total milestone payments for the one remaining neurology target currently subject to the collaboration, of which we have recognized $32.0 million as of March 31, 2026, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions. See "Collaboration and License Agreements" in Note 3 to our unaudited condensed consolidated financial statements for additional information relating to this agreement.

In September 2022, we entered into a collaboration with Lilly under which we are responsible for the discovery and optimization of small molecule compounds addressing an immunology target. Lilly is responsible for the completion of preclinical development, clinical development and commercialization. Under the terms of the agreement, we received an upfront payment and we are eligible to receive up to $420.0 million in discovery, development and commercial milestone payments for the target. We are also eligible to receive low single- to low double-digit royalties on net sales of any products emerging from the collaboration in all markets. In February 2025, we expanded our research collaboration with Lilly to add an undisclosed target to the collaboration, which was subsequently terminated by Lilly in March 2026 for strategic reasons. The collaboration remains active with respect to the initial target.

In November 2024, we entered into a research collaboration and license agreement with Novartis Pharma AG, or Novartis, pursuant to which we and Novartis agreed to collaborate on the discovery, research and preclinical development of small molecule compounds for targets in certain specified therapeutic areas. The agreement is intended to advance multiple development candidates for development and commercialization by Novartis. Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we are eligible to receive up to $2.272 billion in total milestone payments across the initial programs. Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. We are also entitled to a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid single-digits to low double-digits on products commercialized by Novartis under the agreement, subject to certain specified reductions. No milestone revenue has been recognized as of March 31, 2026. In November 2024, we also entered into an expanded three-year software agreement with Novartis that substantially increases Novartis' access to our computational predictive modeling technology and enterprise informatics platform. See "Collaboration and License Agreements" in Note 3 to our unaudited condensed consolidated financial statements for additional information relating to the research collaboration and license agreement.

We generated revenue of $58.6 million and $59.6 million during the three months ended March 31, 2026 and 2025, respectively, representing a year-over-year decrease of 2%. Our net loss for the three months ended March 31, 2026 and 2025 was $60.0 million and $59.8 million, respectively.

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Our annual contract value, or ACV, was $28.4 million for the three months ended March 31, 2026, compared to $25.4 million for the three months ended March 31, 2025. With respect to contracts that have a duration of one year or less, or contracts of more than one year in duration that are billed annually, we define ACV as the contract value billed during the applicable period. For contracts with a duration of more than one year that are billed upfront, ACV in each period represents the total billed contract value divided by the term.

We present ACV as a supplemental operating metric because it provides a consistent measure of the underlying performance of our software business that is not affected by differences in revenue recognition timing across contract types, delivery mo

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

The following discussion and analysis of our financial condition and results of operations covers fiscal 2025 and fiscal 2024 items and year-over-year comparisons between fiscal 2025 and fiscal 2024. Discussions of fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that was filed with the SEC on February 26, 2025.

As a result of many factors, including those factors set forth in Part 1, Item 1A. "Risk Factors" of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For further information regarding our forward-looking statements, see "Cautionary Note Regarding Forward-Looking Statements and Industry Data" in this Annual Report.

Overview

We are transforming the way therapeutics and materials are discovered. Our differentiated, physics-based computational platform enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at a lower cost, compared to traditional methods. Our software platform is licensed by biopharmaceutical and industrial companies, academic institutions, and government laboratories around the world. We are applying our computational platform to advance a broad pipeline of drug discovery programs in collaboration with leading biopharmaceutical companies. In addition, we use our computational platform to discover novel molecules for our pipeline of proprietary drug discovery programs, which we are advancing through preclinical and clinical development.

Since our founding, we have been primarily focused on developing our computational platform, which is capable of predicting critical properties of molecules with a high degree of accuracy, as well as advancing drug discovery programs both with our collaborators and on our own. We have devoted substantially all of our resources to introducing new capabilities and refining our software, conducting research and development activities, recruiting skilled personnel, and providing general and administrative support for these operations.

Over the last decade, we have entered into a number of collaborations with leading biopharmaceutical companies that have provided us with significant revenue and have the potential to produce additional milestone payments, option fees, and future royalties. In 2018, we began to develop a pipeline of proprietary drug discovery programs with the goal of using our platform to produce a portfolio of novel, high value therapeutics.

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Proprietary Drug Discovery Programs

In June 2022, the U.S. Food and Drug Administration, or FDA, cleared our first investigational new drug application, or IND, for our MALT1 inhibitor, which we refer to as SGR-1505. Our ongoing Phase 1 clinical trial of SGR-1505 is designed as an open-label, multi-center dose escalation trial in patients with relapsed or refractory B-cell malignancies. The trial is designed to evaluate the safety, pharmacokinetics, pharmacodynamics, maximum tolerated dose, maximum administered dose and/or recommended dose of SGR-1505. Backfill cohorts evaluate additional pharmacokinetics, pharmacodynamics, preliminary anti-tumor activity, and safety to support the recommended dose.

In April 2024, the FDA cleared the IND we submitted for our novel Wee1/Myt1 inhibitor, which we refer to as SGR-3515. In July 2024, we initiated dosing in a Phase 1 clinical trial of SGR-3515 in patients with advanced solid tumors. The trial is a dose-escalation trial designed to evaluate the safety, tolerability and recommended Phase 2 dose of SGR-3515. Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and preliminary anti-tumor activity of SGR-3515. We anticipate reporting initial data from the trial in the second quarter of 2026.

In August 2025, we announced the discontinuation of the clinical development program for SGR-2921, our CDC7 inhibitor, which was being evaluated in a Phase 1 dose-escalation clinical trial in patients with relapsed/refractory acute myeloid leukemia, or AML, or high-risk myelodysplastic syndromes. Despite early evidence of monotherapy activity observed in the Phase 1 clinical trial, based on the profile observed prior to discontinuation, including two emergent events where SGR-2921 was considered to have contributed to two deaths in patients with AML, we determined the path to development as a combination therapy would be difficult to pursue.

Beyond our planned investments to complete our ongoing Phase 1 dose-escalation clinical trials of SGR-1505 and SGR-3515, we do not intend to initiate additional clinical trials or advance our other proprietary preclinical programs into clinical trials independently. We plan to explore strategic partnerships for the SGR-1505 and SGR-3515 programs to advance the development of these programs beyond our ongoing Phase 1 clinical trials. The phasing out of independent clinical development activities and associated cost reductions, together with the restructuring of our operations we announced in May 2025, which is further described below under "—Restructuring," are expected to result in total savings of approximately $70 million and further improve and enhance our operational efficiency.

Initiative with Bill & Melinda Gates Foundation

In July 2024, we launched an initiative to expand our computational platform to predict toxicity associated with binding to off-target proteins. The goal of this initiative is to develop a computational solution designed to improve the properties of drug development candidates and reduce the risk of development failure associated with binding to off-target proteins, which can be associated with serious side effects. The project is being funded initially by $19.5 million in grants from the Bill & Melinda Gates Foundation. We continue to advance our predictive toxicology initiative and have made the beta version available to customers, which encompasses approximately 50 representative kinases in addition to multiple key anti-targets. We expect to launch our predictive toxicology solution commercially and make it available more broadly to our customers during 2026.

Financial Overview; Software Revenue and Collaborations

We have funded our operations to date principally from the sale of our equity securities, including our initial public offering and our follow-on public offering, and to a lesser extent, from sales of our software solutions and from upfront payments, research funding and milestone payments from our drug discovery collaborations, and from distributions on account of, or proceeds from the sale of, our equity stakes in our collaborators. In 2023, on account of our equity stake in Nimbus Therapeutics, LLC, or Nimbus, we received an aggregate of $147.2 million in cash distributions from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858.

On August 15, 2024, Morphic Holding, Inc., or Morphic, one of our drug discovery collaborators and co-founded companies, was acquired by Eli Lilly and Company, or Lilly, for $57.00 per share, or approximately $3.2 billion. In connection with the acquisition, we received $47.6 million for the 834,968 shares of Morphic we owned. We are also entitled to low single-digit royalties on our clinical development programs under our collaboration agreement with Morphic, including MORF-057.

We currently conduct our operations through two reportable segments: software and drug discovery. The software segment is focused on selling our software to transform drug discovery across the life sciences industry, as well as to

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customers in materials science industries. The drug discovery segment is focused on generating revenue from a diverse portfolio of preclinical and clinical programs, internally and through collaborations, that have advanced to various stages of discovery and development.

Our software segment generates revenue from software product licenses, hosted software subscriptions, software maintenance, professional services, and contributions. The revenue we generate through our software solutions from each of our customers varies largely depending on the type and number of software licenses our customers purchase from us. The licenses that our customers purchase from us provide them the ability to perform a certain number of calculations used in the design of molecules for drug discovery or materials science. The amount we charge per license depends on the specific software products our customers purchase from us, and the number of licenses needed to perform calculations per software product varies. With the exception of certain limited products, the number of licenses a customer requires is typically based on the scale at which they are running our software products and is not based on how many users have access to the software. As customers increase the number of licenses they purchase from us, they will typically be able to run a greater number of simultaneous instances of our products, thereby increasing the number of calculations they will be able to perform in parallel, subject to having enough computational capacity. We deliver our software through either (i) a product license that permits our customers to install the software solution directly on their own in-house hardware and use it for a specified term, or (ii) a subscription that allows our customers to access our cloud-based software solution on their own hardware without taking control of licenses.

Our collaboration agreements typically include upfront consideration, discovery, development, commercial and regulatory milestones, and royalties from future sales of commercialized products. We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of specified discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements. In the future, we may also derive drug discovery revenue from our collaborations from option fees, the achievement of regulatory and commercial milestones, and royalties on commercial drug sales. In addition to revenue from our collaborations, we may also derive drug discovery revenue from collaborating on or out-licensing our proprietary drug discovery programs when we believe it will help maximize the clinical and commercial opportunities for the program.

We are party to an exclusive, worldwide collaboration and license agreement with BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas. After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate. We are eligible to receive up to $482.0 million in total milestone payments for the one remaining neurology target currently subject to the collaboration, of which we have recognized $32.0 million as of December 31, 2025, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions. See "Collaboration and License Agreements" in Note 3 to our consolidated financial statements for additional information relating to this agreement.

In September 2022, we entered into a collaboration with Lilly under which we are responsible for the discovery and optimization of small molecule compounds addressing an immunology target. Lilly will be responsible for the completion of preclinical development, clinical development and commercialization. Under the terms of the agreement, we received an upfront payment and we are eligible to receive up to $420.0 million in discovery, development and commercial milestone payments. We are also eligible to receive low single- to low double-digit royalties on net sales of any products emerging from the collaboration in all markets. In February 2025, we expanded our research collaboration with Lilly to add an undisclosed target to the collaboration. The terms of the expanded collaboration with respect to the additional target are similar to the terms for the existing target.

In November 2024, we entered into a research collaboration and license agreement with Novartis Pharma AG, or Novartis, pursuant to which we and Novartis agreed to collaborate on the discovery, research and preclinical development of small molecule compounds for targets in certain specified therapeutic areas. The agreement is intended to advance multiple development candidates for development and commercialization by Novartis. Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we are eligible to receive up to $2.272 billion in total milestone payments across the initial programs. Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. We are also entitled to a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid single-digits to low double-digits on products commercialized by Novartis under the agreement, subject to certain specified

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reductions. No milestone revenue has been recognized as of December 31, 2025. In November 2024, we also entered into an expanded three-year software agreement with Novartis that substantially increases Novartis' access to our computational predictive modeling technology and enterprise informatics platform. See "Collaboration and License Agreements" in Note 3 to our consolidated financial statements for additional information relating to the research collaboration and license agreement.

For the year ended December 31, 2025, we generated total revenue of $255.9 million and had a net loss of $103.3 million.

Restructuring

On May 19, 2025, we restructured our operations to reduce our workforce and implemented focused cost reductions across the company to improve cash burn rate and enhance operational efficiency. The reduction in workforce has decreased overall headcount by approximately 60 employees, which represented approximately 7% of full-time employees as of May 19, 2025.

We incurred approximately $3 million in charges in connection with the restructuring, consisting of severance payments, employee benefits, and related costs, substantially all of which we recognized during the fiscal year ended December 31, 2025.

The reduction in workforce and cost reductions being implemented are expected to reduce operating expenses by approximately $30 million on an annualized basis. Approximately half of the estimated cost savings are expected to be a result of the reduction in overall headcount.

Impact of Tariffs

The U.S. administration has announced or imposed a series of tariffs on U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. We have not experienced, and do not currently expect to experience, any direct impact from these tariffs and retaliatory measures in the near term. However, the full extent of the future impact of these and other threatened measures remains uncertain. We continue to monitor these tariffs and retaliatory measures and their possible effects on our business, including as to how they may affect our customers in the industries in which we operate, including the pharmaceutical industry.

Change in Key Operating Metrics

During fiscal 2025, we revised the key operating metrics used by management to evaluate business performance. In prior periods, we disclosed certain metrics, such as active customers and ACV cohorts that did not differentiate by customer demographics or industry, which reflected how the business was historically managed and evaluated.

As our business evolved, management determined that these previously disclosed metrics were no longer the primary metrics used to manage the business. Accordingly, we replaced these prior metrics with a revised set of key operating metrics that management now primarily uses to assess operating performance, customer behavior, and growth trends. As the scale and diversity of our customer base have increased, aggregate metrics that do not differentiate by customer type or industry have become less useful in assessing underlying performance and trends. These distinctions are particularly relevant given our increased penetration with large pharmaceutical customers, the differing procurement and usage characteristics of commercial, government, and academic customers, and our ongoing transition toward hosted software arrangements.

The revised key operating metrics include ACV by certain industries and customer cohorts. These cohorts include the following:

Industry cohorts:

•Top 20 pharma. This cohort consists of the top 20 pharmaceutical companies, as measured by their 2024 revenue, which purchase our computational software solutions for drug discovery.

•Rest of life sciences. This cohort includes customers purchasing our computational software solutions for drug discovery, excluding the top 20 pharma cohort.

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•Materials. This cohort includes customers purchasing our computational software solutions for materials design.

•Contribution. This cohort includes customers from which we derive contribution revenue, which for the fiscal years ended December 31, 2025 and 2024, consisted solely of Gates Ventures, LLC and the Bill & Melinda Gates Foundation. We present this ACV separately because it relates to grant agreements accounted for as non-exchange contributions, rather than commercial software contracts.

Customer cohorts:

•Commercial. This cohort includes all of our customers purchasing our computational software solutions for commercial use, excluding government and academic institutions and customers from which we derive contribution revenue.

•Government and academic. This cohort includes U.S. federal, state, local and international government entities, as well as universities, medical centers, and non-profit research institutions.

•Contribution. This cohort includes customers from which we derive contribution revenue, which for the fiscal years ended December 31, 2025 and 2024, consisted solely of Gates Ventures, LLC and the Bill & Melinda Gates Foundation. We present this ACV separately because it relates to grant agreements accounted for as non-exchange contributions, rather than commercial software contracts.

The operating metrics for the cohorts described above are not prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, and do not correspond to our reportable segments or the allocation of costs for U.S. GAAP purposes. These metrics allow management to better understand differences in sales cycles, contract duration, deployment models, renewal behavior, and expansion opportunities among customer and industry groups, supplementing but not replacing our U.S. GAAP results.

We believe that tracking ACV by cohort provides greater transparency and insight into the drivers of our performance and more accurately reflects how management currently evaluates and views business performance. For customers who purchase our computational software solutions for both drug discovery and materials design, management allocates ACV between the applicable life sciences industry cohort (top 20 pharma or rest of life sciences) and the materials cohort based on internal judgment.

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Key Factors Affecting Our Performance

Ability to drive additional growth from our software solutions from existing commercial customers

Our ability to expand within our customer base is demonstrated by the increasing average ACV from our commercial customers with an ACV of over $1.0 million. For example, for the year ended December 31, 2025, we had 27 commercial customers with an ACV of at least $1.0 million compared to 29 such customers for the year ended December 31, 2024. The average ACV per commercial customer with an ACV of over $1.0 million grew to $3.9 million for the year ended December 31, 2025 compared to $3.3 million for the year ended December 31, 2024. Two of the 29 customers with an ACV of at least $1.0 million for the year ended December 31, 2024 were acquired prior to the end of 2025.

With respect to contracts that have a duration of one year or less, or contracts of more than one year in duration that are billed annually, we define ACV as the contract value billed during the applicable period. For contracts with a duration of more than one year that are billed upfront, ACV in each period represents the total billed contract value divided by the term. ACV should be viewed independently of revenue and does not represent revenue calculated in accordance with U.S. GAAP on an annualized basis, as it is an operating metric that can be impacted by contract execution start and end dates and renewal rates. ACV is not intended to be a replacement for, or forecast of, revenue. Our ACV was $198.5 million and $190.8 million for the years ended December 31, 2025 and 2024, respectively.

The figures below show our ACV for each of the past two fiscal years based on our customer and industry cohorts:

Our top 20 pharma industry cohort had an ACV of $80.8 million in 2025 compared to $70.0 million in 2024, and our commercial customer cohort had an ACV of $177.4 million in 2025 compared to $165.8 million in 2024. The ACV that we generate through our software solutions from each of our customers varies depending on the number of licenses for each software solution that each customer purchases from us. Accordingly, we work with our customers to improve their experience and increase the utility of our platform in order to expand the scale at which they deploy our platform in their business. Biopharmaceutical companies are increasingly adopting our software at a larger scale, and we anticipate that this scaling-up will drive future growth.

Ability to retain our customer base for our software solutions

Another important driver of our performance is our ability to retain our customer base. We believe our sales and marketing approach and the quality of our software solutions result in high retention with our commercial customers. For the years ended December 31, 2025 and 2024, our gross dollar retention rate for our commercial customers was 96%. We calculate year-over-year gross dollar retention rate for commercial customers by comparing the ACV from the same cohort of commercial customers across two periods, excluding the effect of any increases or expansions of ACV from any customers within the cohort. This metric also excludes ACV attributable to new commercial customers added during the period. We calculate year-over-year gross dollar retention for this commercial cohort by starting with the prior year's ACV for our commercial customers. We then subtract the amount of decreases in renewals, either as a result of decreased usage

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of our software or lost business, which we refer to as churn. We then divide the resulting number by the prior year's ACV for our commercial customers to arrive at the gross dollar retention rate for our commercial customers. We use gross dollar retention rate to measure our ability to retain existing business from our customer base and to assess the impact of churn, without the effect of expansion activity. This metric highlights the stability and stickiness of our commercial customer relationships.

In addition, our net dollar retention rate for our commercial customers was 100% for the year ended December 31, 2025, compared to 113% for the year ended December 31, 2024. We calculate year-over-year net dollar retention rate by comparing the ACV from the same cohort of commercial customers across two periods. This metric also excludes ACV attributable to new commercial customers added during the period. We calculate year-over-year net dollar retention for this commercial cohort by starting with the prior year's ACV for our commercial customers. We then add the amount of any increase in renewals or expansions of ACV from any customers within the cohort, which we refer to as upsells, and then subtract the churn. We then divide the resulting number by the prior year's ACV for our commercial customers to arrive at the net dollar retention rate for our commercial customers. We use net dollar retention rate to evaluate growth within our existing commercial customer base, including the effect of upsells and churns.

For both our gross dollar retention rate and net dollar retention rate, we exclude from the calculation commercial customers that were acquired by other companies during the applicable period, as these events are outside of our control, may not reflect the underlying demand for our software solutions, and enhance comparability between periods. Together, gross and net dollar retention rates provide insight into both customer retention and our ability to drive incremental growth from current customers.

Advancement of our collaborative programs

We have entered into a number of collaborations with leading biopharmaceutical companies to advance drug discovery. We will seek to enter into additional collaboration agreements, driven by the synergies we expect to achieve between our platform and the capabilities and expertise of our potential collaborators. We believe that our collaborations will be a significant driver of value for us in the form of equity stakes, research fees, preclinical, clinical, and commercial milestone payments, and option fees, as well as royalties on any potential future sales of products, if approved. We continue to work with our current collaborators to advance existing programs through discovery research stages and initiate additional programs. However, we do not generally exercise control over the development programs of our collaborators and depend on our collaborators' decisions with respect to clinical development and commercialization. Our ability to continue to derive value from our collaborations will be driven by our capability to make progress in these programs, whether our collaborators successfully advance such programs beyond the discovery stage, and the strategic priorities of our collaboration partners. We track the aggregate number of collaborative programs for which we are eligible to receive any amount of royalties on sales and as of December 31, 2025, we had an aggregate of 16 collaborative programs for which we are eligible to receive future royalties compared to 13 collaborative programs as of December 31, 2024.

Ability to progress and expand our pipeline of proprietary drug discovery programs

We are advancing our pipeline of proprietary programs through preclinical and clinical development. Our initial programs were focused on discovering and developing inhibitors for targets in DNA damage response pathways and genetically defined cancers. Since then, we have expanded into other therapeutic areas, including immunology and neurology. We have initiated dosing in a Phase 1 clinical trial of SGR-1505 in patients with relapsed or refractory B-cell malignancies and a Phase 1 clinical trial for SGR-3515 in patients with advanced solid tumors. We also continue to advance new programs where we can leverage our computational platform to discover novel molecules, including SGR-6016, our brain-penetrant NLRP3 inhibitor development candidate. As we progress and expand our pipeline of proprietary programs, we will strategically evaluate on a program-by-program basis advancing them into and through preclinical development ourselves, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their development, clinical and commercial potential.

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Components of Results of Operations

Software Products and Services Revenue

Our software business generates revenue from five sources: (i) on-premise software license fees, (ii) hosted software subscription fees, (iii) software maintenance fees, (iv) professional services fees, and (v) contributions.

On-premise software. Our on-premise software license arrangements grant customers the right to use our software on their own in-house servers or their own cloud instances for a specified term, typically for one year, though in recent years, we have entered into a small number of large multi-year on-premise software license agreements. We recognize revenue for on-premise software license fees upfront, either upon transfer of control of the license or the effective date of the agreement, whichever is later.

Hosted software. Hosted software revenue consists primarily of fees to provide our customers with hosted licenses, which allows these customers to access our cloud-based software solution on their own hardware without taking control of the licenses, and is recognized ratably over the term of the arrangement, which is typically one year, though in recent years, we have entered into a small number of large multi-year hosted software license agreements. When a customer enters into a hosted arrangement for which revenue is recognized over time, the amount paid upfront that is not recognized in the current period is included in deferred revenue in our statement of financial position until the period in which it is recognized.

We have accelerated our efforts to transition customers from on-premise software arrangements to hosted software contracts. As a result of this transition, we expect future quarterly and annual revenue trends to be impacted, as revenue associated with hosted software arrangements is generally recognized over the term of the contract, rather than at a point in time, and may differ in timing and pattern from revenue recognized under on-premise software arrangements. While this transition has not had a material impact on our historical results to date, it is expected to affect the timing and mix of revenue recognition in future periods and as a result, we expect revenue to decline in the near-term as the transition progresses.

Software maintenance. Software maintenance includes technical support, updates, and upgrades related to our on-premise software licenses. Software maintenance revenue is recognized ratably over the term of the arrangement. Software maintenance activities are performed in connection with the use of our on-premise software, and may fluctuate from period to period.

Professional services. Professional services include training, technical setup, installation or assisting customers with modeling services, where we use our software to perform tasks such as virtual screening on behalf of our customers. These services are generally not related to the core functionality of our software and are recognized as revenue when resources are consumed. Since each professional services agreement represents a unique, ad hoc engagement, professional services revenue may fluctuate from period to period.

Software contribution revenue. Software contribution revenue consists of funds received under non-reciprocal agreements, as amended, with Gates Ventures, LLC and the Bill & Melinda Gates Foundation. The agreement with Gates Ventures, LLC was originally entered into in June 2020 and further extended through August 13, 2026. The agreement is an unconditional non-exchange contribution without restrictions. Revenue is recognized annually, when invoiced, in accordance with Accounting Standard Codification, or ASC, Topic 958, Not-for-Profit Entities, or Topic 958, as the agreement is not an exchange transaction.

In July 2024, we entered into a one-year agreement with the Bill & Melinda Gates Foundation, that was further extended through April 2026, to initially fund our initiative to accelerate the expansion of our computational platform to predict toxicity associated with binding to off-target proteins. Revenue is recognized as costs are incurred and conditions are met in accordance with Topic 958.

Drug Discovery Revenue

Drug discovery services. We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements. The majority of our current collaborations are in the discovery and preclinical development stages. Milestone payments typically increase in magnitude as a program advances.

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In addition to revenue from our collaborations, we may also derive drug discovery revenue from out-licensing our proprietary drug discovery programs when we believe it will help maximize the development, clinical and commercial potential of the program. Beyond our planned investments to complete our ongoing Phase 1 dose-escalation clinical trials of SGR-1505 and SGR-3515, we do not intend to initiate additional clinical trials or advance our other proprietary preclinical programs into clinical trials independently. Overall, we expect that our drug discovery revenue will fluctuate from period to period due to the inherently uncertain nature of the timing of milestone achievements and our dependence on the program decisions of our collaborators.

Drug discovery contribution revenue. Contribution revenue primarily consists of funds received under agreements with the Bill & Melinda Gates Foundation on a cost reimbursement basis, to perform services aimed at accelerating drug discovery in women’s health. Revenue is recognized as costs are incurred and conditions are met in accordance with Topic 958.

Cost of Revenues

Software products and services. Cost of revenues for software includes personnel-related expenses (comprised of salaries, benefits, and stock-based compensation) for employees directly involved in the development and delivery of software solutions, maintenance and professional services, royalties paid for products sold and services performed using third-party licensed software functionality, and allocated overhead (facilities and information technology support) costs. Pursuant to various third-party arrangements, we license technology that is used in our software. These arrangements require us to pay royalties based on sales volume, and such royalty payments represented 3.5% of software revenues in both the years ended December 31, 2025 and 2024.

Drug discovery. Costs of revenue for drug discovery includes personnel-related expenses and costs of third-party contract research organizations, or CROs, that support discovery activities in our collaborations, royalties paid for services performed using third-party licensed software functionality, allocated compute capacity and overhead costs. While we have incurred costs associated with discovery efforts since late 2017, we have recognized and expect to continue to recognize revenues in the future if and when milestones are considered probable of achievement and there is not a risk of significant revenue reversal, or when they are achieved. Generally, drug discovery costs of revenue for collaborations are incurred in advance of the revenue milestone achievement.

Royalty payments to third-parties represented 2.4% and 9.5% of drug discovery revenues in the years ended December 31, 2025 and 2024, respectively. We expect our drug discovery costs of revenue to fluctuate from period to period depending on the number and mix of collaborative and proprietary programs and their respective stages of development.

Gross Profit and Gross Margin

Gross profit represents revenue less cost of revenues. Gross margin is gross profit expressed as a percentage of revenue. Our software products and services gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of changes in sales mix between on-premise and hosted software solutions due to timing of recognition. For example, the cost of royalties due for sales of our hosted software arrangements are recognized upfront, whereas the associated hosted software revenue for these arrangements is recognized over the term of the underlying agreement.

While the gross margin of our drug discovery business will fluctuate significantly from period to period depending on factors such as the timing of recognition of milestones, the number and mix of collaborative programs, and their respective stages of development, we expect the gross margins to generally trend higher over time as more programs advance to later stages of development, the milestones increase in size and our ongoing research and development obligations to such programs decline in cost.

Research and Development Expense

Research and development expense accounts for a significant portion of our operating expenses. We recognize research and development expense as incurred. Research and development expense consists of drug discovery and development program costs and costs incurred for continuous development of the technology and science that supports our computational platform, primarily:

•personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation for employees engaged in research and development functions;

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•expenses incurred under agreements with third-party CROs and consultants involved in our proprietary drug discovery programs; and

•allocated compute capacity on our proprietary drug discovery programs and overhead (facilities and information technology support) costs.

We expect our research and development expense to stabilize in regards to our investment in activities related to discovery and development of our proprietary drug discovery programs, in advancing our computational platform, and in hiring additional personnel directly involved in such efforts. The amount to which our research and development expense may fluctuate in the future will also be dependent on our development plans for our proprietary drug discovery programs, including the timing of any partnering, collaboration or out-licensing decisions. At this time, we do not know, nor can we reasonably estimate, the nature, timing, or costs of the efforts that will be necessary to complete the development of any of our proprietary drug discovery programs.

Sales and Marketing Expense

Sales and marketing expense consists primarily of personnel-related costs for our sales and marketing staff and application scientists supporting our sales efforts, including salaries, benefits, bonuses, and stock-based compensation. Other sales and marketing costs include promotional events that promote and expand knowledge of our company and platform, including industry conferences and events and our annual user group meetings in the United States and Europe, advertising, and allocated overhead costs. Due to the inherent scientific complexity of our software solutions, a high level of scientific expertise is needed to support our sales and marketing efforts. We plan to make focused investments in sales and marketing over the foreseeable future to foster the growth of our business as we aim to expand software sales to existing customers and increase our customer base.

General and Administrative Expense

General and administrative expense consists of personnel-related expenses associated with our executive, legal, finance, human resources, information technology, and other administrative functions, including salaries, benefits, bonuses, and stock-based compensation. General and administrative expense also includes professional fees for external legal, accounting and other consulting services, allocated overhead costs, and other general operating expenses.

We expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. In addition, as a public company, we expect to continue to incur increased expenses such as insurance and professional services. As a result, we expect the dollar amount of our general and administrative expense to increase for the foreseeable future.

Gain (Loss) on Equity Investments

Gain (loss) on equity investments consists of realized gains in the form of cash distributions from our equity investments.

Change in Fair Value of Equity Investments

Fair value gains and losses consist of adjustments to the fair value of our equity investments, which may include Nimbus, Structure Therapeutics, Inc. or Structure Therapeutics, and Morphic. We remeasure our investments at each period end.

We expect that fair value gains and losses will fluctuate significantly in future periods.

Other Income

Other income consists of interest earned on our cash equivalents and marketable securities, interest expense, and transactional foreign exchange gains and losses.

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Income Tax Expense

Income tax expense consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

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Results of Operations

Comparison of the years ended December 31, 2025 and 2024

The following table summarizes our results of operations data for the years ended December 31, 2025 and 2024:

N/M – not meaningful

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Revenues

Software Products and Services Revenue

On-premise software. The decrease in revenues for on-premise software during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to the timing and size of multi-year customer contracts with upfront revenue recognition in the comparable period versus the current period.

Hosted software. The increase in revenues for hosted software during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to customers switching from on premise to hosted software purchases, as well as increased spend from existing hosted customers and growth in new customers purchasing hosted software subscriptions, for which revenue is recognized ratably over the period of the contract.

Software maintenance. The increase in revenues for software maintenance during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to increased spend from existing customers and longer renewal periods.

Professional services. Professional services revenues remained consistent during the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to the progress and completion of technology and modeling service projects.

Software contribution revenue. The increase in software contribution revenues during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to the agreements with the Bill & Melinda Gates Foundation entered into during the year ended December 31, 2024, aimed to accelerate the expansion of our computational software platform, and the extension of the agreement with Gates Ventures, LLC.

Drug Discovery Revenue

Drug discovery services. The increase in revenues for drug discovery services during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to the Novartis collaboration services that began in November 2024 and the progress of new and existing collaborations.

Drug discovery contribution revenue. The decrease in drug discovery contribution revenue during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to fluctuation in allotted funds spent under an agreement with the Bill & Melinda Gates Foundation, aimed at accelerating drug discovery in women’s health, which began in November 2021.

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Cost of Revenues

Software products and services. The increase in cost of revenues for software products and services during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to increases of approximately $5.0 million in third-party CRO costs related to development, approximately $4.9 million in personnel-related expense, approximately $3.4 million in cloud computing expense, and approximately $0.8 million in royalty expense.

Software products and services gross margin. The decrease in software gross margin during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to an increase in expenses related to our agreement with the Bill & Melinda Gates Foundation to accelerate the expansion of our computational software platform, partially offset by an increase in revenue.

Drug discovery. The increase in cost of revenues for drug discovery during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to increases of approximately $13.2 million in third-party CRO costs associated with the expansion and progression of collaborative programs, approximately $7.3 million in personnel-related expense due to proprietary programs moving to partnered programs, approximately $2.4 million in cloud computing expense, and approximately $2.0 million in other expenses, partially offset by a decrease of approximately $1.2 million in royalty expense.

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Research and Development Expense

A significant portion of our research and development costs have been external preclinical and clinical CRO costs, which we track on a program-by-program basis related to a product candidate, once the candidate has been identified. Our internal research and development costs are primarily personnel-related costs, rent expense, and other indirect costs and are not tracked on a program-by-program basis. All other research and development costs are related to non-program related costs. The following table summarizes our research and development expense for the years ended December 31, 2025 and 2024:

(1)The development of SGR-2921 was discontinued in August 2025.

The decrease in external costs of $10.0 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to decreases in other external research costs to support our early-stage product candidates due to the timing of work performed, as well as a decrease in costs for SGR-2921 which was discontinued in August 2025, partially offset by an increase in costs associated with the ongoing Phase 1 clinical trials and other development activities for SGR-1505 and SGR-3515.

The decrease in internal costs for programs in discovery, preclinical and clinical development of $8.9 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to a decrease in personnel-related expense and rent expense.

The decrease in all other research and development expense during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to decreases of approximately $4.8 million in personnel-related expense, approximately $1.9 million in cloud computing expense, approximately $1.1 million related to office rent, approximately $0.8 million related to professional services, approximately $0.6 million in travel and entertainment expense, and approximately $0.5 million in other expenses.

Sales and Marketing Expense

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The increase in sales and marketing expense during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to increases of approximately $1.0 million in personnel-related expense, approximately $0.1 million in cloud computing expense, and approximately $0.1 million in other expense, partially offset by a decrease of approximately $0.2 million in travel and entertainment expense.

General and Administrative Expense

The decrease in general and administrative expense during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was attributable to decreases of approximately $4.3 million of personnel-related expense, approximately $0.5 million related to royalties, approximately $0.3 million in travel and entertainment expense, and approximately $0.1 million in other expenses, partially offset by increases of approximately $0.6 million in professional services and approximately $0.3 million in cloud computing expense.

Gain (Loss) on Equity Investments

There was no gain or loss on equity investments during the years ended December 31, 2025 and 2024.

Change in Fair Value of Equity Investments

The change in fair value of equity investments during the year ended December 31, 2025 was due to a mark-to-market gain on our investment in Structure Therapeutics of $48.2 million. This consisted of a mark-to-market gain of approximately $7.5 million on the portion of the investment sold during the period and a market-to-market gain of approximately $40.7 million on the portion of the investment held as of December 31, 2025. The change in fair value of equity investments during the year ended December 31, 2024 was primarily due to an unrealized gain on our investment in Morphic of $23.5 million, partially offset by an unrealized loss on our investment in Structure Therapeutics of $18.1 million.

Other Income

The decrease in other income during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to decreases of approximately $2.1 million in interest income, partially offset by an increase of approximately $0.6 million primarily related to favorable foreign currency fluctuations.

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Income Tax Expense

Income tax expense for the year ended December 31, 2025 represents state income tax obligations and taxes in foreign jurisdictions for which we conduct business. Income tax expense for the year ended December 31, 2024 represents certain state income tax obligations and taxes in foreign jurisdictions for which we conduct business. As of December 31, 2025, we have a full valuation allowance on our U.S. federal and state deferred tax assets.

At December 31, 2025, we had federal and state net operating loss carryforwards of approximately $208.5 million and $119.3 million, respectively. The state net operating loss carryforwards will expire between 2025 and 2055, if not utilized. The post-2017 federal net operating loss carryforwards are limited to 80% of taxable income generated in a given year and carry forward indefinitely. As of December 31, 2025, we had federal orphan drug credits and federal research and development tax credit carryforwards of approximately $44.0 million and various state tax credit carryforwards of approximately $4.7 million. These carryforwards will expire between 2033 and 2045, if not utilized.

As required by ASC Topic 740, Income Taxes, our management has evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets, which are composed principally of net operating loss carryforwards and research and development credit carryforwards. Management has determined that it is more likely than not that we will not realize the benefits of our federal and state deferred tax assets and, as a result, a valuation allowance of $211.9 million and $177.2 million has been established at December 31, 2025 and 2024, respectively. The change in the valuation allowance for the years ended December 31, 2025 and 2024 was $34.7 million and $41.2 million, respectively. We recorded income tax expense of $0.9 million and $1.4 million for the years ended December 31, 2025 and 2024, respectively.

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Quarterly Results of Operations

The following tables summarize our selected unaudited quarterly results of operations data for each of the eight quarters in the period ended December 31, 2025. The information for each of these quarters has been prepared on the same basis as our audited annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements included elsewhere in this Annual Report. Historical results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.

(1)Includes stock-based compensation as indicated in the table located further below.

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Revenues:

Deferred Revenue:

Gross Margin:

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Stock-Based Compensation:

Depreciation and Amortization:

Quarterly Revenue Trends

On-premise software revenue is subject to seasonality that generally favors the first and fourth quarter of each year, primarily due to the timing of customer renewals for on-premise software arrangements, for which revenue is recognized at a single point in time. Hosted software revenue grew more steadily over the periods presented, as existing customers and new customers increased their spend on hosted solutions, for which revenue is recognized ratably over the term of the contract. As a result, a portion of the software products and services revenue we reported in each period was attributable to sales we made in prior periods. Software maintenance revenue is related to on-premise software sales and also is recognized ratably over the term of the underlying agreement. Therefore, increases or decreases in customer sales, customer expansion, or renewals in a period may not be immediately reflected in revenue for the period. Our professional services arrangements are typically project-based and, therefore, fluctuated based on individual customer needs and ongoing project support. Drug discovery revenue fluctuated from period to period based on the achievement of specific collaboration milestones, as well as advancements of collaborative services. Software and drug discovery contribution revenue fluctuated from period to period based on the timing of costs incurred and conditions met.

We have accelerated our efforts to transition customers from on-premise software arrangements to hosted software contracts. As a result of this transition, we expect future quarterly and annual revenue trends to be impacted, as revenue associated with hosted software arrangements is generally recognized over the term of the contract, rather than at a point in

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time, and may differ in timing and pattern from revenue recognized under on-premise software arrangements. While this transition has not had a material impact on our historical results to date, it is expected to affect the timing and mix of revenue recognition in future periods and as a result, we expect revenue to decline in the near-term as the transition progresses.

Quarterly Deferred Revenue Trends

Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. Deferred revenue balances have fluctuated based on the measurement of progress toward completion for service projects, the timing of sales, shifts in product mix, and fluctuations to the number and size of milestones that were deemed probable in advance of actual achievement.

Quarterly Gross Margin Trends

Our software products and services gross margin experienced fluctuations over the periods presented due to increased headcount and the product mix for software and services, as the cost of royalties due on sales of our hosted software is recognized upfront, while the associated revenue is recognized over the term of the related agreement. Currently, gross margin is less meaningful for measuring the operating results of our drug discovery business.

Quarterly Operating Expense Trends

Operating expenses generally decreased during the periods presented due to decreased headcount and personnel-related expenses involved in research and development, sales and marketing, and general and administrative activities, and CRO costs related to our proprietary drug discovery programs. The decreases in headcount across our operations represent a focused effort to reduce operating expenses and reduce cash used in operating activities. CRO cost decreases were driven by the discontinuation of development of SGR-2921, as well as the timing and progression of our proprietary drug discovery programs.

Quarterly Other Income (Expense) Trends

Other income (expense) during the periods presented consisted primarily of fair value gains and losses related to our equity investments in Morphic and Structure Therapeutics, and, to a lesser degree, interest income and transactional foreign exchange gains and losses.

Segment Information

See Note 14 – Segment Reporting in our audited consolidated financial statements for additional information regarding our segments.

Liquidity, Capital Resources and Funding Requirements

We have a history of significant operating losses and have primarily incurred negative cash flows from operations from inception through the year ended December 31, 2025. As of December 31, 2025, we had an accumulated deficit of $628.8 million.

We have funded our operations to date principally from the sale of our equity securities, including our initial public offering and our follow-on public offering, and from sales of our software solutions and from upfront payments, research funding and milestone payments from our drug discovery collaborations, and from distributions on account of, or proceeds from the sale of, our equity stakes in our collaborators. Our operating cash flows are impacted by the magnitude and timing of our software sales and by the magnitude and timing of our drug discovery milestone achievements and research funding fees.

On February 28, 2024, we filed a universal shelf registration statement on Form S-3 which allows us to offer and sell an indeterminate number of shares of common stock, preferred stock, depositary shares or warrants, or an indeterminate principal amount of debt securities, from time to time pursuant to one or more offerings at prices and terms to be determined at the time of the sale.

In February 2024, we entered into an amended and restated sales agreement with Leerink Partners LLC (formerly

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SVB Securities LLC), or Leerink Partners, as sales agent, with respect to an at-the-market offering program, or the ATM, under which we could offer and sell, from time to time pursuant to our Registration Statement on Form S-3, shares of common stock, having an aggregate offering price of up to $250.0 million through Leerink Partners. The amended and restated sales agreement amends and restates the original sales agreement that we entered into with Leerink Partners with respect to the ATM in May 2023, which is no longer in effect. During the year ended December 31, 2025, no shares of common stock were sold under the ATM. During the year ended December 31, 2024, 323,085 shares of common stock were sold under the ATM for total net proceeds of $8.7 million and gross proceeds of $8.9 million, before deducting sales agent commissions. As of both December 31, 2025 and 2024, we had $241.1 million of common stock remaining available for sale under the ATM.

As of December 31, 2025, we had cash, cash equivalents, restricted cash, and marketable securities of $402.3 million.

We believe our existing cash, cash equivalents, and marketable securities as of December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months. Our future capital requirements will depend on many factors, including the growth of our software revenue, the timing and extent of spending to support research and development efforts, the continued expansion of software sales and marketing activities, the timing and receipt of milestone payments from our collaborations, as well as spending to support, advance, and broaden our proprietary drug discovery programs, including the impact of tariffs and trade restrictions on such spending. Furthermore, our capital requirements will also change depending on the timing and receipt of any distributions we may receive from our equity stakes in our drug discovery collaborators. The potential for these distributions, and the amounts which we may be entitled to receive, are difficult to predict due to the inherent uncertainty of the events which may trigger such distributions.

We plan to utilize the existing cash, cash equivalents, and marketable securities on hand primarily to fund our software and drug discovery activities. With respect to our proprietary drug discovery programs, we plan to strategically evaluate on a program-by-program basis advancing them into and through preclinical development ourselves, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their development, clinical and commercial potential. Beyond our planned investments to complete our ongoing Phase 1 dose-escalation clinical trials of SGR-1505 and SGR-3515, we do not intend to initiate additional clinical trials or advance our other proprietary preclinical programs into clinical trials independently. We plan to explore strategic partnerships for the SGR-1505 and SGR-3515 programs to advance the development of these programs beyond our ongoing Phase 1 clinical trials.

We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to maintain or expand our operations and invest in our platform, we may not be able to compete successfully, which would harm our business, operations and financial condition. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

Our contractual obligations as of December 31, 2025 include lease obligations of $160.2 million, consisting of our continuing rent obligations through December 2037, primarily for our office located in New York, New York for $126.5 million, which expires in December 2037. In addition, see Note 6 – Commitments and Contingencies to our consolidated financial statements appearing in Item 8 of this Annual Report for more information relating to our operating lease obligations.

In December 2022, we entered into an agreement with a third-party to establish an exclusive integrated drug discovery dedicated facility in Hyderabad, India. The agreement contains a minimum payment obligation, which totals $21.8 million over five years after the date of first occupancy.

In December 2025, we entered into a three-year agreement with a third-party cloud provider for compute power. The agreement contains a minimum payment obligation, which totals $82.0 million over the three years after the date we entered into the agreement.

We also enter into agreements in the normal course of business with CRO vendors for research, preclinical studies, and clinical trials, professional consultants for expert advice, and other vendors for various products and services. These contracts do not contain any minimum purchase commitments and are cancellable at any time by us, generally upon

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30 days prior written notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. We have also agreed to pay volume-based royalties to third-parties for use of software functionality under various licensing and related agreements. See Note 2 – Significant Accounting Policies to our audited consolidated financial statements appearing in Item 8 of this Annual Report for more information relating to our royalty obligations.

Cash Flows

The following table presents a summary of our cash flows for the periods shown:

Operating activities

During the year ended December 31, 2025, operating activities provided approximately $13.9 million of cash, primarily due to changes to our operating assets and liabilities of $118.2 million, $43.0 million of stock-based compensation, and $4.2 million of non-cash operating expenses, depreciation and investment accretion costs. These items were partially offset by a net loss of $103.3 million, which included a $48.2 million non-cash gain on changes in fair value.

During the year ended December 31, 2024, operating activities used approximately $157.4 million of cash, primarily due to a net loss of $187.1 million, which included changes to our operating assets and liabilities of $13.1 million, a $5.7 million non-cash gain on changes in fair value, and $1.4 million of non-cash operating expenses, depreciation and investment accretion costs. These items were partially offset by $49.9 million of stock-based compensation.

Investing activities

During the year ended December 31, 2025, investing activities provided approximately $57.9 million of cash, consisting of $41.6 million provided by marketable securities maturities, net of purchases, and $17.7 million provided by the sale of equity investments. These items were partially offset by $1.4 million in cash used for purchases of property and equipment.

During the year ended December 31, 2024, investing activities provided approximately $148.8 million of cash, consisting of $110.4 million provided by marketable securities maturities, net of purchases, and $48.8 million primarily provided by the disposition of equity investments. These items were partially offset by $7.3 million in cash used for purchases of property and equipment and $3.1 million primarily used for purchases of our equity investment in Ajax Therapeutics, Inc.

Financing activities

During the year ended December 31, 2025, financing activities provided approximately $2.9 million of cash, primarily attributable to proceeds received from stock option exercises.

During the year ended December 31, 2024, financing activities provided approximately $10.1 million of cash, consisting of $8.7 million attributable to net proceeds received from the ATM and $1.4 million attributable to proceeds received from stock option exercises.

Seasonality

Generally, the first and fourth quarter of each year have been our largest quarters for software products and services revenue, primarily due to the timing of customer renewals of on-premise software arrangements, for which revenue is recognized at a single point in time. Seasonality has been a less significant factor for our hosted software

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arrangements, for which revenue is recognized ratably over time. Seasonality has not been a factor for our drug discovery revenues. Historical seasonality may not be indicative of future periods.

Critical Accounting Policies and Estimates

Critical accounting policies are those that are both most important to the portrayal of a company's financial condition and results, and that require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and the accompanying notes. We base our estimates on historical experience, known trends and events, and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, are reflected in the consolidated financial statements prospectively from the date of change in estimates.

While our significant accounting policies are described in more detail in Note 2 – Significant Accounting Policies to our consolidated financial statements appearing in Item 8 of this Annual Report, we believe the following critical accounting estimates used in the preparation of our consolidated financial statements require the most difficult, subjective and complex judgments and estimates and have had, or are reasonably likely to have a material impact on our financial condition or results of operations.

Revenue

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or Topic 606, except for contracts that are within the scope of other standards, such as contribution grants and certain collaboration arrangements. In accordance with Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation.

Significant management judgment is applied to determine the allocation of the transaction price and measurement of progress, including (1) the constraint on variable consideration, (2) the identification of performance obligations and allocation of the transaction price to the performance obligations using their standalone selling price, or SSP, and (3) the appropriate input or output based method to recognize collaboration revenue and the extent of progress to date.

Variable consideration: Our revenue may include upfront payments for the performance of services in the future, which have both fixed and variable consideration. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjust our estimate of the overall transaction price.

Research and development, regulatory or commercial milestones in our collaboration agreements may include some, but not necessarily all, of the following types of events:

•completion of preclinical research and development work leading to selection of product candidates;

•initiation of Phase 1, Phase 2, and Phase 3 clinical trials;

•filing of regulatory applications for marketing approval in the United States, Europe or Japan;

•marketing approval in major markets, such as the United States, Europe, or Japan;

•commercial milestones and/or commercial royalties; and

•achievement of certain other technical, scientific, or development criteria.

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At the inception of each arrangement that includes research, development, or regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or that of the licensee, such as certain regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative SSP basis consistent with the allocation objectives of Topic 606, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which may affect license, collaboration, and other revenues and earnings in the period of adjustment. The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is a risk that we may not earn all of the milestone payments from each of our collaborators. We recognized $12.8 million and $14.1 million from drug discovery milestones for the years ended December 31, 2025 and 2024, respectively.

Software performance obligations and transaction price allocation: At contract inception, we assess the goods or services promised within each contract that falls under the scope of Topic 606 to identify distinct performance obligations, which requires the most difficult, subjective, and complex judgments based on the nature of each transaction. We allocate the transaction price to each distinct performance obligation on an SSP basis. We determine the SSP using information that includes historical discounting practices, market conditions, cost-plus analysis, and other observable inputs. We typically have more than one SSP for individual software license performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, we may use information such as the size and geographic region of the customer in determining the SSP. We may also estimate SSP based on management judgment by considering available data such as internal cost and margin objectives, pricing strategies, market/competitive conditions, historical profitability data, as well as other observable inputs. We establish SSP ranges for our products and services and reassess them periodically. The determination of SSP requires significant management judgment.

Collaboration agreement performance obligations, transaction price allocation, and measurement of progress: At the inception of each arrangement, we utilize judgment to assess the nature of the performance obligations to determine whether they are distinct or a single combined performance obligation. We allocate the transaction price to each performance obligation based on the relative SSP of each performance obligation at inception. We determine the SSP at contract inception of the research activities based on internal estimates of the costs to perform the services, inclusive of a reasonable profit margin. Significant judgment is used to determine the inputs for total costs to perform the research activities, which may include the length of time required, the internal hours expected to be incurred on the services and the number and costs of various studies that will be performed by third-parties to complete the research plan. Revenue is recognized on a proportional performance basis over the period of service, using input-based measurements to estimate the performance. Changes to these assumptions may have a material effect on the amount and timing of revenue recognized. We recognized revenue of $38.4 million and $8.3 million related to collaboration agreements with proportional performance measurement for the years ended December 31, 2025 and 2024, respectively.

Recent Accounting Pronouncements

See Note 2 – Significant Accounting Policies to our consolidated financial statements appearing in Item 8 of this Annual Report for a discussion of recently issued accounting pronouncements.