Schrodinger Eyes Growth From AI Assistant Bunsen and Hosted Software Shift

Key Points

• Schrödinger expects annual contract value to grow 12%–17% this year from $198 million, supported by demand across pharma, life sciences and materials science, as well as new products and customers.
• AI assistant Bunsen remains in beta, and broader adoption is not yet established. Schrödinger plans to monetize it through its throughput-based licensing model; the company cautions that scientists must supervise its work because it can make mistakes.
• The company has begun shifting to hosted software contracts, targeting a 75% hosted share by 2028. The transition may ease onboarding but is creating accounting noise in reported software revenue, so Schrödinger is emphasizing ACV.

Schrodinger NASDAQ: SDGR is looking to its artificial intelligence assistant Bunsen and a shift toward hosted software contracts to expand use of its molecular discovery platform, executives said at the UBS Global Healthcare Conference.

Chief Financial Officer Richie Jain said the company expects annual contract value, or ACV, to increase 12% to 17% this year from a base of $198 million. He pointed to growth across large pharmaceutical customers, the broader life sciences market and materials science, as well as contributions from new products and customers.

Schrodinger licenses software for molecular discovery and also develops therapeutics and collaborates with life sciences companies. Jain said software licensing accounts for the majority of its business, while materials science is a growing market.

Bunsen Remains in Beta

Bunsen, an AI agent designed to help customers use Schrodinger’s software, remains in beta, Jain said. The company has announced a transaction with Bristol Myers Squibb, but other customers are still evaluating the product or conducting security reviews and have not necessarily increased their license packages.

Jain said Schrodinger intends to monetize Bunsen through its existing throughput-based licensing model. Customers need more licenses to run more calculations in parallel, rather than paying based on the number of users.

Pat Lorton, chief technology officer for software, said Bunsen could help computational chemists run more calculations and potentially make the platform accessible to a wider group of scientists. Jain identified medicinal chemists as a longer-term opportunity for expanding the user base.

Lorton cautioned that Bunsen is not fully turnkey and can make mistakes. “It is really important, we’re calling it a co-scientist for a reason, that the scientists still really understand their space,” he said.

Lorton said he could not disclose much about Bristol Myers’ specific use because of confidentiality agreements. Jain said the Bristol Myers arrangement does not prevent Schrodinger from selling to other large customers.

Hosted Software Transition

Schrodinger formally began moving toward more hosted contracts this year, a transition Jain said can improve customer onboarding and make it easier to offer trial licenses and new products. He said the change has also created accounting-related noise in software revenue, prompting the company to emphasize ACV as a measure of performance.

Jain said the company has targeted a 75% hosted share by 2028, after which he expects software revenue reporting to be clearer and more reflective of the business’s fundamentals. Large pharmaceutical companies account for roughly half of Schrodinger’s commercial business, he said.

Therapeutics Partnerships and Profitability

Schrodinger continues to discover proprietary therapeutics at earlier stages, with the option to advance programs through partnerships or newly formed companies, Jain said. He cited Tectora, into which Schrodinger contributed two programs. Tectora raised $55 million, while Schrodinger retained an equity stake and will recognize revenue for services supporting the programs, Jain said.

The CFO said collaborations can generate revenue, milestones and royalties, alongside equity interests. Schrodinger’s equity portfolio has delivered close to $500 million in distributions since its initial public offering, he said.

Milestone payments remain difficult to forecast because Schrodinger often does not directly control the events that trigger them, Jain said. He added that the company considers profitability and continued innovation equally important and has the cash to reach profitability while continuing to invest in its platform.

About Schrodinger (NASDAQ:SDGR)

Schrödinger, Inc. develops computational software used to support drug discovery and materials research. Its platform applies physics-based modeling, computational chemistry and machine learning to help researchers analyze molecular properties and identify promising candidates. The company's tools are used by pharmaceutical and biotechnology companies, academic institutions and other research organizations. Alongside software sales and subscriptions, Schrödinger works with partners on drug discovery programs and advances a portfolio of its own therapeutic candidates.

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