A software company backed by Bill Gates and hedge fund legend David Shaw is about to disrupt the pharmaceutical industry, suggests Jon Markman, growth stock expert and editor of Pivotal Point.
Schrodinger (SDGR) uses breakthrough artificial intelligence to help companies discover new drugs faster and cheaper. The company— which takes its name from a Nobel Prize-winning physicist born in 1887 — raised $232 million in its February IPO, issuing 13.7 million shares at $17 apiece.
The New York software business is tackling the most difficult and costly part of drug discovery with AI, machine learning and physics-based predictive analytics. The platform has become the industry standard for molecular simulation.
The software is in use at 1,250 academic institutions worldwide. The platform also claims patronage of the top 20 pharmaceutical companies, as measured by sales. The customer retention rate for all its 1,150 customers, according to the prospectus, is 96%.
The company generated $66 million in sales in 2018, a 20% increase year-over-year. Due to extensive spending in R&D and new hiring, the company had losses of $18.5 million during that time frame. Despite this, the future is bright.
The prospects for Schrodinger are as good as any new business in recent memory. The operation was funded by visionary investors. Big pharma has deep pockets and it is in the midst of a digital transformation. Schrodinger is the market leader with a tiny share.
Growth-oriented investors should consider using any weakness to buy Schrodinger shares. It’s both small and the next big thing, simultaneously.
