Schrodinger (SDGR)

Schrodinger is a new offering to the market and has only been available to trade since February 5th, but it is exciting in a few different ways.

Firstly it is backed by Bill Gates and hedge fund guru David Shaw who together own 50% of the business.

But the real story is what they do. Schrodinger is using machine learning and artificial intelligence across predictive analytics to achieve the most costly part of drug development. By using software and computers to develop drugs it makes the process much cheaper and faster.

To create this software the company brought together 150 Ph.D scientists. Between them, they have published over 400 white papers on physics-based approaches and computer modelling. The field of computational biology is competitive but in its prospectus, Schrodinger claimed it is now far ahead of its nearest competitors.

That is a bold claim. But one backed up with facts.

Their software is already in use at 1,250 academic institutions worldwide. The top 20 pharmaceutical companies also use it. Customer retention has been running at 96% according to the prospectus.

The pharmaceutical industry spends around $180 billion a year on research and development. So the size of the market spend open to Schrodinger is huge. They generated $66 million in sales in 2018 which was 20% up year on year. That leaves an awful lot of upside to capture.

The company is at the epicentre of digital transformation. Just as Tesla used technology to disrupt a century-old industry, Schrodinger is changing the entire pharmaceutical research spend space.

The prospects for Schrodinger are as good as any new business in recent memory. The operation was funded by visionary investors and Big pharma has deep pockets and is in the middle of a digital transformation.

For those left wondering, the company takes its name from Erwin Schrodinger, a Nobel winning physicist born in 1887. The Austrian is most famous for his Schrodinger’s cat theory. That states that based on quantum physics, a cat placed in a box with radioactive material could be both alive and dead at the same time. It is only the act of opening the box that determines the state. Maybe that is where the saying “Curiosity Killed The Cat” came from?

The stock is trading around $43 now after a stellar IPO. Growth-oriented investors should consider adding the company to their portfolio for it is both small and the next big thing at the same time.

PS. Schrodinger later denied his own theory later in life as the idea of a cat being both alive and dead at the same time is ridiculous.

The author does not hold an investment in Schrodinger and has not been renumerated for this report