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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 207 added, 176 removed, 449 unchanged (46% of the section changed)

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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 2022 items and year-over-year comparisons between fiscal 2023 and 2022 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, 2023, that was filed with the SEC on February 28, 2024.

As a result of many factors, including those factors set forth in "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.

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.

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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.

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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.

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.

We have initiated dosing in a Phase 1 clinical trial of SGR-1505, which 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 and/or recommended dose of SGR-1505.

Exploratory cohorts will evaluate additional pharmacokinetics, pharmacodynamics, preliminary anti-tumor activity, and safety to establish the recommended dose.

We anticipate reporting initial data from the trial in the second quarter of 2025.

We also completed a Phase 1 clinical trial of SGR-1505 in 73 healthy volunteers to gather additional data, including data relating to the safety, tolerability and pharmacokinetics of SGR-1505, as well as the effect of food and drug-drug interactions.

In the healthy volunteer trial, SGR-1505 was generally well tolerated with no drug-related serious adverse events or dose limiting toxicities observed.

In the trial, we observed that SGR-1505 achieved greater than 90 percent inhibition of IL-2 secretion in an activated T cell whole blood assay at 100mg twice a day (n=4), confirming target engagement and meeting the pharmacodynamic goals for the trial.

Inhibition of IL-2 secretion is a marker for target engagement and pathway modulation as it is tightly linked to MALT1 and the downstream NF-κB signaling.

The data supported continued evaluation of SGR-1505 in the ongoing Phase 1 clinical trial in patients with relapsed or refractory B-cell malignancies.

In addition, in August 2023, the FDA granted orphan drug designation to SGR-1505 for the potential treatment of mantle cell lymphoma.

In July 2023, the FDA cleared our IND for our CDC7 inhibitor, which we refer to as SGR-2921.

In July 2024, the FDA granted Fast Track designation to SGR-2921 in patients with relapsed or refractory acute myeloid leukemia, or AML.

In addition, in January 2025, the FDA granted orphan drug designation to SGR-2921 in patients with relapsed or refractory AML.

We have initiated dosing in a Phase 1 clinical trial of SGR-2921, which is designed as an open-label, multi-center dose-escalation clinical trial in patients with relapsed or refractory AML or high-risk myelodysplastic syndrome.

The trial is designed to evaluate the safety and tolerability of SGR-2921 as a monotherapy and to identify the recommended Phase 2 dose, including the maximum tolerated dose.

Secondary and exploratory objectives of the trial include evaluating the pharmacokinetics and pharmacodynamics of SGR-2921 and investigating preliminary anti-tumor activity.

We anticipate reporting initial data from the trial in the second half of 2025.

In March 2024, we also submitted an IND to the FDA for our novel Wee1/Myt1 inhibitor, which we refer to as SGR-3515, and the FDA cleared the IND in April 2024.

We recently initiated dosing in a Phase 1 clinical trial of SGR-3515 in patients with advanced solid tumors.

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 half of 2025.

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 to improve the properties of drug development candidates and reduce the risk of development failure.

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.

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We are also entitled to low single-digit royalties on our clinical development programs under our collaboration agreement with Morphic, including MORF-057.

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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 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.

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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 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.

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.

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.

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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 Agreement" in Note 3 to our consolidated financial statements for additional information relating to this agreement.

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.

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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 will be eligible to receive up to $2.272 billion in total milestone payments across the initial programs.

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

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single-digits to low double-digits, subject to certain specified reductions.

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

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 Agreement" in Note 3 to our consolidated financial statements for additional information relating to this agreement.

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

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.

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.

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.

Key Factors Affecting Our Performance

Ability to drive additional revenue from our software solutions from existing customers

Our large existing base of customers represents a significant opportunity for us to expand our revenue through increased utilization of our software.

We had 1,752 and 1,785 active customers for the years ended December 31, 2024 and 2023, respectively.

We define the number of active customers as the number of customers who had an annual contract value, or ACV, of at least $1,000 in the fiscal year.

Included in the number of customers are entities we derive software contribution revenue from, which for the year ended December 31, 2024, consisted of Gates Ventures, LLC and the Bill & Melinda Gates Foundation.

We use $1,000 as a threshold for defining our active customers as this amount will generally exclude customers who only license our PyMOL software, which is our open-source molecular visualization system broadly available at low cost.

The revenue 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 revenue growth.

Our ability to expand within our customer base is demonstrated by the increasing number of our customers with an ACV at higher thresholds.

For the year ended December 31, 2024, we had 61 customers with an ACV of at least $500,000 compared to 54 for the year ended December 31, 2023.

Furthermore, we had 31, 27, and 18 customers with an ACV of at least $1.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

We also had eight customers with an ACV of at least $5.0 million for the year ended December 31, 2024, compared to four customers for each of the years ended December 31, 2023 and 2022.

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 generally accepted accounting principles in the United States, or U.S.

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.

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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 had 235, 222, and 227 customers with an ACV of at least $100,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

For the year ended December 31, 2024, our year-over-year customer retention rate for such customers was 95% and was 92% or higher for each of the previous 10 fiscal years.

Our customer retention rate for our customers with an ACV of at least $500,000 was 100% for the year ended December 31, 2024 and 98% for the year ended December 31, 2023.

We calculate year-over-year customer retention for our customers with an ACV of at least $100,000 or $500,000 by starting with the number of such customers we had in the previous fiscal year.

We then calculate how many of these customers were active customers in the current fiscal year.

We then divide this number by the number of customers with an ACV of at least $100,000 or $500,000, as applicable, that, we had in the previous fiscal year to arrive at the year-over-year customer retention rate for such customers.

We believe our sales and marketing approach and the quality of our software solutions result in long-term relationships and high retention with our largest customers.

This is demonstrated by the length of our key relationships, with the average tenure of our 10 largest software customers in 2024 being nearly 21 years.

Furthermore, we have significantly penetrated the pharmaceutical industry, with 19 of the top 20 pharmaceutical companies, measured by 2023

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revenue, licensing our software in 2024.

Our ability to continue to grow our software revenue is dependent upon our ability to retain customers through the continued support and investment in our sales and marketing efforts and the ongoing enhancement of our software solutions.

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

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

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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, a Phase 1 clinical trial of SGR-2921 in patients with relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome, and a Phase 1 clinical trial for SGR-3515 in patients with advanced solid tumors.

We anticipate reporting initial data from the Phase 1 clinical trial of SGR-1505 in patients with relapsed or refractory B-cell malignancies in the second quarter of 2025, and from each of the Phase 1 clinical trial of SGR-2921 in patients with relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome and the Phase 1 clinical trial for SGR-3515 in patients with advanced solid tumors in the second half of 2025.

We continue to advance new programs where we can leverage our computational platform to discover novel molecules, including our programs targeting PRMT5-MTA, EGFR C797S , NLRP3, and LRRK2.

As we progress and expand our pipeline of proprietary programs, we will strategically evaluate on a program-by-program basis advancing them ourselves, entering into collaborations to co-develop them with leading industry partners, or out-licensing them to maximize their probability of clinical and commercial success.

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.

Components of Results of Operations

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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.

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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.

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Software contribution revenue .

Software contribution revenue consists of funds received under non-reciprocal agreements with Gates Ventures, LLC and the Bill & Melinda Gates Foundation.

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.

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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 to initially fund our initiative to accelerate the expansion of our computational platform to predict toxicity associated with binding to off-target proteins.

In November 2024, we entered into an expansion of the agreement which extends the funding and effort for this initiative through April 2026.

Revenue is recognized as conditions are met and on a cost reimbursement basis in accordance with Topic 958.

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

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Milestone payments typically increase in magnitude as a program advances.

However, our focus is increasingly on investing in our proprietary drug discovery programs, which may result in a smaller number of collaborative programs over time and, as a result, fewer milestone payments on account of those collaborative programs.

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 probability of clinical and commercial success of the program.

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.

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 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 conditions are met in accordance with Topic 958.

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 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.

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% and 4.1% of software revenues in the years ended December 31, 2024 and 2023, respectively.

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

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revenues in the future if and when milestones are deemed probable or achieved.

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 trend lower over time as we shift our focus to proprietary drug discovery programs.

However, these trends will be impacted by the number and stage of our collaborative programs, especially in the case of new collaborative programs.

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

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• 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 increase in absolute dollars as we continue to invest in activities related to discovery and development of our proprietary drug discovery programs, in advancing our computational platform, and as we incur expenses associated with hiring additional personnel directly involved in such efforts.

The amount to which our research and development expense may increase 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.

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.

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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.

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General and Administrative Expense

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As a result, we expect the dollar amount of our general and administrative expense to increase for the foreseeable future.

Gain on Equity Investments

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

Change in Fair Value

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.

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.

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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

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Other income:

Gain on equity investments — 147,213 (147,213) N/M

Change in fair value 5,683 53,461 (47,778) N/M

Gain (loss) on equity investments — — — N/M

Change in fair value of equity investments 48,174 5,683 42,491 N/M

Other income 16,396 17,902 (1,506) N/M

Total other income 64,570 23,585 40,985 N/M

(Loss) income before income taxes (185,711) 42,919 (228,630) N/M

Loss before income taxes (102,326) (185,711) 83,385 N/M

Income tax expense 939 1,412 (473) N/M

Net (loss) income $ (187,123) $ 40,720 $ (227,843) N/M

Net loss $ (103,265) $ (187,123) $ 83,858 N/M

N/M – not meaningful

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Year Ended December 31, Change

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On-premise software.

The decrease in revenues for on-premise software during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to a decrease in multi-year customer contracts with upfront revenue recognition in the current period versus the comparable period.

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.

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Software maintenance.

Software maintenance revenues remained consistent during the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to the fluctuation of on-premise software renewal periods, including multi-year customer arrangements, in the current period versus the comparable period, as well as increased spend from existing customers.

Software maintenance revenue is recognized ratably over the period of the contract.

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.

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Drug discovery services.

The decrease in revenues for drug discovery services during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to the timing and amount of collaboration milestones achieved, including $25.0 million received from BMS during the year ended December 31, 2023, as well as BMS electing not to proceed with further development for two programs during 2023, which resulted in increased revenue recognition due to the accelerated completion of our obligations related to such programs during the year ended December 31, 2023.

This decrease was partially offset by collaboration milestones achieved in 2024, as well as the progress of

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existing and new collaborations.

We expect that our revenue will fluctuate from period to period due to the inherently uncertain nature of the timing of milestone achievement and our dependence on the program decisions of our collaborators.

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.

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Software products and services.

The increase in cost of revenues for software products and services during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $4.3 million in cloud computing expense and approximately $3.3 million in personnel-related expense, partially offset by a decrease of approximately $0.2 million in royalty expense.

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.

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Drug discovery.

The decrease in cost of revenues for drug discovery during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to decreases of approximately $7.9 million in third-party CRO costs due to the discontinuation of certain collaboration projects and approximately $0.9 million in personnel-related expense reflecting the redeployment of our discovery organization towards proprietary drug discovery programs, partially offset by approximately $0.6 million in royalty expense and approximately $0.3 million in cloud computing expense.

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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.

Research and Development Expense

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SGR-1505 $ 13,125 $ 10,693 $ 2,432 23%

SGR-2921 10,290 6,090 4,200 69%

7,968 10,290 (2,322) (23)%

SGR-3515 7,196 5,930 1,266 21%

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Total research and development expense $ 173,138 $ 201,785 $ (28,647) (14)%

The increase in external costs of $0.6 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to an increase in costs associated with the ongoing Phase 1 clinical trial and other development activities for SGR-2921, as well as other external research costs to support our early-stage product candidates, partially offset by a decrease in costs for SGR-1505 and SGR-3515 due to timing of work performed.

The increase in internal costs for programs in discovery, preclinical and clinical development of $8.5 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to an increase in personnel-related expense and rent expense.

The increase in all other research and development expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $4.8 million in personnel-related expense, approximately $3.5 million in cloud computing expense, approximately $1.4 million related to office rent, approximately $0.7 million related to professional services, and approximately $0.5 million in other expenses.

(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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Sales and marketing $ 40,963 $ 39,917 $ 1,046 3%

The increase in sales and marketing expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $2.1 million in personnel-related expense, approximately $0.6 million in travel and entertainment expense, and approximately $0.3 million in cloud computing expense, partially offset by decreases of approximately $0.1 million related to office facilities and approximately $0.2 million in other expenses.

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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

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General and administrative $ 95,409 $ 99,677 $ (4,268) (4)%

The increase in general and administrative expense during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was attributable to increases of approximately $5.0 million of personnel-related expense, approximately $2.2 million related to professional services, and approximately $0.4 million in cloud computing expense, partially offset by decreases of approximately $4.3 million in royalties related to cash distributions we received from Nimbus, approximately $0.5 million in amortization related to the acceleration of customer relationship intangible assets, approximately $0.4 million in travel and entertainment expense, approximately $0.1 million related to office facilities, and approximately $1.8 million in other expenses.

Gain on Equity Investments

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

Year Ended December 31,

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(in thousands)

Gain on equity investments $ — $ 147,213 $ (147,213)

There was no gain on equity investments during the year ended December 31, 2024.

The gain on equity investments during the year ended December 31, 2023 was due to the realized gain on our equity investment in Nimbus following the closing of Takeda's acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its tyrosine kinase 2 inhibitor, NDI-034858.

Change in Fair Value

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

Year Ended December 31,

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(in thousands)

Change in fair value $ 5,683 $ 53,461 $ (47,778)

The change in fair value 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.

The change in fair value during the year ended December 31, 2023 was due to an unrealized gain on our investment in Structure Therapeutics of $49.8 million, an unrealized gain on our investment in Nimbus of $1.9 million, and an unrealized gain on our investment in Morphic of $1.8 million.

Change in fair value of equity investments $ 48,174 $ 5,683 $ 42,491

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.

Year Ended December 31,

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Other income $ 16,396 $ 17,902 $ (1,506)

The decrease in other income during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to a decrease of approximately $1.2 million in interest income on our investment portfolio and a decrease of approximately $0.6 million primarily related to unfavorable foreign currency fluctuations.

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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.

Income Tax Expense

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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, 2023 represents our federal and certain 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.

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The state net operating loss carryforwards will expire between 2025 and 2055, if not utilized.

The federal net operating loss carryforwards are limited to 80% of taxable income generated in a given year and carry forward indefinitely.

At December 31, 2024, we had federal orphan drug credits and federal research and development tax credit carryforwards of approximately $31.3 million and state research and development tax credit carryforwards of approximately $2.7 million.

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.

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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

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Loss from operations (17,157) (45,947) (52,903) (50,889) (20,712) (68,422) (52,729) (67,433)

Other (expense) income:

(Loss) gain on equity investments — — — — (109) — — 147,322

Change in fair value (22,080) 25,459 (5,833) 8,137 (8,408) (14,522) 40,654 35,737

Other income (expense):

Gain (loss) on equity investments — — — — — — — —

Change in fair value of equity investments 46,999 9,691 4,579 (13,095) (22,080) 25,459 (5,833) 8,137

Other income 3,131 3,623 5,438 4,204 3,539 4,737 4,598 5,028

Total other (expense) income (18,541) 30,196 (1,235) 13,165 (1,891) (8,718) 44,980 185,996

(Loss) income before income taxes (39,253) (38,226) (53,964) (54,268) (31,512) (64,911) (16,153) 155,495

Total other income (expense) 50,130 13,314 10,017 (8,891) (18,541) 30,196 (1,235) 13,165

Income (loss) before income taxes 32,973 (32,633) (42,886) (59,780) (39,253) (38,226) (53,964) (54,268)

Income tax expense (benefit) 462 162 287 28 963 (90) 83 456

Net (loss) income $ (40,216) $ (38,136) $ (54,047) $ (54,724) $ (30,670) $ (62,024) $ 4,278 $ 129,136

Net income (loss) $ 32,511 $ (32,795) $ (43,173) $ (59,808) $ (40,216) $ (38,136) $ (54,047) $ (54,724)

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

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Three Months Ended

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Software products and services $ 601 $ 604 $ 582 $ 611 $ 664 $ 665 $ 669 $ 645

$ 664 $ 665 $ 669 $ 645 $ 671 $ 654 $ 625 $ 600

Drug discovery 747 802 839 792 538 573 691 490

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Total stock-based compensation expense $ 9,950 $ 10,846 $ 10,627 $ 11,574 $ 12,479 $ 12,398 $ 12,808 $ 12,218

$ 12,479 $ 12,398 $ 12,808 $ 12,218 $ 12,533 $ 12,654 $ 11,773 $ 10,881

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Depreciation and Amortization:

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(in thousands)

Depreciation and

amortization:

Depreciation and amortization:

Cost of revenues:

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General and administrative 208 211 230 244 266 262 264 278

Total depreciation and amortization

$ 1,633 $ 1,607 $ 1,454 $ 1,465 $ 1,354 $ 1,273 $ 1,165 $ 1,760

Total depreciation and amortization expense $ 1,437 $ 1,465 $ 1,531 $ 1,589 $ 1,633 $ 1,607 $ 1,454 $ 1,465

Quarterly Revenue Trends

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Drug discovery revenue fluctuated from period to period based on the achievement of specific collaboration milestones, as well as advancements of collaborative services.

Milestone payments typically increase in magnitude as a program advances.

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.

time, and may differ in timing and pattern from revenue recognized under on-premise software arrangements.

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, as well as the unearned portion of unbilled collaboration milestones that are deemed probable in advance of actual achievement.

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.

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Quarterly Operating Expense Trends

Operating expenses generally increased during the periods presented due to increased headcount and personnel-related expenses involved in research and development, sales and marketing, general and administrative activities, and CRO costs related to our proprietary drug discovery programs.

These increases in headcount across our operations have supported the overall growth and management of our business.

CRO cost increases were driven by the expansion and progression of our proprietary drug discovery programs.

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Quarterly Other (Expense) Income Trends

Other (expense) income 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.

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

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Liquidity, Capital Resources and Funding Requirements

We have a history of significant operating losses and have incurred negative cash flows from operations from inception through the year ended December 31, 2024.

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 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.

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

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.

As of 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 December 31, 2024, we had $241.1 million of common stock remaining available for sale under the ATM.

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.

In January 2025, we received the upfront payment of $150.0 million from Novartis in connection with entering into our research collaboration and license agreement with Novartis.

We believe our existing cash, cash equivalents, and marketable securities as of December 31, 2024, together with the upfront payment we received from Novartis, 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.

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.

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.

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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, as part of our strategy we may choose to advance them into preclinical and clinical development ourselves, enter into collaborations to co-develop them with leading industry partners, or out-license them to maximize their clinical and commercial opportunities.

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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.

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.

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The agreement contains a minimum payment obligation, which totals $21.8 million over five years after the date of first occupancy.

In December 2020, we entered into a five-year agreement with a third-party cloud provider for compute power.

The agreement contains a minimum payment obligation, which totals $60.0 million over the five years after the date we entered into the agreement.

There is no annual commitment.

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 30 days prior written notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

These contracts do not contain any minimum purchase commitments and are cancellable at any time by us, generally upon

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.

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(in thousands)

Net cash used in operating activities $ (157,368) $ (136,733)

Net cash provided by (used in) operating activities $ 13,899 $ (157,368)

Net cash provided by investing activities 57,898 148,836

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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.

During the year ended December 31, 2023, operating activities used approximately $136.7 million of cash, due to a $147.2 million gain from equity investments, of which the cash received is included in investing activities, $53.5 million of non-cash gain on changes in fair value, $22.4 million in changes in our operating assets and liabilities, and $2.1 million of non-cash operating expenses.

These items were offset by a net income of $40.7 million, including depreciation and investment accretion costs and $47.8 million in stock-based compensation.

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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.

During the year ended December 31, 2023, investing activities provided approximately $193.0 million of cash, consisting of $147.2 million cash distributions received, on account of our equity investment in Nimbus, from Nimbus in connection with Takeda’s acquisition of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and $63.3 million provided by marketable securities maturities, net of purchases.

These items were partially offset by $13.4 million in cash used for purchases of property and equipment, and $4.1 million used for purchases of our equity investment in Structure Therapeutics.

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.

During the year ended December 31, 2023, financing activities provided approximately $9.0 million of cash, primarily attributable to proceeds from stock option exercises.

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 arrangements, for which revenue is recognized ratably over time.

Seasonality has been a less significant factor for our hosted software

arrangements, for which revenue is recognized ratably over time.

Seasonality has not been a factor for our drug discovery revenues.

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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.

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To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps:

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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 an 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.

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.

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We establish SSP ranges for our products and services and reassess them periodically.

The determination of SSP required significant management judgment.

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

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whether they are distinct or a single combined performance obligation.

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.

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Recent Accounting Pronouncements

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis