SDGR 10-K & 10-Q changes, risk factors and insider trading

We have a history of significant operating losses. Our net losslosses for the yearyears ended December 31, 2025 and 2024 waswere $103.3 million and $187.1 million.million, respectively. Our net income for the year ended December 31, 2023 was $40.7 million. Our net loss for the year ended December 31, 2022 was $149.2 million. As of December 31, 2024,2025, we had an accumulated deficit of $525.5$628.8 million. The net income we generated in the year ended December 31, 2023 was primarily due to the gain recorded on the $147.2 million cash distributions we received from Nimbus Therapeutics, LLC, or Nimbus, on account of our equity stake in Nimbus, following the acquisition by Takeda Pharmaceuticals Company, Limited, or Takeda, of Nimbus Lakshmi, Inc., a wholly-owned subsidiary of Nimbus, and its TYK2 inhibitor NDI-034858 and the non-cash gain on our investment in Structure Therapeutics Inc., or Structure Therapeutics, which, following Structure Therapeutics' initial public offering in February 2023, we valued based on the closing price of its American Depositary Shares as of December 31, 2023. However, the potential for future distributions from, or gains in the fair value of, our equity stakes in our drug discovery collaborators are difficult to predict due to the inherent uncertainty of the events which may trigger such distributions or gains. We therefore expect that gain or loss on equity investments and fair value gains and losses will fluctuate significantly in future periods.

We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest in our proprietary drug discovery programs, sales and marketing infrastructure, and our computational platform. We are still in the early stages of development of our own proprietary drug discovery programs. We have no drug products approved or licensed for commercial sale, and as such, have not generated any revenue from our own drug product sales to date. We expect to continue to incur significant expenses and operating losses over the next several years. Our operating expenses and net income or loss may fluctuate significantly from quarter to quarter and year to year and you should not rely upon the results of any quarterly or annual periods as indications of future results. We anticipate that our expenses will increase substantiallyif and as we:

•conduct preclinical studies and initiate and conduct clinical trials for any of our product candidates;

Our revenue has and may continue to fluctuate from quarter-to-quarter and year-to-year. For example, our total revenues increased by 23% from $207.5 million in the fiscal year ended December 31, 2024 to $255.9 million in the fiscal year ended December 31, 2025, and decreased by 4% from $216.7 million in the fiscal year ended December 31, 2023 to $207.5 million in the fiscal year ended December 31, 2024, and increased by 20% from $181.0 million in the fiscal year ended December 31, 2022 to $216.7 million in the fiscal year ended December 31, 2023.2024. Although we have experienced revenue growth in certain periods, we have also experienced a decline in revenue loss in certain periods, and we may not be able to sustain revenue growth and we may experience certain periods of revenue decline. You should not consider our revenue growth in prior periods as indicative of our future performance. As we grow our business, our revenue growth rates may decreaseslow in future periods.

•general economic conditions, including the impact of increasing or decreasing inflation and interest rates and the impact of tariffs and trade restrictions;

•the timing of recognition of revenue offrom any payments from entering into collaborations or out-licensing our proprietary drug discovery programs, such as under our collaboration agreement with Novartis Pharma AG, or Novartis; and

We expect to devote substantial financial resources to our ongoing and planned activities, including the development of drug discovery programs and continued investment in our computational platform. We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our proprietary drug discovery programs, initiate or progress preclinical and Investigational New Drug, or IND,-enabling studies, submit IND applications, initiate and progress clinical trials and invest in the further development of our computational platform. In addition, though not our current strategy, if we decide to complete clinical development and seek regulatory approval on our own, we expect to incur significant additional expenses. Furthermore, we incur additional costs associated with operating as a public company, as compared to when we were a private company.

As of December 31, 2024,2025, we had cash, cash equivalents, restricted cash, and marketable securities of $367.5$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 that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plans may change as a result of many factors currently unknown to us. As a result, we could deplete our capital resources sooner than we currently expect.

•spending to support, advance, and broaden our proprietary drug discovery programsprograms, including the impact of tariffs and trade restrictions on such spending; and

We also intend to continue leveraging our solutions for broad application to industrial challenges in molecule design, including in the fields of aerospace, energy, semiconductors, electronic displays,displays and chemicals. However, we believe the materials science industry is in the very early stages of recognizing the potential of computational methods for molecular discovery, and there can be no assurance that the industry will adopt computational methods such as our platform. Any factor adversely affecting our ability to market our software solutions to customers outside of the life sciences industry, including in these new fields, could increase our dependence on the life sciences industry and adversely affect the growth rate of our revenues, operating results, and business.

The overall market for molecular discovery and design software is global, rapidly evolving, competitive, and subject to changing technology and shifting customer interests and priorities. Our software solutions face competition from competitors in the business of selling or providing simulation and modeling software to biopharmaceutical companies. These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA, Chemical Computing Group (US) Inc., Cresset Biomolecular Discovery Limited, Cadence Design Systems, Inc., Optibrium Limited, Cyrus Biotechnology, Inc., Molsoft LLC, Insilico Medicine, Inc., Iktos, XtalPi Inc., AbCellera, Inductive Bio, Inc., Chemaxon, PerkinElmer,Revvity, Inc., and Simulations Plus, Inc.

Our solutions include software licensed by third parties under any one or more open-source licenses, including the GNU General Public License, the GNU Lesser General Public License, the GNU Affero General Public License, the BSD License, the MIT License, the Apache License, and others, and we expect to continue to incorporate open-source software in our solutions in the future. Moreover, we cannot ensure that we have effectively monitored our use of open-source software or that we are in compliance with the terms of the applicable open-source licenses or our current policies and procedures. There have been claims against companies that use open-source software in their products and services asserting that the use of such open-source software infringes the claimants’ intellectual property rights. As a result, we and our customers could be subject to suits by third parties claiming that what we believe to be licensed open-source software infringes such third parties’ intellectual property rights, and we may be required to indemnify our customers against such claims. Additionally, if an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we or our customers could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contain the open-source software and required to comply with onerous conditions or restrictions on these solutions, which could disrupt the distribution and sale of these solutions. Litigation could be costly for us to defend, have a negative effect on our business, financial condition, and results of operations, or require us to devote additional research and development resources to change our solutions.

•drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the recent COVID-19 pandemic; and

Even if we or our drug discovery collaborators are able to develop product candidates that demonstrate potential in preclinical studies, we or they may not succeed in demonstrating safety and efficacy of product candidates in human clinical trials. For example, in collaboration with us, Nimbus was able to identify a unique series of acetyl-CoA carboxylase, or ACC, allosteric protein-protein interaction inhibitors with favorable pharmaceutical properties that inhibit the activity of the ACC enzyme. Nimbus achieved proof of concept in a Phase 1b clinical trial of its ACC inhibitor, firsocostat, and later sold the program to Gilead Sciences, Inc., or Gilead Sciences, in a transaction valued at approximately $1.2 billion, comprised of an upfront payment and earn outs. Of this amount, $601.3 million has been paid to Nimbus to date, and we received a total of $46.0 million in cash distributions in 2016 and 2017. In December 2019, Gilead Sciences announced topline results from its Phase 2 clinical trial which included firsocostat, both as a monotherapy and in combination with other investigational therapies for advanced fibrosis due to nonalcoholic steatohepatitis, in which the primary endpoint was not met. Gilead Sciences isrecently currently evaluating firsocostat incompleted a Phase 2b clinical trial evaluating firsocostat in combination with Novo Nordisk A/S’s semaglutide, a GLP-1 receptor agonist, for compensated cirrhosis due to nonalcoholic steatohepatitis. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates.

Research programs to identify new product candidates require substantial technical, financial, and human resources. As an organization, we are advancing SGR-1505, our clinical-stage MALT1 inhibitor, SGR-2921, our clinical-stage CDC7 inhibitor, and SGR-3515, our clinical-stage Wee1/Myt1 inhibitor. We have not yet advanced any other programs into clinical development,inhibitor, and we may fail to identify additional product candidates for development. Similarly, a key element of our business plan is to expand the use of our computational platform through an increase in software sales and drug discovery collaborations. A failure to demonstrate the utility of our platform by successfully using it ourselves to discover internal product candidates could harm our business prospects.

We rely and expect to continue to rely on third parties to synthesize any molecules with therapeutic potential that we discover, including SGR-1505, SGR-2921SGR-1505 and SGR-3515. Reliance on third parties may expose us to different risks than if we were to synthesize molecules ourselves. Our reliance on these third parties will reduce our control over these activities but will not relieve us of our responsibilities. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or synthesize molecules in accordance with regulatory requirements, if there are disagreements between us and such parties or if such parties are unable to expand capacities, we may not be able to fulfill, or may be delayed in producing sufficient product candidates to meet, our supply requirements, and we may not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us to progress viable product candidates for IND submissions or the necessary clinical trials and we will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates. The facilities of these third parties may also be affected by natural disasters, such as floods or fire, or geopolitical developmentsdevelopments, such as tariffs and trade restrictions, or public health pandemics or such facilities could face production issues, such as contamination or regulatory concerns following a regulatory inspection of such facility. In such instances, we may need to locate an appropriate replacement third-party facility and establish a contractual relationship, which may not be readily available or on acceptable terms, which would cause additional delay and increased expense, and may have a material adverse effect on our business.

We expect to rely on future collaborators for the development and potential commercialization of product candidates we discover internally when we believe it will help maximize the clinical and commercial opportunities of the product candidate. We face significant competition in seeking appropriate collaborators for these activities, and a number of more established companies may also be pursuing such collaborations. These established companies may have a competitive advantage over us due to their size, financial resources, and greater clinical development and commercialization expertise. Whether we reach a definitive agreement for such collaborations will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of preclinical studies and clinical trials, the likelihood of approval by the U.S. Food and Drug Administration, or FDA,FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large biopharmaceutical companies that have resulted in a reduced number of potential future collaborators.

Further, if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted. For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action planplan, or DAP, for each phase 3 clinical trial or any other "pivotal study" of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products. Specifically, action plans must include the sponsor’s goals for enrollment, the underlying rationale for those goals, and an explanation of how the sponsor intends to meet them. In addition to these requirements, theThe legislation directs the FDA to issue new guidance on diversity action plans.DAPs. In June 2024, the FDA issued draft guidance outlining the general requirements for diversity action plans.DAPs. Unlike most guidance documents issued by the FDA, the guidance when finalized will have the force of law because FDORA specifically dictates that the form and manner for submission of diversity action plansDAPs are specified in FDA guidance. InOn January 27, 2025, in response to an executive order issued by President Trump on January 21, 2025, on Diversity, Equity and Inclusion programs, the FDA removed thisthe draft DAP guidance from its website. TheOn implicationsJuly 3, 2025, the U.S. District Court for the District of Columbia ruled that the administration’s actions to remove these webpages, including the draft DAP guidance, is unlawful under the Administrative Procedure Act and ordered the restoration of many of these webpages. In late July 2025, the FDA restored the draft DAP guidance to the FDA’s website with a statement that "information on this actionpage aremay notbe yetmodified known.and/or removed in the future subject to the terms of the court's order and implemented consistent with applicable law." Accordingly, in light of these ongoing actions, there is considerable uncertainty surrounding the draft DAP guidance and how the FDA will consider DAPs in connection with its review of marketing applications.

We rely on, and plan to continue to rely on, third-party contract research organizations, or CROs, in addition to other third parties such as research collaboratives and consortia, clinical data management organizations, medical institutions and clinical investigators, to conduct our ongoing, plannedongoing and future clinical trials, including for SGR-1505, SGR-2921SGR-1505 and SGR-3515. These contract research organizations and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. These third-party arrangements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities might be delayed.

Furthermore, third parties on whom we rely may also have relationships with other entities, some of which may be our competitors. In addition, these third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-goingongoing clinical, nonclinical and preclinical programs. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.

In addition, we currently rely on foreign CROs and contract manufacturing organizations, or CMOs, and will likely continue to rely on foreign CROs and CMOs in the future. Foreign CMOs may be subject to U.S. legislation, including sanctions, tariffs and trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies. Moreover, in September 2024, the U.S. House of Representatives passed the BIOSECURE Act (H.R. 7085), and the Senate advanced a substantially similar bill (S.3558), which legislation, if passed and enacted into law, would restrict the ability of U.S. biopharmaceutical companies like us to purchase services or products from, or otherwise collaborate with, specifically named Chinese biotechnology companies and authorizes the U.S. government to impose such restrictions on entities transacting with additional Chinese biotechnology companies as a condition of U.S. government contract, grant, and loan funding. The legislation passed by the House of Representatives contains a grandfathering provision that would prevent disruption to the provision of services or products furnished under contracts with the targeted biotechnology companies entered before the effective date of the legislation until January 1, 2032. It is possible some of our contractual counterparties could be impacted by this legislation.

Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. If the third parties that we engage to supply any materials or manufacture product for our preclinical tests and clinical trials should cease to continue to do so for any reason, including as a result of tariffs or trade restrictions, we likely would experience delays in advancing these trials while we identify and qualify replacement suppliers, and we may be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate supplies of our product candidates or the substances used to manufacture them or any approved drug we may use in combination trials, it will be more difficult for us to develop our product candidates and compete effectively.

If serious adverse events or undesirable side effects are observed in any of our clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of one or more product candidates altogether or limit development to certain uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. We, the FDA, comparable foreign regulatory authorities or an independent institutional review board may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects. SomeFor potentialexample, therapeuticsin developedAugust 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 biotechnologyPhase industry1 thatclinical initiallytrial, showedbased therapeuticon promisethe profile observed prior to discontinuation, including two emergent events where SGR-2921 was considered to have contributed to two deaths in early-stagepatients trialswith haveAML, laterwe beendetermined foundthe path to causedevelopment sideas effectsa thatcombination preventedtherapy theirwould furtherbe development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product duedifficult to its tolerability versus other therapies. In addition, adverse events which had initially been considered unrelated to the study treatment may later, even following approval and/or commercialization, be found to be caused by the study treatment. Any of these developments could materially harm our business, financial condition and prospects.pursue.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the U.S. Food and Drug AdministrationFDA or other comparable foreign regulatory authorities.

From time to time, we may publicly disclose interim, initial, preliminary or topline data from our clinical trials, including our ongoing Phase 1 clinical trial of SGR-1505, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular trial. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. We will also have to make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, initial, topline or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary or topline data we previously published. As a result, interim, initial, topline and preliminary data should be viewed with caution until the final data are available.

For example, with respect to our MALT1 inhibitor, SGR-1505, which we are advancing for the treatment of patients with relapsed or refractory B-cell malignancies, we are aware of several MALT1 inhibitors in clinical development, including by AbbVie Inc., Ono Pharmaceutical Co., Ltd., HotSpot Therapeutics, and Recursion Pharmaceuticals, Inc. In addition, we are also aware of other therapeutics, such as bi-specifics and CAR-Ts, both approved and in clinical development, for the treatment of B-cell lymphomas.malignancies.

With respect to our Wee1/Myt1 inhibitor, SGR-3515, which we are advancing for the treatment of advanced solid tumors, we are aware of several Wee1 inhibitors in clinical development, including by Zentalis Pharmaceuticals, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co. Ltd., BioCity Biopharma, and Aprea Therapeutics, Inc., as well as a Myt1 inhibitor in clinical development being advanced by RepareDebiopharm TherapeuticsInternational Inc.S.A., Furthermore, we are also aware ofand a Wee1/Myt1 inhibitor in preclinical development being advanced by Acrivon Therapeutics, Inc.

•global health pandemics or epidemics, such as the recent COVID-19 pandemic; and

InIncome, additionsales, use or other tax laws, statutes, rules, or regulations could be enacted or amended at any time, which could affect our business or financial condition, including causing potentially adverse impacts to theour CARESeffective Act,tax asrate, parttax of Congress’s response to the COVID-19 pandemic, economic relief legislation was enacted in 2020liabilities, and 2021 containingcash tax provisions.obligations. TheFor example, the Inflation Reduction Act, or IRA, was also signed into law in August 2022.2022, and the One Big Beautiful Bill Act, or OBBBA, was signed into law in July 2025. The IRA introduced new tax provisions, including a one percent excise tax imposed on certain stock repurchases by publicly traded companies. The one percent excise tax generally applies to any acquisition of stock by the publicly traded company (or certain of its affiliates) from a stockholder of the company in exchange for money or other property (other than stock of the company itself), subject to acertain de minimis exception.exceptions. Thus, the excise tax could apply to certain transactions that are not traditional stock repurchases. The OBBBA contains numerous tax provisions that we are currently in the process of evaluating, and which may significantly affect our business or financial condition. The recent changes under the OBBBA include tax rate extensions and changes to the business interest deduction limitation, the expensing of domestic research and development expenditures (in contrast to the continued capitalization and amortization of foreign research and development expenditures), the bonus depreciation deduction rules, and the international tax framework. Regulatory guidance under the 2017 Tax Act,IRA, the IRA,OBBBA, and suchother additionaltax-related legislation is and continues to be forthcoming, and such guidance could ultimately increase or lessen the impact of these laws on our business and financial condition. Additional tax legislation may be enacted, and any such additional legislation could have an impact on our company. In addition, it is uncertain if and to what extent various states will conform to the 2017changes Taxto Act, the IRA, and additionalfederal tax legislation.

As of December 31, 2024,2025, we had federal NOLs of approximately $204.5$208.5 million that do not expire and state NOLs of approximately $129.5$119.3 million, which, if not utilized, generally begin to expire in 2025. As of December 31, 2024,2025, we also had federal orphan drug credits and federal research and development tax credit carryforwards of approximately $31.3$44.0 million and various state research and development tax credit carryforwards of approximately $2.7$4.7 million. Unused credits begin to expire in 20252033 and generally expire over time if they remain unused. TheseCertain of these NOLs, orphan drug credits, and research and developmentdevelopment, and various state tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

In addition, under Sections 382 and 383 of the Code,Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, a corporation that undergoes an "ownership change," generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and research and development tax credit carryforwards to offset future taxable income. We have performed an analysis through December 31, 20242025 and determined that no such ownership change occurredhad in the periods presented.occurred. If such an ownership change were to occur in the future, our ability to use our NOLs and research and development tax credit carryforwards may be materially limited.

There is also a risk that due to regulatory changes, such as suspension of the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities. As described above in "Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition," the 2017 Tax Act, as amended by the CARES Act, includes changes to U.S. federal tax rates and rules governing NOL carryforwards that may significantly impact our ability to utilize NOLs to offset taxable income in the future. In addition, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, we may be unable to use a material portion of our NOLs and other tax attributes.

Our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely and jointly with others or may license from others, particularly patents, in the United States and other countries with respect to any proprietary technology and product candidates we develop, including SGR-1505, SGR-2921,SGR-1505 and SGR-3515, and any trade secrets and know-how relevant to our product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our technology and any product candidates we may develop that are important to our business and by in-licensing intellectual property related to our technology and product candidates. If we are unable to obtain or maintain patent protection with respect to any proprietary technology or product candidate, our business, financial condition, results of operations, and prospects could be materially harmed.

The degree of future protection afforded by our intellectual property rights, whether owned or in-licensed, is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third-party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:

Under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, to the Federal Food, Drug and Cosmetic Act, or FDCA, a company may file an abbreviated new drug application, or ANDA, seeking approval of a generic version of an approved innovator product. Under the Hatch-Waxman Amendments, a company may also submit ana NDAnew drug application, or NDA, under section 505(b)(2) of the FDCA that references the FDA’s prior approval of the innovator product or preclinical studies and/or clinical trials that were not conducted by, or for, the sponsor and for which the sponsor has not obtained a right of reference. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. The Hatch-Waxman Amendments also provide for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and review) of an ANDA or 505(b)(2) NDA.

The FDA may determine that we must provide additional evidence and data before approving a BLA or NDA for our product candidates. For example, the FDA reviews an application to determine whether there is “substantial evidence” to support a finding of effectiveness for the proposed product for its intended use(s), The FDA has interpreted this evidentiary standard to generally require at least two adequate and well-controlled clinical trials to establish effectiveness of a new product. Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional confirmatory evidence may satisfy this standard. The FDA issued draft guidance in September 2023 that outlines considerations for relying on confirmatory evidence in lieu of a second clinical trial to demonstrate effectiveness. In the event that we submit a BLA or NDA on the basis of one clinical trial and confirmatory evidence, the FDA could determine that such information is not sufficient to support approval of the application and the agency could require us to conduct an additional trial in support of a BLA or NDA In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.NDA.

In order to market and sell any product candidatescandidate we may develop in the European Union and many other foreign jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying local regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and we may not receive necessary approvals to commercialize our product candidates in any jurisdiction, which would materially impair our ability to generate revenue.

Additionally, we could face heightened risks with respect to obtaining marketing authorization in the UK as a result of the withdrawal of the UK from the EU, commonly referred to as Brexit. The UK is no longer part of the European Single Market and EU Customs Union. As of January 1, 2025, the Medicines and Healthcare Products Regulatory Agency, or MHRA, is responsible for approving all medicinal products destined for the United Kingdom market (i.e., Great Britain and Northern Ireland). At the same time, a new international recognition procedure, or IRP, will apply, which intends to facilitate approval of pharmaceutical products in the UK. The IRP is open to applicants that have already received an authorization for the same product from one of the MHRA’s specified Reference Regulators, or RRs. The RRs notably include EMA and regulators in the EU/European Economic Area member states for approvals in the EU centralized procedure and mutual recognition procedure as well as the FDA (for product approvals granted in the U.S.). However, the concrete functioning of the IRP is currently unclear. Any delay in obtaining, or an inability to obtain, any marketing approvals may force us or our collaborators to restrict or delay efforts to seek regulatory approval in the UK for our product candidates, which could significantly and materially harm our business.

In addition, foreign regulatory authorities may change their approval policies and new regulations may be enacted. For instance, the European Union pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may, however, have a significant impact on the pharmaceutical industry and our business in the long term. On June 4, 2025, after almost two years of negotiations among the EU member states, the Council of the European Union adopted its position on the proposed overhaul of the EU general pharmaceutical legislative framework, which is known as the new Pharma Package. This proposal will now be the subject of additional negotiations and technical meetings, with the objective of reaching agreement on issues such as the regulatory data protection framework and the access and supply obligations. At this point, it appears that the period of market exclusivity for innovator products may be reduced from two years to one, exclusions from patent infringement for studies and trials will likely expand, and there will be a new obligation to ensure sufficient supply of medicines.

We have and may continue to seek certain designations for our product candidates, including Breakthrough Therapy, Fast Track and Priority Review designations in the United States, and PRIME Designation in the European Union, but we might not receive such designations, and even if we do, such designations may not lead to a faster development or regulatory review or approval process.

We have and may continue to seek certain designations for one or more of our product candidates that could expedite review and approval by the FDA. A Breakthrough Therapy product is defined as a product that is intended, alone or in combination with one or more other products, to treat a serious condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For products that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.

The FDA may also designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. In JulyJune 2024,2025, the FDA granted Fast Track designation tofor SGR-2921SGR-1505 infor the treatment of adult patients with relapsedWaldenström ormacroglobulinemia refractorythat acutehave myeloidfailed leukemia.at least two lines of therapy, including a BTK inhibitor.

We may also seek a priority review designation for one or more of our product candidates. If the FDA determines that a product candidate is intended to treat a serious conditioncondition, and,and if approved, offers a significant improvement in safety or effectiveness, the FDA may designate the product candidate for priority review. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months.

In 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA, which, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. Under Omnibus legislation signed by President Trump on December 27, 2020, the requirement for a product to show clinical superiority applies to drugs and biologics that received orphan drug designation before enactment of FDARA in 2017, but have not yet been approved or licensed by the FDA.

The FDA and Congress may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 (Catalyst Pharms., Inc. v. Becerra) finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” Although there have been legislative proposals to overrule this decision, they have not been enacted into law. On January 23, 2023, the FDA announced that, in matters beyond the scope of that court order, the FDA will continue to apply its existing regulations tying orphan-drug exclusivity to the uses or indications for which the orphan drug was approved. More recently, however, in February 2025, a federal district court fully embraced the reasoning of the Catalyst decision in another decision challenging the scope of orphan drug exclusivity. On April 17, 2025, the FDA appealed this decision to the U.S. Court of Appeals for the D.C. Circuit. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

Additionally, if any product candidates we may develop receive marketing approval, the FDA could require us to adopt arisk REMSevaluation and mitigation strategies, or REMS, to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients and a communication plan to healthcare practitioners. Furthermore, if we or others later identify undesirable side effects caused by our product candidate, several potentially significant negative consequences could result, including:

Finally, our ability to develop and market new drug products may be impacted by litigation challenging the FDA’s approval of another company’s drug product. In April 2023, the U.S. District Court for the Northern District of Texas invalidated the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various measures adopted under a REMS. The Court of Appeals for the Fifth Circuit declined to order the removal of mifepristone from the market but did hold that plaintiffs were likely to prevail in their claim that changes allowing for expanded access of mifepristone, which the FDA authorized in 2016 and 2021, were arbitrary and capricious. In June 2024, the Supreme Court reversed that decision after unanimously finding that the plaintiffs (anti-abortion doctors and organizations) did not have standing to bring this legal action against the FDA. On October 11, 2024, the Attorneys General of three states (Missouri, Idaho and Kansas) filed an amended complaint in the district court in Texas challenging FDA’s actions. On January 16, 2025, the district court agreed to allow these states to file an amended complaint and continue to pursue this challenge. Thereafter, on September 30, 2025, the district court declined to dismiss the case and, instead, transferred it to federal district court in the Eastern District of Missouri. Depending on the outcome of this litigation, our ability to develop new drug product candidates and to maintain approval of existing drug products could be delayed, undermined or subject to protracted litigation.

Disruptions at the FDA and other government agencies caused byfrom funding shortagescuts, orpersonnel globallosses, healthregulatory concernsreform, government shutdowns and other developments could hinder theirour ability to hireobtain guidance from the FDA regarding our programs and retain key leadershipdevelop and othersecure personnel,approval orof otherwise prevent newour product candidates and services from being developed or commercialized in a timely manner, which couldwould negatively impact our business.

The following discussion and analysis of our financial condition and results of operations covers fiscal 2025 and fiscal 2024 items and year-over-year comparisons between fiscal 2025 and fiscal 2024. Discussions of fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023. 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, 2023,2024, that was filed with the SEC on February 28,26, 2024.2025.

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.

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. 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.

In JulyJune 2023,2022, the FDAU.S. Food and Drug Administration, or FDA, cleared our INDfirst investigational new drug application, or IND, for our CDC7MALT1 inhibitor, which we refer to as SGR-2921.SGR-1505. InOur 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 aongoing Phase 1 clinical trial of SGR-2921, whichSGR-1505 is designed as an open-label, multi-center dose-escalationdose clinicalescalation trial in patients with relapsed or refractory AMLB-cell or high-risk myelodysplastic syndrome.malignancies. The trial is designed to evaluate the safetysafety, 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 tolerability of SGR-2921 as a monotherapy andsafety to identifysupport 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 MarchApril 2024, we also submitted an IND to the FDA cleared the IND we submitted for our novel Wee1/Myt1 inhibitor, which we refer to as SGR-3515,SGR-3515. andIn theJuly FDA2024, cleared the IND in April 2024. We recentlywe 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 halfquarter of 2025.2026.

In July 2024, we launched an initiative to expand our computational platform to predict toxicity associated with binding to off-target proteins. The goal of this initiative is to develop a computational solution designed to improve the properties of drug development candidates and reduce the risk of development failure.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.

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

We are party to an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas. After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate. We are eligible to receive up to $482.0 million in total milestone payments for the one remaining neurology target currently subject to the collaboration, of which we have recognized $32.0 million as of December 31, 2024,2025, 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 AgreementAgreements" in Note 3 to our consolidated financial statements for additional information relating to this agreement.

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

In November 2024, we entered into a research collaboration and license agreement with Novartis Pharma AG, or Novartis, pursuant to which we and Novartis agreed to collaborate on the discovery, research and preclinical development of small molecule compounds for targets in certain specified therapeutic areas. The agreement is intended to advance multiple development candidates for development and commercialization by Novartis. Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we will beare eligible to receive up to $2.272 billion in total milestone payments across the initial programs. Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. We are also entitled to a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid single-digits to low double-digits,double-digits on products commercialized by Novartis under the agreement, subject to certain specified reductions. No milestone revenue has been recognized as of December 31, 2024.2025. 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 AgreementAgreements" in Note 3 to our consolidated financial statements for additional information relating to thisthe research collaboration and license agreement.

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

Our ability to expand within our customer base is demonstrated by the increasing numberaverage ofACV from our commercial customers with an ACV atof higherover thresholds.$1.0 million. For example, for the year ended December 31, 2024,2025, we had 6127 commercial customers with an ACV of at least $500,000$1.0 million compared to 5429 such customers for the year ended December 31, 2023.2024. Furthermore,The weaverage hadACV per commercial customer with an ACV of over $1.0 million grew to $3.9 million for the year ended December 31, 27,2025 andcompared 18to $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 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, 2024,2024 comparedwere acquired prior to fourthe customers for eachend of the years ended December 31, 2023 and 2022.2025.

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. GAAP,GAAP on an annualized basis, as it is an operating metric that can be impacted by contract execution start and end dates and renewal rates. ACV is not intended to be a replacement for, or forecast of, revenue. Our ACV was $190.8$198.5 million and $154.2$190.8 million for the years ended December 31, 20242025 and 2023,2024, respectively.

We are advancing our pipeline of proprietary programs through preclinical and clinical development. Our initial programs were focused on discovering and developing inhibitors for targets in DNA damage response pathways and genetically defined cancers. Since then, we have expanded into other therapeutic areas, including immunology and neurology. We have initiated dosing in a Phase 1 clinical trial of SGR-1505 in patients with relapsed or refractory B-cell malignancies, a Phase 1 clinical trial of SGR-2921 in patients with relapsed or refractory acute myeloid leukemia or high-risk myelodysplastic syndrome,malignancies 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. Wealso continue to advance new programs where we can leverage our computational platform to discover novel molecules, including SGR-6016, our programsbrain-penetrant targetingNLRP3 PRMT5-MTA,inhibitor EGFRC797S,development NLRP3, and LRRK2.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 probability ofdevelopment, clinical and commercial success.potential.

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

In July 2024, we entered into a one-year agreement with the Bill & Melinda Gates FoundationFoundation, 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. 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 costs are incurred and conditions are met and on a cost reimbursement basis in accordance with Topic 958.

Drug discovery services. We generate drug discovery revenue through the performance of specified research and development activities under our collaboration agreements and upon the achievement of discovery and development milestones, and we have the potential to generate drug discovery revenue from commercial and regulatory milestones, option fees, and royalties under our collaboration agreements. The majority of our current collaborations are in the discovery and preclinical development stages. Milestone payments typically increase in magnitude as a program advances. 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. Overall, we expect that our drug discovery revenue will fluctuate from period to period due to the inherently uncertain nature of the timing of milestone achievements and our dependence on the program decisions of our collaborators.

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

Software products and services. Cost of revenues for software includes personnel-related expenses (comprised of salaries, benefits, and stock-based compensation) for employees directly involved in the development and delivery of software solutions, maintenance and professional services, royalties paid for products sold and services performed using third-party licensed software functionality, and allocated overhead (facilities and information technology support) costs. Pursuant to various third-party arrangements, we license technology that is used in our software. These arrangements require us to pay royalties based on sales volume, and such royalty payments represented 3.5% and 4.1% of software revenues in both the years ended December 31, 20242025 and 2023, respectively.2024.

Drug discovery. Costs of revenue for drug discovery includes personnel-related expenses and costs of third-party contract research organizations, or CROs, that support discovery activities in our collaborations, royalties paid for services performed using third-party licensed software functionality, allocated compute capacity and overhead costs. While we have incurred costs associated with discovery efforts since late 2017, we have recognized and expect to continue to recognize revenues in the future if and when milestones are deemedconsidered 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 9.5%2.4% and 3.5%9.5% of drug discovery revenues in the years ended December 31, 20242025 and 2023,2024, respectively. We expect our drug discovery costs of revenue to trendfluctuate lowerfrom over time as we shift our focusperiod to proprietaryperiod drugdepending discovery programs. However, these trends will be impacted byon the number and stagemix of our collaborative programs,and especiallyproprietary inprograms theand casetheir respective stages of new collaborative programs.development.

We expect our research and development expense to increasestabilize in absolute dollars as we continueregards to investour investment in activities related to discovery and development of our proprietary drug discovery programs, in advancing our computational platform, and as we incur expenses associated within hiring additional personnel directly involved in such efforts. The amount to which our research and development expense may increasefluctuate 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.

Gain (Loss) on Equity Investments

Our revenue has and may continue to fluctuate from quarter-to-quarter and year-to-year. For example, our total revenues decreasedincreased by 2%3% from $59.6$114.3 million in the threesix months ended MarchJune 31,30, 2025 to $58.6$117.5 million in the threesix months ended MarchJune 31,30, 2026, and increased by 23% from $207.5 million in the fiscal year ended December 31, 2024 to $255.9 million in the fiscal year ended December 31, 2025. Although we have experienced revenue growth in certain periods, we have also experienced a decline in revenue in certain periods, and we may not be able to sustain revenue growth and we may experience certain periods of revenue decline. In addition, 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. This transition 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. You should not consider our revenue growth in prior periods as indicative of our future performance. As we grow our business, our revenue growth rates may slow in future periods.

•changes in the fair value of or receipt of distributions or proceeds on account of the equity interests we hold in our drug discovery collaborators, such as Structure TherapeuticsTherapeutics, Ajax Therapeutics, and Nimbus;

Our current drug discovery collaborators, from whom we are entitled to receive milestone payments upon achievement of various development, regulatory, and commercial milestones as well as royalties on commercial sales, if any, under the collaboration agreements that we have entered into with them, face numerous risks in the development of drugs, including the conduct of preclinical and clinical testing, obtaining regulatory approval, and achieving product sales. In addition, the amounts we are entitled to receive upon the achievement of such milestones tend to be smaller for near-term development milestones and increase if and as a collaborative product candidate advances through regulatory development to commercialization and will vary depending on the level of commercial success achieved, if any. We do not anticipate receiving significant milestone payments from many of our drug discovery collaborators for several years, if at all, and our drug discovery collaborators may never achieve milestones that would result in significant cash payments to us. In addition, while we have equity stakes in a number of our collaborators, the value of these equity stakes can vary significantly based on a number of factors beyond our control, and there can be no assurance that we can rely on such equity as capital to fund our operations. For these reasons we may need, or choose, to obtain additional capital to fund our continuing operations.

As of MarchJune 31,30, 2026, we had cash, cash equivalents, restricted cash, and marketable securities of $406.4$418.8 million. We believe that our existing cash, cash equivalents, and marketable securities as of MarchJune 31,30, 2026 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plans may change as a result of many factors currently unknown to us. As a result, we could deplete our capital resources sooner than we currently expect.

The overall market for molecular discovery and design software is global, rapidly evolving, competitive, and subject to changing technology and shifting customer interests and priorities. Our software solutions face competition from competitors in the business of selling or providing simulation and modeling software to biopharmaceutical companies. These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA,BIOVIA; Chemical Computing Group (US) Inc.,Inc.; Cresset Biomolecular Discovery Limited,Limited; OpenEye, a brand of Cadence Design Systems, Inc.,Inc.; Optibrium Limited,Limited; Cyrus Biotechnology, Inc.,Inc.; Molsoft LLC,LLC; Insilico Medicine, Inc.,Inc.; Iktos,Iktos; XtalPi Inc.,Inc.; AbCellera,AbCellera; Inductive Bio, Inc.; Certara, Inc., Chemaxon,including Revvity,Chemaxon; Inc.,Revvity Signals; and Simulations Plus, Inc.

We also have competitors in materials science, such as BIOVIA and Materials Design, Inc., and in enterprise software for the life sciences, such as BIOVIA, Certara USA, Inc., Chemaxon,Revvity Revvity, Inc.,Signals, and Dotmatics, Inc.a brand of Siemens. In some cases, these competitors are well-established providers of these solutions and have long-standing relationships with many of our current and potential customers, including large biopharmaceutical companies. In addition, there are academic consortia that develop physics-based simulation programs for life sciences and materials applications. In the life sciences industry, the most prominent academic simulation packages include AMBER, CHARMm,CHARMM, GROMACS, GROMOS, OpenMM, and OpenFF. These packages are primarily maintained and developed by graduate students and post-doctoral researchers, often without the intent of commercialization. Companies distributing simulation based methods also face competition from proprietary and open source AI-based methods such as AlphaFold3, Chai-1, Boltz-2, and OpenFold. These proprietary and open source methods may be developed and released by commercial entities, including for example, Alphabet, Chai Discovery, and Boltz; or by academic consortiums, including for example, OpenFold.

In addition, we are facing increasing competition from companies utilizing artificial intelligence, or AI,AI and other computational approaches for drug discovery. Some of these competitors are involved in drug discovery themselves and/or with partners, and others develop software or other tools utilizing AI which can be used, directly or indirectly, in drug discovery. To the extent these other AI approaches to drug discovery prove to be successful, or more successful, than our approach, the demand for our platform could be adversely affected, which could affect our software demand as well as reduce the demand for us as a collaborator in drug discovery.

We also rely on collaborators for the development and potential commercialization of product candidates we discover internally when we believe it will help maximize clinical and commercial opportunities for the product candidate. For example, under our research collaboration and license agreement with Novartis, we are responsible, together with Novartis, for the discovery of small molecule compounds directed against specified targets pursuant to mutually agreed research plans. After the identification of a development candidate in any project plan, Novartis will be solely responsible for the further preclinical and clinical development, manufacturing and commercialization of products containing all compounds resulting from such project plan. We cannot be certain that we will successfully identify development candidates for Novartis to develop and commercialize under our research collaboration and license agreement. Further, Novartis may not achieve the discovery, development, and commercial milestones for those development candidates that would result in additional payments to us.

In addition, the regulatory landscape related to clinical trials in the European Union, or EU, has evolved. The EU Clinical Trials Regulation, or CTR, became applicable on January 31, 2022. While the Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application to all member states concerned. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. TheAs CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials whose CTA was made under the Clinical Trials Directive before January 31, 2022, the Clinical Trials Directive applied until January 31, 2025. Additionally, sponsors were still permitted to choose to submit a CTA under either the Clinical Trials Directive or the CTR until January 31, 2023 and, if authorized, those will be governed by the Clinical Trials Directive until January 31, 2025. Beginningof January 31, 2025, all ongoing clinical trials in the EU are subject to the provisions of the CTR.

For example, with respect to our MALT1 inhibitor, SGR-1505, which we are advancing for the treatment of patients with relapsed or refractory B-cell malignancies, we are aware of several MALT1 inhibitors in clinical development, including by AbbVie Inc., HotSpotRecursion Therapeutics,Pharmaceuticals, Inc., Janssen Research & Development, LLC, Ono Pharma USA, Inc., and RecursionAurigene Pharmaceuticals,Oncology, Inc. In addition, we are also aware of other therapeutics, such as bi-specifics and CAR-Ts, both approved and in clinical development, for the treatment of B-cell malignancies.

With respect to our Wee1/Myt1 inhibitor, SGR-3515, which we are advancing for the treatment of advanced solid tumors, we are aware of several Wee1 inhibitors in clinical development, including by Zentalis Pharmaceuticals, Debiopharm International SA, IMPACT Therapeutics, Inc., Shouyao Holdings Co. Ltd., BioCity Biopharma, and Aprea Therapeutics, Inc., as well as a Myt1 inhibitor in clinical development being advanced by DebiopharmRepare InternationalTherapeutics S.A.,Inc., and a Wee1/Myt1 inhibitor being advanced by Acrivon Therapeutics, Inc.

For the three and six months ended MarchJune 31,30, 2026 and the year ended December 31, 2025, sales to customers outside of the United States accounted for approximately 46%36%, 41% and 40% of our total revenues, respectively. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. We have limited operating experience in some international markets, and we cannot assure you that our expansion efforts into other international markets will be successful. Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other markets. Our international expansion efforts may not be successful in creating further demand for our solutions outside of the United States or in effectively selling our solutions in the international markets we enter. In addition, we face risks in doing business internationally that could adversely affect our business, including:

A number of cases decided by the U.S. Supreme Court have involved questions of when claims reciting abstract ideas, laws of nature, natural phenomena and/or natural products are eligible for a patent, regardless of whether the claimed subject matter is otherwise novel and inventive. These cases include Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 12-398576 (2013) or Myriad; Alice Corp. v. CLS Bank International, 573 U.S. 13-298208 (2014); and Mayo Collaborative Services v. Prometheus Laboratories, Inc., or Prometheus, 566 U.S. 10-115066 (2012). In response to these cases, federal courts have held numerous patents invalid as claiming subject matter ineligible for patent protection. Moreover, the USPTO has issued guidance to the examining corps on how to apply these cases during examination. As a result of these decisions, obtaining broad patents in the United States covering software innovations is more challenging than before.

The degree of future protection afforded by our intellectual property rights, whether owned or in-licensed, is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third-party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:

The FDA may determine that we must provide additional evidence and data before approving a BLA or NDA for our product candidates. For example, the FDA reviews an application to determine whether there is “substantial evidence” to support a finding of effectiveness for the proposed product for its intended use(s),. The FDA has interpreted this evidentiary standard to generally require at least two adequate and well-controlled clinical trials to establish effectiveness of a new product. Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional confirmatory evidenceinformation may satisfy this standard. The FDA issued draft guidance in September 2023 that outlines considerations for relying on confirmatory evidence in lieu of a second clinical trial to demonstrate effectiveness.efficacy. The FDA has not yet finalized such guidance but, in February 2026, then existing FDA leadership published an editorial in the New England Journal of Medicine in which they declared that, in most cases, the new default requirement for FDA approval of a new product will be one robust pivotal clinical trial plus confirmatory evidence, rather than two pivotal clinical trials. In determining whether to rely on one trial, the eventFDA thatwill we submit a BLA or NDAfocus on the basissingle trial’s quality, including magnitude of oneeffect, clinicalappropriateness trialof control arms, endpoint selection, statistical power, blinding, handling of missing data, biological plausibility and confirmatoryalignment evidence,with intermediate biomarkers. At this point, it is unclear how this new policy will be implemented by the FDA could determine that such information is not sufficient to support approval of the application and thehow, agencyif couldat requireall, usit towill conductaffect anour additionalclinical trialdevelopment in support of a BLA or NDA.programs.

Additionally, we could face heightened risks with respect to obtaining marketing authorization in the UK as a result of the withdrawal of the UK from the European Union, commonly referred to as Brexit. The UK is no longer part of the European Single Market and EU Customs Union. As of January 1, 2025, the Medicines and Healthcare Products Regulatory Agency, or MHRA, is responsible for approving all medicinal products destined for the United Kingdom market (i.e., Great Britain and Northern Ireland). On April 28, 2025, the UK Parliament adopted amendments to improve and strengthen the UK’s clinical trials regulatory regime, which will taketook effect on April 28, 2026. In anticipation of these new requirements, on October 1, 2025, the MHRA updated its guidance for clinical trials to address, among other things, research transparency requirements for clinical trials, the approvals process, Research Ethics Committee review of clinical trials, simplified arrangements for consent in clinical trials and pharmacovigilance. Since the UK left the European Union prior to the date on which the EU CTR took effect, the UK legal framework did not benefit from the same revisions as occurred at EU level.

In addition, foreign regulatory authorities may change their approval policies and new regulations may be enacted. For instance, the European Union pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may, however, have a significant impact on the pharmaceutical industry and our business in the long term. On June 4, 2025, after almost two years of negotiations among the EUEuropean Union member states, the Council of the European Union adopted its position on the proposed overhaul of the EU general pharmaceutical legislative framework, which is known as the new Pharma Package. ThisOn proposalDecember will11, now be2025, the subjectEuropean of additional negotiationsParliament and technicalEuropean meetings,Council withreached thea objectiveprovisional of reachingpolitical agreement on issuesthe suchlegislation. asThe revisions may have a significant impact on the regulatorypharmaceutical industry and our business. The new Pharma Package would, among other things, set a baseline period of eight years of data protection frameworkexclusivity and theone access and supply obligations. At this point, it appears that the periodyear of market exclusivity with possible extensions for innovatornew productsindications mayup to a maximum of 11 years total. The new framework is expected to be reducedadopted fromby twothe yearsfall toof one, exclusions from patent infringement for studies and trials will likely expand,2026 and there will likely be a newtransition obligation to ensure sufficient supplyperiod of medicines.24 months, with the changes taking effect in mid-2028.

The FDA and Congress may further reevaluate the Orphan Drug Act and its regulations and policies. ThisFor may be particularly trueexample, in lightSeptember of a decision from2021, the Court of Appeals for the 11th Circuit in September 2021 (Catalyst Pharms., Inc. v. Becerra) findingheld that, for the purpose of determining the scope of orphan drug exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.use” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” Although there have been legislative proposals to overrule this decision, they have not been enacted into law. On January 23, 2023, the FDA announced that, in matters beyond the scope of that court order, the FDA will continue to apply its existing regulations tying orphan-drug exclusivity to the uses or indications for which the orphanproduct drug wasis approved. More recently, however,Subsequently, in Februaryanother 2025,case, a federal district court fullyin embracedWashington, D.C. followed the reasoning of the Catalyst11th Circuit decision inand anotherthat decision challenging the scope of orphan drug exclusivity. On April 17, 2025, the FDAwas appealed this decision to the U.S. Court of Appeals for the D.C. Circuit. On February 3, 2026, the Consolidated Appropriations Act of 2026 was enacted into law. It overruled these court decisions and codified the FDA’s longstanding interpretation of the scope of orphan drug exclusivity to apply to “the same drug for the same approved use or indication within such [designated] rare disease or condition.” This change, which applies retroactively, expressly authorizes the FDA to approve multiple versions of the same orphan drug for different sub-indications and subpopulations, such as adult and pediatric patients or multiple variations of the same disease that are caused by different genetic variants. We do not know if, when, or how the FDA may further change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

Further, while the FDA’s review of marketing applications and other activities for new drugs and biologics is largely funded through the user fee program established under the Prescription Drug User Fee Act, or PDUFA, it remains unclear how the administration’s reduction in force and budget cuts will impact this program and the ability of the FDA to provide guidance and review our product candidates in a timely manner. For example, while the FDA reduction in force did not reportedly specifically target FDA reviewers, many operations, administrative and policy staff that help support such reviews were affected and those losses could lead to delays in PDUFA reviews and related activities. As of July 15, 2025, there has been at least one report in which the FDA failed to meet a PDUFA goal date for approval of an NDA due to heavy workload and limited resources. In addition, while currently unclear, there is a risk that the reduction in force and budget cutbacks could threaten the integrity of the PDUFA program itself. That is because, for the FDA to obligate user fees collected under PDUFA in the first place, a certain amount of non-user fee appropriations must be spent on the process for the review of applications plus certain other costs during the same fiscal year.

In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. That regulation was challenged in a lawsuit by the Pharmaceutical Research and Manufacturers of America, or PhRMA, but the case was dismissed by a federal district court in February 2023 after the court found that PhRMA did not have standing to sue HHS. Several states have passed laws allowing for the importation of drugs from Canada and a few states have passed legislation establishing working groups to examine the impact of a state importation program. Several of these states have submitted Section 804 Importation Program proposals to the FDA. In January 2024, the FDA approved Florida's plan for Canadian drug importation. Florida now has authority to import certain drugs for a period of two years once certain conditions are met. Florida will first need to submit a pre-import request for each drug selected for importation, which must be approved by the FDA. Florida will also need to relabel the drugs and perform quality testing of the products to meet FDA standards. On May 21,6, 2025,2026, the FDA announcedgranted thatFlorida itanother wouldsix-month offerextension—through individualNovember 6, 2026—to begin implementation. In January 2026, the FDA introduced a Section 804 Importation Program Quality Assurance (QA) Tool intended to help states theand opportunitytribes toprepare submitcompliant aSIP draftsubmissions. proposalThe tool includes lessons learned from earlier submissions, practical guidance, and tips for pre-review and meet with the agency to obtain initial feedback frommeeting FDA prior to formally submitting their SIP proposal. The intent of these meetings is to assist states in developing their proposals by further clarifying requirements, enhancing the quality of proposals submitted to the agency and ultimately shortening the review timeline.requirements.

Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. This provision applies to drug products that have been approved for at least nine years and biologics that have been licensed for 13 years. Drugs and biologics that have been approved for a single rare disease or condition were originally categorically excluded from price negotiation. With passage of the OBBBA in July 2025, Congress extended this exemption to drugs and biologics with multiple orphan drug designations. With passage of the OBBBA in July 2025, Congress extended this exemption to drugs and biologics with multiple orphan drug designations.

On June 6, 2023, Merck & Co., Inc., filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the U.S. Constitution. Subsequently, other parties, including the U.S. Chamber of Commerce and other pharmaceutical companies also filed lawsuits in various courts with similar constitutional claims against HHS and CMS. HHSEvery court that has generallythus wonfar considered substantive disputes in these cases, and various federal district court judges have expressed skepticism regarding the merits of the legal arguments being pursued by the pharmaceutical industry. Certain of these cases are now on appeal, and on October 30, 2024, the Court of Appeals for the Third Circuit heard oral argument in three of these cases. On May 8, 2025, the Third Circuit rejected AstraZeneca’s challengechallenges to the Medicare drug price negotiation program,program findinghas thatruled against the programpharmaceutical didindustry, notdismissing violateboth theconstitutional company’sand duestatutory process rights under the constitution since there is no protected property interest in selling goods to Medicare beneficiaries at a price higher than what the government is willing to pay in reimbursement.arguments. We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.

OnIn addition, the Trump administration has taken a number of actions to reduce the costs of pharmaceutical products. For example, on April 15, 2025, President Trump issued an Executive Order which directs HHS to take steps to reduce the prices of pharmaceutical products. Such measures include streamlining the state drug importation program and modifying provisions of the 340B program. Further, on May 12, 2025, President Trump issued an additional Executive Order calling on pharmaceutical manufacturers to voluntarily reduce the prices of medicines in the United States. The Executive Order provides that if such actions do not lower the costs of pharmaceuticals, the Secretary of HHS would pursue other actions, including proposing a rulemaking that imposes most-favored nation, or MFN, pricing in the United States. Thereafter, on July 31, 2025, thePresident PresidentTrump issued letters to 17 pharmaceutical companies reiterating the requirements of the May 12, 2025 executiveExecutive orderOrder and demanding that such companies extend MFN pricing to Medicaid patients, guarantee MFN pricing for newly-launched drug products, return increased revenues abroad to American patients and provide for direct purchasing at MFN pricing. TheSince lettersthat alsotime, urgedvirtually all of these pharmaceutical companies tohave stipulateentered thatinto they will not offer other developed nations better prices for new drugs than the prices offered for such products in the United States. The letters called for engagementagreements with the FDA and CMS within 60 days to implement these changes and threatened to use “every tool in our arsenal” to address what the letter characterized as “abusive drug pricing practices.” Subsequently, the Trump administration has announced deals with nearly all such pharmaceutical companies to reduceprovide thefor costslower ofprices drugs.on certain pharmaceuticals. On February 5, 2026, President Trump launched TrumpRx.gov, a website that directs individuals to pharmaceutical manufacturer websites that are offering price discounts based on the administration’s pricing agreements with pharmaceutical manufacturers.

The regulatory framework for the collection, use, safeguarding, sharing, transfer, and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data and employee data, is subject to the European Union General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or EEA, in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR increases our obligations with respect to any clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. Such requirements may be subject to change in the future as the European Commission considers amendments to the GDPR. In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States and, as a result, increases the scrutiny that such rules should apply to transfers of personal data from any clinical trial sites located in the EEA to the United States. In October 2022, President Biden signed an executive order to implement the EU-U.S. Data Privacy Framework, which serves as a replacement to the EU-U.S. Privacy Shield. The European Commission initiated the process to adopt an adequacy decision for the EU-U.S. Data Privacy Framework in December 2022, and the European Commission adopted the adequacy decision on July 10, 2023. The adequacy decision permits companies in the United States who self-certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the European Union to the United States. However,The somedecision privacyrests advocacyupon groupsa havenumber alreadyof suggestedfactors, including that theythe willData bePrivacy challengingFramework was overseen by the FTC, an independent authority. However, the long-term viability of the EU-U.S. Data Privacy Framework.Framework Ifremains thesesubject to challenges. In addition to potential challenges arefrom successful,privacy theyadvocacy may not only impactgroups, the EU-U.S.2023 Datadecision Privacycould Framework,be butchallenged alsoin furtherresponse limitto a recent U.S. Supreme Court decision in Trump v. Slaughter allowing the viabilitypresident ofto thefire standardFTC contractualcommissioners clausesat and other data transfer mechanisms.will. The uncertainty around this issue has the potential to impact our business internationally.business.

Following the withdrawal of the United Kingdom from the European Union, the United Kingdom’s Data Protection Act 2018 applies to the processing of personal data that takes place in the United Kingdom and includes parallel obligations to those set forth by GDPR. The European Union and United Kingdom data protection regimes are independent of each other but remain largely aligned. In relation to data transfers, both the United Kingdom and the European Union have determined, through separate "adequacy" decisions, that data transfers between the two jurisdictions are in compliance with the United Kingdom’s Data Protection Act 2018 and the GDPR, respectively. In October 2023, the United Kingdom and the United States implemented a U.S.-U.K. "data bridge," which functions similarly to the EU-U.S. Data Privacy Framework and provides an additional legal mechanism for companies to transfer data from the United Kingdom to the United States. Any changes or updates to these developments have the potential to impact our business. In addition, in 2025, the United Kingdom’s Data (Use and Access) Act 2025, or the DUAA, was approved, implementing various measures concerning data usage in the United Kingdom and reforming data protection laws. Certain provisions of the DUAA became effective in 2026, while others are expected to take effect at a later time. It remains too soon to tell how the DUAA will have an impact on our business.

Similar privacy and data security requirements are either in place or underway in the United States. There are a broad variety of data protection laws that may be applicable to our activities, and a range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns. The Federal Trade Commission, or FTC, and state Attorneys General are aggressive in reviewing privacy and data security protections for consumers. For example, the FTC has been particularly focused on the unpermitted processing of health and genetic data through its enforcement actions and is expanding the types of privacy violations that it interprets to be “unfair” under Section 5 of the Federal Trade Commission Act, as well as the types of activities it views to trigger the Health Breach Notification Rule (which the FTC also has the authority to enforce). The agency is also in the process of developing rules related to commercial surveillance and data security that may impact our business. We will need to account for the FTC’s evolving rules and guidance for proper privacy and data security practices in order to mitigate our risk for a potential enforcement action, which may be costly. If we are subject to a potential FTC enforcement action, we may be subject to a settlement order that requires us to adhere to very specific privacy and data security practices, which may impact our business. We may also be required to pay fines as part of a settlement (depending on the nature of the alleged violations). If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements.

In addition to California, a number of other states have passed comprehensive privacy laws similar to the CCPA and CPRA. These laws are either in effect or will go into effect sometime before the end of 2026. Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data (which includes health data in some cases). Some of the provisions of these laws may apply to our business activities. There are also states that are considering or have already passed comprehensive privacy laws that will go into effect in the near future. There are also states that are specifically regulating health information that may affect our business. For example, Washington state passed a consumer health privacy law that will regulate the collection and sharing of health information, and the law also has a private right of action, which further increases the relevant compliance risk. Other states already have or are considering similar laws in their states. These laws may impact our business activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our products.

The reciprocal tariffs and the fentanylfentanyl-related tariffs were imposed pursuant to the International Emergency Economic Powers Act, or the IEEPA. These tariffs were found to be unconstitutionalunlawful by multiple federal courts in the spring and summer of 2025. On February 20, 2026, the U.S. Supreme Court held that the IEEPA does not authorize the U.S. President to impose tariffs, invalidating both the reciprocal tariffs and the drug trafficking tariffs. Shortly thereafter, President Trump issued a new executive order revoking the IEEPA tariffs and Customs and Border Protection ceased collecting the tariffs on February 24, 2026. At the same time, however, theThe Trump administration then imposed a new 10% global tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026. PursuantOn May 7, 2026, the U.S. Court of International Trade held that the Section 122 tariff exceeded the President’s statutory authority, although the court limited relief to the statute,importer absentplaintiffs anand extensionthe State of Washington; the government appealed, and the tariffs continued to be collected from most other importers while the appeal was pending. In any event, the Section 122 tariffs expired by Congress,operation theseof tariffs will expire in 150 daysstatute on July 24, 2026. ForHowever, on July 23, 2026, the Office of the U.S. Trade Representative announced final action under Section 301 of the Trade Act of 1974 imposing new tariffs on imports from 60 trading partners based on findings that those countries thathad havefailed concludedto tradeadopt dealsand effectively enforce prohibitions on imports of goods produced with theforced U.S.,labor. The new tariffs, set at either 10% or 12.5% depending on the tariffcountry’s rateslevel agreedof to, including with regardcommitment to pharmaceuticalsforced-labor andimport pharmaceuticalrestrictions, ingredients,took haveeffect now reverted to 10% untilon July 24, 2026.2026, Likeand replaced the IEEPAtariffs tariffs,that pharmaceuticalshad andbeen pharmaceuticalimposed ingredients are exempt from theunder Section 122 tariffs along with a list of other products.122. The Trump administration has announced that it also plans to initiate new investigations related to excess capacity on “most major trading partners” under Section 301 of the same act, which will likelymay lead to additional tariffs.

Neither the U.S. Supreme Court’s decision nor the Executive Order revoking the IEEPA tariffs addressedfully refunds,resolved the availability or timing of refunds for importers that paid the IEEPA or Section 122 duties, leaving the issue to renewed proceedings before the U.S. Court of International Trade, where importers may need to pursue administrative remedies and/or litigation amiddepending continuedon uncertainty.the status of entries. Sustained uncertainty about, or the further escalation of, trade and political tensions between the United States and China could result in a disadvantageous research and manufacturing environment in China, particularly for U.S. based companies, including retaliatory restrictions that hinder or potentially inhibit our ability to rely on CMOs and other service providers that operate in China.

Separately, in April 2025, the U.S. Department of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 into the impact on U.S. national security of the imports of pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items. On September 25, 2025, via a post on Truth Social, President Trump announced that, beginning October 1, 2025, all branded or patented drugs imported in the U.S. would face a 100% tariff. At the same time, Trump indicated that these tariffs could be avoided by building pharmaceutical manufacturing facilities in the U.S. Thereafter, Trump delayed the October 1, 2025 effective date of the tariffs on branded or patented pharmaceutical products announcing that the Trump administration had now “begun preparing” tariffs on manufacturers that do not build in the U.S. or enter into a most-favored-nation drug pricing agreement with the Trump administration. A host of other U.S. tariff actions remain possible, including an additional 25% tariff on products from countries that do business with Iran or Cuba. On April 2, 2026, the President issued Proclamation 11020 concluding that imports of patented pharmaceuticals and associated active pharmaceutical ingredients, including key starting materials, threaten to impair U.S. national security. The proclamation imposes a default 100% ad valorem duty on covered patented pharmaceutical products and associated ingredients, subject to exclusions and reduced-rate pathways. The tariffs were scheduled to take effect on July 31, 2026, for companies identified in Annex III to the proclamation and on September 29, 2026, for other covered companies. The proclamation also provides reduced or alternative rates for certain products or companies, including a 20% rate for companies with Commerce-approved onshoring plans; a 15% rate for covered products from the European Union, Japan, South Korea, Switzerland and Liechtenstein; and separate treatment for products from the United Kingdom, while excluding generic pharmaceuticals, biosimilars and certain other categories at this time. These measures remain subject to future modification, implementation guidance, possible litigation and potential retaliatory or negotiated responses by trading partners.

As a result of changes in tariffs that have been announced and/or implemented, and the underlying uncertainty currently surrounding international trade, we could experience a negative impact to our costs of materials and production processes, and supply chain disruptions and delays as a result of any new tariff policies or trade restrictions. If we are unable to obtain necessary raw materials or product components in sufficient quantity and in a timely manner due to disruptions in the global supply chain caused by tariffs, retaliatory trade measures, geopolitical developments or other macroeconomic events and conditions, the development, testing and clinical trials of our product candidates may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business. We cannot yet predict the effect of theexisting recentlyor imposedfuture U.S. tariffs on imports, or the extent to which other countries will impose quotas, duties, tariffs, taxestaxes, countermeasures or other similar restrictions upon imports or exports in the future,future. norWe canalso wecannot predict future trade policy orpolicy, the terms of any renegotiated trade agreementsagreements, andthe theirscope or duration of any tariff exclusions, or the impact of any of these measures on our business.business, financial condition, supply chain, research and development activities, clinical trials or results of operations.

Further, some of our manufacturers and suppliers are located in China. Trade tensions and conflicts between the United States and China have been escalated in recent years and, as such, we are exposed to the possibility of product supply disruption and increased costs and expenses in the event of changes to the laws, rules, regulations and policies of the governments of the United States or China, or due to geopolitical unrest and unstable economic conditions. Certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, thereby potentially disrupting their supply of material to us. For example, in February 2024, U.S. lawmakers called for investigations into and the imposition of possible economic sanctions against Chinese biotechnology companies WuXi AppTec and WuXi Biologics, or collectively WuXi, over alleged ties to the Chinese military.

In December 2025, as part of the National Defense Authorization Act for FY 2026, President Trump signed into law the BIOSECURE Act, which prohibits, subject to limited exceptions, the direct or indirect use of U.S. federal government contract, grant, and loan funds for purchasing biotechnology equipment and services from certain Chinese biotechnology companies of concern, or BCCs. Under the BIOSECURE Act, U.S. government agencies cannot (i) buy or obtain biotechnology equipment or services provided by a BCC, (ii) enter into, extend, or renew a contract with any entity using biotechnology equipment or services provided by a BCC to perform a government contract, or (iii) expend loan or grant funds for biotechnology equipment or services provided by a BCC, whether directly or through a loan or grant recipient. Instead of specifying particular Chinese entities as BCCs, the BIOSECURE Act treats any biotechnology companies that have been identified on the so-called 1260H List by the U.S. Department of DefenseWar as Chinese Military Companies Operating in the United States as BCCs. The legislation allows for other biotechnology companies to be added to the federal funding prohibitions at a later time. On December 18, 2025, the Chairs of multiple Senate and House committees, including the House Select Committee on China, sent a letter to the Department of DefenseWar recommending that WuXi be added to the 1260H list, which would make it a BCC. The 1260H list was updated by the Department of DefenseWar in January 2024 and January 2025. On February 13, 2026, the Department published an updated list, which included WuXi, but then abruptly withdrew the list. TheSubsequently, on June 8, 2026, the Department of War released an updated version of its list of Chinese Military Companies operating in the United States, pursuant to the requirements of Section 1260H. Notably, the Department added WuXi to the list, along with two other biotechnology companies (Complete Genomics and Novogene). Since these companies were just added to the list, they will be covered under a five-year grandfather clause that allows any contracts signed before the effective date of the ban to be protected through 2031. Nonetheless, on June 11, 2026, WuXi filed a legal challenge to its designation as a Chinese Military Company. Accordingly, the implications of this action remain unclear.

As of AprilJuly 23,29, 2026, our executive officers and directors and our stockholders who beneficially owned more than 5% of our outstanding common stock, in the aggregate, beneficially owned shares representing approximately 39.2%39.9% of our common stock and all of our limited common stock, or, if the holder of our limited common stock exercised its right to convert each share of its limited common stock for one share of our common stock, approximately 46.7%47.3% of our common stock. As a result, if these stockholders were to choose to act together, they would be able to influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would influence the election of directors and approval of any merger, consolidation, or sale of all or substantially all of our assets.

Our stock price has been, and is likely to continue to be, volatile. Since our initial public offering in February 2020 and through AprilJuly 23,29, 2026, the intraday price of our common stock has fluctuated from a low of $10.94 to a high of $117.00. As a result of volatility, our stockholders may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock, impair our ability to raise capital through the sale of additional equity securities, and make it more difficult for our stockholders to sell their common stock at a time and price that they deem appropriate. As of AprilJuly 23,29, 2026, we had outstanding 65,556,53165,641,435 shares of common stock and 9,164,193 shares of limited common stock. All of our outstanding shares of common stock, including shares of common stock issuable upon the conversion of shares of our limited common stock, are available for sale in the public market, subject only to the restrictions of Rule 144 under the Securities Act of 1933, as amended, in the case of our affiliates. In addition, certain of our executive officers, directors and affiliated stockholders have entered or may enter into Rule 10b5-1 plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the executive officer, director or affiliated stockholder when entering into the plan, without further direction from the executive officer, director or affiliated stockholder. A Rule 10b5-1 plan may be amended or terminated in some circumstances. Our executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.

We are party to an amended and restated sales agreement with Leerink Partners 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 Form S-3, shares of our common stock having an aggregate offering price of up to $250.0 million, through Leerink Partners. The number of shares that are sold by Leerink Partners after we request that sales be made will fluctuate based on the market price of our common stock during the sales period and limits we set with Leerink Partners. Therefore, it is not possible to predict the number of shares that will be ultimately issued by us, if any, pursuant to the amended and restated sales agreement. As of MarchJune 31,30, 2026, we have sold 323,085 shares of common stock for total net proceeds of $8.7 million, and have $241.1 million of common stock remaining available for sale under the ATM.

OnIn April 27,June 2026, Eli Lilly and Company, or Lilly, andacquired Ajax Therapeutics, Inc., or Ajax, a company co-founded by us, jointly announced Lilly's planned acquisition of Ajax.us. Under the terms of the agreement, Ajax shareholders could receive up to $2.3 billion in cash, inclusive of an upfront payment and subsequent payments upon the achievement of certain clinical and regulatory milestones. TheIn transactionconnection iswith subjectthe to customary closing conditions. Ascompletion of Decemberthe 31, 2025,acquisition, we heldreceived a 5.8%cash payment of approximately $57.2 million, comprised of $47.2 million on account of our equity positionstake in Ajax onand an$10.0 issuedmillion from a collaboration milestone payment. We are also eligible to receive additional cash payments upon the achievement by Ajax of specified clinical and outstandingregulatory basis.milestones, as well as potential cash payments currently held in escrow related to the closing.

We are party to an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas. After mutual agreement on the targets(s) of interest, we are responsible for the discovery of development candidates. Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate. We are eligible to receive up to $482.0 million in total milestone payments for the one remaining neurology target currently subject to the collaboration, of which we have recognized $32.0 million as of MarchJune 31,30, 2026, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions. See "Collaboration and License Agreements" in Note 3 to our unaudited condensed consolidated financial statements for additional information relating to this agreement.

In November 2024, we entered into a research collaboration and license agreement with Novartis Pharma AG, or Novartis, pursuant to which we and Novartis agreed to collaborate on the discovery, research and preclinical development of small molecule compounds for targets in certain specified therapeutic areas. The agreement is intended to advance multiple development candidates for development and commercialization by Novartis. Under the terms of the research collaboration and license agreement, Novartis paid us an initial upfront fee of $150.0 million in January 2025 and we are eligible to receive up to $2.272 billion in total milestone payments across the initial programs. Such milestones consist of up to $892.0 million in discovery and development milestones and up to $1.38 billion in commercial milestones. We are also entitled to a tiered percentage royalty on net sales of each product commercialized by Novartis ranging from mid single-digits to low double-digits on products commercialized by Novartis under the agreement, subject to certain specified reductions. No milestone revenue has been recognized as of MarchJune 31,30, 2026. In November 2024, we also entered into an expanded three-year software agreement with Novartis that substantially increases Novartis' access to our computational predictive modeling technology and enterprise informatics platform. See "Collaboration and License Agreements" in Note 3 to our unaudited condensed consolidated financial statements for additional information relating to the research collaboration and license agreement.

We generated revenue of $58.6$58.9 million and $59.6$54.8 million during the three months ended MarchJune 31,30, 2026 and 2025, respectively, representing a year-over-year decreaseincrease of 2%.8%. Our net income for the three months ended June 30, 2026 was $6.0 million and our net loss for the three months ended MarchJune 31, 2026 and30, 2025 was $60.0$43.2 million. Our net income for the three months ended June 30, 2026 was primarily due to the $57.2 million andcash $59.8payment million,we respectively.received in connection with the completion of Lilly’s acquisition of Ajax discussed above.

Our annual contract value, or ACV, was $28.4$29.6 million for the three months ended MarchJune 31,30, 2026, compared to $25.4$23.3 million for the three months ended MarchJune 31,30, 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.

Initiative with Bill & Melinda Gates Foundation

In July 2024, we launched an initiative to expand our computational platform to predict toxicity associated with binding to off-target proteins. The goal of this initiative is to develop a computational solution designed to improve the properties of drug development candidates and reduce the risk of development failure associated with binding to off-target proteins, which can be associated with serious side effects. The project is being funded initially by $19.5$24.5 million in grants from the Bill & Melinda Gates Foundation. We continue to advance our predictive toxicology initiative, which encompasses approximately 50 representative kinases in addition to multiple key anti-targets. We recently launched our predictive toxicology solution commercially and expectbegan to makemaking it available more broadly to our customers during 2026.

Software contribution revenue. Software contribution revenue consists of funds received under non-reciprocal agreements, as amended, with Gates Ventures, LLC and the Bill & Melinda Gates Foundation. The agreement with Gates Ventures, LLC was originally entered into in June 2020 and further extended through August 13, 2026.2027. The agreement is an unconditional non-exchange contribution without restrictions. Revenue is recognized annually, when invoiced, in accordance with Accounting Standard Codification, or ASC, Topic 958, Not-for-Profit Entities, or Topic 958, as the agreement is not an exchange transaction.

In July 2024, we entered into a one-year agreement with the Bill & Melinda Gates Foundation, which was subsequently extended through April 2026,2027, 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 contribution revenue. Contribution revenue primarily consists of funds received under agreements with the Bill & Melinda Gates Foundation on a cost reimbursement basis, to perform services aimed at accelerating drug discovery in women’s health. Revenue is recognized as costs are incurred and conditions are met in accordance with Topic 958.

Contribution. Cost of revenues for contribution includes personnel-related expenses, costs of third-party contract research organizations that support software development and drug discovery activities under our non-reciprocal agreements with the Bill & Melinda Gates Foundation, and allocated compute capacity. Contribution cost of revenues are recorded as costs are incurred under the agreements. We expect our contribution cost of revenues to fluctuate from period to period depending on the timing and progress of work completed.

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

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The following table summarizes our unaudited results of operations data for the three and six months ended MarchJune 31,30, 2026 and 2025:

On-premise software. The decrease in revenues for on-premise software for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was primarily attributable to customers switching from on-premise to hosted software purchases as well as the timing and size of multi-year customer contracts with upfront revenue recognition in the comparable period versus the current period, as well as customers switching from on-premise to hosted software purchases.period.

Software maintenance. The decrease in revenues for on-premise software maintenance for the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025 was primarily dueattributable to the timing and size of multi-year customer contracts with upfront revenue recognition in the comparable period versus the current period as well as customers switching from on premiseon-premise to hosted software purchases.

ProfessionalSoftware services.maintenance. The increasedecrease in revenues fromfor professionalsoftware servicesmaintenance for the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025 was primarily relateddue to fluctuationscustomers inswitching thefrom timingon ofpremise progressto andhosted completionsoftware of technology and modeling service projects.purchases.

The increase in revenues for drug discovery services for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was primarily due to a $10.0 million collaboration milestone payment received from Lilly's election not to proceed with further development for one program under the collaboration, which resulted in increased revenue recognition due to the accelerated completionacquisition of our obligations related to such program,Ajax and the progress of existing collaborations.

Software contribution revenue. The decrease in revenues from software contribution during the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025 was due to a decrease in funds spent during the period as a result of depletion of allocated funds under the agreements with the Bill & Melinda Gates Foundation aimed at accelerating the expansion of our computational software platform during 2025.

Drug discovery contribution revenue. The decreaseincrease in drug discovery contribution revenue for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was primarily due to aan decreaseincrease in funds spent during the period as a result of depletionadditional offunding allocated fundsapproval under an agreement with the Bill & Melinda Gates Foundation, aimed at accelerating drug discovery in women’s health.

Software products and services. The increase in cost of revenues for software products and services during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was attributable to increases of approximately $1.4$0.6 million in cloud computing expense, approximately $0.3 million in personnel-related expense,expense and approximately $0.1 million in otherpersonnel-related expenses.expense.

Contribution. The decreaseincrease in cost of revenues for contributionsoftware products and services during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was attributable to decreasesincreases of approximately $1.9 million in personnel-related expense and approximately $1.3 million in cloud computing expense, partially offset by an increase of approximately $0.2$0.4 million in CROpersonnel-related expense.expense, and approximately $0.1 million in other expenses.

A significant portion of our research and development costs have been external preclinical and clinical CRO costs, which we track on a program-by-program basis related to a product candidate, once the candidate has been identified. Our internal research and development costs are primarily personnel-related costs, rent expense, and other indirect costs and are not tracked on a program-by-program basis. All other research and development costs are related to non-program related costs. The following table summarizes our research and development expense for the three and six months ended MarchJune 31,30, 2026 and 2025:

The decrease in external costs of $3.0$2.5 million during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was primarily attributable to a decrease in external research costs related to the discontinuation of the clinical development program for SGR-2921, as well as decreases in external research costs for SGR-1505 and SGR-3515 due to the timing of work performed, partially offset by higher costs for our early-stage product candidates.

The decreaseincrease in internal costs for programs in discovery, preclinical and clinical development of $0.2$0.7 million during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was primarily attributable to aan decreaseincrease in personnel-relatedfacility expense.and other expenses.

The increasedecrease in all other research and development expense of $1.1$0.4 million during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was attributable to increasesdecreases of approximately $1.0 million inrelated personnel-relatedto expenseoffice facilities and approximately $0.5 million in cloud computing expense, partially offset by decreases of approximately $0.2$0.1 million related to professional services, partially offset by increases of approximately $0.1$0.4 million relatedin tocloud officecomputing facilities,expense and approximately $0.1$0.3 million in travelpersonnel-related and entertainment expenses.expense.

The increasedecrease in sales and marketing expense during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was primarily attributable to increasesdecreases of approximately $0.5 million in travel and entertainment expense, approximately $0.5 million in personnel-related expense, approximately $0.1$0.2 million in cloudtravel computingand entertainment expense, and approximately $0.1 million in other expenses.expenses, partially offset by increases of approximately $0.2 million in cloud computing expense and approximately $0.1 million related to office facilities.

The decrease in general and administrative expense during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was attributable to decreases of approximately $1.8$1.3 million in personnel-related expense, approximately $0.5$1.0 million in professional services expense, approximately $0.4$0.1 million related to office facilities, and approximately $0.1 million in other expenses, and approximately $0.2 million in travel and entertainment expense.expenses.

The change in fair value of equity investments during the three months ended MarchJune 31,30, 2026 was due to an unrealized lossgain of approximately $42.1 million on our investment in Ajax Therapeutics in connection with the completion of Eli Lilly and Company’s acquisition of Ajax, as well as an approximately $3.7 million unrealized gain on our investment in Structure Therapeutics of $13.5 million. This consisted of a mark-to-market loss of approximately $14.5 million on the portion of the investment held as of March 31, 2026, partially offset by a mark-to-market gain of approximately $1.1 million on the portion of the investment sold during the period.Therapeutics. The change in fair value of equity investments during the three months ended MarchJune 31,30, 2025 was due to an unrealized lossgain of $13.1approximately $4.6 million on our investment in Structure Therapeutics.

The decrease in other income during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was attributable to a decrease of approximately $2.1 million of interest related to our investment portfolio and unfavorable currency fluctuations of approximately $1.0$0.6 millionmillion, andpartially aoffset decreaseby an increase of approximately $0.5$0.3 million ofrelated to an interest income related to our investment portfolio.reclassification.

During the three and six months ended MarchJune 31,30, 2026 and 2025, we continued to recognize a full valuation allowance on our U.S. federal and state tax assets. Our income tax expense primarily represents our income tax obligations in certain states and taxes in foreign jurisdictions in which we conduct business.

Detailed information about our critical accounting estimates is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 25, 2026. There were no material changes to our critical accounting estimates during the threesix months ended MarchJune 31,30, 2026.

We have a history of significant operating losses and have primarily incurred negative cash flows from operations from inception through the three months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, we had an accumulated deficit of $688.8$682.9 million.

In February 2024, we entered into an amended and restated sales agreement with Leerink Partners 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. No shares of common stock were sold under the ATM during the three and six months ended MarchJune 31,30, 2026 and 2025. As of MarchJune 31,30, 2026, we had $241.1 million of common stock remaining available for sale under the ATM.

As of MarchJune 31,30, 2026, we had cash, cash equivalents, restricted cash, and marketable securities of $406.4$418.8 million.

We believe our existing cash, cash equivalents, and marketable securities as of MarchJune 31,30, 2026 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months. Our future capital requirements will depend on many factors, including the growth of our software revenue, the timing and extent of spending to support research and development efforts, the continued expansion of software sales and marketing activities, the timing and receipt of milestone payments from our collaborations, as well as spending to support, advance, and broaden our proprietary drug discovery programs, including the impact of tariffs and trade restrictions on such spending. Furthermore, our capital requirements will also change depending on the timing and receipt of any distributions we may receive from our equity stakes in our drug discovery collaborators. The potential for these distributions, and the amounts which we may be entitled to receive, are difficult to predict due to the inherent uncertainty of the events which may trigger such distributions.

Our contractual obligations as of MarchJune 31,30, 2026 include lease obligations of $155.8$155.5 million, consisting of our continuing rent obligations through December 2037, primarily for our office located in New York, New York for $124.1$121.8 million, which expires in December 2037. In addition, see Note 5, “Commitments and Contingencies” to our unaudited condensed consolidated financial statements for information relating to our operating lease obligations.

During the threesix months ended MarchJune 31,30, 2026, operating activities used approximately $14.8$48.9 million of cash, primarily due to a net loss of $60.0$54.1 million.million, Thiswhich netincluded lossa was$32.4 million non-cash gain on changes in fair value of equity investments. These items were partially offset by $17.9 million of stock-based compensation, changes to our operating assets and liabilities of $21.8$16.9 million, $13.5 million of non-cash loss on change in fair value of equity investments, $9.1 million of stock-based compensation, and $0.8$2.8 million of non-cash operating expenses, depreciation, and investment accretion costs.