Andrew Left’s Citron Research said in a new report that Schrödinger Inc’s recent (NASDAQ:SDGR) initial public offering (IPO) is the “most important” in the past five years and that the similarities between the physics-based software maker and Tesla (NASDAQ:TSLA) are “too obvious to ignore.”
Left argued in his research that both Tesla and Schrödinger-a company that helps some of the largest pharma brands with drug discovery, were founded on the premise of combining unique business models with technology and software to solve humanity’s problems. In the case of Tesla, long-range, clean-energy electric cars, and in that of Schrodinger, use of software and artificial intelligence to research novel molecules for use in drug development.
The notable short seller believes that just like Tesla which disrupted and changed the transportation industry, Schrodinger’s software platform, as “the most disruptive to ever hit the pharmaceutical industry,” can completely change the drug development process and expedite “advances in chemistry beyond limits ever imagined.”
It’s worth noting that when it comes to balance sheet numbers Schrödinger reported a net loss of $22 million and $18.5 million at the end of FY2018 and FY2019, respectively. In its IPO filing the company states that it has a history of “significant operating losses” and that it expects to “incur losses over the next several years.” Schrödinger also said that as of Sept. 30, 2019, it had an accumulated deficit of more than $98 million.
Left predicts Wall Street is likely to “quickly re-rate Schrodinger shares much higher,” particularly at a time when investors are willing to pay large premiums for pharma companies with disruptive potentials. He placed an $80 price target on Schrödinger shares, representing 60% upside to Friday’s close.
Schrödinger’s stock closed $2.38, or 5%, higher at $50 on Friday. Ticker was priced at $17 a share during its IPO on Feb. 6.
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