Certara, Inc.

Certara, Inc. is a global leader in biosimulation science, technology, and consulting services, primarily serving the biopharmaceutical and biotech industry by utilizing Model-Informed Drug Development (MIDD) to enhance drug research, development, and commercialization. The company's core mission is to enable the life sciences industry to leverage data, modeling, and analytics for improved decision-making, aiming to increase productivity and significantly reduce drug development costs. The pharmaceutical industry annually spends over $290 billion ¹ on R&D, with an average cost of $6.2 billion ² and 10-15 years to develop one new medicine, including failures, highlighting the critical need for Certara's solutions to improve success rates. Certara's approach integrates AI capabilities within validated scientific frameworks and expert-led workflows, emphasizing transparency, reproducibility, and explainability, rather than deploying AI as standalone automated systems. The company's proprietary biosimulation platforms are built on biology, chemistry, and pharmacology principles with proprietary mathematical algorithms, developed and validated over two decades using extensive scientific data.

Certara's competitive positioning is based on its combination of scientific modeling expertise, regulatory experience, and technology enablement, differentiating it from general-purpose AI technology providers and point-solution modeling tools. The company's internal data indicates that its customers have received 90% or more of all novel drug approvals by the U.S. Food and Drug Administration (FDA) from 2014 through 2025. Certara has collaborated on over 10,000 customer projects in the last decade and its software products are licensed by more than 160,000 users ³ and 20 global drug regulatory agencies, including the FDA, Japan’s Pharmaceuticals and Medical Devices Agency (PMDA), and China’s Center for Drug Evaluation (CDE) ⁴. The principal competitive factors in its market include the functionality and quality of models, breadth of molecular types, therapeutic areas, and modalities supported, regulator acceptance, ease of use, depth of drug development experience, brand awareness, total cost, and secure integration capabilities. The time, effort, and investment required to develop validated models and extensive MIDD experience are considered significant barriers to new entrants.

The company generates revenue from the sale of software products and the delivery of consulting services. Software revenue is derived from licenses, subscriptions for cloud-based solutions, and maintenance fees. Software license fees are recognized upfront upon delivery, while subscription and maintenance fees are recognized ratably over the contract term, typically one to three years for subscriptions and one year for maintenance. Services revenue, primarily from technology-driven and professional services, is recognized over time as services are performed, either on a time-and-materials basis or by estimating progress to completion for fixed-fee and prepaid services. The company's customer base includes over 2,600 life sciences companies and academic institutions across 70 countries ⁵, including 38 of the top 40 biopharmaceutical companies by R&D spend in 2025 ⁶. No single customer accounted for more than 10% of revenues in 2025 ⁷, while the ten largest customers represented 24% ⁸ of revenues for the year ended December 31, 2025.

Certara offers comprehensive biosimulation solutions designed to predict pharmacokinetics and pharmacodynamics, encompassing both mechanistic and empirical approaches. The Simcyp Simulator is a mechanistic biosimulation platform for physiologically based pharmacokinetic (PBPK) simulation, used for various drug development stages from first-in-human dosing to virtual bioequivalence analyses. Its modules include Simcyp Discovery, Simcyp Biopharmaceutics, and Simcyp Secondary Intelligence. The empirical biosimulation software platform includes the Phoenix PK/PD suite, featuring Phoenix WinNonlin for non-compartmental analysis, Phoenix Cloud for cloud-based data management, Phoenix NLME for population modeling, and Pirana Modeling Workbench for model creation and simulation.

In 2024, Certara acquired Chemaxon, a software company specializing in chemical property prediction, search, and analysis, which strategically expands Certara's presence in the drug discovery biosimulation market. Key Chemaxon products include JChem Engines for chemical search, Compound Registration for lead optimization, and Design Hub for compound design and tracking. Certara's D360 software is a scientific informatics application for small molecule and biologics discovery. The Preclinical & Clinical Data Pipeline and Automation Suite, primarily the Pinnacle 21 family of products, helps customers standardize and validate preclinical and clinical data for regulatory submissions. Regulatory Science solutions, such as CoAuthor software and GlobalSubmit eCTD Submissions Management, streamline the creation and submission of regulatory documents. Technology-enabled services include Quantitative Systems Pharmacology (QSP), Drug Development and Regulatory Strategy, Pharmacometrics, Data Science, Clinical Pharmacology, and Regulatory Operations.

For the fiscal year ended December 31, 2025, Certara reported total revenues of $418.838 million ⁹, an increase of 9% ¹⁰ from $385.148 million ¹¹ in 2024. Cost of revenues increased by $6.610 million ¹², or 4% ¹³, to $161.126 million ¹⁴. Gross profit, calculated as revenues minus cost of revenues, was $257.712 million [9, 14]. Operating expenses totaled $236.696 million ¹⁵. Income from operations was $21.016 million ¹⁶. Net loss for the year was $(1.595) million ¹⁷, an improvement from $(12.051) million ¹⁸ in 2024. Diluted EPS was $(0.01) ¹⁹. Net cash provided by operating activities was $96.325 million ²⁰. As of December 31, 2025, cash and cash equivalents stood at $189.392 million ²¹, and total long-term debt (net of current portion and debt discount) was $290.131 million ²².

Year-over-year, total revenues increased by $33.690 million ²³, or 9% ²⁴. Software revenue grew by $27.579 million ²⁵, or 18% ²⁶, to $183.275 million ²⁷, driven by strong demand from existing customers, expansion of relationships, and business acquisitions. Services revenue increased by $6.111 million ²⁸, or 3% ²⁹, to $235.563 million ³⁰, primarily due to continued growth in technology-enabled services. Cost of revenues increased by $6.610 million ³¹, or 4% ³², mainly due to a $4.2 million ³³ increase in intangible assets amortization and a $2.6 million ³⁴ increase in license and service expense, partially offset by a $2.0 million ³⁵ decrease in employee-related costs. Sales and marketing expense rose by $6.276 million ³⁶, or 13% ³⁷, to $53.720 million ³⁸, primarily due to headcount growth and investment in the commercial organization. Research and development expense increased by $3.935 million ³⁹, or 11% ⁴⁰, to $41.040 million ⁴¹, driven by an $11.4 million ⁴² increase in employee-related costs for software development, including AI integration, partially offset by a $5.6 million ⁴³ increase in capitalized R&D costs. General and administrative expense decreased by $8.841 million ⁴⁴, or 9% ⁴⁵, to $85.380 million ⁴⁶, largely due to an $11.7 million ⁴⁷ decrease from contingent consideration remeasurement and a $2.0 million ⁴⁸ decrease in lease abandonment expense, partially offset by increases in professional and consulting expenses and employee-related costs. Interest expense decreased by $1.782 million ⁴⁹, or 8% ⁵⁰, to $19.738 million ⁵¹, primarily due to a $4.2 million ⁵² decrease in interest from floating rate term loan debt. Net other income increased by $0.271 million ⁵³, or 4% ⁵⁴, to $6.338 million ⁵⁵, mainly from a $4.3 million ⁵⁶ increase in foreign currency remeasurement gains. The provision for income taxes increased by $14.344 million ⁵⁷ to $9.211 million ⁵⁸, with an effective tax rate of 120.9% ⁵⁹, compared to a benefit of $5.133 million ⁶⁰ and a 29.9% ⁶¹ effective tax rate in 2024.

During 2025, Certara introduced 103 new software applications and upgrades ⁶², including Phoenix Cloud's AI PK reports module, Pinnacle 21 Enterprise Plus, and Certara IQ. In 2024, the company acquired Chemaxon for a total cash consideration of $96.4 million ⁶³, expanding its drug discovery biosimulation market presence. In 2023, Certara acquired Drug Interaction Solutions, University of Washington (DIDB) for an estimated $8.3 million ⁶⁴, Formedix for $41.4 million ⁶⁵, and Applied BioMath, LLC (ABM) for $36.6 million ⁶⁶, enhancing its data platform, QSP capabilities, and model-informed drug discovery support. The company also launched Certara.AI, an AI platform for life sciences, and the next generation of its CoAuthor regulatory writing software, which integrates generative AI, data integration, and structured content authoring tools.

Certara's growth strategy is centered on enhancing its science, technology, and consulting services to provide greater certainty and speed in decision-making for its customers. The company aims to lead innovation in biosimulation through continuous engagement with customers, regulatory agencies, and academic institutions. A key investment priority is the development of additional biosimulation capabilities and uses to improve decision certainty and patient outcomes. The company plans to release new software, features, and upgrades frequently, with a focus on cloud-based solutions to integrate and connect its products within an end-to-end platform.

A major growth area for Certara is the advancement of its technology, particularly through the integration of AI. In 2025, the company introduced 103 new software applications and upgrades ⁶⁷, including Phoenix Cloud's AI PK reports module, Pinnacle 21 Enterprise Plus, and Certara IQ. The company's investment in AI is specifically focused on enhancing modeling productivity, improving data connectivity across its platform, and supporting scientific decision-making. This integration prioritizes existing validated workflows to ensure new capabilities align with scientific best practices and regulatory requirements. The company believes AI predictive models will continue to enhance the effectiveness of biosimulation models and be utilized impactfully within drug development, with plans to incorporate additional AI technology into more products and services.

Another significant growth vector is expanding within its existing customer base. Certara actively engages with its customers to up-sell and cross-sell its solutions, leveraging its unique blend of science, technology, and consulting services. The company's scientists, regulatory and market access experts, business developers, marketing professionals, and business leaders collaborate to provide a high-quality customer experience and foster long-term partnerships. A primary goal is to facilitate customer growth over time through increased adoption of biosimulation solutions.

Geographic expansion also forms a part of Certara's growth strategy. The company has continuously invested in an international footprint to effectively serve the global biopharmaceutical and biotech industry. As of December 31, 2025, Certara had employees in 28 countries ⁶⁸, including approximately 585 in the US, 707 in Europe, and 177 in Asia ⁶⁹. The biopharmaceutical industry had over 6,800 companies worldwide with active R&D pipelines in 2025 ⁷⁰, up from nearly 2,400 in 2011 ⁷¹, indicating a growing market for Certara's global expansion efforts.

Operationally, Certara expects its headcount and total operating expenses to continue to increase over time due to investments in scientific talent, sales and marketing, research and development, and other operational and administrative functions to support anticipated growth. The company initiated a review process in 2024 to evaluate long-term strategic options for its regulatory services business, which could potentially have a significant impact on its operations.

Regarding capital allocation, Certara's top investment priority is to develop additional capabilities and uses for biosimulation. The company expects to continue investing in research and development to enhance and scale its software product offerings through new features and increased functionality. As of December 31, 2025, Certara had cash and cash equivalents of $189.392 million ⁷². The Board of Directors approved a stock repurchase program on April 11, 2025, authorizing the company to repurchase up to $100.0 million ⁷³ of its common stock. For the twelve months ended December 31, 2025, the company repurchased 3,368,374 shares ⁷⁴ for an aggregate purchase price and fees of $42.6 million ⁷⁵. As of December 31, 2025, approximately $57.4 million ⁷⁶ remained available under this program. The company does not currently expect to declare any dividends on its common stock in the foreseeable future, anticipating that all earnings will be used for working capital, operations support, business growth and development, and debt reduction.

Management explicitly flagged several structural headwinds and execution risks to the growth plan. These include the potential for deceleration in, or resistance to, the acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities or academic institutions, which could reduce demand for products and services. The market is competitive and highly fragmented, with competition from other scientific software providers, technology companies, in-house development by biopharmaceutical companies, and open-source solutions. Changes or delays in government regulation relating to the biopharmaceutical industry, such as relaxation of requirements or streamlined approval procedures, could decrease the need for some services. Reductions in R&D spending by customers due to lack of funding or delays in the drug discovery process, potentially exacerbated by adverse global economic conditions, could also negatively impact demand. Operational disruptions, funding constraints, and policy changes at the FDA and other government agencies, such as the planned reduction of approximately 3,500 full-time positions at the FDA ⁷⁷ pursuant to Executive Order 14210, could adversely affect regulatory activity and the business. Consolidation within the biopharmaceutical industry may reduce the pool of potential customers or the number of software licenses.

Geographic, regulatory, and macro factors identified as constraints include economic, political, and other risks associated with global operations. During 2025, 31% ⁷⁸ of revenues were transacted in foreign currencies, exposing the company to fluctuations in exchange rates, primarily British Pound Sterling, Euro, and Japanese Yen. Changes in tax laws or rulings, such as those included in the Inflation Reduction Act of 2022 and the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025 ⁷⁹, could impact the effective tax rate and customer R&D spending incentives. The EU's Artificial Intelligence Act, effective August 1, 2024, with some exceptions applying as of August 2, 2026 ⁸⁰, and California's climate disclosure laws, are examples of evolving regulatory environments that could impose significant obligations and costs.

Certara faces several material risks, including a potential deceleration in the acceptance of model-informed biopharmaceutical discovery and development by regulatory authorities or academic institutions, which could reduce demand for its products and services. The market is highly competitive and fragmented, with competition from other software providers, technology companies, in-house solutions, and open-source software like R and PK-Sim. Changes or delays in government regulation, such as a relaxation of regulatory requirements or streamlined approval procedures, could decrease the need for Certara's services. Reductions in R&D spending by customers, driven by factors like lack of funding, economic downturns, or drug price controls (e.g., provisions in the Inflation Reduction Act of 2022 and the One Big Beautiful Bill Act of 2025 ⁸¹), could negatively impact demand. Operational disruptions, funding constraints, and policy changes at regulatory agencies, such as the planned reduction of approximately 3,500 full-time positions at the FDA ⁸² in 2025, could adversely affect regulatory activity. Consolidation within the biopharmaceutical industry may reduce the customer base or the number of software licenses. The company's continued revenue growth depends on its ability to expand its customer base, deepen existing relationships, and successfully enter new markets, which may be challenging without significant investment. Dependence on highly qualified personnel is a key risk, as competition for talent is high, and the loss of key employees could harm the business. Delays or defects in new software releases, particularly those integrating AI, could lead to increased costs, delayed market acceptance, diminished demand, and potential liability. The implementation and use of AI and machine learning also introduce risks of increased competition, reputational harm, regulatory action, or legal liability, especially given the nascent stage of AI technology and evolving regulatory environments like the EU's Artificial Intelligence Act, which will begin to apply as of August 2, 2026 ⁸³. Failure of existing customers to renew software licenses or purchase additional solutions at favorable prices would negatively impact operating results. Government contracts and grants expose the company to risks including early termination, audits, investigations, sanctions, or penalties. Acquisitions, a part of Certara's growth strategy, carry integration risks, potential dilution, and diversion of management's attention. Overestimation of the addressable market could limit future growth opportunities. Adverse global economic conditions, including inflation and higher interest rates, could negatively affect business, results of operations, and liquidity. International operations expose the company to foreign currency exchange rate fluctuations, with 31% ⁸⁴ of 2025 revenues transacted in foreign currencies, and economic and political risks. Failure to comply with trade compliance and economic sanctions laws could result in reputational harm and significant penalties. Litigation, including intellectual property claims, could be costly and time-consuming. Cybersecurity breaches or unauthorized access to data could lead to significant liabilities, reputational damage, and loss of customer confidence, especially with the increasing complexity of AI-driven threats. Non-compliance with privacy and data security laws, such as HIPAA, GDPR, and CCPA, could result in financial losses and reputational harm, with potential fines up to €20 million or 4% of annual global revenues ⁸⁵ for GDPR violations. Reliance on third-party cloud infrastructure providers poses risks of disruption, capacity limitations, or interference. Use of open-source software in solutions could lead to compliance failures, litigation, and potential disclosure of proprietary source code. Inability to adequately enforce or defend intellectual property rights, particularly for AI-created content, is a risk. Non-compliance with healthcare fraud and abuse laws could lead to substantial penalties. The company's indebtedness, totaling $295.5 million ⁸⁶ in outstanding borrowings on the Term Loan as of December 31, 2025, could materially affect its financial condition and ability to operate, with variable interest rates posing a risk if they increase significantly. Impairment of goodwill or other intangible assets, as seen with the $46.984 million ⁸⁷ goodwill impairment charge in 2023, could adversely impact future results. The ability to use net operating losses (NOLs) and R&D tax credit carryforwards to offset future taxable income may be subject to limitations due to ownership changes or other factors.

Management's overall tone emphasizes Certara's position as a global leader in biosimulation, focused on leveraging Model-Informed Drug Development (MIDD) to enhance productivity and reduce drug development costs for the life sciences industry. They highlight the company's commitment to integrating modern scientific understanding, data analysis, and AI within validated scientific frameworks, ensuring transparency, reproducibility, and explainability. Management explicitly states that their solutions continue to rely on validated models and expert interpretation to support decision-making in regulated environments, even as AI enhances productivity. Key strategic priorities for the period ahead include advancing technology through continuous innovation in biosimulation, with a top investment priority on developing additional capabilities and uses for biosimulation to improve certainty in decision-making and patient outcomes. This includes frequent releases of new software, features, and upgrades, with a focus on cloud-based solutions and integrating AI across the product portfolio. Another priority is to grow within the existing customer base by actively engaging to up-sell and cross-sell solutions, fostering long-term partnerships, and facilitating higher adoption of biosimulation. Expanding the customer base globally is also a strategic focus, supported by continuous investment in an international footprint. Finally, scaling through strategic acquisitions remains a part of the strategy, as evidenced by past acquisitions and the recent acquisition of Chemaxon in 2024. Management believes that existing cash and cash equivalents of $189.392 million ⁸⁸ will be sufficient to fund operations and capital expenditure requirements for an extended period, though future capital requirements will depend on factors like potential acquisitions and growth opportunities. The Board of Directors approved a stock repurchase program on April 11, 2025, authorizing the repurchase of up to $100.0 million ⁸⁹ of common stock, with approximately $57.4 million ⁹⁰ remaining available as of December 31, 2025.