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After soaring by 33% last Thursday and Friday, Certara (CERT) is launching higher again today following the company's upside 1Q25 revenue guidance, reaffirm of FY25 guidance, and announcement of a new $100.0 mln share repurchase plan. The initial spark for this remarkable rally is tied to the FDA's announced plans on April 10 to phase out animal testing in the development of monoclonal antibody therapies, which aligns with CERT's expertise in bio-simulation models and should drive even stronger demand from pharmaceutical companies for CERT's bio-simulation software.

• In Q1, software revenue jumped higher by 18% yr/yr, representing an uptick from last quarter's growth of 17% and Q3's increase of 16%. Rising adoption of CERT's bio-simulation software -- especially its Simcyp Simulator for pharmacokinetics modeling -- is a primary driver behind the healthy gains. The FDA announcement paves the way for AI-enabled bio-simulation tools, such as Simcyp Simulator, to significantly build upon the expanding adoption within the biopharmaceutical industry.
• CERT has increasingly leveraged AI across its platform to enhance predictive modeling accuracy and to streamline drug development workflows. For example, the latest version of Simcyp Simulator includes features like the "Ask Simcyp" AI-enabled help chat and chemical structure-based parameter predictors, improving usability and precision in drug modeling. These tools are helping to drive customer net retention rate, which was strong at 110% in 2024.
• Separately, the company also announced the launch of its Non-Animal Navigator platform in support of the FDA's plans to phase out animal testing. Positioned as a key solution for transitioning drug manufacturers away from animal testing, Non-Animal Navigator offers strategic regulatory advice, integrated preclinical development plans, and optimized AI-enabled modeling toolkits. The platform should bolster CERT's existing bio-simulation offerings, leading to increased adoption among biopharmaceutical companies that are focused on monoclonal antibodies and anti-body drug conjugates.

The main takeaway is that CERT's strong and improving software revenue growth reflects its ability to capitalize on a growing industry adoption trend to use new approaches like AI-enabled bio-simulation in the drug development process. Regulatory tailwinds, such as the FDA's decision to reduce animal testing, and CERT's integration of AI into its software offerings, position the company for healthy growth in the quarters ahead.