Certara Exits Medical Writing, Reorganizes Around AI Platform as Services Stumble and Growth Stalls
Q1 2026 Earnings Call — May 11, 2026
Certara's first quarter results landed roughly where management expected, but expectations themselves remain the problem. Total revenue of $106.9 million grew just 1% year-over-year, adjusted EBITDA fell to $31.7 million from $34.8 million a year ago, and adjusted EPS dropped to $0.09 from $0.14. Against that backdrop, new CEO Jon Resnick — now past his 100-day mark — used the call to announce a series of structural moves that represent the most significant reshaping of the company in years. The question for investors is whether those moves address the root causes of persistent underperformance or simply add reorganization noise to an already choppy execution story.
The Divestiture That Changes the Shape of the Business
The single most consequential announcement is the completed sale of Certara's regulatory writing and medical writing business to Veristat, which closed on the Friday before the earnings call. In 2025, these businesses generated $50 million in revenue and approximately $17 million in adjusted EBITDA, excluding unallocated overhead. They contributed roughly $13 million in Q1 2026 and will add approximately $5 million more in Q2 before disappearing entirely from the income statement.
Management framed the exit as a focus sharpening exercise, arguing the writing business lacked the tight software-services integration that defines Certara's strongest value proposition. CFO John Gallagher was direct: "We do best when our technology and services are integrated." The divestiture is expected to unlock approximately 150 basis points of incremental growth in 2027 and beyond, and will shift the company's revenue mix to roughly 50% software and 50% services on a go-forward basis. Investors should note that while the EBITDA loss from the divested business is real, management's argument that it was "extremely lumpy" and structurally disconnected from the core platform is credible given the bookings volatility the services segment has displayed over recent quarters.
Services Remains the Persistent Weak Spot
Services revenue of $57.2 million declined 4% year-over-year, and services bookings of $66.6 million fell 14% from the prior year period. Tier 1 customer softness in MIDD services was specifically called out, compounded by weakness in regulatory services. Gallagher acknowledged the pattern bluntly: "There's been a lot of inconsistency and back and forth over the last few quarters." The trailing 12-month services bookings figure of $286.9 million is up only 2% year-on-year, suggesting the pipeline is not building at a pace consistent with the second-half recovery management is projecting.
That second-half recovery is a critical assumption embedded in full-year guidance. Management expects services growth to run at or below the low end of their 0% to 4% range in the first half before improving to the high end in the back half. Gallagher pointed to strong backlog conversion in Q1 and the carryover effect of Q4's strong bookings as the bridge to that improvement. However, the execution failures Resnick referenced — misaligned sales incentives, disconnected commercial organization, over-reliance on a centralized sales structure — are not quick fixes, and investors should treat the back-half services acceleration as the highest-risk element of the 2026 outlook.
Software Provides the Quarter's Only Clean Win
Software was the lone bright spot. Revenue grew 7% to $49.7 million, software bookings surged 20% to $48.7 million, and the net retention rate ticked up to 106%. Simcyp, Phoenix Cloud, and Chemaxon all contributed, and Gallagher noted performance was at or above plan across all three customer tiers — a meaningful statement given the mixed Q4. Phoenix Cloud in particular was highlighted as having strong pipeline momentum, and even Pinnacle 21, which management noted is subject to clinical trial start variability, slightly outperformed expectations.
The deferred revenue balance is higher than a year ago, giving management more visibility into software's second-half trajectory. Gallagher was careful to contextualize the expected growth acceleration: "It's more of a ramp in growth rate than it is in dollars. The comps ease as we get into the second half of the year." That is a modestly reassuring technical point, though it underscores how much of the full-year software story is really about easier year-ago comparisons rather than new demand inflection.
The Next-Generation AI Platform: Ambitious, Early, Unmonetized
Resnick devoted considerable attention to what he described as a next-generation AI-integrated platform that will sit on top of and connect Certara's existing portfolio. The strategic logic is clear: Certara holds decades of proprietary scientific data, 10,000 completed projects, 36 trillion validated data points in Pinnacle, the only EMA-qualified mechanistic modeling software in Simcyp, and more than 160,000 users including regulators. The investment thesis is that this institutional knowledge — which Resnick called "clinical intelligence" — can be unified into a single environment capable of answering complex, cross-lifecycle drug development questions in a way that no new entrant can easily replicate.
When pressed on monetization, Resnick was candid about the timeline. "I wouldn't think too much about near-term modeling. I think what we'll do is provide more guidance towards the end of this year about how you should think about this relative to our conventional software portfolio as we think more on the platform into '27 and beyond." The company has formed an AI-native team, appointed CTO Chris Bouton as Chief AI Officer, and is actively engaging lighthouse customers. For 2026, this is investment, not revenue.
The NVIDIA partnership, announced in April and still in early implementation stages, is designed to apply accelerated computing to reduce the sequential, time-intensive steps in biosimulation — particularly the more computationally intensive QSP and PBPK applications. Resnick described the core ambition as democratization: "If we can speed some of the core QSP and PBPK offerings, we can allow for much broader use within organizations so you can get quicker reads on what's going on earlier." Details on commercial structure and financial impact were deferred to a future communication.
Organizational Restructuring Into MID3 and ACE
Certara is reorganizing into two operating groups. MID3 — standing for Model-Informed Drug Development and Discovery — will integrate technology assets including Simcyp and Certara IQ with expert services covering QSP and PBPK, creating what Resnick called a flywheel between scientific services and software innovation. ACE, or Accelerated Clinical Evidence, will house Phoenix, Pinnacle 21, CoAuthor, and GlobalSubmit, focused on accelerating data-to-submission workflows in the context of the FDA's recently announced push for real-time clinical trials.
A Chief Product Officer search is underway to oversee product development across both groups. The commercial organization is being realigned to place portfolio sales teams directly within each business unit rather than operating as a centralized independent function — a change Resnick characterized as addressing accountability and shortening client feedback loops rather than a fundamental restructuring. He acknowledged that change creates near-term friction: "Change always creates some churn, as you'd expect."
The Build-vs.-Buy Threat From Large Pharma
Analyst Max Smock raised the competitive question investors have been circling: can large pharma build internal AI solutions that displace Certara's offerings, particularly in MIDD and discovery? Resnick's answer was confident but grounded. He pointed to the two-year EMA qualification process for Simcyp — involving 27 member state representatives and 25 years of data, code, and process documentation — as the clearest illustration of the moat's depth. "To our knowledge, Simcyp is the only mechanistic modeling software qualified in Europe at this critical level." He argued that replication would be structurally inefficient for pharma companies and noted that incoming calls from large pharma are more often about accessing Certara's capabilities than replacing them. The more credible near-term risk in his framing is early-stage discovery, where he acknowledged most of the large-pharma AI investment is currently concentrated — and which he characterized as a net positive for Certara's MIDD business by increasing the number of compounds entering clinical development.
Guidance and Capital Allocation
Updated full-year 2026 guidance reflects the divestiture. Total reported revenue is expected to be $395 million to $405 million, including $18 million from the divested business in 2026. Excluding divested revenue in both periods, the company is guiding for 0% to 4% growth — unchanged from February's outlook. Adjusted EBITDA margin is expected to remain in the 30% to 32% range for the full year, with first-half margins modestly below that band. Adjusted EPS guidance is $0.35 to $0.41 on 157 to 159 million diluted shares.
On capital allocation, Certara repurchased $40 million of stock in Q1 alone against a $100 million board authorization, with approximately $82.6 million repurchased to date. Gallagher indicated that both continued buybacks and tuck-in M&A remain active considerations, with proceeds from the Veristat transaction providing incremental flexibility. The balance sheet carries $149.5 million in cash against $294.8 million in term loan borrowings, with the revolver fully undrawn.
The Credibility Gap That Remains
Resnick spoke directly about the goal of "double-digit growth that everyone externally is expecting and that we believe is 100% possible," a statement that now sits uncomfortably alongside guidance for 0% to 4% ex-divestiture growth in 2026. The structural arguments for Certara's moat are sound. The regulatory tailwinds from ICH M15, FDA real-time trial initiatives, and NAM guidance are real. The software bookings acceleration in Q1 is encouraging. But a 1% total revenue growth print, a 14% decline in services bookings, and a third consecutive quarter of management acknowledging execution gaps mean the credibility of a path to double-digit growth still needs to be demonstrated rather than asserted. The back half of 2026, and in particular the services recovery and the specificity of the AI platform monetization framework Resnick has promised to provide by year-end, will be the evidence investors need to watch.
Certara Deep Dive
Business Model and Core Operations
Certara operates at the highly specialized intersection of life sciences, applied mathematics, and enterprise software. The company is the premier global provider of Model-Informed Drug Development solutions, a discipline commonly known as biosimulation. At its core, the business model monetizes the digitization of pharmaceutical research and development. Rather than conducting expensive, time-consuming, and ethically complex physical trials on humans or animals, Certara provides the software infrastructure and consulting expertise to simulate how a drug will behave within the human body in silico. Historically, the company has operated through a dual-engine model split between high-margin software licenses and technology-enabled consulting services. Following a strategic portfolio rationalization and divestiture in early 2026, the revenue mix is projected to be evenly balanced at 50% software and 50% services.
The software portfolio is anchored by a suite of deeply entrenched, industry-standard platforms. Simcyp is the company's flagship physiologically-based pharmacokinetic simulator, utilized extensively to predict drug-drug interactions and optimize dosing regimens across specialized patient populations. Phoenix, encompassing WinNonlin and NLME, serves as the global gold standard for pharmacokinetic and pharmacodynamic modeling. Expanding its footprint downstream into the clinical and regulatory phases, Certara acquired Pinnacle 21, a software suite that validates clinical trial data against the strict standardization formats required by global regulatory bodies. Upstream, the $114 million acquisition of ChemAxon in late 2024 allowed the company to penetrate the early-stage drug discovery and cheminformatics market. The services segment utilizes this proprietary software ecosystem to deliver high-value, bespoke consulting. Certara deploys a small army of over 1,100 PhD-level scientists and pharmacologists who partner directly with biopharmaceutical companies to design trial protocols, predict safety outcomes, and navigate complex regulatory submissions.
Competitive Landscape and Customer Base
The customer base represents a veritable who's who of the global biopharmaceutical industry. Certara serves over 2,400 life sciences organizations worldwide, including the entirety of the top 35 largest pharmaceutical companies. However, the most critical constituents in Certara's customer ecosystem are the global regulatory agencies. Entities such as the United States Food and Drug Administration, the European Medicines Agency, and Japan's Pharmaceuticals and Medical Devices Agency are all active users of Certara's software. These agencies utilize platforms like Simcyp and Pinnacle 21 to independently simulate and verify the clinical data submitted by drug sponsors.
In the competitive arena, Certara operates in a consolidated, high-barrier niche. Its most direct pure-play competitor is Simulations Plus, a smaller but highly regarded software vendor known for its GastroPlus platform. While clients frequently utilize both platforms in tandem, Certara's Simcyp is widely considered the heavier, enterprise-grade workhorse for complex population simulations. Upstream in the discovery phase, Certara competes with computational chemistry giants like Schrodinger. In the broader life sciences software ecosystem, the company faces tangential competition from Dassault Systemes and its BIOVIA suite. Additionally, the proliferation of open-source modeling frameworks, such as R-based packages and PK-Sim, presents a persistent alternative for price-sensitive academic institutions or internal data science teams at large pharmaceutical firms who prefer to build proprietary infrastructure. On the supply side, the business is highly asset-light. Its primary inputs are cloud computing infrastructure, predominantly hosted on Amazon Web Services, and the highly specialized human capital required to write scientific algorithms and provide expert consulting.
Market Share and Industry Positioning
The total addressable market for biosimulation software and technology-enabled regulatory science is estimated to be roughly $3 billion, growing at an annual rate of 12% to 15%. Within the specialized biosimulation software niche, Certara is the undisputed heavyweight, commanding an estimated 35% market share. This dominance is perhaps most visibly quantified by its pervasive presence in the regulatory approval process. Over the last decade, over 90% of all new drug approvals granted by the Food and Drug Administration have been supported by Certara's software or services. This near-monopolistic footprint in successful drug commercialization underscores a market position that transcends simple vendor status, elevating the company to an institutional pillar of the pharmaceutical development pipeline.
Competitive Advantages
Certara's competitive moat is exceptionally wide, fortified by regulatory lock-in, profound switching costs, and unique network effects. The most potent driver of this moat is the aforementioned adoption of its software by 17 global regulatory agencies. In the pharmaceutical industry, a delayed drug approval can cost a sponsor millions of dollars per day in lost patent exclusivity revenue. Consequently, sponsors are overwhelmingly incentivized to submit their clinical data and biosimulation models in the exact software formats that regulators already use and trust. By utilizing Simcyp or Pinnacle 21, drug developers effectively eliminate the friction of software translation risk during the review process. This regulatory gold standard dynamic creates an asymmetric barrier to entry for new software providers, who must convince highly risk-averse pharmaceutical companies to gamble their multi-billion-dollar pipelines on unproven, non-standardized modeling tools.
This dynamic yields extraordinary customer stickiness. Certara reports an enterprise customer retention rate exceeding 90%, while its software net revenue retention consistently tracks above 106%, indicating that existing clients steadily expand their deployment of modules over time. The average tenure among its top customers exceeds nine years, a testament to the immense switching costs involved in tearing out core pharmacometrics infrastructure. Furthermore, Certara benefits from a unique data network effect through its Simcyp Consortium. For over two decades, a coalition of nearly 40 leading pharmaceutical companies has collaborated with Certara to pool pre-competitive clinical data, continuously refining and validating the Simcyp algorithms. This collaborative repository of proprietary, cross-industry physiological data forms a scientific moat that a new entrant armed solely with venture capital and coding talent would find virtually impossible to replicate.
Industry Dynamics, Opportunities, and Threats
The structural tailwinds driving Certara's long-term opportunity are rooted in the worsening economics of pharmaceutical research. The industry has long been plagued by Eroom's Law, the observation that drug discovery becomes slower and more expensive over time, despite technological advancements. The cost to bring a single novel therapy to market now routinely exceeds $2 billion, hampered by high attrition rates in late-stage clinical trials. Biosimulation directly attacks this inefficiency. By predicting toxicity, optimizing dosages, and identifying unviable compounds in silico before a single patient is enrolled in a physical trial, Certara provides a massive return on investment. Furthermore, global regulators are actively pushing the industry away from traditional animal testing toward computational alternatives, an initiative that heavily favors Certara's core competencies.
Conversely, the company is not immune to cyclical headwinds and technological disruption. Despite the recurring nature of its software revenue, Certara's services business is exposed to the volatility of biotechnology funding and pharmaceutical research budgets. In late 2025 and early 2026, the company experienced a pronounced deceleration in services bookings driven by top-tier customer budget scrutiny and pipeline reprioritizations. Technologically, while the barriers to entry in validated pharmacokinetics are high, the rapid advancement of open-source artificial intelligence models presents a latent threat. If global regulatory bodies begin to accept raw, open-source deep learning models without the need for standardized proprietary software environments, Certara could see its pricing power compress over the long term.
New Product Innovations and Growth Catalysts
To proactively address the artificial intelligence revolution, Certara has aggressively embedded generative and predictive intelligence into its product suite. The most significant recent catalyst is the launch of Certara IQ in late 2025. This platform represents a leap forward in Quantitative Systems Pharmacology, a discipline that models how a drug interacts with entire biological systems rather than isolated targets. Historically, these models were notoriously difficult to build, requiring bespoke coding and massive computational power. Certara IQ leverages generative artificial intelligence to provide a no-code interface, pre-built validated templates, and a cloud-based simulation engine that runs thousands of times faster than legacy systems. This platform effectively democratizes systems pharmacology, expanding the user base beyond niche specialists to broader biological research teams.
Additionally, the company has rolled out Certara.AI, an enterprise-grade generative intelligence platform specifically trained on a corpus of over 60 million life sciences publications. This tool accelerates the literature review process, assists in drafting regulatory documents, and identifies hidden patterns in clinical data. Management has noted that early deployments of these artificial intelligence tools have reduced model build times by 60% to 80%, dramatically accelerating time-to-decision for sponsors. The recent integration of ChemAxon also provides a formidable growth driver, allowing Certara to cross-sell its clinical-stage biosimulation products upstream into the discovery phase, capturing a larger share of the research wallet. While new artificial intelligence-native biotechnology firms are emerging to disrupt drug discovery, these entities typically operate as biotech companies building proprietary pipelines rather than competing as pure-play software vendors, leaving Certara's position as a neutral, agnostic infrastructure provider largely uncontested.
Management Track Record and Execution
The past few years have tested Certara's operational resilience, resulting in a pivotal executive transition. Following a challenging period marked by execution shortfalls, slowing bookings, and a compressed valuation multiple, long-time chief executive officer William Feehery departed at the end of 2025. On January 1, 2026, Jon Resnick, a seasoned veteran from IQVIA, assumed leadership with a clear mandate to drive operational rigor and refocus the enterprise. Resnick wasted no time in executing a strategic turnaround. By April 2026, he orchestrated the divestiture of Certara's lower-margin regulatory and medical writing services unit to Veristat for $140 million. While this unit generated $50 million in revenue and $17 million in adjusted earnings during 2025, it was increasingly viewed as a commoditized consulting drag on Certara's high-margin, technology-driven narrative.
Under Resnick and chief financial officer John Gallagher, 2026 has been explicitly framed as a transition year. Management has guided for muted top-line revenue growth in the flat to low single-digit range as the company digests the divestiture, reorganizes its commercial teams, and rationalizes its cost structure by identifying roughly $10 million in cost avoidance. Despite the top-line pressures, the core margin profile remains highly attractive, with adjusted operating margins expected to hover between 30% and 32%. The leadership team is prioritizing capital allocation toward artificial intelligence integration and cloud migration, resisting the urge to chase growth through dilutive acquisitions. This clinical, back-to-basics approach suggests a management team that is finally prioritizing return on invested capital and operating leverage over top-line empire building.
The Scorecard
Certara possesses one of the most enviable structural moats in the life sciences software sector. By embedding its biosimulation engines into the core evaluation processes of the FDA and other global regulators, the company has effectively mandated its own utility. Pharmaceutical sponsors simply cannot afford the friction of presenting multibillion-dollar clinical data in formats unfamiliar to the agencies that hold the keys to commercialization. This regulatory symbiosis guarantees a sticky, recurring revenue base and immense pricing power for its flagship software assets. The strategic pivot under the new executive team to divest commoditized consulting segments and aggressively incorporate generative artificial intelligence into quantitative systems pharmacology signals a necessary and promising evolution toward a higher-quality, pure-play technology multiple.
However, the transition is not without execution risk. The soft services bookings and flat revenue guidance for 2026 highlight the company's vulnerability to broader pharmaceutical budget tightening and internal sales integration challenges. The thesis requires patience as the new leadership team resets the baseline and proves that artificial intelligence can serve as a deflationary operational tool rather than a disruptive competitive threat. Ultimately, for those willing to look past a noisy transitional year, Certara remains an indispensable toll road in the modern drug development ecosystem, uniquely positioned to capitalize on the pharmaceutical industry's desperate need to digitize, accelerate, and de-risk its research and development pipelines.