Simulations Plus Slashes Guidance Amid Biotech Spending Cuts, Analyst Expresses Doubt

Core Viewpoint - Simulations Plus Inc has significantly lowered its fiscal 2025 sales outlook, leading to a sharp decline in its stock price, reflecting market uncertainties and operational challenges [1][2]. Group 1: Sales Outlook and Financial Performance - The company expects third-quarter sales to be between $19 million and $20 million, which is below the consensus estimate of $22.78 million [1]. - The fiscal 2025 sales forecast has been revised down to $76 million-$80 million from a previous guidance of $90 million-$93 million, against a consensus of $90.26 million [1][5]. Group 2: Market Conditions and Operational Challenges - CEO Shawn O'Connor highlighted that market uncertainties regarding future funding, drug pricing, and potential tariffs are causing significant challenges for pharmaceutical and biotech clients, leading to budget cuts, project cancellations, and delays [2]. - The demand for services has been more sensitive to market volatility, resulting in performance below expectations, although the software segment remains resilient [3]. Group 3: Workforce and Restructuring - The company has reduced its workforce by approximately 23 employees, which is about 10% of its full-time staff, and expects to incur around $0.7 million in restructuring charges [4]. - The decision to cut guidance was unexpected and larger than anticipated, raising concerns about the impact on margins and the outlook for fiscal 2026 [5]. Group 4: Stock Performance - Following the announcement, Simulations Plus stock fell by 23.2%, trading at $20.30 [6].