Summary of Simulation Plus Conference Call Company Overview - Simulation Plus is celebrating its 30th anniversary, indicating a long-standing presence in the bio simulation market [2] - The company specializes in software licensing and scientific consulting services to support drug development [4] Industry Insights - Bio simulation combines technology, science, and regulatory support to enhance drug development efficiency [3] - The FDA has shown increasing support for bio simulation, particularly in reducing animal testing requirements [3][22] Core Business and Services - The company provides tools for various stages of drug development, including discovery, preclinical, and clinical phases [5][6] - Key products include: - **Admet Predictor**: Focused on early-stage applications, representing 15% of client support [6][7] - **GastroPlus**: A PBPK modeling tool used extensively in translational medicine and clinical trial design [7][8] - **PKPD Modeling**: Used for profiling drugs and patient stratification, crucial for personalized medicine [8] AI and Drug Development - AI has been integrated into the company's products for decades, enhancing data analysis and candidate identification [9][10] - The use of AI is seen as a revolutionary tool in drug development, improving efficiency and success rates [10][12] - Challenges include ensuring data quality and managing large datasets effectively [11][13] Regulatory Environment - The FDA's roadmap to reduce animal testing presents opportunities for Simulation Plus, as biosimulation can potentially replace some traditional methods [22][23] - The adoption of biosimulation is expected to grow, but the process will take time due to regulatory scrutiny [24][25] Market Challenges - The biopharma and biotech sectors are currently facing a challenging demand environment, with cost constraints and low funding impacting client investments [31][32] - Despite these challenges, there is a strong need for improved ROI in drug development, which bio simulation can address [33][34] Strategic Realignment - The company has undergone a reorganization to create a more functional organization, enhancing collaboration across different scientific domains [35][36] - The integration of products and development of cloud technology aims to accelerate the company's roadmap and improve client offerings [37] Future Opportunities - The company is focused on staying current with advancements in science and regulatory guidance, particularly in oncology and other therapeutic areas [39][41] - There is a long runway for biosimulation value in drug development, with ongoing opportunities for innovation and market solutions [41][42]

Financial Data and Key Metrics Changes - The biosimulation market has historically grown at a 15% CAGR but has fallen below that over the last couple of years, with the company achieving 10% organic growth during this period [15][18] - The company's revenue guidance was adjusted due to project cancellations and delays, impacting the expected growth trajectory [16][18] Business Line Data and Key Metrics Changes - The business is composed of approximately 60% software licensing and 40% consulting services, with the software side remaining relatively unaffected by recent market challenges [17][20] - Renewal rates for software licenses remain consistent at over 90%, with fluctuations primarily due to client bankruptcies and consolidations [20][21] Market Data and Key Metrics Changes - The drug development industry is facing cost constraints and reduced funding, leading to tighter budgets among clients [14][15] - The FDA's recent announcements regarding the reduction of animal testing requirements are seen as a potential tailwind for the biosimulation market, which could enhance growth opportunities [23][24] Company Strategy and Development Direction - The acquisition of Proficiency has expanded the company's total addressable market (TAM) from $4 billion to $8 billion, allowing for increased opportunities in clinical operations [5][6] - The company is focusing on integrating various modeling and simulation techniques to enhance product offerings and cross-selling opportunities [29][30] Management's Comments on Operating Environment and Future Outlook - Management noted that the drug development industry does not respond well to surprises, which has led to a slowdown in project approvals and contract negotiations [16][18] - The company anticipates a return to a more steady flow of project requests in fiscal year 2026, with expectations of regaining a growth rate closer to 15% [18][19] Other Important Information - The company is launching a cloud-based platform, Astra Plus, which is expected to enhance functionality and accessibility for clients [33][34] - The integration of AI technology into the company's products is a key focus for future development [31][34] Q&A Session Summary Question: What are the expectations for renewal rates and future fiscal year performance? - Renewal rates are expected to remain stable at over 90%, with the service side impacted by client cancellations but the software side performing well [20][21] Question: How is the FDA's movement away from animal models affecting the company? - The FDA's announcements regarding biosimulation and animal testing are seen as positive developments that could lead to increased adoption of the company's tools [23][24] Question: What is the company's growth formula regarding new and existing clients? - Software revenue typically comes from 80% renewals, 10% upsells, and 10% new clients, with a focus on cross-selling opportunities [29][30]