Certara, Inc. (CERT) Earnings Call Transcript & Summary

Good morning, and welcome to the First Annual Meeting of Stockholders of Certara. I now call this meeting to order. I am Sheri McCoy, Chairman of the Board of Directors of Certara. In accordance with our amended and restated bylaws, I will be acting as Chairman of this meeting. Along with my fellow directors and executive officers of the company, I would like to thank you for your attendance, your interest and most importantly, your support of Certara. As you are aware, due to the public health impact of COVID-19 and to protect everyone's health and well-being, we are holding this meeting virtually. Stockholders may submit questions at any time during this meeting in the space provided on the virtual meeting screen. This Annual Meeting of Stockholders is held pursuant to the amended and restated bylaws of the company and written notice to all stockholders. During the annual meeting, questions from stockholders should pertain to the proposals being considered at that particular time. Stockholders wishing to ask other questions will be given an opportunity to do so following adjournment of the meeting and an overview of the business by our Chief Executive Officer, Dr. William Feehery. After introducing the directors and officers in attendance and dealing with a few procedural matters, we will take up the items to be acted upon. Now I would like to introduce you to and welcome each member of our Board of Directors who is present at today's meeting. With us, we have James Cashman, Mason Slaine and Ethan Waxman, who are standing for reelection at this meeting. Our other directors present are William Feehery, Eric Liu and Stephen McLean. Matthew Walsh, unfortunately, is not able to attend today's meeting. I would also like to introduce you to the members of our executive management team present today: Andrew Schemick, Chief Financial Officer; Robert Aspbury, President of our Simcyp Division; Justin Edge, President of our Regulatory and Access Division; Leif Pedersen, President of Software; Craig Rayner, President of Integrated Drug Development; Jieun Choe, Chief Strategy and Marketing Officer; and Richard Traynor, General Counsel. Mr. Traynor will act as Secretary of the meeting for us today. In addition, I'm pleased to welcome Christopher Mahon, a representative of CohnReznick LLP, our independent registered public accounting firm. Mr. Mahon is available to respond to appropriate questions during the general question-and-answer period. Finally, I'd like to introduce Peter Descovich, a representative of Broadridge Financial Solutions, who has been appointed by the Board to act as our inspector of election for this meeting. He has previously taken his oath as our inspector of election. Will the Secretary please report on the proof of notice of meeting?

Thank you, Madam Chair. I have an affidavit of mailing from Broadridge Financial Solutions, Inc. Certifying as to the giving of notice of this meeting and the sending to stockholders of record as of March 24, 2021, and the notice of Internet availability of proxy material, all of which Broadridge commenced distributing to stockholders on April 8, 2021. I also have a copy of the company's annual report on Form 10-K for the fiscal year ended 2020, which includes financial statements certified by CohnReznick. A copy of this annual report was sent or made available to each stockholder entitled to vote at this meeting, and an electronic copy of the annual report is available on the website used to access this meeting. The notice of meeting and the affidavit of mailing, together with the attachment thereto, the annual report and the oath of the inspector of election, will be filed with the minutes of this meeting.

The secretary has the list of the holders of record of the common stock of the company at the close of business on March 24, 2021, which was the record date set by the Board. The list of stockholders has been open for examination by any stockholder for any purpose germane to the annual meeting for a period of 10 days prior to this meeting by contacting our Investor Relations department. This list is available for inspection during this meeting by any stockholder on the website used to access this meeting. The secretary will please file a copy of the list of stockholders with the records of the company. Mr. Traynor, will you please present your report of attendance at this meeting so that we can determine whether a quorum is present.

Madam Chair, on March 24, 2021, the record date for this annual meeting, there were outstanding and entitled to vote a total of 152,979,479 shares of common stock. I have been informed by the inspector of election that there are 125,331,019 shares of stock represented by proxy or approximately 81.92% of all of the shares entitled to vote at this annual meeting. The shares so represented exceed 50% of the total shares entitled to vote at this meeting and therefore, constitute a quorum.

Thank you, Mr. Traynor. On the basis of the report of the secretary and the inspector of election, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has been duly convened. It is 9:06 a.m. on May 18, 2021, and the polls for voting on all matters are open. All Certara stockholders entitled to vote at this meeting have the ability to do so online. If you are a stockholder entitled to vote and have not yet voted or if you want to change your previously cast vote, please do so via the website used to access this meeting. Please remember that if you have already voted by proxy, it is not necessary to vote again. After voting has been completed on all matters on the agenda, we will close the polls, and the inspector of election will provide his preliminary report. We'll now move to a review of the proposals. Voting will commence after all proposals have been presented. The first proposal to come before the meeting is the election of directors. At this meeting, we will be electing 3 Class I directors to hold office until our 2024 Annual Meeting of Stockholders. If elected, these directors shall serve until their successors have been duly elected and qualified or until any such director's earlier resignation or removal. The nominees are: James E. Cashman III, Mason P. Slaine and Ethan Waxman. The Board has recommended you vote in favor of each of the nominees. The 3 nominees receiving the highest number of votes at this meeting will be elected. Information concerning these nominees and other matters which may be of interest are contained in the company's proxy statement. No other nominations were received prior to the deadline established by the company's amended and restated bylaws. Therefore, no additional nominations may be made at this meeting, and I declare the nominations to be closed. Are there any questions or comments on the first proposal? We will now move to the second proposal. The next matter to come before the meeting is the ratification of the appointment of CohnReznick LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021. The Board recommends that you approve the appointment of CohnReznick LLP to serve as the company's independent registered public accounting firm and to audit the company's financial statements for the fiscal year ending December 31, 2021. Are there any questions or comments on this proposal? This concludes our presentation of the proposals at this meeting. The polls are about to close, so if you have not yet voted, please do so. [Voting]

Since everyone has had the opportunity to vote, it is now 9:09 a.m. and the polls are now closed. The inspector of election has delivered his preliminary report, and I will now ask Mr. Traynor to read the preliminary results of the annual meeting.

Madam Chair, based on the inspector of election's preliminary report, on the first proposal, the 3 nominees receiving the highest number of votes cast in favor of his election are, in alphabetical order, James E. Cashman III, Mason P. Slaine and Ethan Waxman. As a result, each of these individuals has been reelected as a Class I director of the company to hold office until our 2024 Annual Meeting of Stockholders. On the second proposal, a majority of the votes cast were in favor of the ratification of the appointment of CohnReznick LLP as the company's independent registered public accounting firm, and therefore, the appointment has been ratified. We will file the final report of the inspector of election with the records of this meeting. We expect to report the results of the voting on a Form 8-K to be filed with the SEC within 4 business days of this meeting.

That concludes the business for the meeting. It is 9:10 a.m., and the meeting is now adjourned. I would now like to introduce our CEO, William Feehery, who will provide an update on the business of the company.

Thank you, Sheri. I am going to spend a few moments to provide a brief overview and update on Certara. The problem that Certara addresses is that traditional drug development takes too long and it costs too much. There are far too many expensive failures, especially in the clinical trial phases where the majority of drug R&D dollars are spent. The fast-moving vaccine developments that have occurred this past year as a result of the COVID pandemic have shown that there is a significant potential to improve. Certara's mission is to transform this traditional process by using biosimulation to accelerate and improve drug discovery and development. Our biosimulation technology is a computer simulation of what happens when a dose of a drug is introduced to a human body. It is a large complex model that captures the transport of the drug in the body and the concentration over time. We also model drug metabolism and excretion and the action of the drug on its intended target. Our proprietary software has many different uses during drug development. For example, when we start a Phase I trial, we want to know the first in-human dose. This will be informed by lab and animal study data, but biosimulation can give a more refined and accurate estimate of the optimal dose for humans. As the drug moves into clinical studies, biosimulation can be used to design a trial efficiently. In later stages, biosimulation is frequently used in drug-drug interaction studies or in pediatric translational studies in which we use data from adult clinical trials to predict the right dose for children. These are just some of the many uses for this versatile tool that result in direct cost savings and advancements in safety and efficacy for patients. We continually invest in innovation to expand the use cases for biosimulation throughout the drug R&D continuum. So far this year, we were very pleased to release 3 major updates to our biosimulation platforms and introduced a new software focused on safety pharmacology. We announced version 20 of our Simcyp Simulator, which has now been used to inform approximately 250 drug labels for more than 80 novel drugs approved by the FDA. We developed new models for maternal health and expanded our biologic simulator capabilities, and the biologic simulator is now available as a stand-alone software. Our Quantitative Systems Pharmacology platform for immunogenicity has also been upgraded to better inform models and predict clinical outcomes. Our QSP platform for immuno-oncology can now test combinations of chemotherapy and radiotherapy using virtual patients, which would be very challenging to do in real patients. We launched Secondary Intelligence, our new software that predicts the likelihood of adverse effects from secondary pharmacology, which is the activity of a drug that is not related to its desired therapeutic target. With Secondary Intelligence, safety pharmacologists and toxicologists can automate, streamline and standardize secondary pharmacology analysis and increase confidence in their go/no-go decisions on which compounds to move forward or discontinue. We license our biosimulation platforms to customers but we also use our software to deliver biosimulation services. So our investment in innovation underpins our growth across both software and services. Our customer base continues to grow steadily, and in the first quarter of 2021, we set a new record for the number of new customers, more than 100. Not only do we work with all of the top 35 global biopharmaceutical companies, but we also partner with thousands of biotech companies worldwide. We were excited that our customers who use our software and services received 90% of novel drug approvals by the FDA for the seventh consecutive year in 2020. While virtually all recently approved drugs have used biosimulation at some point in their development pathway, we don't believe that drug developers have used biosimulation everywhere they could have or should have. And our technology keeps getting better and better, so we see a large opportunity for continued further penetration by our products and services. We have a proven growth strategy which is summarized in the 5 points here. As I shared, we continue to invest heavily in technology to expand the uses of biosimulation and deliver the features our customers value. We have a strong track record of cross-selling with our existing customers and landing many new and exciting biotech entrants. We are expanding our footprint globally, with especially strong momentum in Europe and Asia Pacific in the first quarter of 2021. We have an excellent history of successful and well-chosen acquisitions, and we have structured our culture and our practices to attract and retain the best talent in the industry. The success of our growth strategy is evidenced by our financial results in 2020 and the first quarter of 2021. In our first full quarter as a public company, we delivered 16% growth in revenue and 20% growth in adjusted EBITDA over the same quarter last year. And our total company growth in bookings of 34% is driven by demand across all customer types, reflecting higher levels of industry activity as we begin to make our way out of the pandemic. Our Certara team continues to be dedicated and focused on our commitments to customers, delivering strong growth for our stockholders. We believe that Certara is well positioned to continue benefiting from solid market trends. We expect to capture a larger share of the overall biopharmaceutical R&D spend as we continue to innovate, acquire and add new solutions to our end-to-end platform. Thank you for joining us today and for your continued support.

Thank you, William. Please follow the instructions provided on the virtual meeting screen to submit questions and be mindful of the rules of conduct, especially regarding the time limit. Seeing no questions, ladies and gentlemen, that concludes our agenda. And I thank you for attending today's meeting.