The rapid development of COVID-19 vaccines and drugs has driven demand by biopharmas in speeding up R&D by running virtual trials that inform clinical studies. This surging interest helps explain last week’s successful initial public offering (IPO) by a leading developer of biosimulation software, which closed Wednesday night at about $769 million, plus regulatory science and market access services.
Certara’s software and services power virtual trials, complete with virtual patients, that are designed to predict how drugs behave in real-life patients—predictions that customers aim to confirm when they get into the clinic. Certara says its customers have received more than 90% of all new drug approvals by the FDA, and include all of the top 35 biopharma companies ranked by R&D spending in 2019.
Certara’s biopharma customers also include companies that have carried out more than two dozen COVID-19 development programs. The company won’t name those customers but did say that the programs ranged from therapies to antibodies to some vaccines.
In addition to biopharmas, Certara’s customers include academic institutions, and 17 regulatory agencies worldwide, including the FDA, the European Medicines Agency, and China’s National Medical Products Administration.
“The pandemic has shown everybody that there’s a lot of possibilities to improve the efficiency of drug development, just because these amazing vaccine developments have happened so fast. I view that as a real wake-up call for the industry that there’s opportunities to do things differently and very effectively,” Certara CEO William F. Feehery, PhD, told GEN.
“We’re very proud that we helped on those COVID-19 programs,” Feehery added. “Longer term, the success of the pharmaceutical industry in dealing with this terrible pandemic is certainly driving interest in new technologies like biosimulation.”
Investor Interest
That interest appears to be shared by investors. Certara saw its shares zoom 70% in their first day of trading, peaking above $39 before dipping to $38.08 at the close of trading. Although Certara’s shares dipped 12% on Monday, they were still running about 50% above the offering price of $23 at the start of trading today.
According to its IPO, Certara finished the first nine months of 2020 with net income of $5.05 million on revenues of $178.89 million, compared with a $2.91 million net loss on revenues of $154.65 million in the first nine months of 2019. Most of Certara’s revenues—69% or $122.96 million—came from the sale of services, with the remainder from software sales.
Nearly two-thirds of the company’s revenue last year came from applications used in clinical stages, given the size and expense of trials, while 10% were used in discovery phases, 15% in preclinical, and 10% in post approval. “The largest amount of money in drug development is in clinical, so it’s reasonable to expect that we would probably stay pretty concentrated there,” Feehery said.
Certara says more than 20,000 licensees use its biosimulation software, while another 28,000 use its software for regulatory science and market access. The company’s offerings include:
- Mechanistic Biosimilation Platform (Simcyp), designed to predict the pharmacokinetics and pharmacodynamics of new drugs without in vivo human or animal studies. Simcyp data has informed approximately 200 label claims for more than 70 drugs.
- Empirical Pharmacokinetic/Pharmacodynamic Biosimulation Platform (Phoenix): Includes conventional and biosimulation-driven interpretation, and related workflow modules for validated data handling, model management, and regulatory reporting.
- Scientific Informatics Platform (D360): Designed to help customers manage small molecule and biologics discovery projects. The platform includes chemical structure search capabilities for structure-activity relationship analysis, molecular design tools, and visualization solutions. Certara estimated more than 6,000 discovery research scientists worldwide use D360.
- Clinical Outcomes Databases for Biosimulation (CODEx): More than 40 proprietary CODEx databases in a range of disease areas for meta-analysis of a new drug’s safety and efficacy in relation to competitive products.
- Authoring and Management of Regulatory Submissions Platform (GlobalSubmit): Cloud-based software for publishing, review, validation and electronic filing of regulatory submissions.
- Market Access Communication Platform (BaseCase): Cloud-based SaaS platform for drag-and-drop visualization of biosimulation results and other complex data. Designed to communicate the value of a new therapy to payors and providers, in order to gain formulary acceptance and reimbursement.
$1 Billion Saved
“By using virtual trials, we can inform what’s going to happen when we go into a real trial. We can design it much more efficiently. And there are many cases in which pharmaceutical companies have in fact, reduced a lot of the time and costs of drug development by using this technology,” Feehery said.
One example: An estimated $1 billion was saved in clinical trial costs using biosimulation in the development of Merck & Co.’s blockbuster cancer drug Keytruda due to consistently shorter completion times in later-phase clinical trials, according to an analysis published in 2016 in Applied Clinical Trials Online co-authored by Edmundo Muniz, MD, PhD, Certara’s then CEO. (Muniz stepped down from the board last September but chairs the company’s Science Committee.)
According to the analysis, the Phase III trial for Keytruda was more than a year shorter than the duration of trials for two cancer drugs that did not use biosimulation as extensively, Genentech (Roche)’s Avastin (bevacizumab) and Herceptin (trastuzumab).
In addition to immuno-oncology, Certara has been applying its software and services more recently in other growing areas that include cell and gene therapies, immunogenicity of vaccines and biologics, and neurodegenerative diseases such as Alzheimer’s and Parkinson’s diseases.
Shedding Light on Alzheimer’s
Drug developers have long struggled to create successful new drugs for Alzheimer’s; the handful of approved therapies merely slow progression of symptoms by 6 to 12 months. A 2014 Cleveland Clinic study found a 99.6% failure rate of clinical trials for Alzheimer’s disease drug candidates between 2002 and 2012. That study found high attrition rates for Alzheimer’s disease treatments, with 72% of agents failing in Phase I, 92% in Phase II, and 98% in Phase III.
“There are a lot of failures there. Scientists are thinking a little bit about whether their understanding of the basic biology might be improved,” Feehery said. “A lot of the drugs did where they’re supposed to do in some ways. But they didn’t stop the disease. By using biosimulation and by modeling the biology and using data that’s known about the trials that have gone on, we hope to shed more light on what’s going on with that disease.
“It’s still one of the biggest untreated areas that you could really make a big difference in the world,” Feehery observed. “There are a lot of companies that are very interested in figuring that out.”
One of Certara’s customers, a top 10 global biopharmaceutical company by R&D spending, estimated saving more than $500 million over three years using biosimulation, while another biopharmaceutical customer avoided a Phase III trial after submitting its biosimulation analysis to the FDA for a central nervous system therapy, saving about $60 million and 24 months.
“The technology itself, in terms of its accuracy and its additional uses, are expanding, so there are a lot of opportunity for further use of the technology in drugs that are currently under development, and in future ones that are being launched,” Feehery said. “We’ve gotten to the point where I say we have been adopted, but we haven’t by any means fully penetrated all of the areas that we can see adding value during drug development.”
900 Strong Workforce
Headquartered in Princeton, NJ, Certara employs 900 people—the workforce grew 10% during 2020 and is expected to expand further. Certara is majority-owned (64.4%) by EQT, a global investment organization that acquired the company for $850 million in 2017. EQT has more than 159,000 employees across its portfolio companies, and around €40 billion (about $49 billion) in assets under management across 19 active funds.
Certara closed its IPO Wednesday night. Upon completion of the IPO, EQT said last night, it lost its majority, its stake shrinking to 49%, since underwriters fully exercised their 30-day option to purchase up to 4,358,250 additional shares at the IPO price, less discounts and commissions.
As a result, Certara’s gross proceeds soared from $336.5 million to more than $436.7 million.
Certara’s IPO originally consisted of 29.055 million shares at $23 a share for gross proceeds of $668.265 million, and grew to 33.413 million shares for gross proceeds of $768.504 million. Certara sold 14.63 million shares of common stock at $23 a share, which was expected to translate into approximately $311.3 million in net proceeds from the IPO, according to the company’s IPO prospectus.
The IPO also included 14.425 million shares of common stock sold by the company’s largest shareholders, directors, executive officers, and investors. They include Feehery, who held a 2.3% stake before the IPO, as well as the Howard Hughes Medical Institute (1.3%). Certara said it will not receive any proceeds from the sale of those shares.
Certara plans to use its net proceeds to pay off debt and other corporate purposes. The company plans to repay a loan (80 million in principal outstanding) and a portion of a first-lien term loan on which the company has about $305 million in borrowings outstanding.
The company initially planned to sell 24.39 million shares at between $19 and $22 a share. Those shares included the 14.63 million Certara shares, and only 9.76 million shares sold by the selling stockholders, with up to 3,658,500 shares made available to underwriters, according to an amended registration statement filed December 3—two weeks after the company first disclosed IPO plans.
The IPO was offered through an underwriting group led by Jefferies, Morgan Stanley and BofA Securities, acting as lead joint book-running managers, and Credit Suisse, Barclays and William Blair, acting as joint book-running managers.
