Is Virtual Patients a Chance for Better Cell Therapies?

Is Virtual Patients a Chance for Better Cell Therapies? ...

Cell therapy has provided remarkable results for blood cancer patients. Most individuals who receive CAR-T cell therapies tend to enter remission within the first months after treatment. Some individuals continue to live cancer free for the rest of their lives.

Statistically speaking, the numbers indicate a significant improvement over the norm of care. Commercially speaking, the findings are mixed.

Cell therapy manufacturing is expensive and difficult to nail down. While engineering cells isn't perfect, diagnosing the appropriate dosage for each patient tends to be more art than science. That's despite tens of billions of dollars invested in the field.

Certara (CERT) - Get Certara Inc. A new collaboration with Memorial Sloan Kettering, a leading cancer research institution, aims to improve the efficiency of CAR-T cell therapies. Can it provide benefits for patients and investors?

Certara's New Partnership Explained

Certara is a leading provider of biosimulation tools and services. Biosimulation works by using computational models to discover, design, and develop medicines. For example, the company's software tools can create virtual patient populations and allow customers to conduct virtual clinical trials.

Biosimulation offers a way to reduce clinical trials and safety testing in the real world. Rather, it's similar to simulating the Super Bowl before the start of the latest Madden video game. However, the company's software has been used to skip clinical trials and safety studies altogether in some situations, saving millions of dollars and months of development time.

Certara serves over 2,000 customers across the world, including many of the world's leading regulatory bodies, including the Food and Drug Administration (FDA). The FDA licenses multiple software products to speak the same language as drug developers and to ensure drug developers are properly submitting marketing applications.

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The latest breakthrough aims to develop new CAR-T cell therapies biosimulation algorithms. Certara and Memorial Sloan Kettering Cancer Center will use blinded patient data to better understand real-world outcomes for immunotherapies, then attempt to develop simulations to accelerate future research.

The duo hopes that the two-year collaboration will help scientists avoid the guesswork in determining cell therapy dosage, identifying patients who are most likely to benefit from treatment, and developing combination therapies. Certara may have a significant advantage in understanding the complex nature of cell therapy, especially given recent breaches with CRISPR gene editing capabilities.

Certara has historically relied on services for the majority of its income, although services revenue is often accompanied by lower margins due to specialized (and costly) labor. Software revenue is often accompanied by significantly higher margins because it can be placed directly in the hands of customers.

Certara expects software products to account for 34 percent of total revenue in 2022, an all-time high, compared to just 30 percent in 2021. If the company can develop a suite of biosimulation tools in cell therapy by the middle of the decade, it might further shift the revenue mix in favor of software.

A Smart Move for a Premium Growth Stock

Certara isn't as sexy as some of the high-flying growth companies out there. It's not pumped to the moon, primarily because it doesn't need to rely as heavily on storytelling. The combined market opportunities targeted by the technology platform are worth "only" $13 billion today.

Certara is delivering profitable growth while also generating cash from operations, which may be more valuable in a world with tighter financial conditions. The company can self-fund growth investments.

Certara has been leaning more heavily on international markets for revenue growth in recent years, which might be jeopardized by a strong US dollar in 2022. Additionally, an expanding workforce will increase expenses while keeping the company nearing breakeven levels in the near future.

Management believes that the investments will be well worth it in the long run. Which is why Certara is one of my main anchor positions in my personal portfolio. However, investors may not dismiss the value of valuation until they receive the next progress report on growth, currency headwinds, and outlooks for the cell therapy partnership on the second-quarter 2022 conference call August 9.

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