WHAT DO THEY DO?
Certera is a software as a service provider for Bio Simulation in the market of drug discovery. Their software seeks to reduce costs associated with real life trials of drugs since only 14% of drugs pass clinical trials and gain FDA approval. Their Software seeks to simulate how drugs will perform accordingly on the human body to save costs for business on costly clinical trials.
MGMT
The Previous CEO stepped down after serving 6 years, paving the way for William F. Feehery. Feehery graduated from MIT for his PhD in Chemical Engineering and also got his MBA alongside his PhD.
Alongside these amazing credentials, he worked at Dupont in varying positions, ultimately becoming President of Industrial Biosciences.
TAM
The current Drug Discovery Market for software is a 10$ Billion, expected to grow to 21$ Billion by 2025.
RISKS
- Highly Fragmented Simulation Market
- Low adoption of Software As A Service for Simulation
- Government intervention could render business useless
- Rising Small drug discovery businesses not purchasing software
- Revenue dependent upon success of major drug discovery companies
INCOME/REVENUE
From 2018 to 2019, we see that there is an increasing amount of operating leverage as Revenues increase yet Operating expenses not increasing at a similar amount. We may see profit in the coming years.
VALUE
With 152,681,756 shares outstanding and an expected IPO price of 19–22$, this would equate to 2.9 - 3.3$ Billion dollars. With a expected growth of 15% a year and competitors, such as Simulation-plus, this company seems to have little upside potential based on TAM.
Suppose they grow 15% a year, in two years, their revenue line will have grown to 275$ Million. With a Price to Sales Ratio of 10, their Mkt cap would be 2.75 Billion, which is still under their IPO price. Of course, they do have a lot of experts in the field on their team and a knowledgeable CEO. However, their current valuation is high at the current moment.