Simulations Plus Slashes Guidance Amid Biotech Spending Cuts, Analyst Expresses Doubt

Simulations Plus Inc SLP stock tanked after the company lowered its fiscal 2025 sales outlook.

The company expects third-quarter sales of $19 million-$20 million, much below the consensus of $22.78 million.

On Wednesday, the company cut its 2025 sales forecast to $76 million—$80 million versus a consensus of $90.26 million, down from prior guidance of $90 million—$93 million.

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"Market uncertainties surrounding future funding, drug pricing and potential tariffs are creating significant headwinds for both our pharmaceutical and biotech clients, resulting in budget reductions, project cancellations, and delays that are more pronounced than what we have experienced over the past two years," said Shawn O'Connor, CEO of Simulations Plus.

"While our software segment has remained relatively resilient, given its role as critical infrastructure in drug development programs, demand for services has proven more sensitive to market volatility and is coming in below our expectations."

Earlier in June, the company restructured its operations to reduce its workforce and implemented focused cost reductions to enhance operational efficiency and reduce operating expenses.

The workforce reduction will decrease the overall headcount by approximately 23 employees, representing approximately 10% of full-time employees as of the Effective Date.

The company estimates that it will incur approximately $0.7 million in charges for the restructuring.

William Blair writes, "We are surprised Simulations Plus decided not to include yesterday's update in its restructuring announcement last week (which has already caused the stock to fall by almost 17%).

"While we had assumed a guidance cut was coming on the back of last week's release, the size of the downward revision was significantly greater than we had expected. We are admittedly left with more questions than answers at this point, particularly with respect to the impact on margins for the remainder of this year and the company's outlook for fiscal 2026," analyst Max Smock wrote on Thursday.

William Blair maintains the Outperform rating on Simulations Plus.

Price Action: SLP stock is down 23.2% at $20.30 at the last check on Thursday.

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