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Thursday, Mar 28, 2024

Simulations Plus Prospers With Diversification

Simulations Plus Inc. recently procured a five-year, $4.7 million contract with a research foundation to develop the company’s proprietary software called Kiwi. Together, Simulations Plus and the unnamed foundation plan to use Kiwi to work on the “eradication of underserved diseases,” the company said in a statement. It’s another example of how the Lancaster company, which develops software used in pharmaceutical research, has moved beyond off-the-shelf software into related areas, such as consulting and customized programming. The diversification goes back to 2014 when Simulations Plus acquired Cognigen Corp. of Buffalo, N.Y. Both companies license modeling software for different stages in the drug development process. Traditionally, Simulations Plus’ software was used in the earlier research and development stages. Cognigen’s software was typically utilized during later-stages of development when pharmaceutical companies prepare to deal with regulatory agencies. “That’s the reason why it (the merger) is so complimentary,” said Ted Grasela, president of Simulations Plus and head of the Buffalo division. “We share the same customers in many cases, but we are talking to different departments within those pharmaceutical companies.” As for the recent Kiwi agreement, the research foundation had a particular problem with streamlined communication among its scientists and laboratories, who are conducting medical research all around the world for different underserved diseases. The contract aims to expand Kiwi so this globally-distributed group can share research to increase efficiency to accelerate the development and approval of new drugs. Grasela said Simulations Plus hopes to eventually make the added capabilities of Kiwi available to other customers. “We are hoping the Kiwi platform can become a standard for the way mathematical models are built and how results are communicated to the scientific community as well as regulatory agencies,” he said. “We see this as a huge opportunity to really build on what we have been working on for a very long time.” During the past two fiscal quarters, net income for Simulations Plus was $2.25 million, up more than 50 percent compared to the first half of 2015. The company attributed the rise to renewed software licensing agreements as well as growth in new license sales and consulting services. The new revenue streams have caught the attention of Howard Halpern, an analyst at Taglich Brothers Inc. who follows the company. “We project sales and net income growth through fiscal year 2017 due to the Cognigen acquisition, new software offerings MembranePlus and PKPlus, funded collaborations with the FDA (Food and Drug Administration), the first large-scale Kiwi contract and continuing pressure on pharmaceutical and biotechnology companies’ R&D budgets and increasing usage of simulation tools by global regulatory agencies,” Halpern wrote in a research report on April 22. Halpern told the Business Journal that the five-year foundation contract will provide a good-reference customer for Kiwi going forward. In the April 22 report, Taglich Brothers gave Simulations Plus a “buy” rating but lowered its 12-month price target to $12 from $13.30 a share because of diminished sector valuation. Shares for the company closed April 27 at $8 on the Nasdaq.

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