Friday, February 18, 2011

Simulations Plus ( Nasdaq - SLP ) -- Follow-up Report

Simulations Plus (SLP $3.25) appears on track to produce excellent on target Q2 (February) results.  The key pharmaceutical modeling software line is benefiting from an aggressive marketing campaign.  Price hikes implemented last spring will enhance comparisons, too.  And existing customers are expanding use of the technology to save money and accelerate product development, by narrowing down promising drug candidates with computers instead of animal testing.  The Words Plus speech to text product line appears to be holding its own, moreover, helped by recent new product introductions.  That line accounts for about 25% of total sales and contributes little in the way of income. 

Closer ties with the FDA could leverage future results.  Simulations Plus has expanded its presence in the drug review process by working directly with the agency to save time and money by implementing the software.  It also sells the programs at a 90% discount to the government.  The company recently formed a second relationship with the FDA to computerize the analysis of potential food dangers and toxicology issues.  Simulations Plus hopes to create a master database from the results of that work, and introduce a series of commercial products for those applications later in calendar 2011.  The potential market could exceed the drug business, which itself remains in an early stage of development.

The company is starting to invent its own magic molecules, too.  Relying entirely on its software, Simulations Plus is screening millions of candidates to address specific diseases and conditions.  Candidate drugs are tested, modified, and retested in a series of iterations to weed out the obvious losers and focus on compounds that could work, at least in theory.  The company isn't bringing any unusual drug development expertise to the process; just computer and mathematical know how.  Early stage blind testing already has produced molecules that are similar to some top selling drugs.  Interest among large pharmaceutical companies is growing.

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