New products are in the pipeline. Existing software packages are being enhanced with more science, faster performance, and more convenient database connections and user interfaces. Entirely new programs are in development, as well. Introduction could come in early fiscal 2013 (August). Simulations Plus also is putting its technology to work in real life demonstrations. A recent effort used the software to identify eight promising drug candidates for malaria. Those designs now are being produced by an outside lab. Testing on actual malaria germs is slated for Q3 (May). The company doesn't expect a perfect cure to be achieved. But if the computer generated molecules are active, the effort could serve as a compelling marketing tool by demonstrating the technology's ability to quickly identify promising compounds.
Cash flow remains positive. Simulations Plus sells its software using a recurring revenue model where customers renew their licenses one year at a time. Organic growth has been running about 15% a year in the software business. That trend appears sustainable. Margins could widen on further volume gains, freeing cash for acquisitions, share buybacks, and dividends. The company itself represents an attractive takeover candidate, moreover, in light of its reliable cash flow generation, growth prospects, and competitive position.
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