Monday, October 1, 2012

Simulations Plus ( Nasdaq - SLP ) -- Wins Another Government Contract

Simulations Plus (SLP $4.75) landed a contract with the U.S. Army.  The company is a leading provider of drug simulation software.  The military laboratory will use the technology for toxicology testing.  That's a similar application to one already underway at the F.D.A.  Simulations Plus already is widely known in the drug industry, with a particularly strong customer base among larger companies.  The Government business promises direct benefits.  It also is likely to reinforce demand among commercial users, since the software has a de facto stamp of approval. 

Fourth quarter revenue was pre-announced by the company.  Sales were up 15% to $1.64 million, excluding last year's contribution from a non core business that subsequently was sold off.  Earnings were not commented on.  But we continue to estimate full year income of $.20 a share (+11%).  The fiscal year just ended (August) was affected by a downturn in third party collaboration revenue, and a fall-off in consulting activity.  Both of those segments are poised to re-accelerate in the upcoming year.  License sales continue to grow at a 15% pace, moreover.  We estimate income will improve 25% to $.25 a share in fiscal 2013.  The market opportunity remains lightly penetrated.  Above average gains could be sustained well into the decade.

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