Tuesday, November 20, 2012

Simulations Plus ( Nasdaq - SLP ) --

Simulations Plus (SLP $4.40) reported good on target Q4 (August) results.  Earnings doubled to $.02 a share.  Revenues improved by 15% to $1.64 million, after excluding last year's contribution by a subsidiary that later was sold off.  Margins were lower than expected due to increased hiring.  Research and development expenses also climbed somewhat.  The new scientific and sales personnel are slated to contribute in the upcoming year.  Performance was impacted by the soft overall economy.  Several pharmaceutical companies combined laboratories and pursued other cost saving initiatives, reducing the number of users running Simulation Plus's software.  New customers continued to be added at a brisk pace, though.  Approximately 25% of revenues for the fiscal year were generated by new buyers.

The malaria project continues to turn heads.  Last year Simulations Plus conducted a spec operation with its own personnel to apply its technology towards the discovery of a malaria treatment.  The company identified seven candidate molecules, all of which showed some activity.  Two were particularly potent, although further refinement still is required.  That effort raised interest in the technology among potential customers.  It also created the potential for direct funding by third parties to complete the fine tuning and come up with a finished drug.  Simulations Plus plans to perform a second demonstration project this year.  Another successful effort probably would jump start demand for the company's software products, boost consulting revenue, and possibly set the stage for another third party injection of research funds.

Our baseline fiscal 2013 (August) estimates see growth being sustained at a 15% pace.  A substantially stronger showing could develop if a third party funding deal is signed.  Long term growth could accelerate if the second demonstration project lifts overall demand.

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