SIMULATIONS PLUS, INC. Forward-Looking Statements
This document and the documents incorporated in this document by reference contain forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements.
The forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as "believes," expects," "anticipates," "intends," "will," "may," "could," "would," "projects," "continues," "estimates" or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by the forward-looking statements.
The forward-looking statements contained or incorporated by reference in this document are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs, or current expectations.
Among the important factors that could cause actual results to differ materially
from those indicated by forward-looking statements are the risks and
uncertainties described under "Risk Factors" in our Annual Report and elsewhere
in this document and in our other filings with the
Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events, or otherwise.
General BUSINESS OVERVIEW
We are a global leader focused on improving the ways scientists use knowledge and data to predict the properties and outcomes of pharmaceutical and biotechnology agents by providing a wide range of early discovery, preclinical, and clinical consulting services and software. Our innovations in integrating new and existing science in medicinal and computational chemistry, pharmaceutical science, biology, physiology, and machine learning into our software have enabled us to be a leading software provider for physiologically based pharmacokinetics (PBPK) modeling and simulation, pharmacometric modeling and simulation, prediction of molecular properties from structure, and prediction of the propensity of drugs to induce liver injury or to treat nonalcoholic fatty liver disease. Our scientific consulting staff draw upon extensive experience across multiple therapeutic areas and a full range of modeling and simulation techniques to assist our clients across the full spectrum of drug development.
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We generate revenue by delivering relevant, cost-effective software and creative and insightful consulting services. Pharmaceutical and biotechnology companies use our software programs and scientific consulting services to guide early drug discovery (molecule design screening and lead optimization), preclinical, and clinical development programs, including using our software products and services to enhance their understanding of the properties of potential new medicines and to use emerging data to improve formulations, select and justify dosing regimens, support the generics industry, optimize clinical trial designs, and simulate outcomes in special populations, such as in elderly and pediatric patients.
Simulation Plus acquired
PRODUCTS General
We currently offer eleven software products for pharmaceutical research and
development: five simulation programs that provide time-dependent results based
on solving large sets of differential equations: GastroPlus; DDDPlus™;
MembranePlus™; DILIsym; and NAFLDsym®; three programs that are based on
predicting and analyzing static (not time-dependent) properties of chemicals:
ADMET Predictor; MedChem Designer™; and MedChem Studio™ (the combination of
ADMET Predictor, MedChem Designer, and
26 Software business
Our software business represents 58% of our total revenue during the first quarter of fiscal year 2021, and is primarily generated by the following products:
GastroPlus®
Our flagship product, originally introduced in 1998, and currently our largest
single source of software revenue, is GastroPlus. GastroPlus mechanistically
simulates the absorption, pharmacokinetics, pharmacodynamics, and drug-drug
interactions of compounds administered to humans and animals and is currently
one of the most widely used commercial software of its type by industry, the
ADMET Predictor®
ADMET Predictor is a top-ranked, chemistry-based computer program that takes
molecular structures (i.e., drawings of molecules represented in various
formats) as inputs and uses artificial intelligence/machine learning
technologies to predict approximately 175 different properties for them at an
average rate of over 200,000 compounds per hour on a modern laptop computer.
This capability allows chemists to generate estimates for a large number of
important molecular properties without the need to synthesize and test the
molecules, as well as to generate estimates of unknown properties for molecules
that have been synthesized, but for which only a limited number of experimental
properties have been measured. In
DILIsym®
The DILIsym software is a quantitative systems pharmacology (QSP) program that was introduced in 2011. QSP software models are based on the fundamental understanding of complex biological pathways, disease processes, and drug mechanisms of action, integrating information from experiments and forming hypotheses for the next experimental model. DILIsym deals with the propensity for some drug molecules to induce temporary or permanent changes in biological functions within liver cells (hepatocytes) that can result in damage to the liver (i.e., drug-induced liver injury or DILI).
Monolix SuiteTM
The Monolix Suite is a unique solution for modeling and simulation for
pharmaceutical companies, biotechs, and hospitals. It supports nonparametric
analyses, population PKPD analyses and modeling, and clinical trial simulation.
The extended MonolixSuite contains three main products: Monolix, Simulx, and
PKanalix. These products are interconnected and interoperable, i.e., allowing
users to go from one application to another one without changing anything in
terms of data set or of biological models. Monolix 2020R1 was released in
Consulting Services
Our consulting business represented 42% of our total revenue during the first quarter of fiscal year 2021, and is primarily generated by the following services:
PKPD
Our clinical-pharmacology-based consulting services include pharmacokinetic and pharmacodynamic modeling, clinical trial simulations, data programming, and technical writing services in support of regulatory submissions. The Company provides modeling and simulation consulting services and assistance when an organization does not have the time or resources to use our software directly.
27 QSP/QST
We provide creative and insightful consulting services to support our QSP/QST modeling focused on heart failure, liver safety, radiation syndrome, as well as other areas. Pharmaceutical and biotechnology companies use our scientific consulting services to guide early drug discovery (molecule design screening and lead optimization), preclinical, and clinical development programs. This includes using our software products and services to enhance their understanding of the properties of potential new medicines and to use emerging data to improve formulations, select and justify dosing regimens, support the generics industry, optimize clinical trial designs, and simulate outcomes in special populations, such as in elderly and pediatric patients.
PBPK
Beginning in 2014, the FDA and other regulatory agencies began to emphasize the need to encourage mechanistic PBPK modeling and simulation in clinical pharmacology, with final guidance documents completed in 2018. This has resulted in an increased need for us to provide consulting-related services to support this sophisticated product. We support Model Based Drug Development in all phases of drug discovery, translational research, and clinical development when an organization does not have the time or resources to use our software, directly. More specifically, our clients seek out our consulting services to acquire scientific, therapeutic-area-related modeling and simulation expertise that they do not have in-house.
Summary Results of Operations
Comparison of Three Months Ended
The following table sets forth our condensed statements of operations (in thousands) and the percentages that such items bear to net sales:
(in thousands) Three Months Ended November 30,
2020 2019
Revenues $ 10,701 100.0% $ 9,401 100.0%
Cost of revenues 2,433 23 2,643 28
Gross margin 8,268 77 6,758 72
Selling, general and administrative 4,408 41 3,514 37
Research and development 809 8 526 6
Total operating expenses 5,217 49 4,040 43
Income from operations 3,051 29 2,718 29
Other income (expense) (55 ) (1 ) 15 0.2
Income before provision for income taxes 2,996 28 2,733 29
(Provision for) income taxes (517 ) (5 ) (675 ) (7 )
Net income $ 2,479 23% $ 2,058 22%
Consolidated Revenues
Consolidated revenues increased by 14% or
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This increase is primarily due to a
Consolidated Cost of Revenues
Consolidated cost of revenues decreased by
Consolidated Gross Margin
Consolidated gross margin increased
The higher gross margin is primarily due to the addition of the Lixoft division,
which contributed
Overall gross margin percentage increased by 5% to 77% for the three-month
period ended
Consolidated Selling, General and Administrative Expenses
Selling, general, and administrative expenses increased
The increase in Selling, General, and Administrative expense was primarily due to the following:
· Salaries and wage increased by$391 thousand due to higher corporate salaries and bonuses, higher headcount and higher contract labor costs; · Payroll tax expense increased$218 thousand due to higher headcount and wages; · Insurance expense increased by$116 thousand due to cost increases, higher employee counts and increased liability-related insurance; · Professional fees increased by$95 thousand due to higher accounting costs. Research and Development
Total research and development costs increased by
Other Income (Expense)
Total other expense was
29 Provision for Income Taxes
The provision for income taxes was
Net Income
Net income increased by
Segment Results of Operations
Revenue
(in thousands) Three Months Ended November 30,
2020 2019 Change ($) Change (%)
Simulations Plus $ 5,432 $ 4,927 $ 505 10%
Cognigen 2,668 2,387 281 12
DILIsym 1,372 2,087 (715 ) (34 )
Lixoft* 1,229 - 1,229 100
Total $ 10,701 $ 9,401 $ 1,300 14%
Cost of Revenue
(in thousands) Three Months Ended November 30,
2020 2019 Change ($) Change (%)
Simulations Plus $ 711 $ 744 $ (33 ) (4)%
Cognigen 1,145 1,271 (126 ) (10)
DILIsym 386 628 (242 ) (39)
Lixoft* 191 - 191 100
Total $ 2,433 $ 2,643 $ (210 ) (8)%
Gross Margin
(in thousands) Three Months Ended November 30,
2020 2019 Change ($) Change (%)
Simulations Plus $ 4,721 $ 4,183 $ 538 13%
Cognigen 1,523 1,116 407 36
DILIsym 986 1,459 (473 ) (32)
Lixoft* 1,038 - 1,038 100
Total $ 8,268 $ 6,758 $ 1,510 22%
*Lixoft was acquired on
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Three Months Ended
Simulations Plus
Revenue increased
Cognigen
Revenue increased
DILIsym
Revenue decreased
Lixoft
Revenue increased
Liquidity and Capital Resources
Historically, our principal sources of capital have been cash flows from our operations. We have achieved continuous positive operating cash flow over the last eleven fiscal years. We believe that our existing capital and anticipated funds from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for the foreseeable future.
In
Notwithstanding the foregoing, if cash generated from operations and the net proceeds from our underwritten public offering are insufficient to satisfy our capital requirements, we may draw from our revolving line of credit with the bank, or we may have to sell additional equity or debt securities or obtain expanded credit facilities. In the event such financing is needed in the future, there can be no assurance that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If cash flows from operations became insufficient to continue operations at the current level, and if no additional financing was obtained, then management would restructure the Company in a way to preserve its pharmaceutical business while maintaining expenses within operating cash flows.
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