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Model Firm

Walt Woltosz has evidence that his company Simulations Plus Inc. is in a growth industry. He recently attended a conference in Germany specifically on the life sciences modeling software developed by companies like his, Simulations Plus Inc. Another development occurred when Novartis, a client of Simulations Plus, created the position of vice president for modeling and simulation that reports directly to the CEO. Both these developments mean a lot for the Lancaster-based firm Woltosz founded in 1996 and grew into a major player in modeling software to the point of bringing in $10.7 million in sales for its recently completed fiscal year. Analysts following the company project double digit growth over the next few years. There has been a shift in attitude on the part of executives at pharmaceutical and biotech companies as increasing familiarity with the use of computers in the workplace has made it easier to push for use of modeling and simulation. “The management commitment is there now and that is what is causing it to accelerate and take off,” Woltosz said. But there’s more to the acceleration at Simulations Plus than just the clients using its software. A strategy of more marketing and visibility at scientific conferences and industry trade shows is promoting growth, while acquisition targets are carefully sought after and vetted to see if they are the right fit. With consolidation in the pharmaceutical industry, those employees left behind will be asked to do more and Simulations-Plus software can aid in that, said analyst Howard Halpern, with Taglich Brothers Inc. As the software is sold on an annual subscription basis rather than a one-time perpetual basis as done by competitors there will always be repeat customers, said Walter Ramsley, of Walrus Partners in Boston. “That is a less precarious from a financial standpoint,” Ramsley said. Two units Simulations Plus is made up of two divisions: pharmaceutical, and a subsidiary WordsPlus Inc. that creates technologies used by persons with disabilities. Stephen Hawking, for instance, used a communications system made by WordsPlus. The pharmaceutical division has the software business and a consulting business. Gastro+, the best seller of the software products, simulates the absorption of drugs into the gastro-intestinal tract and has expanded into eyedrops, injections, and doses delivered by inhalation. The ADMET Predictor software is used by scientists in creating new molecules and can tell from modeling the absorption rate, toxicity, which enzymes will metabolize it, and how it leaves the body. The consulting side comes into play when companies are going into human testing or already at that stage and having problems. Client companies are among the biggest names in drug manufacturing – Pfizer, Johnson & Johnson, GlaxoSmithKline. “As consultants we see a lot of problems and our experience is very broad,” Woltosz said. When it comes to the adoption of modeling and simulation software, the life sciences are following a path Woltosz saw when he was in the aerospace industry – skepticism followed by gradual acceptance to acceleration in use. Complex modeling The pharmaceutical and biotech industries are moving from the use of simple modeling to determine the right dose of a drug for a patient to the more complex modeling offered by Simulations-Plus that can take into account age, body size, and racial background. The conference in Germany, Woltosz said, gave a major push toward that type of modeling. “A significant part of our consulting clients are with groups that did not have to work at such a detailed level,” Woltosz said. Creating new drugs is a costly and lengthy process. Out of the thousands of compounds emerging from early discovery there will be very few that make it through the stages of clinical trials, and even then a new drug can still fail if not marketed properly. What the modeling software does is make that process more efficient and can weed out what Woltosz characterized as “the loser” molecules. “It takes away some of the risk and focuses on the candidates that will work,” Ramsley added. Finding candidates that work also describes the approach taken by Simulations-Plus when it comes to its growth strategy through acquisition. The company doesn’t want to buy the assets of other companies or the entire company itself just for the sake of making a deal. Nor does it want to get into industry sectors outside its expertise. There have been many deals that fell apart as closer investigation revealed problems or an over-valuation of the acquisition target, Woltosz said. A good fit would be a company small enough for Simulations Plus to absorb, the right personal chemistry and preferably located in California, although targets have been looked at on the East Coast and Europe. What is also important, said Taglich’s Halpern, was that in buying the assets and tools of other companies that Simulations Plus bring on board one or two people who created those technologies in order to move it forward. In Ramsley’s opinion, Simulations Plus has been needlessly conservative in not completing any deals. The money is available but the will was absent to take the leap and accelerate the company’s growth. “The opportunities have been available to them but they have not pulled the trigger,” Ramsley said.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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