Simulations Plus Streamlines Operations for Growth Following Acquisitions
Simulations Plus, Inc. (SLP), a leading developer of simulation software for pharmaceutical, chemical, and biotechnology companies, is restructuring its business units and leadership to capitalize on recent acquisitions. These changes, effective Aug. 30, 2024, reflect the company’s strategic focus on optimizing its resources and driving growth across the drug development continuum.
Key Takeaways:
- Streamlined Structure: Simulations Plus is creating two new business units – Adaptive Learning & Insights and Medical Communications – to better serve clients and enhance engagement throughout the drug development process.
- Leadership Promotions: Several key leadership appointments will drive these new units, including Jenna Rouse as president of Adaptive Learning & Insights and Murry Alper as president of Medical Communications.
- Growth Focus: The company is redirecting funds previously allocated to dividends toward growth initiatives, reflecting a commitment to long-term shareholder value.
Restructuring for Growth and Efficiency
Simulations Plus has been strategically acquiring companies to expand its offerings and market reach. In June 2024, the company acquired Pro-ficiency Holdings, Inc., its largest acquisition to date, for around $100 million. This acquisition doubled Simulations Plus’ addressable market by adding $4 billion in revenue opportunities in the clinical simulations training, analytics, and medical communications sectors.
As the company integrates these new acquisitions, it’s implementing a streamlined organizational structure to drive growth. The key changes include:
New Business Units
- Adaptive Learning & Insights: This unit, led by Jenna Rouse, will focus on providing clients with advanced learning and insights solutions.
- Medical Communications: Headquartered by Murry Alper, this unit will concentrate on medical communications and related services.
Regulatory Strategies Center of Excellence
Simulations Plus is also evolving its Regulatory Strategies unit into a Center of Excellence. This transformation aims to enhance sales visibility and foster cross-selling opportunities by bringing together expertise across the company.
Leadership Promotions
The company is recognizing talent by elevating several key individuals to leadership roles:
- Steven Chang has been promoted to President of Quantitative Systems Pharmacology. He joined Simulations Plus with the Immunetrics acquisition in June 2023.
- Jenna Rouse will lead the Adaptive Learning & Insights unit as President. She previously served as Chief Marketing Officer, Clinical at Pro-ficiency.
- Murry Alper becomes President of Medical Communications, bringing his expertise from the Pro-ficiency acquisition.
The departure of Brett Howell, President of Quantitative Systems Pharmacology, and Michael Raymer, President of Clinical Simulations & Medical Communications, will be facilitated by the transition to the new structure.
Financial Performance and Future Outlook
Simulations Plus’ recent financial performance reflects its commitment to growth. Revenue in the third quarter of fiscal 2024 increased by 14% year over year to $18.5 million, driven mainly by higher software revenues in the Clinical Pharmacology & Pharmacometrics and Cheminformatics business units.
However, sales in the PBPK unit, part of the services segment, were down 10% due to temporary delays in acquiring client source data.
The company’s decision to discontinue quarterly cash dividends underscores its dedication to growth initiatives, aiming to generate long-term value for shareholders.
Simulations Plus’ strategic restructuring, coupled with its recent acquisitions, positions it for continued growth and expansion within the drug development industry.
Competition and Market Considerations
Simulations Plus operates in a competitive industry, facing challenges from other software developers and consulting firms. However, the company’s extensive portfolio of simulation software and its focus on meeting specific needs across the drug development continuum provide a competitive advantage.
Stock Performance and Analyst Sentiment
The stock’s recent performance has been relatively weak, with shares down 19.4%. This is in contrast to the sub-industry’s growth of 24.7%. Investors may be hesitant due to the company’s decision to discontinue dividends and focus on growth, which could take time to materialize.
Simulations Plus currently carries a Zacks Rank #4 (Sell). While analysts are watching the company’s restructuring closely, its long-term growth potential remains to be seen.
Conclusion
Simulations Plus’ strategic restructuring represents a significant step towards achieving its growth objectives following its recent acquisitions. By streamlining operations, strengthening leadership, and shifting resources, the company aims to enhance client engagement, drive innovation, and expand its presence in the drug development market. While its stock performance has been lackluster, the company’s future growth prospects remain promising, as it positions itself to capitalize on the evolving landscape of the pharmaceutical and biotechnology industries.
