Investor Conference Call Scheduled for
Friday, July 25, at 1:15 PM PDT
Simulations Plus, Inc. (NASDAQ: SLP), a leading provider of
simulation and modeling software for pharmaceutical discovery and
development, today provided additional details regarding its
Agreement and Plan of Merger (the “Agreement”) with Cognigen
Corporation (“Cognigen”) of Buffalo, New York, announced
yesterday.
Walt Woltosz, chairman and chief executive officer of
Simulations Plus, Inc., said: “The excitement around this
announcement has generated a number of questions on the part of our
shareholders. In order to provide a level playing field for
everyone, we are providing answers to the questions we have
received to the market all at once through this release, and we
will conduct an investor conference call tomorrow right after the
close of the market. Answers to those questions we can answer at
this time are provided below.”
Q. What is the current cash position of Simulations Plus, Inc.
post-transaction, and should we expect the dividend to continue at
the current rate?A. The Board of Directors of Simulations Plus,
Inc. (the “Board”) has indicated that they anticipate the dividend
will continue at the current rate for the foreseeable future;
however, the Board votes on this issue each quarter and reserves
the right to increase, decrease, or discontinue dividend
distributions as the cash needs of the business dictate. As of
today, cash is approximately $9.5 million. Following the closing of
the transactions contemplated by the Agreement, which we expect to
occur on September 2, 2014, after the current Simulations Plus
fiscal year closes on August 31, 2014, cash is expected to be
approximately $6 million.
Q. Does Cognigen have any debt?A. There will be no Cognigen debt
at the close of the transaction.
Q. What will be the name of the new company?A. Simulations Plus
will continue to be Simulations Plus, Inc. Cognigen will be
“Cognigen, a wholly owned subsidiary of Simulations Plus.”
Q. What share price will be used to determine the number of
shares to be issued to the Cognigen shareholders?A. The
volume-weighted average trading price for the 30 trading days two
days prior to closing.
Q. Is a Simulations Plus shareholder vote required?A. The number
of shares anticipated to be issued is currently expected to be well
below the threshold that would require a shareholder vote under
applicable law.
Q. Does Cognigen have similar revenue seasonality to Simulations
Plus, Inc.?A. Cognigen has not previously experienced a significant
seasonality.
Q. What will the expected $5 million in new revenues add to
EBITDA and EPS?A. Simulations Plus does not provide earnings
guidance. As noted in the initial press release, Cognigen is a
profitable company and the Company anticipates it will continue to
operate profitably. Because Cognigen’s revenues come primarily from
consulting activities, the margins are not as high as for
Simulations Plus’ software offerings, but management anticipates
net margins of approximately 10 percent going forward.
Q. At what rate over the trailing 12 months has Cognigen been
growing revenue and net income?A. Revenue growth through May 31,
2014 has been just over 7%. Net income has not yet been determined
for the period.
Q. What cost synergies are expected?A1. One anticipated synergy
will be in marketing and sales, where Cognigen will be able to
“piggy-back” on the marketing and sales programs from Simulations
Plus at minimal additional cost. Simulations Plus attends 50 to 60
conferences/shows per year, exhibiting at a majority of them.
Cognigen has not exhibited at more than one or two shows per year,
relying on the Company’s strong reputation to generate sales.
Simulations Plus will be taking over all financial transactions,
freeing up senior Cognigen management to participate in expanded
marketing and sales activities. Management anticipates these
activities to begin in the fall of 2014. Note that no staff
reductions are planned for either company – management hopes all of
Cognigen’s employees will stay on and participate in the combined
company as new members of the Simulations Plus family.
A2. A second potential synergy involves Cognigen’s in-house
cloud facility – a modern, secure capability used in their work.
The capacity of the Cognigen cloud should be approximately doubled
at minimal cost to accommodate hosting Simulations Plus software.
Several Simulations Plus customers are currently asking for
cloud-based capabilities and management has been testing using the
Amazon cloud. Whether the Company would remain on the Amazon cloud
or move some or all of the cloud-based offerings to the Cognigen
cloud will require a study to determine the most cost-effective way
to operate. Cognigen has built a resource and has IT staff who are
familiar with not only operation of the cloud, but such activities
as programming for parallel processing, and management anticipates
there should be benefit to Simulations Plus as well as
Cognigen.
A3. A third potential synergy is expected from the Simulations
Plus customer base, which is larger than Cognigen’s and includes
most of Cognigen’s customers, but from different departments.
Cross-selling will be a focus, as each company will have the
opportunity to be introduced to the other’s customers and
relationships.
Q. Aside from the revenue metrics, what financial metrics and
multiples were used in determining the purchase price?A. A
combination of multiples involving sales, revenues, and EBITDA were
used in comparison with recent deals in the industry, along with
consideration of the strategic value and financial potential of
combining the capabilities of the two companies going forward.
Q. What are the cross-selling opportunities for customers of
both companies?A. This is one of the primary strategic reasons for
this acquisition. Regulatory agencies have begun to take strong
interest in using physiologically based pharmacokinetics (“PBPK” –
a major strength of Simulations Plus) in clinical trial data
analysis (a major strength of Cognigen). Management believes the
combined capabilities of Simulations Plus and Cognigen will provide
the industry with what the Company believes is a best-in-class
offering to meet this new opportunity.
Q. Where do Cognigen’s product offerings fit within Simulations
Plus’ product suite? Are there any competitive products or expected
cannibalization of revenue from overlap?A. Cognigen’s business is
primarily analysis and reporting of clinical trial data. There is
also a relatively new software product called KIWI, which manages
much of the workflow for this type of work, and is currently in use
at a small number of pharmaceutical companies. These services and
software do not overlap with Simulations Plus’ business. There is a
very small part of Simulations Plus’ consulting services that does
similar calculations to some of Cognigen’s activities; however, the
nature of Simulations Plus’ consulting contracts is quite different
than Cognigen’s, so management does not expect any loss in revenues
on either side. On the contrary, management expects the synergies
of the combined capabilities of the two companies should provide
growth opportunities that exceed those for either company
alone.
Q. Is all of the software used by Cognigen homegrown/fully owned
by the company?A. Cognigen uses a mix of proprietary software and
standard commercial and open-source software licensed by industry
scientists for clinical trial data analysis.
Investor Conference Call
The Company will hold an investor conference call on Friday,
July 25, at 1:15 PM PT/4:15 PM ET. The call will be webcast live
and may be joined by registering at the following website:
https://www2.gotomeeting.com/register/346573050. Upon registering,
you will receive a confirmation e-mail with a unique link and
instructions for joining the call. Please dial in five to ten
minutes prior to the scheduled start time. For listen-only mode,
you may dial 646-307-1705, and enter access code: 630-706-152.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995 – With the exception of historical
information, the matters discussed in this press release are
forward-looking statements that involve a number of risks and
uncertainties. Words like “believe,” “expect” and “anticipate” mean
that these are our best estimates as of this writing, but that
there can be no assurances that expected or anticipated results or
events will actually take place, so our actual future results could
differ significantly from those statements. Factors that could
cause or contribute to such differences include, but are not
limited to: our ability to maintain our competitive advantages,
acceptance of new software and improved versions of our existing
software by our customers, the general economics of the
pharmaceutical industry, our ability to finance growth, our ability
to continue to attract and retain highly qualified technical staff,
our ability to properly manage the new combined company, and a
sustainable market. Further information on our risk factors is
contained in our quarterly and annual reports as filed with the
U.S. Securities and Exchange Commission.
Simulations Plus Investor
RelationsMs. Renée Bouché,
661-723-7723renee@simulations-plus.comorHayden IRMr. Cameron Donahue,
651-653-1854cameron@haydenir.com
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