In the 1970s Walt Woltosz pioneered the use of numerical optimization to automate rocket motor design for a succession of aerospace industry employers.

Today, he’s using a similar approach at his publicly held company to help pharmaceutical researchers discover the next blockbuster products nipping costly failures in the bud.

And Wall Street is starting to take notice.

Woltosz’ Simulations Plus Inc. proprietary computer programs can eliminate molecules as potential treatments for heart conditions, cancer and other diseases. One sophisticated program, for example, can simulate how effectively a drug molecule will pass through a cell wall, or bind to a target protein that causes arthritis.

It can cost companies as much as $70,000 to use just one of the sophisticated programs on a single computer for a year, but in an age where drug development can take a decade and hundreds of millions of dollars, pharmaceutical companies are considering the GastroPlus, ClassPharmer and other software a worthwhile investment.

Among the company’s customers: Amgen Inc., Hoffmann-LaRoche Inc. and even the U.S. Food and Drug Administration uses some of the programs for internal studies.

“The pharmaceutical industry is just catching on to the fact that tools like this can make them extremely productive,” said Woltosz, chief executive of the Lancaster-based company, which he founded with his wife Virginia in 1996 and took public a year later. “They’re looking at hundreds of thousand, even millions of molecules at a time, so it’s like a needle in a haystack.”

The company’s stock, which was trading at $1.73 almost a year ago, hit a 52-week high of $7.50 on Jan. 18, two days after reporting a record first quarter. It closed at $7.32 on Jan. 24 with a market cap of $52 million. One analyst is projecting net sales of $7.1 million this year, up 24 percent from the previous year.

Howard Halpern of Taglish Bros., a New York sponsored-research firm hired by Simulations Plus to stimulate investor interest, said that while there is a growing competition by competing scientific software firms, Simulations Plus has a significant head start in most of the specialized products and support it provides.

“They’re a micro-cap company and thus there are risks, but they have a tremendous first-mover advantage,” said Halpern, who has a “speculative buy” rating on shares.

The road to developing drug discovery software was a serendipitous one for Woltosz, who began considering the health care applications of computing power in the early 1980s after his wife’s mother developed amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease.

Hawking program

To help his mother-in-law better communicate, Woltosz developed software that could run on the rudimentary personal computers available at the time and transmit sentences to a speech synthesizer. He eventually started a company called Words+ Inc., which supplied noted physicist Stephen Hawking, who has a variant of Lou Gehrig’s disease, with a version of the program. Today, the successor to those programs, “Say-It Sam,” runs on a tablet computer.

Words+ today is a subsidiary of Simulation Plus, while the parent company also sells a line of simulation software called FutureLab that enables disabled students to run standard laboratory experiments on a computer.

When talking with potential financial backers about launching the simulation software company, Woltosz initially thought his educational software would be potentially more lucrative.

“But the financial people got very excited about the pharmaceutical software, and it turned out they were right,” he said.

The company earlier this month reported its best first quarter ever, with revenues up 314 percent. About half the revenues were derived from sales of the pharmaceutical software and the rest from the educational and communication software.

Improvements in simulation technology have coincided with the drug industry’s need to contain discovery costs and prevent high-profile failures.

Woltosz noted that last month Pfizer Inc. halted a late-stage clinical trial of its experimental cholesterol drug Torcetrapib after an unexpected large number of patients died taking the drug in combination with Pfizer’s Lipitor heart drug.

“The vast majority of the high cost for a winner (drug) is to make up for the cost of the losers,” he said. “Whatever a company can do to limit the money spent on a loser is money well spent.”

Woltosz said one secret to his 35-employee company’s success is his insistence on hiring scientists who also are programmers and thus have a better understanding of both ends of the process. That can make recruiting a challenge, “But when you find a scientist who loves programming, they’re a gem,” he said.