Cogstate contracts provide fiscal 2019 foundation

By Trevor Hoey. Published at Aug 14, 2018, in Features

Name: Cogstate Ltd (ASX:CGS)

Market Capitalisation: $58 million

Opening Share Price: 55 cents

In fiscal 2018, Cogstate signed $36.1 million of new sales contracts, a 22% increase from the prior year.

Having recognised $28.1 million of revenue from those contracts, as at June 30, 2018 Cogstate had $34.8 million of contracted revenue expected to be recognised in future periods.

It is this strong revenue predictability along with the Cogstate’s anticipated near term transition to profitability that is generating interest in the company.

The company’s shares traded as high as 58 cents following the release of its result, representing an increase of 14%.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

With many small biotech companies struggling to generate revenues let alone earnings, this is a company that has set itself apart from its peers.

Cogstate entered into contracts for the license of Cognigram technology during the 2018 financial year.

Mostly the licence period was 12 months, although some contracts were for an extended period, the longest being six years.

In total, contracts to the value of $676,970 were executed during the 2018 financial year.

The other promising news looking towards fiscal 2019 is that management believes the company will transition to profitability in the second half as the full benefit of cost reduction measures is realised.

This is a speculative belief at this stage and investors should seek professional financial advice if considering this stock for their portfolio.

Diversified player in mental health sector

Cogstate also operates in a niche market, and with its expertise in cognitive conditions and technologies the company is well-positioned to take advantage of increased investment in improving mental health diagnostics, treatment and care.

Solutions provided by the company assist in optimising the measurement of cognition in clinical trials, academic research and healthcare.

Cogstate provides enabling technologies and professional services for higher quality neuropsychological assessments and it is a pioneer in commercializing rapid, reliable and highly sensitive computerized cognitive tests.

The company’s customers include the world’s leading biopharmaceutical companies, elite sporting organizations and defence forces.

On the medical front, the company is involved with physicians and patients, as well as academic institutions and public-private partnerships.

Alzheimers is a key focus area

In the last 12 months, Cogstate has continued its growth in the clinical trials market, with contract sales up 22%.

The company has also added important scientific resources, with a business development focus and expertise in key focus areas, such as Alzheimer’s disease as well as paediatric and rare diseases.

Management highlighted that a recent analysis had showed that the number of drugs in phase 2 Alzheimer’s disease studies had increased 17% over the last year.

Further, the number of disease modifying drugs in phase 2 Alzheimer’s disease studies is up 34% over the last year.

Cogstate is of the view that the huge societal need (and associated commercial opportunity) for Alzheimer’s disease treatments will result in continued investment in potential treatments.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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