Over the next 12-24 months a number of companies in the sector may receive acquisition bids. The last company to be acquired was ResApp Health for $180 million by Pfizer in 2022. Three companies viewed as potential targets by Bioshares are discussed below.
In February this year Cogstate (CGS: $1.48) announced to the market that discussions regarding the acquisition of the company had ended following extended consideration by both parties.
Cogstate had achieved an exceptionally strong financial performance in FY2022, with sales (contracts signed) increasing by 74% to US$82.5 million and with a net operating positive cashflow of US$9.7 million.
However with funding constraints impacting the biotech sector (including companies to which Cogstate provides its services) and a stalling in decision-making in the Alzheimer's disease field as major products moved through the approval process (70% of the company's work is in Alzheimer's disease), Cogstate's new contract signings fell significantly; in the first half of FY2023 sales were US$27 million, falling to just US$6.7 million in the second half.
The drop off in sales was likely a deciding factor in the end to M&A discussions. However Cogstate has recently announced that the level of interest in new work (quotes) has increased, rebounding back to 2022 levels. As a result, strong sales can be expected in this half, becoming stronger for the second half if the level of activity is maintained.
One of the drivers of new contracts for Cogstate will be major studies with Eisai's Leqembi, which received full FDA approval in July, and Eli Lilly's donanemab, which is expected to be filed for FDA approval at the end of this year. The studies will look at other indications such as Lewy Body Dementia, Alzheimer's disease in Down's syndrome, as well as in combination with tau inhibitor drug candidates in development.
The company is also seeing substantially more work in rare diseases and paediatric studies where regulators are insisting on more safety measures, including effects on cognition. Between October and March, the company is expecting a major period for new contract signings.
For FY2024 and FY2025, the company had already secured US$32 million and US$30 million of revenue from existing contracts respectively. The company had US$29 million in cash at the end of June and is currently conducting a share buyback, viewing its market valuation as being undervalued. A strong FY2024 may well bring M&A discussions back to the negotiation table.
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