Audited results will be released at the end of this month with the net profit (before tax) expected to be between US$10.3 - US$10.8 million. Total cash inflow for the year was US$7.0 million and the company finished with a cash balance of US$30.6 million.
Revenue and EBIT margins are expected to continue to increase this year. The company has already secured revenue of US$34 million for this financial year and US$33 million for FY2024. This revenue will increase from contracts secured during the year. Around 20% of the value of each contract is recognised in the year the contract is signed.
Cogstate will also receive US$10 million in total over the first five years of the licensing deal with Eisai for its cognitive tests, and US$20 million in total over years 6 - 10.
In the last quarter, results were soft compared to previous quarters with only US$8.8 million in sales contracts signed. CEO Brad O'Connor said at an investor briefing that this is not a trend with a strong September quarter expected for new sales.
Alzheimer's Disease Trials Driving Sales
In FY2022 84% of all sales secured were for software and services in cognition testing in Alzheimer's disease studies.
However, a driver for sales in the healthcare market (for use by patients and doctors) is the take-up of a disease modifying treatment for the disease. The adoption of the first of these therapies, Aduhelm, has been poor. However, there are three significant clinical trial outcomes in Alzheimer's disease expected over the coming 12 months.
The first will be from Eisai's drug candidate lecanemab (BAN2401). This is a promising compound that binds most strongly to soluble beta-amyloid protofibrils (compared to Aduhelm which binds to aggregated forms of beta amyloid). Eisai is conducting a study in 1900 patients with early Alzheimer's disease. Results from this study are due in October - November this year.
In a Phase II study in 856 people with early-stage disease (or mild cognitive impairment), cognitive decline was slowed by 47% as measured by the Alzheimer's disease assessment scale ADAS-Cog and by 30% when measured by ADCOMS at 18 months. The result was dose dependent.
The safety profile is also considerably better than with Aduhelm with only 10% developing ARIA (brain swelling) with most of those cases being asymptomatic (15% Aria in patients with ApoE4 gene compared to 42% with Aduhelm).
Eisai is also conducting a 1400 patient study with lecanemab in subjects who are cognitive normal but have elevated brain amyloid levels.
Another Phase III program, by Roche/MorphoSys with their compound gantenerumab, is expected to deliver headline results at the end of this year. The studies have recruited 1966 patients with early Alzheimer's disease. Gantenerub binds to aggregated forms of beta amyloid fibrils.
Eli Lilly is conducting a Phase III study with donanemab with early Alzheimer's disease. Donanemab binds to beta amyloid plaque in the brain, with the aim of clearing plaque and not inhibiting its formation. Previous plaque busting drugs have caused microhemorrhage in the brain but donanemab does not. Results from the 1,625 patient Phase III study is due in the first half of next year. A Phase II study showed a 32% slowing in cognitive decline over placebo at 18 months.
Last year Eli Lilly started a long-term Phase III study with donanemab in asymptomatic patients who have high plasma tau levels. That trial will follow 3,300 patients (50-55 years old) until 2027 in a decentralised trial format. Cogstate co-ordinates all of Eli Lilly's Alzheimer's disease studies and its test battery is a secondary endpoint in this study. This major contract was reflected in the US$40.8 million of sales in the September quarter last year for Cogstate.
Cogstate is capitalised at $316 million.
Bioshares recommendation: Buy
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