Revenue for the quarter from clinical trials was US$7.8 million, lower than expected due to the delay in the start of some trials, which are expected to commence in subsequent quarters. Both contracts signed and revenue recognised was down from the PCP, however this was due to the very strong first quarter of FY2022. The first quarter saw sales contracts of US$40.8 million and clinical trial revenue of US$11.1 million, from the major study contract signed with Eli Lilly (a five-year study in 3,300 asymptomatic patients with high plasma tau levels being treated with donanemab).
Positive Lecanemab Phase III Results Should See Demand Surge for Cogstate
Of the contracts signed in the latest quarter, 89% were in Alzheimer's disease or dementia. The level of activity in Alzheimer's disease research should surge following the positive Phase III trial results from Eisai's lecanemab, which should see the first disease modifying treatment for Alzheimer's disease approved by the FDA next year. According to CEO Brad O'Connor, companies in the space have immediately sought to expand clinical programs following the Eisai news.
According to chairman Martyn Myer, lecanemab is not a cure but this initial breakthrough will lead to progressive improvements in treatments for Alzheimer's disease. Cogstate expects to grow market share in a growing market.
Other Phase III trial readouts in this field are expected from Roche/MorphoSys this year with gantenerumab (unlikely to be as good as the lecanemab results) and from Eli Lilly mid next year with donanemab.
More Consistent and Predictable Revenue Ahead
Over the last quarter the level of backorders for work increased to US$110 million from US$100 million at the end of June. Over the last three financial years an average of US$57 million a year of clinical trials contracts has been signed, which gives an indication of the expected revenue moving forward over the medium term. This level of revenue should deliver an estimated overall positive cashflow of US$15 million a year.
For FY2023 Cogstate has already secured US$36.8 million of revenue, and around US$36 million for FY2024. For this financial year Bioshares estimates revenue to be similar to the previous year, at around US$45 million, and a similar net profit (US$7.5 million).
Additional blue sky will be from wider adoption of the Cogstate community-based test being distributed by Eisai. Demand for this test is expected to grow if/when lecanemab is approved for the treatment of Alzheimer's disease.
Cogstate is capitalised at $307 million with cash of US$31 million.
Bioshares recommendation: Buy
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