Over the last five years, the average value of contracts signed by Cogstate (CGS: $2.55) has been US$46 million a year (US$10.5 million on a quarterly basis). Cogstate's revenue mainly comes from the provision of cognitive testing in clinical studies.
In the recent September quarter, the company announced sales of US$21.4 million, which is the value of contracts executed. This is the second largest quarter to date for new contracts signed. Revenue is generated from upfront fees and from the provision of the services within those contracts. As such, the company has revenue already locked in for several years ahead.
For FY2026, the company expects to generate US$35.9 million from existing contracts (as of 21 August). This has increased from US$31.5 million at the start of the July, with US$4.1 million of revenue added from the US$14.1 million of contracts signed from July 1 - August 21. This equates to around 30% of the contract value.
The pleasing aspect of the first quarter sales has been that just 33% has been from what has historically been the company's core business, in Alzheimer's disease studies. The company has invested in expanding its services into other CNS and rare diseases, with other CNS conditions making up 44% of sales, and rare diseases accounting for 19% of total sales in the September quarter.
The highest quarter of sales to date was in Q1 FY2022, US$40.8 million. However that was mostly due to a large Alzheimer's disease study (around US$35 million).
The jump in sales in the September quarter has coincided with a 72% increase in quotes the company provided compared to the PCP. CEO Brad O'Connor said that the level of quotes moved to unusually high levels from the end of last year and has been sustained.
Part of this is due to the collaboration with its channel partners, including with Medidata, the largest of its partners. Medidata was involved in 72% of all FDA drug approvals last year. Medidata views CNS disorders as a major focus area according to O'Connor.
However the impact of the company's channel partners was largely not the reason for the strong September quarter sales.
In the June quarter Cogstate invested in its capabilities in psychiatric disorders, which accounted for US$6.9 million of sales in the recent quarter, compared to just US$3.2 million in all of FY2025.
The tie up with another channel partner, Clinical Ink, has resulted in the joint offering being granted preferred vendor status with another Top 10 pharma. This is expected to yield additional deal flow in the second half of this financial year. Cogstate is already the preferred vendor for Eli Lilly's cognitive assessments for clinical studies.
Cogstate has also increased its presence in the Asia Pacific region. This with the increased investment in psychiatric disorders may see up to a 0%-3% reduction in profit margins, depending on sales growth.
Forecast for FY2026
Cogstate expects revenue for the first half of this financial year to be in line with the previous six months (2H FY2025), which was $29.1 million. It is not providing forecasts for the full year.
If the company can achieve revenue growth of US$10 million over the year to US$63 million (the same growth in the previous year), then Bioshares estimates a profit after tax of between A$16.2 - A$18.5 million for FY2026. Net profit for FY2025 was US$10.1 million (A$15.5 million).
Cogstate has positioned its business for more stable growth with an emphasis on growing profitability. Its channel partners, particularly Medidata, can be expected to begin having a material impact on the business. And the diversification into other disease outside of Alzheimer's disease helps build a more robust business.
Cogstate is capitalised at $436 million. For FY2025 the company paid a $0.02 dividend and has indicated a payout ratio (percentage of net profit) of between 20%-50% to shareholders.
Bioshares recommendation: Hold
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