Why the CogState Limited share price rocketed a massive 27% today

One of the biggest movers on the market today has been the CogState Limited (ASX: CGS) share price.

In afternoon trade the cognitive science company’s shares are up a remarkable 27% to $1.06.

Why has it jumped?

Although there has been no news out of the company today, it appears as though this gain is a delayed reaction to a big announcement CogState released at the end of last week.

That announcement revealed that the company has been chosen as a preferred provider to healthcare giant Eli Lilly and Company to support its Alzheimer’s disease platform.

This means that CogState will look to leverage its technology to provide solutions that ensure high-quality neuropsychological outcome measures in clinical trials.

Together the two companies will deploy “an innovative program to improve the way that research sites train and collect endpoint data across Lilly’s portfolio of Alzheimer’s disease studies.”

Should you invest?

Whilst this is undoubtedly big news for this fledgling company, it is perhaps a little too soon to get overly excited.

At this stage CogState has merely being designated a preferred provider, it does not constitute an award of new business just yet.

But considering the growing demand for its technology from pharmaceutical companies, I wouldn’t be too surprised to see the company awarded business from Eli Lilly in the near future.

But until that happens I would suggest investors hold off an investment. Especially with its shares trading at 56x annualised earnings.

At this point in time I think investors would get better value for money with investments in fellow medical technology shares Nanosonics Ltd. (ASX: NAN) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH).

So rather than risk your hard-earned money in CogState, I would suggest you look at Nanosonics and Fisher & Paykel Healthcare or consider an investment in one of these stunning blue-chip shares. I'm tipping each of them for BIG gains this year.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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