The CogState Limited (ASX: CGS) share price has surged up 24.7% at the time of writing to $1.34 a share after closing at $1.09 yesterday and opening at $1.15 this morning.
This move represents a continuation of the stellar year Cogstate shareholders have enjoyed so far in 2020. Cogstate shares started 2020 at just 45 cents each. That means that, on today's share price, shareholders have enjoyed year-to-date gains of more than 188%.
So what does Cogstate do? And why are its shares exploding today?
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What is this company?
Cogstate is a company dedicated to brain health. Its reported mission is to "optimise cognitive assessments to support the development of new therapeutics and provide earlier brain health insights in clinical care".
It has a market capitalisation of approximately $221 million on current prices with 5 global offices split between Australia (Melbourne), the United States (in Wisconsin, New York and Connecticut) and the United Kingdom (London). Cogstate offers 3 core products and services: clinical trials, healthcare and academic research.
The clinical trials division provides "services and solutions" to help with decision making in drug development. The healthcare division revolves around providing innovative tools to screen and monitor cognitive changes, such as those arising from diseases like Alzheimer's and from brain injuries. The academic research division offers assistance and solutions for researchers and academics studying cognition.
Cogstate has been around for roughly 2 decades and has given investors a wild time over that period. Its share price has always been highly volatile, but also essentially went nowhere between May 2006 and October 2014. However, in the past five years, Cogstate has been as high before as the levels we see today – back in January 2017. However, between that month and July 2019, the shares lost more than 88% of their value.
Why is the CogState share price exploding today?
To understand today's pricing move, we first have to go back to a partnership Cogstate recently announced. Early last week, Cogstate advised the market that it has inked a 10-year agreement with Japanese pharmaceutical company Eisai. Eisai is a ~A$33 billion company with more than 10,000 employees worldwide.
The deal will see Eisai distribute Cogstate's cognitive assessment technologies in healthcare and other markets worldwide (including in China, Japan, Europe and the US) on an exclusive basis. The clinical trials division does not fall under the arrangement. Cogstate will receive ongoing royalties for the use of its products and services. It will also see Eisai provide an upfront payment to Cogstate of US$15 million. Eisai will also fund product research and development to adapt Cogstate solutions for each market.
Today's announcement has given investors additional details on this arrangement with Eisai. It told investors that Eisai's Chinese subsidiary has established a joint venture with Chinese e-commerce company JD.com Inc's (NASDAQ: JD) subsidiary JD Health. The new joint venture will be called Jingyi Weixiang (Shanghai) Health Industry Development Company.
This company will reportedly build a "health service platform for the elderly in China". This platform will be a "one-stop" platform where users can "select and use the most suitable individual service from a variety of information and medical services". Some of the tools used in this development will be provided by CogState under the previously-discussed arrangement.
