CogState (ASX:CGS) share price rockets 9% on record quarter

Just how good of a quarter was it for the neuroscience technology company?

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The CogState Ltd (ASX: CGS) share price is moving with gusto today following the release of its quarterly cash flow statement.

In afternoon trade, shares in the neuroscience technology company are fetching $2.40, up 9.59%.

Here’s what the company revealed in its latest announcement.

What’s sending the CogState share price higher today?

Investors are bidding up the CogState share price following a record quarterly result. The quarter, ended 30 September 2021, involved substantial growth across various metrics. Here are some of the highlights from the report:

  • Quarterly revenue of $12.3 million, up 99% year on year
  • Clinical trials sales contracts of $40.8 million, an increase of 391% year on year
  • Total revenue backlog of $130 million, up 202% year on year and a record result
  • Net cash of $23.4 million at the end of the quarter
  • Net operating cash outflow of US$0.3 million compared to US$2.2 million in the Q1 FY21

What happened during the quarter?

CogState has kicked off the new financial year with a cracking quarter. The company, which offers brain health assessments solutions, reported a record quarter in Q1.

In dollar terms, the use of its solutions in clinical trials provided the most significant increase in the company’s revenue. Out of the total $12.3 million of record quarterly revenue, $11.1 million was from clinical trials — typically to do with Alzheimer’s disease. Revenue from clinical trials grew by 93% compared to the prior corresponding period.

Meanwhile, the other portion of revenue denominated as ‘healthcare’ revenue experienced a dramatic 255% surge to $1.1 million. Clearly, shareholders are happy with this increase, as the CogState share price rallies into the afternoon.

The near tripling in healthcare revenue for the quarter was mostly attributable to the recognition of deferred revenue. This was from the licensing agreement associated with the pharmaceutical company Eisai. CogState entered a 10-year global agreement with Eisai back in October 2020 for it to market CogState’s assessment tools globally.

Furthermore, CogState executed a record $40.8 million worth of clinical trials sales contracts in Q1. This included a contract for the use of digital assessment tools in a large phase 3 Alzheimer’s disease trial. As a result, the value of clinical trials sales contracts executed in Q1 was more than the first three quarters of FY21 combined.

What did management say?

Commenting on the record quarterly result, CogState CEO Brad O’Connor stated:

The 2021 financial year was a watershed year for Cogstate and, pleasingly, the 2022 financial year has started positively. In the first quarter, Cogstate has executed almost a year’s worth of clinical trials sales contracts. This result was underpinned by the award of a large phase 3 Alzheimer’s disease study, which is being conducted as a completely virtual, decentralized trial. That trial will use Cogstate proprietary digital assessments as key endpoints in the trial.

How does the future look for the CogState share price?

Finally, in another positive for the CogState share price, the company is optimistic for the FY22 outlook. Notably, research and development spending on Alzheimer’s is expected to increase with time, putting CogState in a good position.

Hence, the company reiterated its previous full-year guidance. This includes operating expenses to range between 31% and 33%. Meanwhile, underlying operating cash flow is expected to be 30% to 35% of earnings before interest, depreciation, and amortisation (EBITDA).

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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