It has been a disappointing year for the CogState Limited (ASX: CGS) share price.
Since the start of 2022, the neuroscience technology company's shares have tumbled 43% to $1.45.
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Is the CogState share price in the buy zone?
One leading broker that believes the CogState share price is great value after this decline is Bell Potter.
According to a note, the broker has retained its buy rating with a slightly trimmed price target of $1.95.
Based on the current CogState share price, this implies potential upside of 34% for investors over the next 12 months.
What did the broker say?
Bell Potter highlights that CogState appears well-placed to benefit from a significant increase in therapies aiming to treat Alzheimer's disease. This increased activity bodes well for demand for the company's brain health assessments. It explained:
With currently no disease modifying therapies (DMT) available, there has been an increasing interest in identifying potential treatments. The number of unique agents under investigation has increased from 93 in 2016 to 143 in 2022. The amyloid hypothesis has been a critical target for these therapies with important Phase 3 trials underway and results on the horizon.
In addition, the broker highlights that CogState has a material revenue backlog and notes that demand is increasing for other indications.
Cogstate currently has US$139.1m in contracted revenue backlog: US$100.2m in clinical trials and US$38.9m in healthcare (EISAI agreement). 84% of new clinical trial contracts in FY22 were in AD which reflects the strong relationship with CGS. Whilst there has been increasing utilisation of CGS technology in other indications such as Parkinson's Disease, Rare Paediatric Disorders and Depression, these studies are usually of lower contract sizes (safety endpoints, smaller cohort sizes).
All in all, the broker believes this will underpin solid sales and earnings growth through to at least FY 2025. In fact, by then, the broker expects CogState's revenue to be $79.8 million and its EBIT to be $18.4 million. This will be a 77.3% and 72% increase, respectively, over FY 2022's numbers.
