Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cogstate Ltd (COGZF, Financial) reported a 9% revenue growth in their Clinical Trials segment, showcasing the expansion of their service offerings.
- The company successfully secured four new phase two Alzheimer's programs from different customers, three of which were new to Cogstate, indicating a diversification of their customer base.
- Cogstate Ltd (COGZF) achieved a significant improvement in Clinical Trials gross margins by 6 points, translating a $3.3 million increase in revenue into a $4 million increase in gross profit.
- The renegotiation of the Eisai agreement allowed Cogstate to regain ownership and control over their intellectual property, providing strategic growth opportunities.
- Cogstate Ltd (COGZF) has started the financial year '25 strong, executing an additional $9.3 million of net Clinical Trials sales contracts, indicating a positive outlook for future growth.
Negative Points
- Clinical Trials sales contracts executed were $27 million, down 21% from the prior year, reflecting a decrease in new contract sales.
- The renegotiation of the Eisai agreement resulted in a decline in Healthcare revenue by 9%, impacting the overall revenue mix.
- Future contracted revenue decreased by 16% year-on-year, from $132.6 million to $110.9 million, due to lower Clinical Trials sales and the Eisai agreement renegotiation.
- Cogstate Ltd (COGZF) had to forego $15 million of future payments from Eisai, impacting cash flow expectations for financial years '28 to '31.
- The share buyback program has been suspended, indicating potential concerns about capital allocation or future investment needs.
Q & A Highlights
Q: Now that Alzheimer's drugs are on the market, is there an opportunity for Phase 4 contracts with larger customers? Would these contracts have similar economics to other trial phases?
A: Yes, we expect to see Phase 4 trials or real-world evidence studies. These trials tend to be more cost-sensitive than Phase 3, but the contract sizes are larger due to scale. Our digital endpoints and central rating solutions are well-suited for Phase 4, and we anticipate growth in this area as more drugs enter the market. - Brad O'Connor, CEO, and Rachel Colite, EVP Clinical Trials
Q: Is there potential for new Phase 3 trial contracts to grow over their lifespan?
A: Almost certainly. Phase 3 trials often grow over time due to longer-than-expected durations, recruitment challenges, and the need for a diverse patient mix. The largest Phase 3 trial we conducted grew by 60-70% from its original contract value. Additional services are often added as trials progress. - Brad O'Connor, CEO
Q: How much contract sales were achieved in non-Alzheimer's disease indications?
A: In financial year '24, $14 million worth of contracts were signed in non-Alzheimer's disease areas, representing a 60% growth from the prior year. This diversification is part of our strategy to expand beyond Alzheimer's. - Brad O'Connor, CEO
Q: Can you comment on the quality of the current clinical trials' contracted revenue balance, considering trial delays and consolidations?
A: We believe we have a clean book now, with no stalled trials and a clear understanding of our backlog. This gives us more confidence in the revenue run-off than we had last year. - Brad O'Connor, CEO
Q: What is the industry's interest level in concepts such as central rating?
A: There is strong interest, especially in rare neurodevelopmental disorders and mood disorder trials. Central rating provides a neutral third-party view and improves data quality. It has become more common post-COVID-19, as trials adapted to remote and patient-centric approaches. - Rachel Colite, EVP Clinical Trials
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
