Health Check: Cogstate suffers a nasty share price head knock, but its future ‘has never looked brighter’
Neurologist monitoring house Cogstate says current half revenue – and thus earnings – have been slower than expected. But timing differences are to blame.
Cogstate shares plunge on revenue and earnings downgrade
Immuron shares have the runs after failed US military trial
Was Immutep’s share price reaction underdone?
CogState (ASX:CGS) shares have tumbled as much as 30% on the back of a revenue and profit downgrade.
This is despite the company claiming the revision is due only to timing differences, rather than a fundamental sales downturn.
A leader in neurological testing for clinical trials, Cogstate expects revenue of US$25-26 million for the first (December) half, 5-9% higher year on year.
But management previously guided to 18-20% growth.
This downgrade stems from timing-related revenue deferrals that are likely to bolster the second (June) half numbers.
Indeed, the company expects sales contracts of US$37-40 million for the first half, up 82-97%.
“This performance is supported by a record level of pipeline opportunities and ongoing conversion of those opportunities into contracted work,” the company says.
Cogstate expects December half gross margin of 50%-52%, compared with 61% (both year on year and for the June 2025 half).
The company says its earnings before interest, tax depreciation and amortisation (ebitda) will shrink to 20-23% of revenue, from 33% a year ago.
Management also cites an unfavourable change in revenue mix between service and licence fees.
The company recognises service fees over the life of a trial, thereby providing revenue growth and margin contribution in subsequent periods.
Purple patch
Cogstate has enjoyed a purple patch, courtesy of a surge in global Alzheimer’s disease trials for which it provides monitoring services.
The company is also eyeing wider work with other dementia-related trials, as well as studies for Parkinson’s disease, psychiatry, schizophrenia, sleep disorders and rare diseases.
“Cogstate’s future has never looked brighter,” chirps CEO Brad O’Connor.
“We are seeing a record level of opportunities from an expanded customer base and across more indications.
"Those opportunities are now translating into higher levels of sales contracts.”
Still, impatient investors prefer being rewarded in the here and now.
Immuron trial doesn't pass muster
Immuron (ASX:IMC) shares have plunged 35% on news that a US military gut health trial did not reach its primary endpoint of statistical significance.
Carried out by the Uniformed Services University, the study evaluated a “third-party manufactured product” containing Immuron’s hyperimmune bovine colostrum (IMM-124E).
Immuron markets the compound as the well-known Travelan anti travellers' trots treatment.
But Immuron has not given up, claiming the compound was not administered properly.
“Immuron does not consider the results of this trial to reflect the performance of Travelan when taken in compliance with directions for use”.
At an end-of-study meeting with the US Food and Drug Administration, the company will propose the “established and clinically validated three-times-daily-dosing schedule.”
Immuron will continue to collaborate with two other military organs, the Naval Medical Research Command and the Walter Reed Army Institute of Research.
This is in view of developing novel vaccines targeting the Campylobacter and Shigella bugs.
Are investors out of step on Immutep?
Have investors overlooked the significance of Immutep's (ASX:IMM) partnering deal?
Shares in the immuno-oncology drug developer surged up to 33% on Tuesday’s news of a commercialisation tie-up that delivers up to $530 million of total potential payments.
Crucially, it also puts $30 million in the company’s pocket up front.
The deal involves the Hyderabad, India based Dr Reddy’s Laboratories getting exclusive commercial dibs on Immutep’s eftilagimod alfa (efti).
Immutep is undertaking a phase III trial for non-small cell lung cancer.
In a note today, Bell Potter dubs the deal as an “impressive ... validation from a credible pharma company in emerging markets”.
(The New York listed Dr Reddy's has a US$12 billion market cap).
It's a small world
The deal might be 'global', but it excludes North America, Europe, Japan and Greater China (licensed to EOC Pharma in 2018).
Bell Potter notes the territory licensed to Dr Reddy’s accounts for only around 5% of global sales for novel oncology biologics.
“It is therefore reasonable to extrapolate the global opportunity still owned by Immutep to be around 19 times the value ascribed in emerging market regions.”
This implies the drug candidate so worth around US$7 billion, on a “fully derisked” basis.
The firm believes the deal could spur other industry parties (most obviously Immutep’s clinical collaborator Merck) to bid for the US and European rights.
Despite yesterday’s share spurt – and a further advance this morning – Immutep trades at similar levels to early May this year.
Bell Potter estimates the company now has cash to last until mid 2027, “excluding any potential milestones that may also be received”.
The firm values the stock at 60 cents per share, almost double the current valuation.
Immutep is due to release a ‘futility’ analysis – a decision on whether the trial is worth continuing – in the March quarter.
In brief
The local Therapeutic Goods Authority has cleared LTR Pharma (ASX:LTP) to start a phase II study of its spray-based erectile dysfunction treatment, Spontan.
The study will enrol over 65 men, the key demographic poorly served by current oral treatments.
Enrolling 27 healthy blokes across three cohorts, the study should kick off in the March quarter.
Ultimately, the trial should support regulatory clearance, both here and in the US.
Wound repair house Orthocell (ASX:OCC) says surgeons have treated the first Hong Kong patient commercially with its nerve repair tool Remplir.
Orthocell is also selling Remplir, its flagship product, in the US, Australia, New Zealand and Singapore.
The company expects first sales in Canada and Thailand “in the near term”.
Rhythm Biosciences (ASX:RHY) says an arm of Britain’s National Health Service (NHS) will evaluate its blood-based bowel cancer assay, Colostat.
The Royal Surrey NHS Foundation Trust’s southern hub research team will put Colostat – a potential replacement for the distasteful ‘poo test’ – through its paces.
This is in view of potentially using Colostat as a “screening pathway” nationally.
“This evaluation marks an important next phase towards the international commercialisation of Colostat,” the company says.
Originally published as Health Check: Cogstate suffers a nasty share price head knock, but its future ‘has never looked brighter’
