Cognetivity Neurosciences hits key catalyst, Echelon Capital says

Stefan Quenneville of Echelon Capital Markets likes the progress being made by Cognetivity Neurosciences (Cognetivity Neurosciences Innovation Stock Quote, Chart, News, Analysts, Financials CSE:CGN), maintaining a “Speculative Buy” rating and target price of $1.50/share for a projected return of 114 per cent in an update to clients on Wednesday.

Incorporated in 2011 and headquartered in Vancouver, Cognetivity is a digital health company that is using artificial intelligence (AI) to enable early detection of cognitive decline in neurodegenerative diseases such as Alzheimer’s dementia (AD). The company’s primary product is a validated Integrated Cognitive Assessment (ICA) tool, an app-based alternative to pen and paper diagnoses that aims to serve a market of over 50 million people globally over the age of 65 who have AD, with over half of those suffering dying without a proper diagnosis, or diagnosed at a point where care providers have limited opportunity to take mitigation steps like behavioural and pharmaceutical interventions.

Quenneville’s latest analysis comes after the company announced that its AI-powered Integrative Cognitive Assessment (ICA) tool has been cleared by the U.S. Food and Drug Administration for screening and diagnostic use.

“This is a key catalyst for the stock and a significant achievement for the Company as it opens the door for commercialization of the test in the US market, which is typically the global leader in adoption of new technologies,” Quenneville said.

Having already been cleared by European regulatory bodies, clearance in the United States is a significant step for the IDA test for patients who are at risk of Alzheimer’s Disease (AD) and other conditions that lead to cognitive decline. 

Quenneville said the timing of the clearance dovetails with an increase in demand for cognitive testing and the triaging of AD patients as Biogen’s recently approved AD treatment, Aduhelm, is undertaking its US commercial launch and Eli Lilly has been granted a Breakthrough Therapy designation by the FDA for its investigational therapy, donanemab.

According to the company, the test itself is a five-minute, computerized cognitive assessment delivered on iPads to provide greater benefits than tests done with pen and paper, including its high sensitivity to early-stage cognitive impairment, avoidance of cultural or educational bias and absence of learning effect upon repeat testing.

“We’re delighted to have reached this major company milestone, which is the culmination of many years of hard work,” said Dr. Sina Habibi, CEO of Cognetivity in the company’s October 20 press release. “This grants us access to the world’s largest healthcare market, where, sadly, there is much more to be done to tackle the massive problem of dementia. Of course, we’re excited about the opportunity to revolutionize the way cognitive impairment is assessed and managed in the US and make a positive impact on the health and wellbeing of millions of Americans.”

Cognetivity’s work in its field has not gone unnoticed, as it was recently selected to be part of Silicon Valley’s Plug and Play Health Batch consortium, where leaders in the healthcare space are partnered with smaller firms with the goal of driving innovation and accelerating the commercialization of promising new technologies, while also providing the company the opportunity to explore business development opportunities with American pharmaceutical companies like Pfizer and Eli Lilly.

More recently, the company announced its first commercial agreement for the ICA to be deployed in clinical care in the Middle East, specifically at the Clemenceau Medical Center in Dubai, as well as completing a commercial agreement to deploy the ICA with Birmingham and Solihull Mental Health NHS Foundation Trust, one of the leading mental health Trusts in the UK’s National Health Service (NHS) serving a population of more than 1.3 million patients.

In addition, the company has secured an agreement with Ketamine One, a Vancouver-based wellness company focused on ketamine-assisted treatment of various mental health conditions, to deploy the ICA in five of its 16 locations with the intent of monitoring cognitive performance in patients with treatment-resistant depression and PTSD.

Quenneville forecasts the company to bring in its first revenue in 2022 at $200,000, though the figure is projected to gradually increase through 2025, where Quenneville projects revenue of $17.8 million. Meanwhile, after projecting losses of $3.9 million in 2022 and $2.9 million in 2023, Quenneville projects the company’s EBITDA to turn positive in 2024 at $1.3 million, followed by another forecasted jump to $7.7 million in 2025.

From a valuation perspective, Quenneville projects the company’s EV/Sales multiple for the first time in 2022 at 21.1x compared to the peer group projection of 8.1x, with 2023 projecting a 7x multiple for Cognetivity and a 6x multiple for the peer group. Meanwhile, only the peer group EV/EBITDA is projected, with figures of 58.8x in 2021, 37.7x in 2022 and 32.6x in 2023.

Overall, Cognetivity’s stock price has risen by 28.8 per cent for the year to date, reaching a high point of $1.30/share on June 16.