Echelon lowers target on Cognetivity Neurosciences

A slower than expected rollout of the company’s AI-enabled cognitive impairment platform is cause for a target price drop from Echelon Capital Markets analyst Stefan Quenneville on Cognetivity Neurosciences (Cognetivity Neurosciences Stock Quote, Charts, News, Analysts, Financials CSE:CGN). Quenneville reviewed the latest quarterly results in an update to clients on Monday, saying CGN could be in for an important catalyst early in the new year.

Digital health company Cognetivity Neuroscience is currently commercializing its FDA-cleared CognICA platform as an app-based alternative to existing pen and paper dementia assessments by clinicians. The company released its third quarter fiscal 2023 financials for the period ended October 31, 2022, on December 16, reporting no revenue for the quarter, although recognizing $6,000 in deferred revenue from paid pilot programs. The fiscal Q3 net loss was $1.8 million and EPS was negative $0.02 per share. 

The numbers were lower than expected, according to Quenneville, who had been calling for revenue of $103,000, a net loss of $1.2 million and EPS of negative $0.01 per share, with the miss attributed mostly to higher-than-expected R&D costs.

In terms of other news on the company, Quenneville noted CGN’s recent non-brokered private placement of 15.5 million convertible preferred shares for gross proceeds of $4.5 million, where the funds were largely provided by Dubai-based investment firm SAYACORP, which the analyst said, “appears to have taken a long-term, strategic position in CGN, which is in keeping with the firm’s stated focus on investing in defensive sectors with strong growth prospects.”

Quenneville also pointed to a case study published last week by Alzheimer’s Research UK, the leading UK dementia research charity, which cited CognICA as an innovative solution for detection and monitoring of Azheimer’s. The overall recommendations of the paper were for improved dementia diagnosis and treatment in primary care with an emphasis on the importance of early detection.

On the upcoming catalyst, Quenneville said there’s been recent Phase 3 data on promising Alzheimer’s drugs from companies Biogen and Eisai on lecanemab and Ei Lilly on donanemab, and the analyst said these could lead to an FDA approval as early as January 2023. 

“This would serve as a meaningful catalyst to drive adoption of the CognICA as millions of patients will need to be triaged for use of these drugs. While we continue to view CGN as meaningfully undervalued given the CognICA tool’s proven efficacy, ease of use and scalability, and are maintaining our Speculative Buy rating, we have tempered our forecast for a slower-than-expected rollout and have lowered our price target to $0.75/shr (from $0.90/shr) accordingly,” Quenneville wrote.

At the time of publication, Quenneville’s new $0.75 target represented a projected one-year return of 226 per cent.