Echelon Capital Markets analyst Stefan Quenneville reviewed the latest quarterly results from Cognetivity Neurosciences (Cognetivity Neurosciences Stock Quote, Charts, News, Analysts, Financials CSE:CGN) in an update to clients on Monday, saying while the numbers arrived below expectations, a new contract win and potential for industry catalysts are supportive of CGN.
Cognetivity Neurosciences is a digital health company using artificial intelligence to enable the early detection of cognitive decline in neurodegenerative diseases such as Alzheimer’s dementia (AD). The company has an FDA-cleared Integrated Cognitive Assessment platform called CognICA that enables clinicians to secure reimbursement for monitoring patients’ cognitive abilities in conditions such as AD.
The company recently released its fourth quarter fiscal 2023 financials (year end January 31), reporting $45,400 in revenue and a net loss of $2.5 million. EPS was at negative $0.01 per share and CGN ended the quarter with $2.2 million in cash.
Quenneville said the top and bottom lines were under forecasts, where he had been calling for $100,000 in revenue and a net loss of $1.5 million. EPS was in-line with the analyst’s call at negative $0.01 per share.
At the same time, Quenneville said the rollout of CognICA is continuing to gain commercial traction.
“We believe the recent CMS decision to reimburse Alzheimer’s drugs with traditional FDA approval should serve as a meaningful catalyst to drive the adoption of CognICA, given the reimbursement is contingent upon collecting real-world evidence of effectiveness through a registry that will gather patient information in an “easy-to-use” format,” Quenneville wrote.
“We continue to view CGN as meaningfully undervalued given the CognICA platform’s proven efficacy, ease of use and scalability, and we are maintaining our $0.75/shr price target and Speculative Buy rating,” he said.
Quenneville noted CGN’s first large contract win with Japanese insurance company Mitsui Sumitomo Aioi Life Insurance, one of the major life insurance arms of the global MS&AD Insurance Group. Mitsui will take on CognICA to test its four million policyholders, while CGN and Mitsui are also currently negotiating on a distribution agreement for undisclosed Asian markets by mid-2023.
Quenneville pegs the contract at a US$3-$4.5 million annual revenue opportunity for CGN.
“[The contract] validates the value proposition of its CognICA platform and, if it can successfully close the distribution agreement in the coming months, provide Cognetivity with a credible commercial partner to help accelerate its growth in Asian markets,” he wrote.
Quenneville sees CGN revenue going from $0.0 million in fiscal 2023 to $1.4 million in 2024 and to $7.0 million in fiscal 2025, while EBITDA is expected to go from negative $7.0 million in fiscal 2023 to negative $4.7 million in 2024 and to positive $2.0 million in fiscal 2025.
At press time, Quenneville’s maintained $0.75 target represented a projected one-year return of 150 per cent.
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