The stock is down significantly over the past year and Stefan Quenneville of Echelon Capital Markets is now being more careful on Cognetivity Neurosciences Ltd. (Cognetivity Neurosciences Innovation Stock Quote, Chart, News, Analysts, Financials CSE:CGN), maintaining a “Speculative Buy” rating while dropping his target price from $1.50/share to $0.90/share for a projected return of 210 per cent in an update to clients on Monday. 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). Quenneville’s updated analysis comes after Cognetivity released its fourth quarter financial results for the 2022 fiscal year, which Quenneville noted to have missed expectations. Cognetivity did not report any revenue in the quarter, which is down from the Echelon projection of $81,000 for the quarter, while its research and development spending was considerably less than expected at $14,000 compared to the $175,000 Echelon estimate, though its SG&A spending was $4.1 million, well above the Echelon forecast of $0.8 million. According to Quenneville, the increased SG&A costs were primarily driven by one-time payouts associated with the FDA approval of the CognICA in October 2021, as well as meaningful expansion of the commercial team, though the increase led to a $4.1 million loss in adjusted EBITDA for the quarter (Echelon estimate of a $0.9 million loss). However, Quenneville expects costs to normalize as sales of the CogniCA kick into high gear. Recently, Cognetivity announced it had signed an agreement to deploy its CogniCA pilot program as a screening tool for cognitive impairment with the Abu Dhabi Health Services Company (SEHA), an independent public company that owns and operates all public hospitals and clinics across Abu Dhabi consisting of 13 hospitals with 2,644 beds and 36 primary healthcare clinics, in addition to 24 additional supporting facilities and specialized clinics. “We’re hugely excited about this latest deployment of our CognICA technology and thrilled to confirm another major deal in the Middle East,” said Dr. Sina Habibi, CEO of Cognetivity in the company’s June 2 press release. “To tackle the enormous global problem of brain health, including dementia, we have to massively improve the detection of early-stage impairment on a large scale, making brain health testing as routine as blood pressure monitoring. CognICA is the perfect tool in every way for this job and this latest implementation further demonstrates the value that our technology adds to progressive healthcare systems.” Staying in the Emirates, Cognetivity also signed an agreement with the Dubai Health Authority to deploy the CogniCA platform across numerous dementia clinics in the region to screen for at-risk patients on a population-wide scale. Meanwhile, in Florida, Cognetivity announced a one-year agreement with Beyond Geriatrics, which has provided complete care to geriatric patients, including brain health screens, since 2014; the deal also carries an additional three-year option. With the disappointing quarter now on the books with a call for no revenue for 2022 at the year-end, Quenneville lowered his 2023 revenue projection from $3 million to $0.6 million, while maintaining his 2024 forecast of $3.2 million (projected year-over-year increase of 433 per cent) and 2025 outlook of $7.7 million, good for a potential year-over-year increase of 140.6 per cent. In terms of valuation, Quenneville reported the company’s EV/Sales multiple for 2022 to be 59.9x, then projected it to drop to 10.3x in 2023, which is significantly higher than the 3.1x target. Meanwhile, Quenneville lowered his EBITDA projection for 2023 from a $0.9 million to a $4.1 million loss, then maintains a $12.4 million loss projection for 2024 before turning a positive at a projection $2.1 million in 2025, implying a margin of 27.3 per cent. From a valuation perspective, Quenneville lists the company’s EV/EBITDA multiple as NMF in comparison to the 18.4x target. Meanwhile, for potential investors, Quenneville doesn’t forecast a positive EPS until 2025 at $0.01/share. Despite the target drop, Quenneville believes Cognetivity is in a solid position as FDA approval and recent commercial validation have meaningfully de-risked the CognICA over the last year. “While we have tempered our roll-out assumptions given the unfavourable environment around Biogen’s Aduhelm in the US, the Company’s CognICA tool is beginning to gain commercial traction and generate recurring revenues via recent deployments in leading hospitals and memory clinics in the US and Middle East,” Quenneville said. “As such, we continue to view CGN as meaningfully undervalued given the tool’s proven efficacy, ease of use and scalability.” Cognetivity’s stock has crumbled to a 51.9 per cent loss in 2022, consistently dropping after hitting an early peak of $0.57/share on February 28. The stock is presently trading at $0.26/share, representing its lowest point of 2022.