Cogstate Limited

Good morning, everyone. Welcome to the presentation of Cogstate's financial results for the half year ended 31 December 2021.

My name is Brad O'Connor. I'm the CEO of Cogstate.

Joining me today is Cogstate's CFO, Darren Watson. I'm really pleased to be able to present to you these results, which are, I think, really strong results, reflecting the great state that our businesses is in.

I note that today's presentation includes forward-looking statements and therefore, no doubt disclaimer. Some of the information in this presentation is general in nature.

I encourage all investors to consider our own investment objectives and also to review in detail the half year financial statements were lodged with the ASX today. Before we get started, just some of administrative items.

Following our presentation, we'll take questions. If you do have a question, there are 2 ways to ask that question.

Firstly, you can type your question into the control panel and that will be read by the moderator. Alternatively, you can raise your hand and have your line muted to ask your question.

Finally, our note that the presentation has been lodged with the Australian Stock Exchange this morning and also the slides are available under the handouts tab I also note that a recording of this presentation will be available from the Investor Center section of the Cogstate's website following the conclusion today. So let's get started.

Since the inception of Cogstate in 1999, our investment thesis is focused on an aging population and increasing incidence of Alzheimer's disease and the need to provide technology solutions to simplify the measurement of cognition for patients to their doctors and for company developing new embedded therapies. Put simply, we believe that brain health is important, and it should be easily available to everyone.

Cogstate combines proven science and technology to make assessment of cognition as simple as the measurement of blood pressure. Cogstate was founded more than 20 years ago in Australia.

But today, most of our workforce is based in the United States. We are a team of around 255 people, made up of employees as well as a global network of clinicians, mostly neuropsychologists.

Our technology solutions are based on excellent science. And since our inception, we've supported more than 2,000 academic and medical research studies and over 2 million Cogstate tests have been administered.

Our largest customer base is pharmaceutical and biotech companies who are developing new drugs where we help them determine if their new drug is impacting the cognition of patients in their study. We are proud that we've supported each of the world's top 10 pharma companies in their endeavors to bring new drugs to market.

In the coming years, with the release of new therapies in Alzheimer's disease and other neurological diseases better solutions for screening and diagnosis will be critical, and Cogstate's uniquely placed to support this need. Our company is growing rapidly.

Through the 2021 calendar year, Cogstate has now recorded USD 42 million of revenues to reduce an EBIT of $10 million. The market for Cogstate technology is large and growing based on several key dynamics.

Our population is aging and there's an increased focus on brain health. Investment in neuroscience is increasing, and we believe that, that trend will continue over the coming years.

The clinical trials industry is ripe for disruption, and there is a greater desire to leverage digital assessments as part of new study designs. And finally, we believe that the launch of new therapies for Alzheimer's will create lucrative market for brain health screening diagnostic support.

Within the context of the broader market dynamics, Cogstate is really well positioned. Our technology solutions is scientifically and commercially validated.

We're a trusted partner to our pharma biotech customers, having contracted with 69 different companies over the last 18 months, many on multiple occasions. Cogstate often works with our customers very early in the process as advisers and consultants in respect of the design of clinical trials.

We are seeing growth in sales through both our direct sales but also our indirect channel partners, where Cogstate technology is deployed by the device or the technology platform of our partners. Our business is profitable and cash flow positive with a large revenue backlog that provides certainty in respect of future earnings, and there is significant upside beyond the current financial results as we begin the launch of our technology into the health care market via our partnership with large pharma company, Eisai.

The positive market dynamics in Colgate's positioning within that market is reflected in our record financial results for the half year ended 31 December 2021. I should note that all Cogstate financial results are presented in United States dollars.

In our clinical trials business, sales contracts executed is our leading indicator. During the half year ended 31 December, Cogstate executed $54.5 million of clinical trial sales contracts, which is up over 140% on the previous corresponding period.

The major contributor to that results were sales in respect of Alzheimer's disease clinical trials. The long-term nature of our clinical trial sales contracts provides insight into future revenue performance.

Currently, Cogstate has almost $133 million of contracted revenue that will be recognized in future periods. That is up 78% on the same time last year and is again record.

For the half year, we recorded $23 million of revenue, $21 million of which was from our clinical trials business. The clinical trials business is showing significant margin expansion as we deliver revenue growth.

Our 62% clinical trials Contribution margin was up significantly on the previous corresponding period and is also an increase of 4 percentage points in the most recent half year period. With cost control of the operating expense level, we were able to deliver EBIT of $6.1 million for the half year.

Net cash flow -- net cash at the end of the period was $24.6 million with strong cash flows from operations over the course of the last year. I'm now going to hand over to Darren, our CFO, to dig into the financial results in a little more detail.

Thanks, Brad. So as we turn to Chart 9, I'd like to expand the profitability -- improved profitability of the business.

This chart will demonstrate for you have been able to leverage the existing capacity in the business and allow us to return to strong margin performance over the last 2 halves. Getting above 20% EBIT margin in the second half of last financial year and improving further to more than 26% EBIT margin in the first half of this financial year.

I'd call out 3 key drivers to this improvement in our margins. Firstly, had a significant improvement in the productivity of existing capacity in the clinical trials business coming from improved work practices and investment in our tools and technology.

Secondly, a change in the revenue mix with the software license revenue making up 23% of the first half of this financial year compared to 21% in the second half of last financial year, and that compares to a more historical average in the range of roughly 17%, 19% prior to that. And the third point I'd make is that the leverage on the operating expense, which is a percentage of our revenue has decreased from over 40% in the first half of last year to roughly 33% in the second half of last year and down to 30% in the first half of this year.

Over the last year, we've substantially lifted the volume of business that we've put throughout our business in terms of supporting our clients as a result of improved work practices, careful investment in tools and technology and also our growing software license mix. The level of software license mix, however, in this half has been a record high for Cogstate, partly attributable to the large deal that we saw in the first quarter.

So we don't necessarily see that as reflective of our future revenue mix. Therefore, we expect to see EBIT margins in the range of 18% to 24% going forward.

So that is dependent on the level of software license mix in future periods. As I go to Chart 10, I just like to comment on the fall backlog.

So you can see that the strong performance in new contract sales in recent quarters has led to a considerable growth in our backlog of future revenue under contract. We have $92 million of clinical trials revenue under contract, up 85% on where we were a year ago.

And almost $41 million of health care revenue under contract, being the minimum spend commitments under the ACO agreement, up 63% on where we were a year ago. On Chart 11, we've provided a view of how that backlog runs off over future years.

I'd like to highlight on this chart that our financial year '23 revenue under contract is almost $31 million. For the current '22 financial year, this time a year ago, our revenue under contract was $20.1 million.

So we're now more than $10 million ahead looking into financial year '23. And of course, we still have a half year of signings to go.

So we feel confident about our growth prospects as we look forward into financial year 2023. The growth is fueled by the strong clinical trials and new contract sales performance.

A year ago, our '22 revenue under contract, which is $16 million for 2023. We have over $26.5 million already under contract.

You can also see that we've added strong future revenue by FY '24 and beyond, again, supports our strong future backlog growth. If I go to the clinical trials business, so a little bit more detail on Chart 12, you'll see the strong contribution that clinical trials business is made to the improvement in group EBIT that I covered back on Chart 9.

Through the improved productivity and higher software license mix, the contribution margin for the clinical trials business, it's 62% in the first half of this financial year. As I mentioned before, this has benefited from the higher level of software license mix.

So at this stage, we see a more sustainable margin going forward to be in the range of 54% to 60% as we continue to invest in our tools and technology and achieve our leverage as the business grows. But as I mentioned before, this will vary depending on the level of sofolicense mix that we see in the various periods.

I'll now hand back to Brad for a little further detail around the clinical trials business.

Thanks, Darren. So we've already discussed the sales contracts executed during the half year, $54.5 million and the fact that most of that has come from Alzheimer's these clinical trials.

As you can see in the pie chart presented, the value of contracts executed predominantly made up of Phase II and Phase III clinical trials. Now obviously, these trials are large and they take longer to they take longer to perform, and therefore, they cost more to run.

So the fact that Phase II and III studies make up the majority of our -- the value of our sales isn't going to surprise anyone. The differences between the value of sales contracts or the Phase II and III trials that are executed in any given period is really just reflective of the individual opportunity in the stage of development of the drugs that our customers are developing.

I would also note that the value of Phase III contracts executed in the most recent half year period to the pie chart on the very right of the screen reflects the fact that we executed extremely large Phase III Alzheimer's disease trial in the September quarter. So I wouldn't necessarily read into that as a trend.

That's all provided a sort of backdrop to understand that Cogstate is not solely focused on Alzheimer's disease. We're currently running 117 clinical trials, only 31 of those trials are in Alzheimer's disease.

As you can see from the list here, Cogstate is working in a wide variety of other indications. There's no doubt that the Alzheimer's disease trials tend to be larger trials and therefore, generate more revenue per trial than many of the other indications.

As you might expect, 93% of Cogstate revenue backlog comes from Phase II and III trials, again, Phase trials tend to be much smaller in scale, and therefore, don't generate as much revenue. But I do think it's important to point out here that the 76 Phase I and Phase II clinical trials at Cogstate's running currently do provide a great opportunity for future sales opportunities.

if those drugs are, in fact, successful in their earlier stage trials. Throughout our history, we've seen great carry-through for future contracts where a drug has been successful in an earlier phase trial.

Notwithstanding the fact that we are working across a range of indications, obviously, Alzheimer's disease trials are important to our future sales and revenue opportunities. In this chart, what we're trying to do is present our own analysis of Cogstate market share for Alzheimer's disease clinical trials.

So to talk to the methodology here a little bit. We have used clinicaltrials.gov as the source of our data.

All studies that are run within the United States need to be lodged with clinicaltrials.gov. In doing so, in the analysis of that data, we found that there are 127 ongoing Alzheimer's trials that are sponsored by a pharma company that are listed in the database and 90 of those studies were initiated since the first of July 2019.

Again, important to note here, we're focused only on the trials that are sponsored by a pharmaceutical company because obviously, that's our target audience. when we analyze both all of the ongoing studies and the studies initiated since July 2019, Cogstate has approximately 13% market share in each case.

So we believe there's a significant opportunity for Costa to increase our market share over time. It's also important to note that we do expect to that market to grow in coming years.

So what we're seeing here is we expect to be able to deliver market share growth in a growing market. Looking more broadly at the clinical trial segment.

we see a business that's in really good shape and poised for continued growth. We've got a growing and diverse portfolio of ongoing studies.

We believe that the recent decisions by the Neurology division of the FDA indicative of a favorable regulatory environment, and we think that's positive for increasing investment in Alzheimer's disease and other neurological diseases in coming periods. As we've discussed, Alzheimer's trials are important to our future growth, and we are encouraged by positive comments by the larger players in this space, and we see indicators of continued investment in Alzheimer's disease trials.

As we've spoken about previously, the clinical trials industry is ripe for disruption, and we're excited about the prospect of more virtual as the known decentralized clinical trials Cogstate technology has proven benefits for use as a remotely administered or even self-administered assessment. Cogstate has established a subgroup within our clinical trial segment that is focused solely on developing and delivering solutions for decentralized trials is a major focus area for us.

In recent periods, we've also focused on the expansion of our channel sales strategy, and we believe that this strategy is now beginning to pay off. CogState is seeing sales opportunity presented by these channel partners.

And sometimes these are opportunities that have been introduced to us by our partners, not opportunities that we've had any awareness on our own. With the goal of increasing such indirect sales, we've been improving the ability of our technology to integrate with those channel partners for further ease -- to further ease the process of adoption by those channel partners and adoption by their customers.

This final statement, we continue to invest in technology that will make our internal processes more efficient. We're always conscious that efficient process will result in higher contribution margins.

We want to continue that very positive result that we've delivered during the first half of this financial year. If we turn our attention to the Healthcare segment, the revenue record during the half year was essentially the amortization of the contracted minimum revenues from the Eisai agreement.

I note here that the table shows a slight fall in revenue from the June to the December half year period. That's a difference related to the accounting treatment of software development costs that have been reimbursed to Cogstate by Eisai.

In the June half year period, those reimbursements were treated as revenue in the most recent half year period, those reimbursements have been treated in negative expense, and that negative expense appears on the operating expense line, so outside of this segment result. The amounts reimbursed in the December half year period are detailed in Note 6 of the financial statements that were lodged earlier with the ASX.

I think it's Page 15 of those statements, if you wanted to dig into the detail a bit there. Looking more broadly, the health care business, we're really excited about this opportunity.

There are multiple promising potential Alzheimer's therapies with data to be released in the coming months, and the launch of those therapies will increase demand for easy-to-use accurate brain health assessments. We've been saying that for many years.

We are making good progress in Japan, where over 26,000, no assessments have been performed through initial engagement with municipalities businesses seeking to offer those tests to their employees or residents or customers. so that they can understand their grown health.

Of all no, no testing sessions that have been started, over 90% have been successfully completed. It's an amazing result for a self-assessment of cognition.

As we've announced previously, we're really pleased that Eisai has been able to negotiate that a version of the non-assessment has been preinstalled on the Raku-Raku smartphones. These phones are marketed to senior population in Japan that shipped more than 7 million units.

And those phones are designed with the specific needs of an elderly population in mind with things like larger test, is it a Navigate, et cetera. So it's really our target market.

So it's great to have that solution preinstalled. Last month, Eisai announced the launch of Cogstate technology in Taiwan and Hong Kong, and we expect similar launch to occur in other countries in the near future.

And finally, there's been a substantial investment by Eisai in Cogstate technology over recent months, a multilingual version of the Cogstate brief battery to be branded as Cogstate -- Cogmate, I should say, has been developed, and that has now been launched in Taiwan and Hong Kong, as I mentioned. That version is equipped with multilingual functions, which is essential for our efficient product launch into new territories.

That means we're not going to have to reproduce different version of technologies as we now go into new territories. It's already pre-installed with multilingual functionality.

Just -- and just to focus a little bit on our data strategy and area that we're also investing in. We're investing here because we believe that this has the potential to increase the competitive moat around Cogstate.

And in fact, the database itself may also act as a source of revenue in the future. Over our history, over 2 million Cogstate tests have been administered over the coming years as we deliver against our existing commercial strategy, that number of tests has potential increased dramatically, thereby building a data set of brain health assessment that will be unparalleled.

Through the use of advanced analytical techniques and machine learning algorithms, we believe that there is potential to increase the sensitivity of our existing assessments and also the potential to allow for earlier identification of the impairment. Success in those endeavors would position Cogstate incredibly well for long-term growth in all of our business segments.

I'm going to turn our attention now to our expectations for the second half of the 2022 financial year. And we produced quite detailed guidance here that I want to talk you through.

In our Clinical Trials segment, we expect revenue for the second half of the financial year to be in the range of $19 million to $22 million. Of course, that result will be subject to the level of sales contracts that we do, in fact, execute over the coming half year period.

We expect that the contribution margin for clinical trials for the second half to their range of 54% to 57%. But again, that's subject to the revenue mix that Darren mentioned earlier.

And so that margin could push higher than that 57%. That result that we've guided for would leave a full year contribution margin in the range of 58% to 61% for the clinical trials business and that higher full year guidance because of that really strong first half as whole.

The second half financial result for the Healthcare segment should be much the same as the first half. From a group perspective, when we look at the full year results, we anticipate that revenue will be in the range of $44 million to $47 million for the year and that operating expenses will remain in the range of 31% to 33% of revenue, which is what we previously guided.

Overall, we expect EBIT margin to be in the range of 20% to 24% of revenue, and that would provide for full year EBIT in the range of $8.8 million to $11.3 million. Finally, we expect operating cash flow to improve significantly in the second half of the financial year, and we've guided for an operating cash inflow of at least $4 million for the second half, taking operating cash inflow for the full year to more than $5 million.

Overall, our business is in really good shape. We're extremely pleased with the half year results that we have produced, but we see the opportunity to see significant growth in the future.

So with that, I'll pause, and I'll open the line for questions.

[Operator Instructions]

Thank you so much for the presentation. Brad and Darren.

Certainly, Cogstate is in a strong position, and it's fantastic to see these results and projections. So we do have several questions from participants, so I will go ahead and dive right in.

First, can you further explain the growth in clinical trials contribution margin that was achieved for the first half?

Darren, I'll let you take that question.

Yes. Thanks, Ruth.

So 2 key factors. Firstly, we've been able to lift the productivity within the organization.

As I mentioned earlier, better work practices investment in technology. But probably the larger contributor is the increase in the software license mix.

So you can see our software license mix of 23% of our revenue was attributable to sulfur licenses. That in itself, if you take that as a percentage of revenue, contributes about an additional 3 to 4 points of margin.

So that's been probably single largest driver to the increase in margin. And really, that is a result of the large deal that we did sign in the first quarter of this financial year.

and the software license that was associated with that deal. So that's the main reason.

And somewhat associated on a similar trend, the cash flow projections that were provided for the second half of financial year '22 are much stronger than the first half. Could you explain this difference?

Yes. The main driver to the improved cash flow in the second half is really working capital related.

So it's largely associated with the timing of our invoicing timing of collections, our accounts payable balance. So really attributable primarily to improvements in working capital as we go forward through the second half.

Great. Thank you for those perspectives and taking a little bit of a shift in direction.

We've had a few questions regarding Agile Home. So first, I wanted to just note or asked this question regarding the limited proposed reimbursement from CMS proposed on the anti-amyloid antibody drugs, do you see that slowing pharmaceutical companies near-term investment interest in trials in Alzheimer's?

So I'll take that. So look, I think the short answer to that is that we don't refer people to the commentary that has been provided through the recent earnings calls by both Eli Lilly and Eisai.

I think what you're seeing there is those pharmaceuticals companies firstly, lodging objections to the CMS decision in relation to reimbursement. But then secondly, given that the limited reimbursement under the accelerated approval pathway, really focusing on their Phase III clinical trial data.

I think it was someone from Eli Lilly, who said that at the end of the day, compelling Phase III data is what is necessary here as has always been the case. We see we see that the reimbursement issues is something that will get solved over time.

As I said, I think it gets solved by more compelling completed Phase I data. And so that doesn't change the situation.

I think it also -- it operates, as we mentioned, within the context of decisions by the neurology division of we've seen more accommodating to Alzheimer's disease trials and approvals, and we think that has a positive impact as well in respect of investment decisions in R&D.

And so a little bit on the flip side of this, there's the other side of this equation with a question on how much of your recent bookings growth has been driven by increased R&D in response to AgiHelm's approval? And when do you expect Alzheimer's R&D to begin to really accelerate industry-wide or has it already?

And yes, I wonder if you can expand kind of on that. I know you've touched on it a little bit already.

So I don't think that the growth we've seen in Alzheimer's disease R&D is reflective of the Agile approval as yet. I think you're beginning to see.

And really, this talk to the, I suppose, the flexible position of the FDA here that we spoke about earlier. And what we're beginning to see is that companies are beginning to invest in our funds disease research.

I don't think we're yet seeing that reflect in our level of bookings you'll appreciate it takes some time to run through that investment cycle. So the short answer to that question is I don't think it's really started as yet.

We'll see that into the future.

Great. Next question.

For the large Phase III trial at about 30 million, at what time is there a milestone assessment that might determine if the rest of the trial will proceed or terminate?

So that question there implies a futility analysis. It's my understanding that this trial has not been designed with the futility analysis in mind.

Great. I have a raised hand from Elyse Shapiro, Elyse, I'm going to go ahead and unmute your line at this point, just one moment, and we'll let you ask your question.

Okay. You are unmuted, Elyse.

Let's see if we can hear your question.

Great. And congrats on the results.

How is performance looking year-to-date? And what impact do you think the return to things like in-person conferences and travel to visit sites will have?

Thanks, Elyse. So look, the business, as we said, is running really well.

We the sales pipeline as we look forward to the June half year is strong. Where there's plenty of opportunities out there.

We are beginning to see a return to in-person conferences. There's an upcoming Alzheimer's ease conference in Barcelona next month that we have some Cogstate staff attending.

I think it's going to be interesting to see whether that makes any difference to opportunities. I think it makes us all feel better about getting face-to-face and talking to some people.

I think the industry has been running pretty efficiently though, in a virtual environment. So we're not necessarily anticipating that to be a significant driver of new activity.

But I suppose we -- and we just -- we're excited by the opportunity to get there and see some of our customers again.

Indeed, we are. Next question, any plans to list on NASDAQ, so bigger audiences can invest in the growth of the company will also help to get more valuation for existing shareholders?

Well, there's an implication in that question that the NASDAQ listing implies a higher valuation, which I think is hypothesis that could be tested. But no, look, we don't have any plans to -- for a dual listing at this stage.

Great. Next question we have.

I note that your market share is lower for Phase III at 9% versus Phase I and II at 13% and 14%. Is there an expectation that as the trials flow through that the Phase III market share will increase over time?

Yes, I think that's a really good question and a good observation. I think the lower market share that we're enjoying currently in Alzheimer's disease in Phase III trials, just reflects the fact that the of, I suppose, more recent acceptance about technology, the fact that it was used in those Phase II studies have proceeded and sort of ran into those Phase III studies.

So I think the -- again, just to highlight the point that we mentioned earlier, we do see good stickiness in terms of the use of our technology from one phase to the other. And so we do anticipate that if those 2 trials are successful, that we will see an increased use of collate technology in those both in future Phase III trials.

Related to the market share question broadly, but in a different category. So you highlighted that you have 13% market share in Alzheimer's clinical trials.

How do you intend to gain share over the coming quarters and years? And who would you be displacing i.e., paper and pencil, other digital assessment providers.

How do you set yourself apart from the competition?

Yes, again, a really good question. And I think it's a $62,000 question, right, of how do you gain market share?

And a lot of that is the is the standard blocking and tackling of how do you win sales. So it's continued performance with our existing customers is expansion of our customer base.

It's and we do that through the demonstration of the quality results that we've been able to produce in large Phase III studies with our existing customers. it's through the adoption of our channel partners and the ease at which our technology can be integrated into the into the platforms of those channel partners, it's continued investment in the site and showing the utility of our assessments.

I think also the successful launch of our product by Eisai and the health care market actually has pulled through into the clinical trials part of the business. whereby we can see our technology used as sometimes a secondary or exploratory end point with a view to the use of that technology to help identify patients once the drug gets out of trials and into market.

So I think it's a range of those factors. In terms of who we're winning work from, I think it is fair to say, as highlighted in that question.

that most of the work currently is conducted by a stand in neurological assessment. So we don't see ourselves as displacing the digitized assessment of cognition because, by and large, we don't see that in those Alzheimer's disease trials.

We don't see other providers in those trials as a general statement. So there's a number of companies who support those standardized measures of cognition and largely that she would be seeking to displace.

Great. And it turns out, Elyse actually had another question.

So I apologize for cutting you off early Elyse. Let me go ahead and unmute you again.

Here we go. And you are unmuted.

Great. Do you mind typing it down.

I've got a few questions. So if you just don't mind on reading until the end.

Looking at the software license mix as a component of the trial's revenue, how do you see that increasing over time? And do you think that it will continue to increase as decentralized trials kind of asystematic, can you continue to play out?

That's a really good observation, Elyse. I think -- yes, so as a general statement, the license fee mix, obviously, it's our it's our goal to increase to increase that mix over time.

And really, that comes back to the adoption of our digital measures as more in more studies and as more important components in those studies. So when we look at where is the most obvious places that can happen as trials move to the more virtual decentralized trial, there's an obvious role for digitized assessment just because of the ease administration and the easy delivery of those assessments.

So we really do see that as an opportunity or a means by which we can increase that software revenue about license fee revenue as part of the overall mix.

Got it. And then just looking at pipeline, would you say that there's a similar distribution of like Phase I, II and III compared to what we've seen in the first half?

Or do you think it's kind of skewed more towards earlier stage trials?

When we look at the June half?

Or just the pipeline in general?

Pipeline in general. I think -- yes, look, I think it's probably more of the historical trend.

So I think when you look at the value of contracts signed in the first half, there's obviously that huge swing to Phase III. As we look forward through the existing pipeline.

There is a lot of Phase II work coming through. and a decent amount of are certainly more Phase III work coming through, I would suggest in the pie than what we've seen historically.

So that's kind of our expectation as to where the business is going and where the -- and reflects the growing acceptance of our solutions. So look, I think I don't really answer your question.

Look, I think there's a good mix certainly, a majority of Phase II in terms of number of opportunities, but obviously, the Phase III opportunities tend to be higher in value. So they have an important impact on the value of contracts signed.

Yes, definitely great. And just one last question.

Any insights into Eisai's U.S. launch plan on the health care side?

Look, I think what I would say there is there's a lot of consideration going in there really between the role of the medical device. So the Cognigram registered medical device that will be provided to clinicians.

And how does that interrelate with the sort of more general consumer application and how similar or different should those applications be. So they're being a been quite considered in their approach to launch, and we're very supportive of that.

The because we do think it's important to get that launch right and to be providing the right type of messaging and the right types of products to each of those markets. So look, we expect that we expect for that to come on to market soon.

I do note that in the U.S. they have launched the Cogstate technology into an application called, My Sleep Log.

So if you go to mysleeplog.com, it's a website that's supporting the insomnia medications and then launched a Cogeco test through that. So they have launched in the U.S.

just not in the Alzheimer's disease market. And really, as I said, that's really just thinking through exactly what they're going to launch into the consumer market and how that should differ from what's offered to physicians.

Kind of in that realm, jumping into another question that we had in the health care realm, and then we'll steer back into clinical trials as we have several questions in that area still. But can you give an update on the development plans for the Lila voice-based test?

And could you provide any insight with respect to any new scales or tests that we're developing?

So the -- in respect to Lila, so that's a phone-based version of our international shopping list test. The prototype of that product is in existence and is in -- is going through scientific validation currently.

We have planned to have certainly in this half year, we expect to have that technology available. And we're thinking about how we will in conjunction with AI, we're thinking about how we'll commercialize that within the health care market and also thinking about internally how we will commercialize that within the context of clinical trials.

So that product is coming along really well. And we think that's going to be a really nice addition.

In terms of newer products or newer tests, we constantly working with our science team is constantly working with their academic collaborators around different tests and different ideas. I would suggest there's probably more focus at the moment around refinement of the existing tests and there is around establishment or development of a whole range of new tests, the Lila application side and really focused on the movement of a number of our assessments to both phone-based modalities, but also to self-assessment modalities and that's really important in the context of the decentralized or virtual clinical trial that if we the greater number of tests that could be self-administered just makes that offering more compeling.

Great. And pivoting back, yes, into the clinical trial space.

The question is with regards to contracted clinical trials amount, historically, what is the follow-through on those contracts as a percent of total? And can we see even higher contribution margin from the Clinical Trials segment down the line?

Or is 54% to 60% optimal or maximum?

So Darren, I don't know if you want to take the first half of the question here, which is around the revenue roll-off from clinical trial sales contracts.

Yes. Let me comment on that, Brad.

So typically, the period in which our contract signs, and it does vary depending on what kind of contract it is. We have contracted that pure provision of software licenses, and we have contracts that include services as well.

But typically, on average across the portfolio, we'd expect to see something in the range of 10% to 17% of new contract signings within a period yield in revenue in that period. And then the revenue after that typically rolls off in pretty much a straight line basis over the term or whatever the contract is.

So depending on what kind of trial it is, whether it goes 2 years or 5 years that the revenue rolls off in a relatively straight line over that period. It does have some peaks and troughs, but fair to assume it's relatively consistent over that period.

And then in relation to the second part of the question around target margin for the clinical trials business. Look, I think into the into the next few periods, we view that sort of that range of the high 50s, low 60s as probably the -- where the business is sitting at the moment.

Implied in the question is as we accelerate revenue substantially in that business, does it impact get more efficient? But I think there's a potential for that, and we are looking to invest in different technology solutions that improve the efficiency of our group.

We're also been moving our group to agile working methodologies to seek to make that group more efficient. So we're always focused on that and delivering a higher margin result in that business.

I think we need a little bit more time to see whether it's possible that we can push those margins, those contribution margins into the low to mid-60s.

Great switching gears. Has the Board reassessed the capital management plan on the cash balance?

And over $5 million positive operating cash flow noted, what big investment projects or acquisitions or the company planning to spend the cash on?

It's a good question. So we have -- we've looked at a couple of different potential add-ons to our clinical trials business, so different technology solutions that might accelerate our accelerate our plans.

We haven't yet found anything that we think would substantially accelerate the business and that we think where the asking price, if you like, for the business has been justifiable from our point of view. So we're always eager to, I think, really focused around that clinical trials business is the quicker we can achieve that growth in market share or achieve -- and then subsequently achieved growth in those revenues the better.

And so if we do see particularly technology solutions bolt-ons that could help us accelerate that growth, we are very interested, but we've got to find the right opportunities and we're going to find them at the right price.

Great. We've got just a few more questions here that we're going to take with the time we have.

In previous years, EBIT margin has typically been higher in the second half than in the first half. Could you talk to any seasonality that might typically favor the second half profitability?

No, I don't. And look, I think that if we look at the graph that I'm showing there, you can see in the second half of '20 and the second half of '21, that EBIT margin is higher.

I would suggest that to you, that's really because the revenue numbers in each of those years were higher than the first half. So I think in those earlier years, I don't think the revenue was at a sustainable future level to really read too much into those EBIT margins.

I think as we as we push this revenue beyond $40 million a year, I think you start to get to a size and scale of the business where the operating leverage comes through. So the short answer to your question, no, I don't think there's seasonality built into it.

I think that just reflects the revenue growth.

Great. Thanks, Brad.

And we're going to take 2 more questions here. The first is, given the market share estimate of around 13% for Cogstate, can you talk about the remaining market share breakdown?

Is it one big competitor or extremely fragmented?

I think it's a good question and one we're trying to solve ourselves. Look, certainly, there's a couple of larger competitors who support standardized measures of cognition.

So those competitors are Signet Health, the WGC Group. So we see them as our major competitors in that Alzheimer's of the space as to what percentage market share they have.

It's really hard to know. It's quite difficult for us to map to clinicaltrials.gov to do that in respect of another provider who doesn't have their proprietary assessments included within those trials, it's almost impossible unless you have first-hand knowledge as to who's running the trial.

So that's a very difficult exercise. But we do know that the from our perspective, they are our major competitors in the space, focusing on the support of those standardized measures of cognition.

Great. And with this, we've got a last question that is very sweeping, where do you see Cogstate date in 2025 and the next 5 years?

20 to 25 years was the question?

In 2025 or in the next 5 years?

I think you meant in 25 years. So in 2025, so look, I think -- because I think that's a long enough time frame that you really got you get the health care product on market, and you're really looking at that change dynamics of the business.

So when you look at our revenue mix currently, the health care business only represents about 10% or thereabouts of the clinical trials business. We see the health care opportunity to be really large and potentially much larger than the clinical trials opportunity.

So over the course of the, say, the next 3 to 5 years, we expect to be able to grow that clinical trials business, and we talked about how we can grow market share into a growing market, particularly in outside of this disease. So we expect to be able to grow that clinical trials revenue.

But I think the unanswered question is how much does health care revenue grow beyond the minimums that affected the Eisai agreement. And what are we seeing by 2025 in that respect.

And I think that our hope is that by that sort of 2025 period, you've got product on market in a number of territories you're really starting to generate significant revenue from that from that health care business. And so the mix between the segments, I think, starts to change.

The other thing that happened by sort of 2025 and 2026, which we're showing one of the last slides that here that was shown in the additional information that was of the deck that was lodged with the ASX is you start to see that the annual cash flows that come in from Eisai, which is the blue bar across the bottom start to really increase. And so what you -- so rather than just be an amortization of cash that we've already banked, that starts to more reflect cash that's coming in over particularly years '26, '27 and '28.

So you're seeing a lot more free cash in the business as we push out bags. And that's only at the minimums, of course, to the extent that the -- that we're successful in the revenue increases beyond those minimums, I think there's substantial upside beyond that.

Fantastic. Brad and Darren, thank you again for the presentation and perspectives.

And any final words for attendees, maybe we'd start with Darren?

We might have lost Darren. I will close out just to say that the -- we think, as I said at the outset, I think the business is in great shape.

We're looking forward to a strong second half result. We've provided good guidance here.

I think there is upside beyond that guidance. We're really driven by what is the level of contracts -- clinical trial sales contracts that we execute through this half year period.

As we look forward to fiscal '23 and '24, we see a lot of growth that's already booked in, in terms of the strong revenue pipeline that we have and the significant sales opportunities that are in front of us. So the business is in good shape, and we expect to be able to continue to grow both revenues and profits over the coming years.

Wonderful. And with that, we thank everyone for joining us today.

This presentation will be made available on the Cogstate website as well as our YouTube channel. And I'll also take this moment to invite you to learn more about what we do by following us on social channels and exploring our website.

So again, thank you all for tuning in, and we wish you a lovely rest of your day. Thanks so much.