Cogstate Limited

Good morning, everyone. Thank you for joining today's investor update, which include a discussion of our results for the half year result -- half year ended 31 December 2023.

My name is Brad O'Connor, I'm the CEO of Cogstate. I'm going to be joined today by Darren Watson, who's our CFO; and by Rachel Colite, who's the Executive Vice President of our Clinical Trials business.

Rachel has recently been promoted into that role and where she has full P&L responsibility for our Clinical Trials business. So excited for you to hear from her directly.

Today's presentation includes forward-looking statements, and therefore, note our disclaimer stating this information in this presentation is general in nature. I encourage all investors to consider your own investment objectives and also to review in detail our half year financial statements that have been lodged with the ASX this morning.

Following our presentation, we will take questions. If you have a question, there are 2 ways in which to ask that question.

[Operator Instructions] As I said, this presentation has been lodged with the ASX and these slides will be available in the handouts tab of the meeting that you're currently in. And a recording of this presentation will be available later today on the Investors section of the Cogstate website.

So we want to start this presentation by looking at the big picture. We'll dig in to each of these points in detail as we progress through the presentation.

Firstly, we believe that the pharma biotech investment in central nervous system and neurological disorders will provide a platform for growth over the medium, long term. We'll talk to some of the recent evidence to support this statement throughout the presentation.

Secondly, Cogstate's been -- has proven to be a trusted provider of best of breed technology and services to large pharmaceutical companies over a number of years now. Our combination of technology and services differentiates us from our competitors in this space and provides us with a unique advantage that we will seek to leverage and gain market share in a growing market.

Finally, over a number of years, we've proven that Cogstate is run with a focus on our template financial model. We see gross margins between 55% and 60% in the Clinical Trials business, higher margins in the software-focused Healthcare business and relatively flat overhead costs.

Flat revenues over recent half year periods have made it difficult for us to maintain the gross margins and EBIT margins that we achieved in financial year '22. But we've taken steps to remove costs and maintain that financial discipline over the last year.

And we've proven that the financial leverage exists to translate revenue growth into profit growth. We believe that over the longer term, Cogstate can be a business that produces 20%-plus EBIT margins consistently.

So let's start with a look at the industry trends that we think will impact Cogstate's financial performance over the coming years. Over the medium to long term, we believe that central nervous system and neurological disorders will be a growth area for pharma and biotech investment and also with clinical trials activity.

Our basis for this statement is threefold. Firstly, in a range of indications over recent years, we've seen an increase in positive clinical data.

Drug development for CNS diseases is complicated by a limited ability to measure whether a drug candidate is accessing and affecting the human brain, particularly in early-stage trials. Over the last 10 to 15 years, we've seen significant advances in imaging technologies and other biomarkers that have taken a lot of guess work out of the CNS drug development.

Nowhere has this been more evident than in Alzheimer's disease with 2 positive Phase III trials have read out recently, the success of which can be directly linked to the ability to measure amyloid deposits in the brains of the patients using PET scans and other biomarkers. Secondly, the regulatory environment now seems more accommodating of drug developers than it did previously.

In making a statement, I'm focused particularly on the U.S. FDA, which is a critical commercial market for all drug developers.

The [ SGA's ] Center for Drug Evaluation and Research, approved 55 new drugs in 2023, which is a jump of almost 50% compared to 2022. The 10-year rolling average for new approvals is now 46 per year, the highest it's been in over 20 years.

With approval of new treatments, we've seen expansion of reimbursement also, which is critical to that investment decision from pharma. Finally, we've seen over the last year an increase in pharma interest in CNS assets.

And just to give you a couple of examples of that interest. J&J, at their recent Investor Day, we're keen to point to the role that neuroscience was expected to play in their specific revenue goals.

I note the Cogstate test is for use as the primary safety endpoint in a series of Phase III trials that supported the approval of SPRAVATO, which is now the fastest -- now J&J's fastest-growing product. And J&J has been a long-time Cogstate customer.

There's also been recent M&A activities, such as the acquisitions of Cerevel by AbbVie and Karuna by BMS, both demonstrating the strategic importance of neuroscience assets to larger pharma companies. I note that Cogstate is working with both AbbVie and BMS also.

So while we have confidence in the long-term outlook. There's no getting around the fact that we've been somewhat surprised by a lack of new trial starts in calendar 2023.

And it's worth spending a couple of minutes here to explore the factors at play for those 2023 results. In Alzheimer's disease, the leading companies and certainly Cogstate's largest customers have been focused on regulatory approval of their new therapies, and this has led to a slowdown in new trial starts that we're seeing.

While Cogstate has been successful in adding new customer names over the last 12 months in Alzheimer's disease, and Rachel will talk to that in a little bit more detail. Those new programs start with smaller Phase IIa trials with a much smaller contract and revenue value for Cogstate.

So the work is coming through, but not at a level or not at a financial level that we've seen. Where we have been really successful is in rare disease, we where we've grown our customer base, and we've been able to show important success in central nervous system indications.

This is a strategically important area for us and allows us to build trusted partner relationships with a range of new customers. However, given the nature of rare disease trials, they are naturally smaller and generate less revenue of Cogstate than some other indications.

Anecdotally, we've heard from our industry partners that everyone experienced a slowdown in new trial starts in CNS diseases throughout calendar '23. And there's no doubt that this is somewhat impacted by access to capital issues that have impacted all biotech companies over the last couple of years.

As we look forward though, we can see that these trends are starting to revert to our expected long-term trend line. And here, I want to hand over to Rachel to speak in more detail to the commercial opportunities that we believe will be able to develop over the next 12 months.

Thank you, Brad. So in the coming months, we do expect growth in later stage [ AD ] trials in particular, to begin to resume.

We're seeing this in our customer discussions, which gives us confidence in a stronger sales result for the second half of financial year '24 where pipeline opportunities that were previously delayed should begin to execute. In Alzheimer's disease, we are currently pursuing new late-stage sales bookings in support of a monoclonal antibody targeting amyloid.

And then later in the year, we expect to support tau in combination therapy candidates provided these move into Phase II. We are also discussing sponsor plans for cognitive assessment in post-approval real-world evidence studies.

So these types of trials are expected to increase in line with drug approvals. This is an area where our remote assessment and our decentralized trial experience is really key for providing the scale and cost efficiencies that these trials require.

Trial prescreening and patient identification in the community is another exciting growth area where we have ongoing sponsor-funded pilots, that include community-based events where our digital cognitive assessments are being combined with questionnaires and blood-based biomarkers to predict study inclusion qualification. As more trials move into the early and presymptomatic stages of disease, moving into the community for patient engagement becomes really important, including the engagement of underrepresented populations.

Because this screening occurs prior to enrollment, these services tend to be less impacted by slow trial enrollment, where high screen fails delay the recognition of contracted revenue as we sometimes see when we support trial endpoints. Further, we are really encouraged by the activity around in-licensing in neurodegeneration, as you mentioned, as the industry prepares to see new compounds moving into the later stages of development.

Cogstate's unfair advantage in this Alzheimer's disease space is first related to our unparalleled scientific and operational expertise, having supported over 100 Alzheimer's trials and presymptomatic -- all presymptomatic industry-sponsored programs. We're also seeing an expansion of approved vendor and preferred vendor relationships with 3 new top tier large pharma sponsors in Alzheimer's disease, where we have secured awards in the last year to support their Phase II programs in which we will seek to follow that into Phase III.

So another area of near-term growth for Cogstate is sleep disorder trials, where there is some renewed excitement around drug candidates that act on the neuropeptide orexin to modulate arousal and other functions. We're seeing -- we are engaged in multiple late-stage program initiations that are planned in multiple indications, including a program of Phase III trials planned for this calendar year, whereby a Cogstate digital endpoint will be included as a primary end point.

In this area of sleep disorder trials, we have invested in unique fit-for-purpose solutions to enhance the usability and acceptability of our technology by individuals with sleep disorders and enhanced real-time data quality monitoring for sponsors that leverage our newer data lake and data analytics capabilities. The next growth area is the area of mood disorder trials, which includes indications such as major depressive disorder, bipolar, anxiety, schizophrenia.

There are a number of exciting new targets and mechanisms, including the area of psychedelics which we are seeing an increase in pipeline opportunities as these programs move into later phases. In the first half, Cogstate invested in the development of new radar certification assets, such as a new gold standard scoring videos for the key primary and secondary end points in these trials, and this has really strengthened our competitiveness in this area.

We also expanded our network of consultants to include individuals with expertise on these rating scales. The growing pipeline that we're seeing for mood disorder trials is attributed in part to the strong fit between the technical requirements of these rating scales and some of the platform capabilities of our growing eco channel partners.

So as these programs are often encouraged by regulators to use a central rating approach to how these assessments are administered, they can include a wide range of Cogstate solutions in each trial, which then increases their contract values. And finally, rare diseases, specifically the area of rare genetic neurodevelopmental disorders is, of course, another area where we expect to see growth, given how deeply embedded we are in many of these Phase II programs that are now reading out and being some of the first to see positive results.

So based on these trial results presented to date, we are hopeful of Phase III trial starts for multiple sponsors throughout the calendar year.

Thanks, Rachel. Rachel will be available for questions on various topics at the end of the presentation.

So just to talk a little bit about Cogstate's expertise in this area specifically. We provide a unique offering to our customers that we believe enable us to win market share over coming years, includes both a combination of technology and specialist expertise which really differentiates Cogstate.

We're focused solely on the measurement of cognition and all the issues associated with that. Our offering is more specialized than our competitors allowing a relatively small team to develop deep expert team -- expertise, sorry.

As a team, we've proven our ability to develop very deep relationships with our customers. We're trusted partners for those customers, helping our large pharma customers to run strategically important global trials.

We're really proud of these strong relationships, and we invest in them a lot. We win -- when our customers win, and we feel the sense of loss when a program fails.

We differentiate with our digital cognitive assessments. And even though software license fees only make up on average about 18% of total revenue, we do see that Cogstate digital assessments are included in over 90% of the trials that we run.

In other words, the digital assessments are a key [ thought ] to us winning work and therefore, a key differentiator to our competitors. Unlike our competitors, we're platform agnostic when it comes to data collected within the clinical trial.

So Cogstate has not built out our own ecosystem or a digital electronic data capture system. Instead, we leverage other tech providers to provide the necessary expertise to allow such tech providers to sell into those complex CNS trials.

In this way, we allow our customers to choose their preferred vendor, and we think that gives us an advantage over our competitors. Finally, we are a disruptor in the clinical trials market, and that's a market that's ripe for disruption.

We are quick to adopt technology and process solutions and prove that those can work. And there's really no better example of that than the global Phase III Alzheimer's disease trial that we're currently running for a big pharma that is being run at 100% remotely.

The patients never go to a clinical trial site and Cogstate delivers all telehealth neuropsych assessments and all ancillary services. I think it's a great example that how we've seen a gap in the market and we've been able to take the assets at our disposal and apply them to that challenge.

Cogstate is a leader in clinical trials of Alzheimer's disease treatment. But that trial environment for Alzheimer's is about to change dramatically.

We can expect to see and we are seeing more companies enter into Alzheimer's R&D as new drugs provide a pathway to market. And that's great and presents opportunity for us.

But at the same time, it's going to be harder to recruit patients for a few reasons. Firstly, recruitment will be competing with approved drugs.

And secondly, as an industry, we'll be looking for more patients to fill more trials. And then finally, the regulators and the community generally want to see greater diversity in patient populations for trials.

All of these recruitment challenges will lead to a widening of the net to attract sites for clinical trials. And I think gone of the days of just recruiting from Alzheimer's disease research centers, which is largely what we've done over the last 10 years.

Pharma companies will need to work with Alzheimer's naive sites. And this also creates opportunity for improved training solutions and better technology design that detects or even prevents error from occurring, when assessing patients at those Alzheimer's naive sites.

Cogstate with our digital assessment is uniquely placed to assist with the push into the community and trying to find representation from more diverse communities. We have demonstrated the ability to apply advances in technology, collaborative efforts and innovative trial designs that can help mitigate a lot of these challenges.

Similarly, the treatment of cognitive impairment in Alzheimer's disease in primary care medicine is about to change. From the work that Cogstate has done with focus groups in the community and particularly in the United States, we know that people are keenly interested to understand their own brain health, and they want the ability to track it provided the tools are easy to use, they're low cost and they're provided by a trusted source.

We also know that earlier treatment of Alzheimer's disease leads to better health outcomes with those newly approved treatments. So -- and what I'm saying there is that there's a clear benefit to those who are engaging and tracking their brain health and who are, therefore, able to identify very early changes and to seek appropriate treatment at that time.

We also know the primary care docs who simply refer a specialist -- refer a patient to a specialist with a long waiting list is not an ideal solution and actually just makes things worse. I think the development of blood-based biomarkers are hugely beneficial for early diagnosis, but they're not yet commercially available and work better to help with differential diagnosis when paired with a cognitive assessment.

Finally, we believe that treating the -- that the treating health care professional should be able to knowledgeably speak to prescription of new drugs, of course, but they should also be able to speak to options such as clinical trials in the event at the current treatment is not right for a patient. And that can happen for a range of reasons, including the cost of that [ trick ].

In summary, we believe there's still a lot of work to do in expanding access to accurate measurement of brain health, and that creates a lot of opportunity for Cogstate. So within that context, we're pleased to announce that in the coming weeks, Eisai will be launching Cognigram to U.S.A.

primary care physicians with a specific focus on the annual wellness visit, which is a Medicare code that's available to all Medicare recipients and those over the age of 65 in the United States. In considering the take-up of such assessments, I think it's really important to understand that the prescription of new Alzheimer's therapies requires much more than simply a measurement of cognitive impairment.

Therefore, while the Cognigram launch is a really important first step to identification disease, it's just that. It's a first step.

The differential diagnosis of Alzheimer's disease and the confirmation of amyloid is presently complex, costly and invasive. Rates of diagnosis and prescription of drug will continue to be slow until more structural changes have implemented.

And within that context, we believe that Cogstate can play an important role in exploring those changes and those structural changes. The Cogstate digital tools in conjunction with our industry relationships mean that Cogstate is uniquely positioned to explore ways of pushing digital assessments further into the community.

We're presently involved in discussions and pilot programs to explore how technology can be used to facilitate identification of undiagnosed impairment of the community. And we expect to be able to talk more about that in the coming months.

Before I hand over to Darren to dig into the financial details of the financial results for the half year, I want to talk broadly about the financial model. Our pro forma financial model provides the Cogstate management team with really clear guidelines of what we're seeking to achieve, and it's important that our investors understand those guides.

We expect the Clinical Trials business to operate a gross margins between 55% and 60%. We expect that the Healthcare business will be more of a SaaS-style model with associated higher margins.

We expect that overhead costs will be relatively stable, providing financial leverage as we grow revenue. If we can achieve these goals, EBITDA margins of more than 25% and EBIT margins of more than 20% are possible.

As mentioned already, through calendar '23, we've seen a real slowdown in clinical trial sales contracts, and that's resulted in flat revenues over the past 4 half year periods. Therefore, we made in -- 2023, we made adjustments to our cost base, which has seen an improvement in profitability, notwithstanding those flat revenues.

The challenge looking forward is to grow revenue and demonstrate the financial leverage that we believe exists within the current cost base. So now I'm going to hand over to Darren to examine the December half year financial results in more detail.

Great. Thanks, Brian.

So before I start, please just note that all numbers are reported in U.S. dollars unless specifically noted.

And following the restructure that we undertook in May 2023, the research division is now part of Clinical Trials, all the prior year compares that you'll see throughout here have been updated to reflect that. In the first half of financial year 2024, Cogstate has grown revenue by 3% year-to-year to $20.2 million, and substantially improved our net profit before tax to $2.1 million compared to a breakeven result in the prior comparative period.

As Brad just mentioned, our new contract sales were $10.9 million, lower than our expectation, which has flowed to a decline in our future contracted revenue, which is down at $123.7 million, down 16% from the prior comparative period. We have achieved positive operating cash flow, excluding the effects of pass-through for the period of $0.5 million, which is up 17% from the prior period.

Turning to the P&L for the first half. As I mentioned, group revenue was $20.2 million, up 3% year-to-year, driven largely by revenue growth in Clinical Trials.

While new contract sales have been slower than expected, strong delivery against the contracted backlog has delivered revenue growth in the reported half. Gross profit was $10.8 million, up 19% year-to-year with the gross profit margin growing 7 points year-on-year, taking the gross profit margin to 54%.

This reflects the productivity gains achieved following the restructure that was undertaken in May of 2023, which included a 13% reduction in the company's full-time workforce. While the margin is below our target model, the investments that we have made to drive productivity improvements, we believe positions us well to achieve the target margins as revenue grows.

Operating expenses improved year-on-year by 6%, again reflecting some of the restructuring actions that were taken back in May 2023, but partially offset by lower capitalization of labor costs as we carefully consider our investment in technology to drive our future productivity. Both EBIT and net profit before tax have recorded strong improvements year-on-year, with EBIT margin improving by 10 percentage points year-on-year.

And while not at our target model level, as Brad mentioned before and as I also said before, we believe we're well positioned to return to those levels as the revenue grows. Looking now at segments.

Clinical Trials revenue has grown 3% year-on-year to $17.9 million. The recent levels of new contract sales means this is lower than the level of growth we are targeting.

However, as I said before, it does reflect strong execution against the contracted revenue for the period. Our gross margin has improved to 50 points, up 6 points from the prior period, their cost base now well aligned to the current volume of business following that may restructure.

Our software license mix within this revenue was only 13% compared to our historical averages of around 18% to 19%, partly the lower level of new contract sales, but also reflects the growth in our labor-based offerings being taken up by our customers. Healthcare continues to reflect the amortization of both the global and Japan licensing agreements.

And the margin improvement results also arise from the May 2023 restructure. Our partnership continues with Eisai, as Brad mentioned and focus of deployment of new testing into various markets, particularly, as Brad mentioned, the launch into U.S.

is expected imminently. If I go to cash flow, operating cash flow, excluding the effects of pass-through has improved from $0.4 million in the prior period compared to $0.5 million in the current period.

While we have seen a decline in receipts from customers, we have been able to more than offset that by lower payments to employees, given the reduced head count that we have following the restructure and also lower payments to vendors. The cash flow from investment activities reflects the lower capitalization of labor costs when compared to the prior period.

And you'll see $3.1 million of cash is being used for the share buyback program, which accounts for a significant increase in cash outflow in the financing activities. We continue to have a very strong cash position with $25.3 million of cash, cash equivalents on hand at the end of the half.

Our future contracted revenue, as I mentioned before, has declined 16% from the prior half to $123.7 million, mostly due to the lower contract sales over the calendar year of '23 as outlined previously. From a backlog runoff perspective, financial year 2024 revenue under contract, including the first half actual revenue now amounts to $36.7 million, up from the $31.9 million at the commencement of the financial year.

The $4.8 million added through the first half is low compared to historical averages and reflects the new contract sales and mix within those sales. FY '25 revenue under contract is now sitting at $35 million and with a strong pipeline of opportunities that we see as outlined by Rachel, we expect to see this grow through the second half of this financial year.

That positions us well for FY '25, '26 and '27, and you can see all have grown from prior period reporting. With that, I'll hand back to Brad.

Thanks, Darren. And Darren will also be available for questions at the end of this presentation.

This time last year, we commenced a share buyback program. Darren just referenced that, that resulted in the cancellation 3.5 million shares, roughly at the total cost of about AUD 5.6 million, which is about USD 3.7 million.

The Board had resolved to restart that buyback program with on-market acquisition of up to a further 5 million shares. The decision to restart the buyback again reflects the Board's confidence in our commercial prospects and our strong capital position.

So to recap, we believe that we'll be able to generate growth over both the short and the longer term. Over the short term, the lifting clinical trial sales contracts is a necessary precursor to revenue and profit growth.

We've reported previously an increase in sales activity, and we believe that, that will see many of those opportunities execute in this June half year period. After period of investment in building both systems and relationships, we are now seeing sales opportunities via our growing network of eCOA and CRO partners, which is an important source of new opportunities for us.

Our decentralized offering where we provide additional services via our network of consulting neuropsychologists provides opportunity for larger contract value delivered by Cogstate and we've seen that over the last couple of years. And we've demonstrated that with a stable cost base we're able to translate revenue growth into profit growth.

Over the longer term, we believe that we are focused on a growing area with an increase in R&D activity expected over many years. Alzheimer's disease R&D will face a number of new challenges over the next 5 years.

And I think Cogstate is really well placed to address those challenges with our unique combination of both digital assessments and our service offerings. As an industry, we'll need to find ways to move out of our -- sorry, to move out of Alzheimer's disease research centers and further into the community to be able to identify patients who will benefit from treatment, but also those who may be eligible for trials and new experimental treatments.

Turning our attention specifically to the FY '24 financial results. As I stated earlier, a lifting clinical trial sales contracts is going to be the necessary precursor to revenue and profit growth.

We've reported that we that we've seen an increase in those sales activities, and we now have confidence that we'll see many of those opportunities executed in this current June half year period. Therefore, we're confident of an improved sales booking result in the second half of this financial year.

However, there remains uncertainty in respect to the timing of contract execution and therefore, uncertainty of the runway for revenue impact in the current half year period. As a result, we haven't provided specific guidance in respect to the financial year.

I'm going to pause there and I'll allow -- ask the questions. As a reminder, if you do have a question, there's 2 ways that you can ask it.

Firstly, you can type your question with the control panel and that will be read by the moderator or you can raise your hand to have your line unmuted to ask a question.

Thank you so much, Brad. And Rachel and Darren.

Folks, this is Ruth Ray. I'm the senior marketing manager here at Cogstate, and I'll be leading this Q&A session.

We do have several questions submitted already and some hand raises. I see you there, and we'll definitely get to those and let you all ask your questions.

First, we have a couple of questions around -- it's been spoken of several times about the predicted growth in the Alzheimer's drug development realm. And I have 2 questions kind of relating to this.

One of them is any commentary on the GLP-1 drug interest and investment in the Alzheimer's disease space? And if that would change any of the appetite for Alzheimer's drug development efforts.

And then also any commentary on lecanemab and its approval and the possibility of impacting the health care side of Cogstate's business.

Sure. I'll take both of those.

So firstly, thanks for the questions. Let's deal with the GLP-1 stuff first.

So most investors will understand that Lilly is one of Cogstate's largest customers. If you follow Lilly's earnings calls, you will see that they've pivoted substantially over the last 6 to 12 months where previously there was a lot of questions in relation to the Alzheimer's disease program.

And now there's predominantly questions in relation to the GLP-1 and other questions related to the diabetes franchise, obviously, a really exciting area. But we don't see any particular crossover between the GLP-1s and Alzheimer's disease.

I think there's some interesting questions in relation to the GLP-1s. There's talk of those -- that drug class acting in a general inhibitor, people are reporting a reduction in gambling and alcohol consumption and other things when on those drugs.

And I think there's an interesting question as to what's causing that. What is the cognitive impact?

But certainly, we haven't seen any of those drug developers with a focus on cognitive endpoints at this stage. To talk about the lecanemab or Leqembi launch in the United States.

Again, Eisai, the most recent quarterly provided details of the take-up of that. That's been slow.

I think that was perhaps a surprise to some in the market. It wasn't a surprise to Eisai in our discussions with them.

As I mentioned in the presentation that the differential diagnosis and the pathway to drug in the United States and the reimbursement processes you need to go through to achieve reimbursement, they are complex and time-consuming. And it's going to take time to get people on drug.

I think the bigger issue with respect to whether it's Leqembi or Lilly's donanemab, which is expecting approval in this March quarter, is that the benefit -- so the efficacy that's been seen on each of those drugs is much greater in earlier disease state and similarly, the side effects that have been reported are much less in earlier disease state. So there's a real focus for both of those drug developers to find people in the community at the very earliest stage of disease, so that their drugs have the optimal chance of showing benefit for those patients.

And as I mentioned in the presentation, there's a real infrastructure gap of finding those people in the community. And so I think that Cogstate has got a really important role to play or can have an important role to play in finding people in the community who will benefit from treatment.

And one part of that is putting the right tools in the hands of primary care physicians, but I think it probably goes beyond that. And there's some exciting opportunities that we're exploring currently.

And we think there's lots of upside for us there to solve what's a really significant problem in terms of getting the right patient on the right drug.

Brad, thank you so much that commentary, super helpful. I'm going to go to the audience now.

We have a hand raise from Dennis Hulme. Dennis, I'm going to go ahead and unmute you.

All right? You now should be able to unmute on your side and ask your question, you will need -- to yes, there you go.

It looks like you're good to go.

My first question is related to, I think, it was Slide 6, where you talk about the growth drivers for Alzheimer's disease. You split out the opportunities for next-generation assets with an amyloid focus but early in the calendar year and for tau mono combo therapies later in the year.

Just wondering if you can give us a bit more color as to why you've split it out in that timing? And just what you're seeing in the pipeline that lies behind those comments?

Yes. So Dennis, thank you for the question.

The -- I'll just preface any comments by, of course, we're restricted somewhat in our comments in relation to the various confidentiality agreements we have in place. But as a general statement, I think to deal with them in chronological order, the next-gen amyloid focused drugs are Phase III trials that are ready to kick off.

And so those will be opportunities for new trial starts that will impact us in this June half year period. When we look at the tau therapies, the opportunities that we're looking are Phase III opportunity -- sorry, both a Phase II and a Phase III opportunity that are relying on or waiting on readout of previous trials.

So the reason that we're noting those for starting later in the year is that they're -- that's just the time line for the development of those assets. Now I think we have confidence and the sponsors in question have confidence in relation to those trial starts, but that will be later in the year.

When we talk about mono and combination therapies for the tau drugs, so monotherapy is the tau-only therapy, a combination therapy will be tau plus the monoclonal antibodies that will be approved or that are approved.

Okay. Great.

Second question is just about Cognigram. You mentioned that Eisai is expecting the U.S.

launch before too long. Can you just give us a little bit of color about what form that launch is likely to take, where it's likely to be used initially?

Yes. So to primary care physicians.

So they have a -- they have a database of primary care physicians. They will be launching an e-mail campaign.

There will be associated websites, education materials directed to both primary care physicians or general practitioners. They're seeking to explain to those primary care physicians how they can use Cognigram in the context of the annual wellness visit.

The annual wellness visit is a annual checkup that's subsidized by Medicare and provided free of cost to all Medicare recipients in the United States. It's been a program that's been underutilized in terms of lack of use by general practitioners.

And Medicare are keen to see a lift in the number of annual wellness visit assessments that are undertaken. The -- one of the issues that's been noted by Eisai in their analysis of the use of the annual wellness visit billing code is that the primary care -- the annual wellness visit has a compulsory cognitive check as part of that.

And the primary care physicians don't feel comfortable in terms of undertaking that cognitive assessment. And so they see a link there of providing Cognigram and giving physicians access to an already approved billing code that they can open up by using Cognigram and undertaking that annual assessment.

So we think that's a really -- it's a really good opportunity. We'd actually hoped that they may have launched that in February, but it's now looking like that it will be closer to the end of March just as they're working through their medical -- Medicare legal approvals in relation to all the claims and things like that.

But a lot of work at Eisai has gone into that, and we're really excited about the launch.

And a follow-up question on the Cognigram launch. Was just -- is there any revenue flowing to Cogstate from that?

So the revenue -- that's covered on the global licensing agreement with Eisai. So the revenue that you'll see in the half year accounts, Darren mentioned $2.1 million of revenue in Healthcare through the 6-month period.

That really relates to that license. So to the extent that, that Cognigram launch is successful enough to exceed those minimums, then there will be additional revenue that flows to Cogstate.

But we don't expect additional revenue on top of the minimum annual payments, certainly not through fiscal '24 and probably not through fiscal '25. But we'll see what the launch looks like and what take-up looks like.

Brilliant. Thank you, Brad.

And we did go to another audience question, Elyse Shapiro, I see you have a hand raise. I'm going to go ahead and unmute you.

And let's see Elyse, you're good to ask your question.

Great. Just in terms of what you're reporting, I know at the quarter, you provided a bit more color around the pipeline, saying it was in a better place than ever before, and I think you even quantified that.

Is the pipeline still kind of better than it ever has been? Or have you seen material opportunities drop off?

Yes. So look, I'll make some initial comments and then hand over to Rachel to talk more specifically about what she's seeing inside the business.

But I think as a general statement, we haven't seen -- we haven't seen a drop off in terms of sales pipeline. We haven't lost opportunities.

Certainly, opportunities are taking longer to close than we would like and that you all would like, but the sales pipeline and the sort of level of opportunities that we're seeking to close is still stronger than ever. Rachel, do you want to provide a little more color there?

No. Just to reiterate that, Brad, I agree.

We have a strong and growing pipeline. We're seeing a continuation of the diversification of the pipeline with respect to key accounts and growing some of our larger strategic accounts, where we were quite concentrated within Lilly as one of our key customers.

So that's a very positive trend. We are seeing a slowness in terms of contract execution for some of the larger Phase III trials.

And as Brad described, I think earlier in the presentation, this has been related to some slowing of decision-making with respect to sponsors who are focused on their approvals and their reimbursement for those first-gen monoclonals, and now are able to turn attention to getting these additional trials off and -- up and running. So really just a slowing in decision-making, but not an increase in our loss rate or anything like that?

Great. And then just within the call, you did disclose that you'd kind of onboarded 3 new top-tier sponsors.

I think BMS and AbbVie were mentioned. Were they historically using a competitor?

Or did they just not have kind of that specialist digital cognition tools on board?

Yes. So I think again, Rachel can add some more color here.

But I think generally, we're talking about at least for 2 out of those 3 sponsors that we've added, they're people who have moved into Alzheimer's disease over the course of the last sort of 12 to 18 months. So we've mentioned for some time an expectation that successful Phase III trials will derisk investment in the space, and we're certainly seeing that.

And we've seen -- we're seeing people both in-licensing and developing assets in Alzheimer's disease, where they either haven't been there before or they haven't been there for some time. Rachel, do you want to add some comments?

Yes, I agree with that. And without speaking to any sponsor in particular, we are seeing generally an increase in adoption of digital endpoints in the Alzheimer space.

So I think it's a sign of the move to detection of earlier decline or earlier change and the need for our sensitive instruments. So we're certainly seeing that.

We're also seeing the application of these tools for new sort of problem statements and challenges around that sort of prescreening and screening use cases, which is also driving an interest in the digital [ cognitive ] space.

Thanks so much, Elyse. Another question here is around Cogstate's work in remote assessment.

Have we seen a greater uptake? Or what is the interest in using remote technologies.

Rachel, do you want to take this one?

Yes, sure. So I think the interest in using remote assessment.

And it becomes a possibility in Alzheimer's disease as the trials move earlier in the disease state, where you're interacting with participants who are quite well, the either presymptomatic or early disease where remote assessment becomes possible. And then the major drivers for remote assessment is really around patient burden, so allowing participants to engage in a trial without traveling to a specialist center for all of their visits.

So that's a key driver. The other that we're seeing is with respect to data quality where you can perform these assessments with a much smaller, more tightly calibrated pool of central raters that will allow for you to just control for data quality in a more robust way.

And then finally, in areas light new disorders, which we commented on around the regulators' push, and we're seeing this in rare disease trials as well where the regulators would like to see central rating, not only for the data quality benefits, but also it allows to sort of maintain blinding when you're dealing with certain types of drugs where there may be some physical attributes, tubal dilation, things like that, that might be -- might impact the blinding of the study. And so having that remote rater can be helpful for those purposes as well.

So those are some of the drivers that we're seeing with respect to central ratings.

Thanks so much, Rachel. So we had a question submission that we may have already covered, but I'll ask it again, just in case there's any other colors you want to add.

So previously, it was said that proposal deliver was done in September -- sorry, proposal deliverables done in the September quarter were worth more than the June quarter, so $109 million in September and June quarter of $64 million. However, a higher activity has not translated into sales in the December quarter.

And the question is on, did your win rate decline? Or were there some delays in decision-making?

Yes. I think I'll take this.

I think the -- I think what we're seeing is as a first statement, generally speaking, that the sales cycle can be quite long on these, and that's not a new development. So an increase in sales pipeline in September won't necessarily immediately result in an increase in sales bookings in December, it could often be March.

So I don't think that's a change. But even within that, I think we're seeing an extension of that sales time line from -- in that decision-making time line as a general statement, I think that's fair.

So no, as we mentioned before, we haven't lost opportunities. This is an element of -- that's the expected outcome.

It does take a little bit of time for these things to close. And -- but we have certainly seen some slowing in that in terms of decision-making.

And you've got a year-end period in there as well that does tend to slow things down a little bit.

Thanks, Brad. Super helpful to add that color.

A multipart question here. So first part is how much of this half year sales were from outside Alzheimer's-related trials?

And then kind of leading into that area outside of our trial -- or Alzheimer's trials. With fundraising environment being tough for small biotechs, do you see slowing down in the trial pipeline in rare diseases?

And on the commentary on rare diseases, the note is that Cogstate has not sustained growth in sales in rare disease trials. Why is that?

And is there a way to improve that sales channel? So I'm happy to remind us there are several different questions in here.

Yes. So in terms of the percentage of Alzheimer's in relation to first half sales, I mean I think the thing I'd say is that first half sales are only -- were less than $11 million.

So it's just not much of a sample. Off the top of my head, and Darren, I'm not to put you on the spot, the percentage of Alzheimer's disease contracts that makes up that the $11 million of contract bookings.

I'm not sure whether you know that off the top of your head?

I believe it was somewhere in the order of around 65%, 70%, Brad, but I can get the exact number.

Yes, which is consistent with historical. So that's to answer the first part.

The second part of was.

Was around the fundraising environment being tough in biotech, so do you see a slowing in rare disease pipeline?

Yes. So -- so Rachel, I mean just to talk about rare disease pipeline, I might hand over to you there to talk about that as a general opening statement.

I think that we're seeing an increase in activity in rare disease pipeline that I'll let you talk to it specifically.

No. I think that's true.

The rare disease pipeline, we've had really strong sales channel activity. We've certainly been winning a large number of rare disease trials.

But our area of rare disease is rare in our developmental disorders. And those trials to date have been -- it's been a newer area of research.

It's been a stage of research where these trials have been focused on characterizing the diseases with natural history studies and then early smaller crucial concept trials, and we're finally starting to see those readout. And so we had the first positive result, which is really a turning a corner and represents a stage of development for the types of rare disorders that we focus on, which will show turn into later phase trials.

And so we have really strong market share in that space, but the share of that market has just been smaller trials. And now we look forward to following those into later stage development.

I think -- just to add an additional comment there is, I think there's a pipeline of opportunities. So our investors will understand that as a general statement, we -- what we do is we attach ourselves to a compound or a program and we follow it through.

When we start on any program, whether it be rare disease or Alzheimer's disease, the opportunities are quite small. But of course, those larger Phase III opportunities come from following that program all the way through.

So I think the excitement in terms of rare disease is we're now -- that work that we have been winning over a period of time is now expected to start to morph into Phase III opportunities, which the Phase III rare disease opportunity is not going to look like a Phase II Alzheimer's disease opportunity from revenue perspective for Cogstate, but there's still good opportunities there that will follow through over the course of next year.

Thanks so much, Brad. Well, with this, I want to thank everybody for all the submitted questions.

And if there are any others that you still would like some color on as well, please feel free to send those to us. You can e-mail [email protected].

And with that, Brad, Darren, Rachel, any final thoughts as we close up the webinar here?

So I just want to thank everyone for their participation in the webinar. Just to summarize, we're confident of an improved sales performance in the June half year period in respect to clinical trials bookings, that's the necessary precursor to revenue growth.

And we think we've got the business structured such that if we deliver the revenue growth, we'll be able to deliver the profit growth. So we look forward to be able to share with you improved results next time we speak.

Thank you, everybody.

Thanks all.

Thank you.