Cambridge Cognition Holdings plc (AIM: COG), which develops and markets digital solutions to assess brain health, announces a trading update ahead of the release of the Company’s interim results for the six months to 30 June 2019 (“H1 2019”), which will be released on 19 September 2019.
With major contract wins from digital solutions and the voice testing platform in H1 2019, the company had a strong and growing order book of £6.34 million (2018: £5.95 million) at the end of H1 2019. However, trading in other parts of the business has been challenging. This has led to unaudited revenues for the period being down on the prior year at £2.17 million (H1 2018: £2.75 million) with a loss for the period of £1.74 million (H1 2018: £1.03 million loss). The outlook for the full year is for revenue to be in the region of £5.50 million (2018: £6.13 million). The loss for the year is expected to be in the region of £2.80 million (2018: £1.44 million loss), largely due to the reduction in revenue and a 30% increase in R&D investment.
Given the first half performance, action has been taken to reduce operating costs and to improve commercialisation. The Company has a substantial qualified order pipeline for the remainder of the year and therefore expects a return to revenue growth in 2020 and, together with planned reductions in R&D expenditure for those projects moving into commercialisation, plans to breakeven in Q4 2020. The Board believes that the Company has adequate cash reserves to drive the business to profitability.
At the start of 2019, the Company stated its intention to invest in R&D and commercialisation of a broader electronic clinical outcome assessment platform and digital cognitive solutions. A recent strategic review confirmed that these, together with the voice testing platform, are priority areas for sustainable, license-based revenues, and long-term growth. These have progressed well with the recent implementation of new contracts including using voice-based cognitive assessments and data collection from wearables.
Lower sales in the core clinical trials business has been due to several short-term market factors. These factors include the merger of two current large pharmaceutical customers, which resulted in the continued postponement of an expected major contract. There has also been a reduction in the number of clinical trials assessing the cognitive safety profile of cardiovascular and pain medication. In addition, several recent high-profile clinical trial failures for drugs for Alzheimer’s disease prompted several pharmaceutical companies to prune their late-stage pipelines. The Company has already switched its focus to different drug classes in multiple indications for cognitive safety profiling and expects an increase in trials for Alzheimer’s disease as there are more drugs in preclinical development in 2019 than 2018.
Dr Matthew Stork, Chief Executive Officer, Cambridge Cognition, said “A strategic review of the business, undertaken since I joined the Company in March 2019, indicates that the prospects for the products that the Company has developed over the last few years, particularly Digital solutions, eCOA and NeuroVocalix™, are excellent. The changes seen in our market underline the importance of these investments. Whilst trading has been difficult this year for the core product range, the Company is taking steps to improve commercialisation and to improve sales in the second half of 2019 and beyond into 2020.”