REG - Cambridge Cognition - Results for the year ended 31 December 2022
03/05/2023 07:00
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RNS Number : 1880Y Cambridge Cognition Holdings PLC 03 May 2023
3 May 2023
Cambridge Cognition Holdings Plc
("Cambridge Cognition", the "Group" or the "Company")
Preliminary results for the year ended 31 December 2022
Cambridge Cognition (AIM: COG), which develops and markets digital solutions
to assess brain health, is pleased to announce its preliminary audited results
for the year ended 31 December 2022.
2022 performance
Cambridge Cognition had a transformative year in 2022, recording 25% revenue
growth and a profit before acquisition-related costs, continuing to
commercialise and develop new solutions, and making two bolt-on acquisitions
(including one completed post period end), as it enhances its position as a
leading digital health tech provider for CNS clinical trials.
Corporate and operational highlights
· 25% revenue growth year-on-year and underlying profitability.
· Innovative new product development and acquisitions that added to
the technology offering and expanded the addressable market.
· Leading market position with unique digital technology solutions
and full commercial coverage of the clinical trial market for cognitive
assessments.
· Major contract wins, including two over £2m for sizeable
clinical trials.
· Sales order intake of £13.1m, up 8% on like-for-like prior year
(2021: £12.1m excluding £3.6m of large one-off orders).
· Contracted order book increased to £19.1m following the
acquisition of Winterlight Labs on 10 January 2023.
Financial highlights
· Revenue up 25% to £12.6m (2021: £10.1m).
· Gross profit up 21% to £9.3m (2021: £7.7m).
· Profit for the year, adjusted for acquisition-related expenses of
£0.5m, of £0.1m (2021: £0.5m).
· Loss per share 1.3 pence (2021: 1.4 pence earnings per share).
· Cash generative with cash balance of £8.3m at 31 December 2022
(31 December 2021: £6.8m).
Commenting on the results, Matthew Stork, Chief Executive Officer, said:
"2022 was a transformational year for Cambridge Cognition, marked by
significant multi-year orders, sustained revenue growth, and the expansion of
our core product set. We also successfully concluded an acquisition in 2022
with another right at the start of 2023. These have strengthened our
technology portfolio and enable us to provide a full offering for CNS clinical
trials. Looking ahead, we remain committed to our objectives of driving
revenue and profit growth by increasing our market share through offering the
most innovative technology, supported by outstanding scientific evidence and a
very experienced team, in the high-value market for CNS drug development."
Investor webinar
Cambridge Cognition's management will be hosting an online presentation and
Q&A session at 5.30 p.m. BST on Wednesday 3 May 2023. This session is open
to all existing and prospective shareholders. Those wishing to attend should
email cog@investor-focus.co.uk (mailto:cog@investor-focus.co.uk) and they will
be provided with log in details.
Participants will have the opportunity to submit questions during the session,
but questions are welcomed in advance and may be submitted to:
cog@investor-focus.co.uk (mailto:cog@investor-focus.co.uk) .
Enquiries:
Cambridge Cognition Holdings Plc Tel: 012 2381 0700
Matthew Stork, Chief Executive Officer press@camcog.com (mailto:press@camcog.com)
Stephen Symonds, Chief Financial Officer
Panmure Gordon (UK) Limited Tel: 020 7886 2500
(NOMAD and Joint Broker)
(Corporate Advisory)
Freddy Crossley / Emma Earl / Mark Rogers
(Corporate Broking)
Rupert Dearden
Dowgate Capital Limited (Joint Broker) Tel: 020 3903 7715
David Poutney / James Serjeant
IFC Advisory Limited (Financial PR and IR) Tel: 020 3934 6630
Tim Metcalfe / Graham Herring / Zach Cohen cog@investor-focus.co.uk (mailto:cog@investor-focus.co.uk)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
CHAIR'S INTRODUCTION
2022 was a pivotal year for our business with significant achievements at all
levels of the organisation. We achieved growth in like-for-like orders and
revenues, underlying business profitability, cash generation and major
progress in innovation. In addition, two acquisitions also further expanded
our position in the market, positively impacting both our technology
capabilities and future revenue growth.
Cambridge Cognition's strategy is to develop and commercialise unique,
well-protected, high-value solutions supported by extensive scientific
evidence and expertise for central nervous system ("CNS") clinical trials.
There has been excellent progress in delivering this strategy and we believe
Cambridge Cognition is exceptionally well-placed for the future.
Over the year, the Board has continued to focus on careful capital allocation
as the Company has expanded organically and inorganically. The acquisitions of
Clinpal (the trading name for eClinicalHealth Limited) in October 2022 and
Winterlight Labs Inc ("Winterlight") at the start of 2023 enhance our
portfolio, expand the addressable market for our products and add to our
revenue growth and drive to sustained profitability. We also expect the
acquired products and technologies to prompt incremental use of the Company's
existing products.
In April 2022, we welcomed Stephen Symonds as Chief Financial Officer and he
was appointed to the Board in August 2022. Stephen brings a wealth of top-four
audit and clinical trial market expertise at a senior level and is already
making a strong contribution to the growth of our company. The Board has
concluded that with the Company's continued growth, adding a Non-Executive
Director would be beneficial later in 2023 to bring further independent
guidance, scrutiny and experience.
Cambridge Cognition is positioned for accelerated revenue growth and
sustainable profitability in the coming years, both from its current offerings
and new products in development. The Board expects the Company to grow rapidly
and deliver substantial, sustainable shareholder value in both the short and
medium term.
Steven Powell
Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I am delighted by Cambridge Cognition's performance in 2022. We worked on a
record number of clinical trials and increased revenue substantially, while
laying the foundations for further growth in future years. In tandem with this
growth, we have focused on delivering high-value technology solutions and
excellent customer service.
Our overarching strategy is to develop and commercialise a unique set of
high-value solutions for CNS clinical trials. Those solutions are well
protected and supported by extensive scientific evidence and expertise. Our
product offerings and capabilities have undergone a step-change through
customer-oriented product development and strategic acquisitions.
Specifically, we have:
· Further developed our suite of leading cognitive assessments,
making them accessible on more devices, in more than 50 languages, and in any
country.
· Set up a global software infrastructure that adheres to stringent
data protection requirements and enables us to store patient data locally, as
mandated by regulations.
· Acquired leading voice-based and decentralised clinical trial
solutions to establish the broadest offering in CNS-related outcomes
measurement.
· Brought in expert-level capability in machine learning for
digital biomarkers, deep knowledge of computational linguistics, and new
clinical trial solutions, such as electronic consent and telemedicine.
· Expanded our software team to accelerate the development of new
modules, opening an office and recruiting an entire team of software
developers in South Africa.
· Invested in sales and marketing, bolstering our brand presence
and providing full coverage across the US and Europe. Additionally, we have
established a distributor relationship in Asia to expand our reach further.
These accomplishments position Cambridge Cognition to secure more contracts
and capture a more substantial share of the growing market opportunity.
Overall, our 2022 financial results were very strong, with revenue growth of
25% to £12.6m (2021: £10.1m) and orders growth of 8% (on a like-for-like
basis) over 2021 to £13.1m. Administrative expenses were well managed during
the year, and although the gross margin percentage was slightly down on the
prior year, this was in line with expectations. In 2022, we changed our
accounting policy for cost of sales and have included pay costs directly
related to revenue (with the prior year restated to the same basis).
The financial results for the year were tempered by a slightly
slower-than-expected final quarter as we experienced delays and scope
reduction associated with large orders. Market forecasts suggest that this is
not representative of a long-term trend. The Company's strategy is designed to
address intermittent slow periods through a broader product offering and
increasing volumes across all contract sizes.
Activity has been high in the first quarter of 2023 and a positive response
from customers to developments in 2022 and early 2023. The Company ended
2022 with a strong contracted order book of £17.6m which increased further to
£19.1m in January 2023 following the acquisition of Winterlight. Moreover,
with the broadened portfolio and additional business capabilities, we have a
solid platform to achieve future profitable growth.
Market Overview
Cambridge Cognition operates across three main business areas:
1. Pharmaceutical clinical trials: The Company has a fully serviced digital
outcomes assessment solution including software, configuration (with
customisation options), consulting, and reporting services that accounts for
approximately 90% of revenue.
2. Academic research: The supply of cognitive outcomes assessments is via a
software-as-a-service solution for use in research by academics.
3. Healthcare: The Company has two products to aid in the triage and
diagnosis of cognitive impairment, one for primary care practitioners and one
for secondary care specialists, that are FDA and EU-approved medical devices.
Demand is currently limited as there is minimal reimbursement; this may change
with more interest in using digital cognitive biomarkers with new drugs being
approved for Alzheimer's disease.
Primarily related to clinical trials, five areas represent substantial market
opportunities for the Company:
1. Digital Cognitive Outcomes Assessments
Approximately 500-600 clinical trials each year use measures of cognition(1).
The traditional assessment method requires clinicians to ask patients
questions and score the answers and can be subjective, costly, and
inconvenient. Touchscreen or voice-based cognitive assessments can be used
alongside or even replace traditional assessment methods. The US market for
digital cognitive assessments was estimated at £70m in 2022 and growing at
10% per annum(2).
2. Automated Quality Assurance
In later phase clinical trials for diseases such as Alzheimer's and
Parkinson's Disease, patient consults are reviewed for quality assurance. This
is a new market opportunity for the Company: our new offering automates part
of the process and enables quality assurance at a lower overall cost. We
commissioned independent market research and estimate the market opportunity
could be £16m per annum within five years(3).
3. Electronic Clinical Outcomes Assessment ("eCOA")
eCOA systems are designed to capture patient, carer, or clinician-reported
data on a patient's outcomes during a clinical trial. This is accomplished
through using licensed questions or scales that are usually widely used in
clinical studies. Uptake is gradual and clinical trial sites report that they
use eCOA half the time or less(4). The remainder still rely on pen-and-paper
methods to collect outcomes. Taking a proportion of the reported global market
for all therapeutic areas, the eCOA market for CNS disorders was estimated to
be £160m in 2022, growing at 15% per annum(5).
4. In-Clinic, Hybrid and Virtual / Decentralised Clinical Trial Systems
Pharmaceutical companies and CROs depend on various information technology
systems to effectively communicate with patients, schedule events, gather and
analyse clinical data, and prepare reports. Among the most used modules are
e-Consent, which captures participation agreements, Electronic Document
Management ("EDC"), which stores all the clinical data, and Telehealth, which
enables clinician-patient consults. A wide range of providers offer one or
more of these systems, with some designed for in-clinic or virtual use or
both. No provider currently markets a CNS-dedicated solution. The global
market for these solutions in CNS virtual clinical trials was estimated to be
£140m per annum, growing at 15%(6).
5. Patient Recruitment
There is a market opportunity for Cambridge Cognition to recruit patients for
a wide range of CNS clinical trials. Recruitment is notoriously challenging:
less than half of studies meet enrolment goals(7). We collaborate with several
partners to provide clinical consulting, patient tracking systems and clinical
screening as part of a dedicated patient recruitment offering. The CNS
clinical trial patient recruitment market, excluding advertising, is estimated
at £100m annually growing at 10% per annum(8).
Operational Review
In 2022, the Group significantly enhanced its operational capability and
performance across commercial, clinical services, product development, people
management, and delivery. We successfully provided solutions to a more
extensive customer base than ever before.
Considerable investment has been made in expanding our commercial team,
increasing the number of sales and sales support staff from four to eight.
These investments were made towards the end of the year, with the aim of
making an impact in 2023. As a result, we now have full coverage of the
cognitive assessment market for clinical trials, a new sales team dedicated to
virtual clinical trials, and an experienced proposal management function.
We achieved 100% on-time-in-full delivery of clinical trial starts and a
continued high customer service record, enhancing our brand position as a
gold-standard provider of assessments. Excellent clinical project management
and scientific support were provided to academic customers, scientific
collaborators, and pharmaceutical clients.
The numerous publications and presentations referencing new data by Cambridge
Cognition employees, leading scientists, and pharmaceutical companies continue
to provide valuable evidence to help secure contracts. The total number of
papers citing studies using the Company's assessments now stands at over
3,000. Two notable examples of such partnerships in 2022 are the Company's
participation in the IdeaFast project to develop new digital biomarkers of
fatigue, and the Brain Health Registry programme, to understand mild cognitive
impairment globally.
Cambridge Cognition has continued to provide a single-source service by
shipping hardware to support clinical trials. Chip shortages and production
delays throughout 2022 increased the challenge of obtaining and shipping
hardware to clients. Despite this, we achieved all contractual obligations and
established an additional inventory of the most used tablets and mobile
phones.
Over the year, the Company transformed its product development function,
introducing new systems and roles to streamline and improve the efficacy of
product development and maintenance. We recruited considerable expertise in
the product and research and development teams with several senior-level new
starts.
Software development resources were enhanced by opening a new office in South
Africa. The region boasts a large pool of highly skilled software developers.
As a result of natural attrition in the UK, most of the Company's software
development capacity at the year-end was based in South Africa.
Investments have been made in the management team, training for people
managers, and role-specific training and development. We saw some pay
inflation as we ensured salaries were competitive for the sector. At the same
time, we reduced our recruitment costs substantially during a growth period
through more successful direct hires managed by our internal team.
Corporate Business Development Review
Over the last two years, Cambridge Cognition had established an ambitious
strategic roadmap to develop new product and service offerings, including
building out modules to support clinic-based and virtual clinical trials and
developing a free-speech-based verbal cognitive assessment. To accelerate the
development of the business and respond to demand, we made two acquisitions to
obtain those technologies and competencies.
In October 2022, the Company acquired Clinpal™ (the trading name for
eClinicalHealth Limited), a digital technology provider of virtual clinical
trial solutions that has been working on trials for three of the world's top
ten largest pharmaceutical companies. With a patient-centric platform that
connects patients, sites, and pharmaceutical companies, Clinpal™ enables all
the essential steps in a clinical trial.
Clinpal was acquired for a total amount payable of £1.7m, and the acquisition
is expected to positively contribute to profitability in 2024. The Clinpal
acquisition immediately allowed the Company to offer full in-clinic and
virtual clinical trial solutions, including specialised CNS clinical trial
patient recruitment solutions. This has already enabled us to respond to a
tender issued by a top-ten pharmaceutical company for a recruitment contract.
The acquisition of Winterlight was completed in January 2023. Winterlight,
based in Toronto, Canada, has developed machine-learning-based voice
assessments using free-speech inputs or those that require deductive reasoning
or interpretation, as well as a unique automated quality assurance service for
clinicians. Winterlight has an excellent customer list, including five of the
top ten global life sciences companies, and limited overlap with Cambridge
Cognition's existing customer base, providing the potential to cross-sell and
generate further revenue growth.
The acquisition of Winterlight was completed for a total amount payable of
£7.0m. As at the acquisition date, Winterlight had a strong pipeline of
opportunities and a contracted order book of £1.5 million (reduced
subsequently from the previously announced £2.5m as a Winterlight customer
failed to secure adequate financing and is now seeking a sale of its assets).
As well as actively cross-selling solutions at this time, the unique quality
assurance offering has enabled Cambridge Cognition to bid on a large tender
for cognitive assessments and clinician services as a single provider,
differentiating us from competitors.
In December 2022, Cambridge Cognition also entered into an agreement with Luca
Healthcare to commercialise our suite of cognitive assessment tools in the
China market. Luca Healthcare, which has existing contracts with
pharmaceutical companies in other therapeutic areas, is now offering solutions
for CNS clinical trials and developing a healthcare solution. Our assessments
are hosted on a secure cloud-based server in China and can be run seamlessly
on Luca Healthcare's platform using Application Process Interfaces ("APIs").
Having made the two recent acquisitions, we have prioritised our go-to-market
strategy for the combined business, including opportunities to cross-sell from
the enlarged portfolio, and the focus is now on integrating operations and
supporting functions. These are critical next steps to ensure we achieve the
expected acquisition returns. While the Company remains open to other
corporate business development opportunities, such as partnerships, licensing
opportunities, or mergers and acquisitions, future opportunities will be
considered primarily in relation to contribution to the Company's profit.
Innovation Review
Cambridge Cognition has a well-established reputation for leadership in the
sector and a history of firsts, which supports the brand's reputation and
creates unique differential advantages. These are protected mainly through
trademarks, copyright, and some patents, establishing our intellectual
property (or 'moat').
With continued investment in innovation in 2022, the three companies,
Cambridge Cognition, Clinpal, and Winterlight, all made major advances.
CANTAB™ cognitive assessments
Cambridge Cognition's core product, CANTAB™, constitutes most of the
Company's revenues. It comprises 18 main tasks that cover all the cognitive
domains typically measured in a clinical trial. In 2022, the number of
publications supporting CANTAB™ grew to 2,850 and as at the end of April
2023 stands at over 3,000.
CANTAB™ assessments are available on Apple iPads™ and most can be accessed
through a web browser. In 2022, a development project enabled screen resizing
and demonstrated validity of results for an assessment on a mobile phone as
well. This development will enable use of CANTAB™ in a much broader context
in the future.
Daily cognitive assessments
In 2022, the Company broadened its existing range of daily mobile phone
assessments by developing four additional prototypes, due for launch in 2023.
Three of these are screen-based, and one voice-based. This will bring the
Group's total number of short daily assessments covering the main cognitive
domains to six by the end of the current year.
The use of these daily assessments is gaining traction. Two major
pharmaceutical companies published the results of their studies in 2022:
1. Takeda, together with the University of Toronto, presented data showing
that a short daily task was well correlated with the pen and paper version
concluding that it could help with guiding treatment choice for patients with
depression(9).
2. Sage published data showing that patients with Parkinson's and
Alzheimer's disease improved using a novel drug as measured by two quick daily
cognitive assessments(10). Early in 2023, Sage also published data showing
that they could demonstrate the day-by-day impact of their drug on cognitive
function.
These new daily assessment are ground-breaking, novel application of digital
technologies with the potential to objectively demonstrate drug effects in
ways that have not been possible before.
Voice-based cognitive assessments
Significant progress was made in 2022, both within the Company and by
Winterlight, in advancing the development of voice-based cognitive
assessments.
The in-house solution developed by Cambridge Cognition progressed by:
· Establishing a roadmap for multi-language support development in
2023, essential for the widespread use of assessments in clinical trials.
· Creating a short daily assessment prototype for a pharmaceutical
company with a well-known verbal assessment but with daily monitoring,
allowing for quicker observation of drug effects and potentially shorter and
more efficient trials.
· Agreeing on collaborations with two major universities to
validate existing assessments. These projects took considerable time from
initial discussion to full grant funding and commencing work, though are now
underway.
Winterlight achieved a number of milestones with its free-speech solution.
These milestones include:
· Adding additional languages to bring the total number to nine
(more than any other company in the sector).
· Establishing a quality assurance solution for clinical trials
with considerable market potential.
· Improving its automated solution with better speech recognition
to simplify and reduce transcription costs.
Cambridge Cognition is now the only company offering such a wide range of
automated voice-based cognitive assessments. These have the potential to
replace many of the existing assessments commonly conducted in clinical
trials.
Academic Collaborations
As well as co-creating solutions with pharmaceutical companies, Cambridge
Cognition participated in several widely recognised academic collaborations in
2022. Some of the most high-profile ones include: the EU IMI grant-funded
IDEA-FAST study to identify digital endpoints for fatigue; the US NIHR-funded
Brain Health Registry that assesses cognition worldwide; the Deep and Frequent
Phenotyping longitudinal study of dementia and AI Brain, an EU Horizon
grant-funded study developing multi-modal biomarkers for dementia. As well as
showcasing our solutions and gathering data, these have provided reference
points for and contact with target customers. By way of example, 13 major
pharmaceutical companies take part in IDEA-FAST.
Clinical Trial Solutions
2022 saw significant progress in clinical trial solutions through the combined
efforts of Cambridge Cognition and Clinpal. Prior to the acquisition, a
proportion of the software development for the Clinpal solution was completed
by Cambridge Cognition under contract. Progress made in the year included:
· Moving from installed solutions in data centres to cloud-based
servers in two regions with a plan to open a third in 2023. This improves
patient data management and facilitates compliance.
· The Clinpal solution added patient-data management communication
features designed for a global virtual study that started in 2022.
· A next-generation patient application for Android and iOS was
designed for the IMI grant-funded Radial clinical trial due to start in 2023.
· New or upgraded modules for eConsent and Telehealth with the
release set for Q2 2023.
Combined product offering
A key objective is to provide a unified solution incorporating modules
developed by Cambridge Cognition, Clinpal, or Winterlight. All three solutions
feature APIs to allow seamless functionality within a single front-end user
interface. This currently puts us in a strong position to select one of the
solutions to run as the customer user interface while incorporating modules
from the other two. We are now bidding with solutions that integrate the three
platforms.
We plan to converge all three solutions, which will require time and
investment. We plan to accomplish this gradually, likely on a module-by-module
basis, as we perform maintenance or make improvements to the system, taking
the best of each platform.
In the medium term, there is the opportunity to create multi-modal digital
biomarkers by combining solutions. As well as using touchscreen and voice
data, this could also include actigraphy or other clinical information to
provide even greater accuracy of diagnostic information. This is an exciting
area of future development that is likely to be funded by grants or
development partners.
Growth Strategy
Our overarching goal is to achieve profitable growth. Our strategy in the
short to medium term from 2023-2025 is to complete development and
commercialise our unique set of well-protected, high-value, and validated
solutions. In addition, our strategy includes having a watching-brief on the
healthcare market with the readiness to promote our medical devices should
demand and reimbursement surface.
To achieve our strategic goals, Cambridge Cognition's areas of focus for 2023
are:
1. Driving sales of existing products, including Winterlight and Clinpal and
winning a greater volume of clinical trial work for our broader portfolio,
including combined offerings.
2. Establishing partnerships with high-impact organisations in the sector,
such as major pharmaceutical companies and CROs.
3. Investing in innovation to maintain our brand position and complete the
development of our offering.
4. Realising synergies from acquisitions and ensuring continued customer
focus as we integrate the three businesses.
5. Focusing on our people and ensuring Cambridge Cognition is a 'great place
to work'.
Economic and Political Environment
Amidst the COVID-19 pandemic, there was a surge in the adoption of digital
solutions, with virtual trials gaining remarkable traction among our
customers. This interest continues.
The ongoing war in Ukraine was and continues to be a cause for concern, and
our thoughts are with all those affected, including several academic centres
in the region that use our solution. No contracts are being progressed with
Russian centres at this time. The conflict has had no material effect on
revenues.
Inflation has had an impact on salary levels and may be contributing to a
reduced investment in the development of CNS drugs. This could lead to a
short-term decline in demand. We expect the situation to normalise during 2023
and do not anticipate any material impact on the Group's overall performance.
Corporate Outlook
Despite a turbulent global economic and political environment, 2022 was an
excellent year for Cambridge Cognition. We saw remarkable growth in orders,
strong revenue growth, cash generation, and considerable progress in
innovation and corporate business development.
The Company had a strong contracted order book at the end of 2022 that
provides excellent revenue visibility through 2023 and a promising pipeline of
further opportunities for the year. With our broader portfolio, we expect a
considerable step-up in our total addressable market and there is the
potential for a considerable increase in investment in CNS drugs with the
successes recently in Alzheimer's Disease with new drugs being approved.
There does remain some uncertainty around the global macroeconomic outlook,
though that is expected to be transitory to our markets.
The Company has extensive market opportunities within existing and new growth
markets. We estimate average growth rates across the markets we are targeting
to currently be approximately 10 percent per annum, and we believe our revenue
growth will exceed this rate of market growth. We will continue to manage
costs carefully and aim to move back into profitability.
The outlook is very exciting as we have a full commercial team and a much
broader portfolio and can win many more sizeable contracts as we build on our
current position over the coming years.
Matthew Stork
Chief Executive Officer
References:
1. Global Data, April 2023
2. Astute Analytica (2021) US Cognitive Assessment Market; Adjusted
using internal data to 10% from 2022.
3. Extrapolated from independent market research report commissioned
by Cambridge Cognition.
4. DT Consulting, Clinical Digital Tracker, 2022
5. Grandview Research (2023), eCOA Market Analysis; Adjusted by CNS
studies as a proportion of all.
6. Estimate from Global Data, April 2023, and Assessing the Financial
Value of Decentralised Clinical Trials, Therapeutic Innovation &
Regulatory Sciences, 57, 209-19, 2023.
7. Strategies to improve recruitment to randomised trials. Cochrane
Database Syst Rev. 2018 Feb 22;2(2)
8. Grandview Research (2022), Clinical Trial Patient Recruitment
Market; Adjusted by CNS studies as a proportion of all.
9. An App-Based DSST for Assessment of Cognitive Deficits in Adults
With Major Depressive Disorder: Evaluation Study, JMIR Ment Health 2022;9(10).
10. Sage Therapeutics Conference Poster at CTAD 2022.
CHIEF FINANCIAL OFFICER'S REVIEW
Overview
The Company delivered another strong performance in 2022 with growth in the
contracted order book and revenues, coupled with continued positive cash
generation that has enabled the completion of two acquisitions, one in October
2022 and one in January 2023. This review includes a comparison of the
financial KPIs used to measure progress over the year:
KPI 2022 2021 Movement
Revenue £12.6m £10.1m £1.5m
Gross margin 73.9% 76.1% (220)bps
Profit before tax £0.6m loss £0.3m profit £(0.9)m
Profit for the year (after adjusting for acquisition related expenses) £0.1m £0.5m £(0.4)m
Investment in R&D £2.2m £1.7m £0.5m
Sales orders £13.1m £12.1m £1.0m
Contracted order book £17.6m £17.0m £0.6m
Cash £8.3m £6.8m £1.5m
Revenues and Gross Profit
We are pleased to report that our revenue grew by 25%, reaching £12.6m
compared to £10.1m in 2021. A large proportion of our contracts are for
clinical trials, which usually commence three to six months after the signing
of the contract and run for several months or even a few years. As a result,
most of the revenue recognised in the year came from orders won in previous
years, with the remaining balance from in-year contract wins.
We anticipate the £19.1m contracted order book as of 10 January 2023
(following the acquisition of Winterlight) will generate, subject to customer
delivery schedules, at least £9.5m of revenue to be recognised in 2023, with
the balance to be recognised in subsequent years. Recognised revenue split by
type was as follows:
2022 2021 Increase Increase
£m £m £m
Software 5.0 3.6 1.4 39%
Services 6.5 5.6 0.9 16%
Total Software & Services 11.5 9.2 2.3 25%
Hardware 1.1 0.9 0.2 22%
Total Revenue 12.6 10.1 2.5 25%
Services revenue grew by 16% in 2022 as more implementation and bespoke
development work were carried out, as well as the additional data and study
management provided as part of our support to larger clinical trials. Software
revenue increased by 39% but given the time lag between contract signature and
software usage, we would expect this to grow further in 2023. Hardware, which
is procured from third parties, is supplied by the Company to support specific
projects.
Three large, one-off contracts won in 2021 were for supplying and supporting
digital wearables for CNS clinical trials in 2022. These had a high
third-party cost of sales component that reduced overall gross margin
percentage in 2022. Gross profit was £9.3m (73.9% margin) compared with
£7.7m (76.1% margin) in 2021.
In 2022, we have changed our accounting policy for cost of sales and now
include pay costs directly related to revenue, with the prior period
restated. The impact on the current year was to include £477,000 (2021:
£394,000) of pay costs in cost of sales that would have been in
administrative expenses under the previous accounting policy.
Expenditure
Administrative expenses, excluding acquisition expenses, increased by 29% to
£9.6m (2021: £7.4m), driven by two main factors. Firstly, investment in
commercial activities increased considerably as the team expanded to provide
complete market coverage and to support further sales of decentralised
clinical trial modules. Secondly, we expanded our in-house software and
product teams to develop new and existing solutions to meet customer demands
and provide future sales opportunities. As with many technology companies, we
experienced inflationary pressure on pay during the year, which we have
addressed in part with the addition of a software team based in South Africa.
Maintaining our position at the forefront of the sector requires a sustained
focus on research and development, a subset of our administrative expenses. In
2022, a total of £2.2m was invested, an increase from £1.7m in 2021. These
funds were primarily allocated towards developing novel high-frequency
cognitive assessments to broaden the portfolio, moving to Amazon Web Services,
strengthening our cyber-security, and conducting essential maintenance of
existing products. R&D spending as a percentage of revenue was 17.4% in
2022 (2021: 16.8%), reflecting our continued investment in our product
portfolio, and we expect this to decrease as revenue grows.
Capital Expenditure and Cash
Capital expenditure was £0.2m, primarily related to IT hardware and office
equipment. We have not capitalised any development expenditure in the year.
Excluding acquisition-related costs, we had a marginal loss before tax of
£0.1m (2021: profit before tax of £0.3m). R&D tax credits receivable
were £0.2m (2021: £0.2m). The post-tax loss for the year was £0.4m (2021:
profit after tax of £0.5m), which equates to a loss per share of 1.3 pence
(2021: 1.4 pence earnings per share).
As of 31 December 2022, cash was at £8.3m (31 December 2021: £6.8m), and the
cash inflow from operating activities during the year was £1.7m (2021:
£3.9m), again driven by sales orders. During the year, £1.1m of cash was
utilised to acquire eClinicalHealth Limited. Sales contracts for clinical
trials typically include a billable amount upon signing, which means that cash
flow is generally ahead of revenue recognition.
The Company continues to hold an investment in Monument Therapeutics Limited
("Monument"), the digital phenotyping drug development business that was spun
out in 2021. The investment in Monument is carried at fair value and reflects
the risks attributable to early-stage biotechnology companies. Monument's
progress with early clinical trials remains on track and aligned with our
expectations. It is currently seeking Series A investment.
Financial Outlook
Cambridge Cognition ended 2022 with sufficient cash to acquire Winterlight and
fund expected growth through to profitability. We are optimally positioned for
further growth in orders of our existing solutions and to support our
continued commercial expansion. Considered investments will continue to be
made to achieve our strategic goals.
While low double digit revenue growth is expected in 2023, the positive impact
of acquisitions and continued investment in product development is expected to
see a decrease in cash balances and operating losses for the year. With this
investment and the associated increase in scale, we anticipate a return to
profitability in the second half of 2024 and growth in profitability
thereafter.
The Company will continue to manage costs carefully with a focus on realising
synergies as we review our operational structure following recent
acquisitions. We anticipate that administrative expenses and research and
development costs will reduce through 2023 relative to revenues whilst we
continue to invest in the product portfolio and increase sales coverage.
We have set out five strategies to help improve people's health globally while
generating future revenue growth above expected rates of growth, currently
estimated at more than 10%, in the markets in which we are operating.
Accordingly, the Company is targeting revenue growth in excess of the market
growth rates with increasing levels of growth in the medium-term driving
towards material profitability in 2025.
Stephen Symonds
Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December
Notes Year to Year to
31 December 31 December 2021
2022 (Restated)
£'000
£'000
Revenue 3 12,613 10,094
Cost of sales (3,291) (2,409)
Gross profit 9,322 7,685
Administrative expenses excluding acquisition expenses (9,616) (7,435)
Administrative expenses - acquisition related (479) -
Total administrative expenses (10,095) (7,435)
Other operating income 156 14
Operating (loss) / profit (617) 264
Interest receivable 9 -
Finance costs (16) (11)
(Loss) / profit before tax (624) 253
Tax credit 215 197
(Loss) / profit for the year (409) 450
Other comprehensive (loss) / income
Items that may subsequently be reclassified
to profit or loss
Exchange differences on translation of foreign operations (302) 14
Total comprehensive (loss) / income for the year (711) 464
(Loss)/ earnings per share (pence) 4
Basic earnings per share (1.3) 1.4
Diluted earnings per share (1.3) 1.4
All items of income are attributable to the equity holders in the Parent.
The above results relate to continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December
Notes At 31 December 2022 At 31 December 2021
£'000 £'000
Assets
Non-current assets
Intangible assets 1,421 373
Property, plant and equipment 188 52
Investments 49 49
Total non-current assets 1,658 474
Current assets
Inventories 216 126
Trade and other receivables 4,680 4,935
Current tax receivable 231 195
Cash and cash equivalents 5 8,322 6,810
Total current assets 13,449 12,066
Total assets 15,107 12,540
Liabilities
Current liabilities
Trade and other payables 15,012 11,908
Total liabilities 15,012 11,908
Equity
Share capital 312 312
Share premium 11,151 11,151
Other reserves 5,823 6,125
Own shares (71) (78)
Retained earnings (17,120) (16,878)
Total equity 95 632
Total liabilities and equity 15,107 12,540
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December
Share capital Share premium Other reserves Own shares Retained earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 312 11,151 6,111 (78) (17,439) 57
1 January 2021
Profit for year - - - - 450 450
Other comprehensive income - - 14 - - 14
Total comprehensive income for the year - - 14 - 450 464
Credit to equity for equity-settled share-based payments - - - - 111 111
Transactions with owners - - - - 111 111
Balance at 312 11,151 6,125 (78) (16,878) 632
31 December 2021
Balance at 312 11,151 6,125 (78) (16,878) 632
1 January 2022
Loss for year - - - - (409) (409)
Other comprehensive income - - (302) - - (302)
Total comprehensive income for the year - - (302) - (409) (711)
Transfer of own shares - - - 7 (7) -
Credit to equity for equity-settled share-based payments - - - - 174 174
Transactions with owners - - - 7 167 174
Balance at 312 11,151 5,823 (71) (17,120) 95
31 December 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
Notes Year to Year to
31 December 2022 31 December 2021
£'000 £'000
Net cash flows from operating activities 5 1,668 3,945
Investing activities
Interest received 9 -
Purchase of property, plant and equipment (189) (56)
Purchase of investment - (49)
Net cash flow used in investing activities (180) (105)
Financing activities
Proceeds from exercise of share options 1 -
Repayment of borrowings 5 (133) -
Interest payments - (11)
Lease payments - (86)
Net cash flows from financing activities (132) (97)
Net increase in cash and cash equivalents 1,356 3,743
Cash and cash equivalents at start of year 6,810 3,047
Exchange differences on cash and cash equivalents 156 20
Cash and cash equivalents at end of year 5 8,322 6,810
1. General information
Cambridge Cognition Holdings plc ("the Company") and its subsidiaries
(together, "the Group") develops and markets digital solutions to assess brain
health.
The Company is a public limited company which is listed on the AIM market of
the London Stock Exchange (symbol: COG) and is incorporated and domiciled in
the UK. The address of its registered office is Tunbridge Court, Tunbridge
Lane, Bottisham, Cambridge, CB25 9TU.
2. Basis of preparation
The financial information of the Group set out above does not constitute
"statutory accounts" for the purposes of Section 435 of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2021 have been filed with
the Registrar of Companies. The statutory accounts for the year ended 31
December 2022 will be delivered to the Registrar in due course. Those accounts
have been reported on by the Independent Auditors; their report for the
accounts for both financial years was (i) unqualified; (ii) did not include a
reference of any matters to which the auditor drew attention by way of
emphasis without qualifying their report; and (iii) did not contain a
statement under 498 (2) or 498 (3) of the Companies act 2006.
The Group financial statements will be properly prepared in accordance with UK
adopted international accounting standards. The accounting policies adopted
will be consistent with those followed in the preparation of the consolidated
financial statements for the year ended 31 December 2021, except as noted
below.
The Group has reconsidered its accounting policy for the presentation of
expenses in the income statement to include staff and related costs relating
to the delivery of those services within cost of sales. The prior year
income statement has been restated for the reclassification of costs between
cost of sales and administrative expenses. As a result, the prior year has
been restated to reflect an increase in cost of sales of £394,000 with a
corresponding decrease in administrative expenses. The overall operating
profit for 2021 remains unchanged.
At the time of approving the preliminary results statement, and based on a
review of the Group's forecasts and business plan, the Directors have a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in preparing the
preliminary statement.
3. Segmental information
An analysis of the Group's revenue for each major product and service category
is as follows:
2022 2021
£'000 £'000
Software 5,027 3,609
Services 6,528 5,638
Hardware 1,058 847
12,613 10,094
4. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
Earnings
2022 2021
'000
£'000
Earnings for the purposes of basic and diluted EPS per share being net (409) 450
(loss)/profit attributable to owners of the Company
Number of shares
2022 2021
'000
£'000
Weighted average number of ordinary shares for the purposes of basic EPS 31,170 31,170
Weighted average number of ordinary shares for the purposes of diluted EPS 31,170 31,519
The diluted loss per share is considered to be the same as the basic loss per
share. Potential dilutive shares are not treated as dilutive where they would
result in a loss per share.
5. Notes to the cash flow statement
2022 2021
£'000 £'000
(Loss) / profit before tax (624) 253
Adjustments for:
Depreciation of property, plant and equipment 57 142
Amortisation of intangible assets 37 6
Share-based payment expense 174 111
Finance costs - 11
Acquisition related expenses deferred amounts 6 -
Interest receivable (9) -
Operating cash flows before movements in working capital (359) 523
Increase in inventories (88) (75)
Decrease/(increase) in receivables 1,012 (2,285)
Increase in payables 912 5,782
Cash generated by operations 1,477 3,945
191 -
Tax credit received less tax paid
Net cash from operating activities 1,668 3,945
Reconciliation of liabilities arising from financing activities
2022 2021
£'000 £'000
Net Debt as 1 January - -
Debt acquired in business combination 133 -
Financing cash flows (133) -
Net Debt as at 31 December - -
Cash and cash equivalents
2022 2021
£'000 £'000
Cash and bank balances 8,322 6,810
Cash and cash equivalents comprise cash and short-term bank deposits with an
original maturity of three months or less. The carrying amount of these assets
is approximately equal to their fair value.
6. Annual Report & Annual General Meeting
The Company announces its intention to hold its Annual General Meeting ("AGM")
on Wednesday 28 June 2023. Details of the AGM will be communicated to
shareholders via the Company's website and a Regulatory Information Service as
soon as they are finalised. This notice will also include the date on which
the notice of AGM and the Annual Report will be posted to shareholders.
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