# Cambridge Cognition Holdings Increase in sales orders of 74% to £8.6 million

- Link: https://www.directorstalkinterviews.com/cambridge-cognition-holdings-increase-in-sales-orders-of-74-to-8.6-million/4121023584
- Published: 2021-09-21T07:10:55+01:00
- Author: Giles

**Cambridge Cognition Holdings Plc** ([LON:COG](https://www.directorstalkinterviews.com/company/cambridge-cognition-holdings-plc/cog.l)),
which develops and markets digital solutions to assess brain health, has announced
its unaudited interim results for the six months ended 30 June 2021.

The Company had a strong and profitable first half, delivering revenues of £4.5 
million, a 50% year-on-year growth.  Order intake was above the Board’s expectations
at £8.6 million and this included two substantial orders outside the Company’s core
area of focus that totalled £3.6 million. 

The Company is now delivering more clinical trial contracts than at any time in 
its history, which is reflected in a contracted order book at 30 June 2021 of £15.2
million, up 36% from 31 December 2020 and more than double the value at 30 June 
2020.  The order book contains contracts for clinical trials in which revenue will
be recognised over one to six years, further increasing the long-term revenue base
for the Company.  The forward order pipeline provides a good platform for growth,
though at this time does not include the unusually large orders seen in the last
two half-year periods. 

The direct impact of COVID-19 on the Company’s operations has been minimal and the
Company continued to deliver high levels of customer service while operating in 
a remote manner.  The pandemic has accelerated interest in virtual clinical trials,
with testing performed at home rather than in-clinic, and, as a result, orders for
home testing solutions grew. We expect this trend to persist after the pandemic.

Looking forward, the Board believes the Company to be well positioned as a digital
technology solutions provider, underpinned by a strong cash position. The Company
will continue to take advantage of the growth in interest in developing new pharmaceuticals
for Central Nervous Systems (“CNS”) disorders and the market shift to virtual clinical
trials, continuing to focus on commercial execution and investment in new products
to expand the product offer for future growth.

**Financial highlights**

| • | 50% year-on-year revenue growth to £4.5 million (H1 2020: £3.0 million) | 
| • | Gross margin maintained at 80% (H1 2020:81%) | 
| • | Profit for the period £0.1 million (H1 2020: £0.4 million loss) | 
| • | 0.3p basic and diluted earnings per share (H1 2020: 1.5p loss per share) | 
| • | Strong cash generation with cash balance of £4.2 million (31 December 2020: £3.0 million) |

**Operational highlights**

| • | Increase in sales orders of 74% to £8.6 million (H1 2020: £4.9 million) | 
| • | Contracted order book of £15.2 million, up 36% since 31 December 2020 and more than double the value at 30 June 2020 (31 December 2020: £11.2 million, 30 June 2020: £7.4 million) | 
| • | Launch of NeuroVocalix™, a digital voice cognition solution, ready for clinical trials | 
| • | Completed successful spin-out and venture financing of Monument Therapeutics |

> **Commenting on the results Matthew Stork, Chief Executive Officer of Cambridge
> Cognition, said: **_“I am delighted with our performance over the first half of
> the year. We have continued to execute our growth strategy, achieving a number
> of firsts, including the highest order intake in a six-month period. The Company
> is well positioned to serve pharmaceutical companies, whose needs are changing
> as the benefits of virtual clinical trials are embraced globally. We continue 
> to attract interest from a wide range of customers and remain confident in the
> outlook for the year.”_

**CHIEF EXECUTIVE OFFICER’S REVIEW**

**Overview**

The Company delivered an exceptionally strong financial and operational performance
in the first half of 2021, with a further considerable increase in secured orders
and successful delivery of new contracts won in 2020 and early 2021.  Progress against
our strategy to focus on commercialisation of existing and newly developed products
continues to be delivered.

Orders received totalled £8.6 million (H1 2020: £4.9 million). These contracts included
a number of major wins for CANTAB™ cognitive assessment software, many for at-home
use.  This is in line with our expectations of a market shift to virtual trials 
catalysed by the COVID-19 pandemic. 

Around two-thirds of the Company’s clinical trial orders came from existing customers,
reflecting excellent customer service and the benefits of the Company’s focus on
commercialisation.  These sales orders cover a range of cognitive assessments across
various clinical trial phases, demonstrating the Company’s ability to deliver against
a spectrum of client needs with a broader portfolio. 

As well as a record sales orders achievement in the first half, I am pleased to 
report more firsts for Cambridge Cognition in the period.  These include:

| • | The achievement of a strategic goal by securing an evergreen contract for post-marketing support for a newly licensed pharmaceutical with a top twenty pharma company | 
| • | Contract wins in a number of new therapeutic areas; examples include a COVID-19 study measuring the impact of the virus on cognition and an oncology study measuring the neurological effects of brain metastases and chemotherapy agents | 
| • | The Company’s largest funded clinical trial, assessing many thousands of patients at home with a mixture of longer web-based assessments and high-frequency, quick assessments on mobiles | 
| • | The provision of NeuroVocalix™, a unique digital voice solution that can conduct common verbal cognitive tests on our regulatory-compliant clinical trial platform  |

Cambridge Cognition is focused on successful operational delivery to meet today’s
customer needs, while investing, as is critical for a growing technology business,
to meet their future requirements.  During the period, the business continued to
invest through R&D initiatives and increased headcount across the business to deliver
against an increased sales order book whilst looking to drive future growth.

**Financial results**

Sales orders of £8.6 million (H1 2020: £4.9 million) contributed to further growth
in the Company’s contracted order book, which has more than doubled from £7.4 million
at 30 June 2020 to £15.2m at 30 June 2021. The contracted order book represents 
confirmed orders that are not yet recognised as revenue.

Revenue, which is recognised as software products and associated services are used,
grew to £4.5 million (H1 2020: £3.0 million), a 50% increase and ahead of our initial
forecasts for H1 2021.  This represents further good growth from £2.2 million in
H1 2019, a period not impacted by the pandemic.

The key components of revenue are shown in the table below:

| Revenue (£m) | H1 2021 | H1 2020 | H1 2019 | 
| Software & services | 4.3 | 2.9 | 2.2 | 
| Hardware | 0.2 | 0.1 | – | 
| Total | 4.5 | 3.0 | 2.2 |

Software & services revenue increased by 47% to £4.3 million due to the increased
number and value of contracts being delivered.  Hardware revenue remains a small
proportion of the sales mix, though may increase over time as it is possible that
the Company supports more trials using wearables.

Gross profit rose by £1.1 million to £3.6 million (H1 2020: £2.5 million) and the
gross profit margin of 80% was broadly in line with the prior year (H1 2020: 81%).

Administrative expenses increased by £0.7 million to £3.6 million (H1 2020: £2.9
million).  Excluding the impact of foreign currency, administrative expenses increased
by £0.4 million to £3.4 million (H1 2020: £3.0 million), reflecting investment in
personnel and increased activity.  Focused R&D remains important to continue to 
position the Company at the forefront of the sector, with R&D investment of £0.8
million remaining broadly in line with the prior year (H1 2020: £0.7 million) and
reducing slightly as a percent of revenue. 

The rise in gross profit, partially offset by increased administrative expenses,
resulted in a profitable first half.  Profit before tax, Profit for the period and
EBITDA all rose by £0.5 million.  Consequently, basic and diluted earnings per share
improved to 0.3p (H1 2020: 1.5p loss on a basic and diluted basis).

The excellent sales order performance combined with higher level of revenues contributed
to strong cash generation, with net cash inflow from operations of £1.2 million (
H1 2020: £0.2 million outflow).  This led to an overall improvement in cash to £
4.2 million as at 30 June 2021.

**Operational review**

The Company’s above expectation sales orders performance in H1 2021 demonstrated
continued strong commercial execution.  Over the period, the business expanded its
marketing and sales team to increase coverage and support sales of the growing product
offering. 

As with most technology businesses, continued R&D investment in products is essential
to support further growth in the future.  Progress has been good through the first
half of 2021 with developments in:

| • | Prototypes of new tests designed for use primarily on mobile phones | 
| • | Services supporting multiple clinical trials with wearable devices, providing richer data for clients | 
| • | Platform development to enable the delivery of a solution for a newly licensed pharmaceutical | 
| • | The production release, further development and planned clinical validation of NeuroVocalix™ | 
| • | Movement of our infrastructure to Amazon Web Services in multiple geographies |

Providing a high level of customer service remains an important element of our offering.
Making operational improvements has been important over the period and we have continued
to deliver projects on time for customers and received excellent customer feedback.
We are now working on over 30% more projects with a 20% increase in service staff
compared to June 2020. 

**Corporate development**

During the period, the Company completed the spin-out of Monument Therapeutics Limited(“
Monument”), a drug development company applying digital phenotyping to CNS disorders
which Cambridge Cognition had been incubating since 2018, with early-stage research
supported by two Innovate UK grants.  Monument applies a novel drug development 
strategy, leveraging digital assessments of cognition, to match patients with new
pharmaceutical treatments. 

To develop these programmes as an independent company, Monument secured £2.6 million
in funding from a consortium of investors led by Catapult Ventures and Neo Kuma 
Ventures.  Cambridge Cognition retained a 36.9% shareholding and agreed a licence
for the use of several of the Company’s gold-standard cognitive assessments, including
CANTAB™, for patient stratification.  Upon successful commercialisation of its drug
development programmes, Monument will pay royalties to Cambridge Cognition. 

Cambridge Cognition is yet to finalise the accounting treatment for Monument.  Costs
incurred by Cambridge Cognition prior to the spin-out have been disclosed as “Investment”
and “Cost of investment” in the balance sheet and cash flow, respectively, for the
purposes of this Report.

Board changes

As previously announced, Michael (Mick) Holton, CFO, was appointed as a Board Director
at the AGM.  Nick Walters, former CFO, continued as an Executive Director until 
the AGM to conduct a handover with Mick. We are pleased to have Mick on board and
are grateful to Nick for seven years’ dedicated service.

**Outlook**

The clinical trials market that the Company serves is large and evolving rapidly,
with many drivers of change supporting potential future growth.  The market for 
electronic clinical outcomes assessments is estimated at over US$1bn p.a. and growing
at 15%, a trajectory which may increase in pace as a result of:

| • | a catalytic effect of the COVID-19 pandemic, with growing evidence that this is likely to be accelerating a move to more virtual clinical trials; and | 
| • | technological innovation enabling real-world testing and data capture, which often has meaningful advantages over testing and data captured in-clinic |

Cambridge Cognition’s core strength is in supporting clinical trials for CNS disorders,
though the Company, at times, wins contracts in other therapy areas based on its
technology, reputation and levels of service.  Pharmaceutical companies are investing
more in therapeutics for CNS disorders, with a 20% increase in number of industry
sponsored clinical trials from 2020 to 2021, likely underpinned by exciting new 
drug developments and the approval of a new drug for Alzheimer’s disease.

The Company remains firmly on track and we continue to trade in line with market
expectations.  We continue to see potential for growth for both clinic-based and
virtual assessments for cognition, whether for recognised solutions such as CANTAB
™, or for newer high-frequency digital or voice-based assessments and for electronic
Clinical Outcomes Assessment solutions for CNS disorders in clinical trials. 

With increasing investment in commercial activities, continued product development,
a rising cash balance and supportive shareholder base, the Company is well positioned
for further revenue growth.  We remain excited about the potential for the future.

Matthew Stork

Chief Executive Officer

21 September 2021

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