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Cambridge Cognition sales shortfall

The developer of computer-based cognitive assessments used in the treatment of neurological and psychological diseases has missed its full-year sales target, but it has a material pipeline of contracts that could be landed in the first quarter of 2019

In the summer I noted that Aim-traded Cambridge Cognition (COG:75p), a company that has developed a suite of computer-based cognitive assessments to improve the understanding, diagnosis and treatment of neurological and psychological diseases, had announced another contract award from a major pharmaceutical company for the use of its Cognition Kit™ digital health software in a clinical trial. The smart software measures cognitive health on mobile and wearable devices, enabling researchers to gather data in everyday life and clinicians to make more insightful treatment decisions for their patients.

Cambridge Cognition already has a collaboration with US-based Takeda Pharmaceuticals to monitor and assess cognitive function in patients with Major Depressive Disorder (MDD) using a specially designed app on an Apple Watch, highlighting the growing interest in its products from the pharmaceutical industry. Indeed, like-for-like sales in the first half to the end of June 2018 rose by 13 per cent to £3.63m, albeit the move to new accounting standard IFRS15 meant that reported first-half revenue was only £2.75m, a reflection of changes to the way service revenue is now accounted for over the course of a contract.

In a pre-close trading update this morning, the company has stated that revenues for the full year will be £6m under IFRS 15 accounting standards, a £900,000 shortfall compared with finnCap’s estimates at the time of the half-year results in September. Moreover, because the company earns a thumping 90 per cent gross margin on sales, this means that almost all the revenue shortfall passes through to the bottom line. Under the previous IAS18 reporting standard, full-year revenues would have been £7m, a £300,000 rise on 2017, but still shy of the £7.8m finnCap had been looking for prior to the adoption of the new accounting standard and an outcome that supported its prediction of a £500,000 pre-tax profit under the IAS18 reporting standard.

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