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Why the CogState share price is surging higher today

Brendon Lau
share price rocket

The CogState Limited (ASX: CGS) share price surged after the brain health testing company reported a record level of sales contracts.

The CGS share price jumped 30% to 39 cents during lunch time trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) indices slipped 0.2%.

Healthcare stocks have been big winners in 2019. You only need to look at how the Nanosonics Ltd. (ASX: NAN) and Polynovo Ltd (ASX: PNV) share prices have performed this year to see what I mean.

Turnaround in sentiment

Cogstate isn’t quite in the same category of 2019 winners as its share price tumbled by over 30% since January 2019, although today’s announcement will help the company make up lost ground.

Management reported that it executed another $19.1 million of clinical trial sales contracts since the start of October. This is on top of the $7.7 million in contracts it achieved in the September quarter.

Record result

The means Cogstate achieved its best first half result on record with the total value of contracts executed since the start of FY20 (meaning July 1) hitting $26.8 million.

The December quarter sales figure is also the highest in at least three years and is better than what the company was expecting a few months ago.

“The level of sales contracts executed in this December half year is a reflection of accelerating demand for the Company’s scientific solutions and technologies,” said Cogstate chief executive, Brad O’Connor.

“Over the last month especially, we have executed a number of contracts in respect of studies that are planning to begin in the March quarter of 2020.”

Beating guidance

Cogstate provided guidance for a 50% increase in clinical trials sales contracts at the start of the financial year. This implies a $27 million sales figure for FY20.

Given we are not even in the second half of the current financial year, Cogstate should easily surpass its guidance.

“The result certainly validates the expectation of a strong rebound from what was a very disappointing 2019 financial year,” added O’Connor.

“Cogstate has seen continued sales growth in rare disease indications as well as a rebound in investment by our customers in Alzheimer’s disease, an area that was negatively impacted throughout the 2019 financial year by a series of clinical trial failures.”

Management will provide a further trading update when it releases its first half results in February next year.

The post Why the CogState share price is surging higher today appeared first on Motley Fool Australia.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019