Transcription of The Stock Network Interview with Cogstate (ASX:CGS), Managing Director CEO and Managing Director Brad O’Connor
Lel Smits: Cogstate is helping drug developers measure how new medicines affect the brain in clinical trials, supplying the cognitive tests, rater training, and data checks behind studies in Alzheimer’s disease, sleep, rare disease, and psychiatry. The company delivered a record year, now supports more trials than ever, and is returning capital through dividends and a share buyback. Ahead of presenting at TIPS Conference, I’m joined by Cogstate CEO and Managing Director Brad O’Connor to discuss recent trial wins, technology partners, and the role of AI.
Brad, welcome to the Stock Network.
Brad O’Connor: Thanks for having me. It’s good to be here.
Lel Smits: Pleasure to have you on. And Cogstate recently won several late-stage bipolar and depression trials helped by its clinical technology partners.
Brad, can you outline for us how those partnerships change the way you compete for work?
Brad O’Connor: Yeah, so over the last couple of years, Cogstate’s changed the way that we go to market, the way that we sell. So previously, we sold directly to pharmaceutical and biotech companies. Over the last couple of years, what we’ve seen more and more of is selling via technology partners.
So these are companies who are selling SAS technology solutions into clinical trials. So they’re selling to the same customers we are, but in order for them to be able to sell into central nervous system disease trials, where Cogstate specialise, they need a services layer and a cognitive testing layer to essentially sit within their technology and enhance their technology. And so that’s been a really important part of how we’ve won those trials that you referenced in this first September quarter.
Generally speaking, we win work at a phase two clinical trial. And what we’ve seen here is the ability to win work at phase three clinical trial, even though we weren’t involved in that initial phase two trial. So it’s really the technology partner and the ability of the customer to use their preferred technology that has allowed us to win that work.
Lel Smits: Brilliant. And you’re also investing in AI and automation over the next couple of years and really have seen trial numbers climb. How do you think it’s going to improve the offering to your clients? As you mentioned, the trial numbers have really increased.
Brad O’Connor: So we’re running around about 175 clinical trials today. That’s up from 110 just over a year ago. So a substantial increase in the volume of work.
And we’re a technology company but also with very much a services element to what we do. And like any services company, the way that we think about technology and how we create efficiencies in our operating model is really important to us as we go forward. So we’ve just embarked on a two-year investment program which will really completely reconfigure the way that the work that we do behind the scenes to deliver for our customers.
So that will do two things for us. One, it will make us much more efficient in terms of the way that we do our work. It will also allow us to offer additional services to our customers or enhance the way that we’re offering services to our customers today.
We think over time that at the moment we’re running at about a 60 per cent gross profit margin. We think over time there’s the ability to increase that margin once we get through this technology work over FY27 and FY28. So we’ll start to see some of that margin improve in FY28, but it’s really an FY29 margin story.
Lel Smits: Well, Brad, I appreciate the update from COGS today. Look forward to hearing more when you’re at TIP Group’s conference.
Brad O’Connor: Look forward to it. Thank you.
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