22 August 2024

Cambridge Cognition Holdings plc

("Cambridge Cognition", the "Company" or the "Group")

Unaudited Interim Results for the six months ended 30 June 2024

Cambridge Cognition Holdings plc (AIM: COG), which develops and markets digital solutions to assess brain health, announces its unaudited interim results for the six-month period ended 30 June 2024 (the "period").

Financial highlights

Revenue is in line with the same period in 2023, which combined with a material reduction in costs, has reduced the adjusted operating loss significantly to £0.1 million (H1 2023: loss of £2.0 million):

·      Revenue of £5.6m (H1 2023: £6.0m)

·      Gross margin increased to 80.7% (H1 2023: 78.8%)

·      R&D expense decreased 35.2% to £1.4m (H1 2023: £2.2m)

·      Total operating expenditure decreased 35.3% to £5.4m (H1 2023: £8.4m)

·      Adjusted operating loss reduced by £1.9m to £0.1m (H1 2023: loss £2.1m)

·      Raised £2.6m to support the balance sheet and business development

·      Cash balances of £3.4m at 30 June 2024 (31 December 2023 £3.2m)

Operational highlights

Following a challenging end to 2023 and tough trading conditions during the period, we executed two critical actions to strengthen the underlying business:

·    Increased investment in the Group's commercial capability to enable it to exploit the central nervous systems ("CNS") clinical trials market through the combination of a clear product focus on cognitive assessments, CNS eCOA, and automated quality assurance solutions, and an expanded commercialisation team with deep sector experience and contacts.  The market is already large (estimated at $700 million in 2024) and is forecast to grow at 15% per annum from 2024 to 2029, and

·    A significant reduction of the cost base in H1 2024 has created a more agile business, which is better positioned to deliver sustainable profitability and cashflow as sales orders and revenues accelerate. 

Commenting on the results, Matthew Stork, Chief Executive Officer of Cambridge Cognition, said:

"I'm pleased with the progress made during the first half as major steps were taken to strengthen our operation and business. The acquisitions of Clinpal and Winterlight are delivering new and expanded solutions and our recently enhanced commercial team is generating a growing pipeline of new business opportunities.  All these actions support our core objective to ensure we close 2024 with a secure balance sheet and a strong contracted order book of business to drive sustainable profitability and cashflow."

Investor webinar

Cambridge Cognition will host an online presentation and Q&A session at 16:00BST on 28 August 2024. This session is open to all existing and prospective shareholders. Those wishing to attend should email cog@hudsonsandler.com 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 sent to cog@hudsonsandler.com.

Enquiries:

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

CHIEF EXECUTIVE OFFICER'S REVIEW

Business Review

During 2023 and early 2024, trading conditions remained challenging globally for the pharmaceutical sector, which has been impacted by inflationary trends and high interest rates.  Following a period of several years of revenue growth, we responded by delivering two critical actions to strengthen the business:

·      increasing commercial capability with increased capacity and deeper expertise and,

·      reducing the cost base of the business without impairing short-term growth potential.

Our objective is to deliver sustainable profitability (which we define as "adjusted operating profit") and sustained positive cashflow.

Increased commercial capability

To drive commercial performance, the Company recruited Alex Livingstone-Learmonth as Chief Commercial Officer in the first quarter.  Since his appointment he has recruited new team members with considerable experience and developed fresh contacts within the sector, increasing both the number and value of opportunities in the sales pipeline.  While contracted sales orders were modest in the first half, we expect to see an improvement as the year develops. 

We are focusing our efforts on product and service areas where we have a leading and/or highly differentiated position, particularly cognitive assessments (CANTAB and Winterlight), eCOA and AQUA, enabling the delivery of a tailored solution to challenging clinical studies where we demonstrate world-class domain expertise.

The recent acquisitions of Clinpal and Winterlight are contributing to the growth of the business. Combining the AQUA and Clinpal eCOA solutions with the Company's leading position in digital cognitive assessments, CANTAB, has given us a strong multi-product solution-oriented offering to meet clients' clinical development needs. 

These product launches, together with the strengthening of the commercial operations, has led to a deeper pipeline of new sales opportunities.  We are confident this will show increased sales orders in the second half of 2024. 

Reduced cost base

The second major initiative completed during the period has been to reduce the cost base to improve operating margins and cash flow generation.  Cost savings will not impact on prospects for short-term growth or operational delivery since they have been focused on integration synergies, trimming medium and long-term R&D projects and right-sizing operational and support teams. There has been a moderate increase in spending on commercialisation and maintenance of the healthcare offering.

During late 2023 we reduced the cost base by £1.5 million per annum.  In the first half of 2024 we completed a second review following integration of Clinpal and Winterlight.  This review reduced the cost base by an additional £2.0 million per annum, resulting in combined annual savings of £3.5 million per annum. 

Financial results

As announced previously at the time of the fundraising in May 2024 and in the trading update published in July 2024, market conditions remained challenging in H1 2024.  Revenue for the period was at a similar level to the same period in 2023. Nevertheless changes to the Company's cost base have delivered a significant positive improvement of £1.9 million at the adjusted operating profit level, with the adjusted operating loss reduced from £2.0 million in H1 2023 to £0.1 million for H1 2024.

The financial results for the period can be summarised as:

·      Revenue of £5.6m (H1 2023: £6.0m)

·      Gross margin increased to 80.7% (H1 2023: 78.8%)

·      R&D expense decreased 35.2% to £1.4m (H1 2023: £2.2m)

·      Total operating expenditure decreased 35.3% to £5.4m (H1 2023: £8.4m)

·      Adjusted operating loss reduced by £1.9 million to £0.1m (H1 2023: loss £2.1m)

·      Raised £2.6m to support the balance sheet and business development

·      Cash balances of £3.4m at 30 June 2024 (31 December 2023 £3.2m)

Revenue is recognised as services are delivered to clinical studies that are executed over several years.  This brings a degree of stability based on the strength of the order book and underpins future revenue generation.

This contracted order book provides good visibility over revenues for the full year, which are expected to be weighted to the second half of 2024. This is in line with historic performance.  At 30 June 2024 the order book was £14.6 million (31 Dec 2024: £17.2 million), but is expected to increase in H2. 

In May 2024 we raised £2.6 million by way of a placing of 6,561,057 new Ordinary Shares at 40 pence each with participation from both certain existing and new shareholders. We were delighted by the strong level of support shown for the Placing.  The funds raised enable us to grow technical and business development activities; to explore healthcare opportunities; for working capital purposes, including expansion of the commercial team; continuation of core development projects and provision of balance sheet strength.

At 30 June 2024 cash balances were £3.4 million (31 December 2023: £1.9million).

As announced previously, recruitment of a new CFO is progressing and we have added additional interim, senior financial resource. Further updates will be made in due course.

Outlook

The changes made to the commercial team have resulted in an expanded pipeline of new business opportunities.  As a result, we have increasing confidence that this will increase the long-term value of our contracted order book and underpin future revenue generation. 

We are beginning to see commercial benefits in the roll out of AQUA and the expanded eCOA product.  Both of these are generating new business opportunities. 

Costs continue to be managed tightly to support the existing product portfolio and grow the business.  We are now a more agile business, better positioned to deliver profitability and cashflow as sales orders and revenue accelerate. As a result of the actions taken during the year, combined with our clear growth strategy, we expect to deliver further success and value to our stakeholders.

Matthew Stork

Chief Executive Officer