MIDAS SHARE TIPS: Cambridge Cognition’s smart tests for Alzheimer’s… it’s a tip to think about

Dementia is one of the most crippling conditions of modern times, causing misery and confusion for patients and their loved ones. Alzheimer’s disease is the most common form of this disease. Currently, more than 60 million people are affected and this number is likely to double in the next twenty years.

The human cost is almost incalculable, but the World Health Organization estimates the economic cost at more than £1 trillion per year, including professional and informal care.

It’s not surprising, then, that pharmaceutical companies are rushing to find ways to cure Alzheimer’s disease or halt its progression. Cambridge Cognition helps them do that and the shares, now 51p, should go far.

The company develops digital tests to assess brain health monthly, weekly or daily. Tests are run on tablets, mobile phones or even smartwatches and results are immediately sent to Cambridge Cognition. After analyzing the data, scientists send it to pharmaceutical companies and academics, who test new treatments for Alzheimer’s disease and other brain-related disorders, such as depression and schizophrenia.

Customers include large multinationals such as Swiss giant Novartis, smaller biotech companies and academic researchers from around the world. They turn to Cambridge Cognition because it is recognized as offering some of the best digital tests on the market, as well as top service.

The company was spun off from the University of Cambridge in 2002, following a test originally developed by two professors in the 1980s. Traditionally, companies and scientists analyze new drugs for brain diseases by gathering groups of patients and sending psychiatrists or special testing experts to personally assess these individuals. Not only is the process time-consuming and expensive, it is also subjective and the results can be erratic.

Digital tests are different. They are objective and reliable, can be performed at any time and repeated regularly, providing a much more detailed analysis of whether drugs work and how effective they are.

Cambridge Cognition’s CANTAB test is widely regarded as the gold standard in digital, but CEO Matthew Stork has added new options, including voice tests and daily assessments, which take just a few minutes.

Tests check about ten different brain functions, including short-term memory, emotional empathy, reaction times, attention and focus. The group turned to qualitative tests with questions such as how happy people feel or how much pain they are in, on a scale of one to ten. And last week, Stork announced a partnership with ActiGraph, a company that conducts physical mobility tests with devices that resemble watches, but are much more advanced.

Big pharmaceutical companies can be slow to change. Face-to-face testing has been the norm for decades and many continue to use it, but the adoption of digital options is accelerating as companies come under increasing pressure to reduce costs and deliver new medicines faster .

Stork also expects to supply tests directly to doctors and hospitals. Tremendous advances have been made in the field of Alzheimer’s disease, with new treatments coming to market and others in the pipeline. However, once sales begin, tests will need to be conducted to assess how effective drugs are and which patients are likely to benefit from them.

Last year was difficult for Stork and his team. Hit by slower economic growth and rising costs, many pharmaceutical companies have scaled back testing activities. Cambridge Cognition still increased sales by 7 percent to £13.5 million, but made an operating loss of £1.2 million.

Conditions have improved in the second half, but orders are increasing and brokers expect turnover of £16 million and profits of £600,000 by 2024, rising significantly in the coming years.

Midas judgment: Cambridge Cognition creates advanced digital tests to help treat some of the world’s most devastating diseases. At 51 cents, the shares seem oblivious to the expertise and future prospects of this company. A purchase for the longer term.

Traded on: GOAL Ticker: COG Contact: cambridgecognition.com or 01223 810700