Good morning, everyone. Welcome to the presentation of Cogstate's Financial Results for the half year ended 31 December 2021. My name is Brad O'Connor. I'm the CEO of Cogstate. Joining me today is Cogstate's CFO, Darren Watson. I'm really pleased to be able to present to you these results, which are, I think, really strong results reflecting the great state that our business is in.
I note that today's presentation includes forward-looking statements and therefore I note our disclaimer stating that the information in this presentation is general in nature. I encourage all investors to consider your own investment objectives and also to review in detail the half year financial statements that were lodged with the ASX today. Before we get started, some administrative items. Following our presentation, we'll take questions.
If you do have a question, there are two ways to ask that question. Firstly, you can type your question into the control panel, and it'll be read by the moderator. Alternatively, you can raise your hand, and have your line unmuted to ask your question. Finally, I note that the presentation has been lodged with the Australian Stock Exchange this morning, and also that the slides are available under the Handouts tab.
I also note that a recording of this presentation will be available from the Investor Center section of the Cogstate website, following the conclusion today. Let's get started. Since the inception of Cogstate in 1999, our investment thesis has focused on an aging population and increasing incidence of Alzheimer's disease, and the need to provide technology solutions that simplify the measurement of cognition for patients, for their doctors, and for companies developing new and better therapies.
Put simply, we believe that brain health is important and it should be easily available to everyone. Cogstate combines proven science and technology to make assessment of cognition as simple as the measurement of blood pressure. Cogstate was founded more than 20 years ago in Australia, but today most of our workforce is based in the United States. We're a team of around 255 people, made up of employees as well as a global network of clinicians, mostly neuropsychologists.
Our technology solutions are based on excellent science, and since our inception, we've supported more than 2,000 academic and clinical research studies and over 2 million Cogstate tests have been administered. Our largest customer base is pharmaceutical and biotech companies who are developing new drugs, where we help them determine if their new drug is impacting the cognition of patients in their study.
We are proud that we've supported each of the world's Top 10 pharma companies in their endeavors to bring new drugs to market. In the coming years, with the release of new therapies in Alzheimer's disease and other neurological diseases, better solutions for screening and diagnosis will be critical, and Cogstate's uniquely positioned to support this need. Our company is growing rapidly. Through the 2021 calendar year, Cogstate has now recorded $42 million in revenues to produce an EBIT of $10 million.
The market for Cogstate technology is large and growing based on several key dynamics. Our population is aging and there's an increased focus on brain health. Investment in neuroscience is increasing, and we believe that that trend will continue over the coming years. The Clinical Trials industry is ripe for disruption and there's a greater desire to leverage digital assessments as part of new study designs.
Finally, we believe that the launch of new therapies for Alzheimer's will create a lucrative market for brain health screening and diagnostic support. Within the context of the broader market dynamics, Cogstate is really well-positioned. Our technology solutions are scientifically and commercially validated. We're a trusted partner to our pharma and biotech customers, having contracted with 69 different companies over the last 18 months, many on multiple occasions.
Cogstate often works with our customers very early in the process as advisors and consultants in respect of the design of clinical trials. We are seeing growth in sales through both our direct sales, but also our indirect channel partners, where Cogstate technology is deployed via the device or the technology platform of our partners. Our business is profitable and cash flow positive, with a large revenue backlog that provides certainty in respect of future earnings.
There's significant upside beyond the current financial results as we begin the launch of our technology into the Healthcare market via our partnership with large pharma company, Eisai. The positive market dynamics in Cogstate's positioning within that market is reflected in our record financial results for the half year ended 31 December 2021. I should note that all Cogstate financial results are presented in US dollars. In our Clinical Trials business, sales contracts executed is our leading indicator.
During the half year ended 31 December, Cogstate executed $54.5 million of Clinical Trial sales contracts, which was up over 140% on the previous corresponding period. The major contributor to that result was sales in respect of Alzheimer's disease clinical trials. The long-term nature of our Clinical Trial sales contracts provides insight into future revenue performance. Currently, Cogstate has almost $133 million of contracted revenue that will be recognized in future periods.
That is up 78% on the same time last year and is again a record. For the half year, we recorded $23 million of revenue, $21 million of which was from our Clinical Trials business. The Clinical Trials business is showing significant margin expansion as we deliver revenue growth. A 62% Clinical Trials contribution margin was up significantly on the previous corresponding period, and is also an increase of 4% points from the most recent half year period.
With cost control at the operating expense level, we were able to deliver EBIT of $6.1 million for the half year. Net cash at the end of the period was $24.6 million, with strong cash flows from operations over the course of the last year. I'm now gonna hand over to Darren, our CFO, to dig into the financial results in a little more detail.
Thanks, Brad. As we turn to chart nine, I'd like to expand on the profitability, improved profitability of the business. This chart will demonstrate for you how we've been able to leverage the existing capacity in the business and allow us to return to strong margin performance over the last two halves. Getting above 20% EBIT margin in the second half of last financial year and improving further to more than 26% EBIT margin in the first half of this financial year.
I'd call out three key drivers to this improvement in our margins. Firstly, we had a significant improvement in the productivity of the existing capacity in the Clinical Trials business, coming from improved work practices and investment in our tools and technology. Secondly, a change in the revenue mix, with the software license revenue making up 23% of the first half of this financial year compared to 21% in the second half of last financial year. That compares to a more historical average in the range of roughly 17%-19% prior to that.
The third point I'd make is that the leverage on the operating expense, which is a percentage of our revenue, has decreased from over 40% in the first half of last year to roughly 33% in the second half of last year and down to 30% in the first half of this year. Over the last year, we've substantially lifted the volume of business that we've put through our business in terms of supporting our clients as a result of improved work practices, careful investment in tools and technology, and also our growing software license mix.
The level of software license mix, however, in this half has been a record high for Cogstate, partly attributable to the large deal that we signed in the first quarter, so we don't necessarily see that as reflective of our future revenue mix. Therefore, we expect to see EBIT margins in the range of 18%-24% going forward, though that is dependent on the level of software license mix in future periods.
As I go to chart 10, just like to comment on the forward backlog, so you can see that the strong performance in new contract sales in recent quarters has led to a considerable growth in our backlog of future revenue under contract. We now have $92 million of Clinical Trials revenue under contract, up 85% on where we were a year ago, and almost $41 million of Healthcare revenue under contract, being the minimum spend commitments under the ACO agreement, up 63% on where we were a year ago.
On chart 11, we've provided a view of how that backlog runs off over future years. I'd like to highlight on this chart that our financial year 2023 revenue under contract is almost $31 million. For the current FY 2022, this time a year ago, our revenue under contract was $20.1 million. We're now more than $10 million ahead looking into FY 2023. Of course, we still have a half year of signings to go. We feel confident about our growth prospects as we look forward into FY 2023.
The growth is fueled by the strong Clinical Trials, new contract sales performance. A year ago, our FY2022 revenue under contract, which was $16 million for FY 2023. We have over $26.5 million already under contract. You can also see that we've added strong future revenue, both FY 2024 and beyond. Again, supports our strong future backlog growth. If I go to the Clinical Trials business, so a bit more detail on Chart 12.
You'll see that the strong contribution that Clinical Trials business has made to the improvement in group EBIT that I covered back on chart nine. Through the improved productivity and higher software license mix, the contribution margin for the Clinical Trials business hits 62% in the first half of this financial year. As I mentioned before, this has benefited from the higher level of software license mix.
At this stage, we see a more sustainable margin going forward to be in the range of 54%-60% as we continue to invest in our tools and technology and achieve the leverage as the business grows. As I mentioned before, this will vary depending on the level of software license mix that we see in the various periods. I'll now hand back to Brad for a little further detail around the Clinical Trials business.
Thanks, Darren. We've already discussed the sales contracts executed in the half year at $54.5 million, and the fact that most of that has come from Alzheimer's disease clinical trials. As you can see in the pie chart presented, the value of contracts executed is predominantly made up of phase II and phase III clinical trials. Now, obviously, these trials are large and they take longer to perform, and therefore they cost more to run. The fact that phase II and phase III studies make up the majority of our sales contracts isn't gonna surprise anyone.
The differences between the value of sales contracts with phase II and III trials that are executed in any given period is really just reflective of the individual opportunity in the stages of development of the drugs that our customers are developing. I would also note that the value of phase III contracts executed in the most recent half year period, so that's the pie chart on the very right of the screen, reflects the fact that we executed extremely large phase III Alzheimer's disease trial in the September quarter.
I wouldn't necessarily read into that as a trend. That's all provided as sort of backdrop to understand that Cogstate is not solely focused on Alzheimer's disease. We're currently running 117 clinical trials. Only 31 of those trials are in Alzheimer's disease. As you can see from the list here, Cogstate is working in a wide variety of other indications, but there's no doubt that the Alzheimer's disease trials tend to be larger trials and therefore generate more revenue per trial than many of the other indications.
As you might expect, 93% of Cogstate's revenue backlog comes from phase II and III trials. Again, phase I trials tend to be much smaller in scale, therefore don't generate as much revenue. I do think it's important to point out here that the 76 phase I and II clinical trials that Cogstate is running currently do provide a great opportunity for future sales opportunities if those drugs are in fact successful, in their earlier stage trials.
Throughout our history, we've seen great carry through, for future contracts where a drug has been successful in an earlier phase trial. Notwithstanding the fact that we are working across a range of indications, obviously Alzheimer's disease trials are important to our future sales and revenue opportunities. In this chart, what we've tried to do is present our own analysis of Cogstate market share for Alzheimer's disease clinical trials. To talk to the methodology here a little bit, we've used ClinicalTrials.gov as the source of our data.
All studies that are run within the United States need to be lodged with ClinicalTrials.gov. In doing so, in the analysis of that data, we found that there are 127 ongoing Alzheimer's disease trials that are sponsored by a pharma company that are listed in the database, and 90 of those studies were initiated since July 1st, 2019. Again, important to note here, we've focused only on the trials that are sponsored by a pharmaceutical company because obviously that's our target audience.
When we analyze both all of the ongoing studies and the studies initiated since July 2019, Cogstate has approximately 13% market share in each case. We believe there's a significant opportunity for Cogstate to increase our market share over time. It's also important to note that we do expect that market to grow in coming years. What we're saying here is we expect to be able to deliver market share growth in a growing market.
Looking more broadly at the Clinical Trial segment, we see a business that's in really good shape and poised for continued growth. We've got a growing and diverse portfolio of ongoing studies. We believe that the recent decisions by the neurology division of the FDA are indicative of a favorable regulatory environment, and we think that's positive for increased investment in Alzheimer's disease and other neurological diseases in coming periods.
As we've discussed, Alzheimer's trials are important to our future growth, and we are encouraged by positive comments by the larger players in this space, and we see indicators of continued investment in Alzheimer's disease trials. As we've spoken about previously, the Clinical Trials industry is ripe for disruption, and we're excited about the prospect of more virtual or as they're known, decentralized clinical trials. Cogstate technology has proven benefits for use as a remotely administered or even self-administered assessment.
Cogstate has established a subgroup within our Clinical Trial segment that is focused solely on developing and delivering solutions for decentralized trials. This is a major focus area for us. In recent periods, we've also focused on the expansion of our channel sales strategy, and we believe that this strategy is now beginning to pay off.
Cogstate is seeing sales opportunities presented via these channel partners, and sometimes these are opportunities that have been introduced to us by our partners, not opportunities that we had any awareness of on our own. With the goal of increasing such indirect sales, we've been improving the ability of our technology to integrate with those channel partners to further ease the process of adoption by those channel partners and adoption by their customers.
As final statement, we continue to invest in technology that will make our internal processes more efficient. We're always conscious that efficient processes result in higher contribution margins. We wanna continue that very positive result that we've delivered during the first half of this financial year. If we turn our attention to the Healthcare segment, the revenue recorded during the half year was essentially the amortization of the contracted minimum revenues from the Eisai agreement.
A note here is that the table shows a slight fall in revenue from the June to the December half year period. That's a difference related to the accounting treatment of software development costs that have been reimbursed to Cogstate by Eisai. In the June half year period, those reimbursements were treated as revenue. In the most recent half year period, those reimbursements have been treated as a negative expense, and that negative expense appears in the operating expense line, so outside of this segment result.
The amounts reimbursed in the December half year period are detailed in note six of the financial statements that were lodged earlier with the ASX. I think it's page 15 of those statements if you're wanting to dig into the detail a bit there. Looking more broadly at the Healthcare business, we're really excited about this opportunity.
There are multiple promising potential Alzheimer's therapies with data to be released in the coming months, and the launch of those therapies will increase demand for easy-to-use, accurate brain health assessments. We've been saying that for many years. We are making good progress in Japan, where over 26,000 NouKNOW assessments have been performed through initial engagement with municipalities and businesses seeking to offer those tests to their employees or residents or customers, so that they can understand their brain health.
Of all NouKNOW testing sessions that have been started, over 90% have been successfully completed. It's an amazing result for a self-assessment of cognition. As we've announced previously, really pleased that Eisai has been able to negotiate that a version of the NouKNOW assessment has been pre-installed on the Raku-Raku Smartphones. These phones are marketed to senior population in Japan.
They've shipped more than 7 million units, and those phones are designed with the specific needs of an elderly population in mind, with things like larger text, easier to navigate, et cetera. It's really our target market, so it's great to have that solution pre-installed. Last month, Eisai announced the launch of Cogstate technology in Taiwan and Hong Kong, and we expect similar launch to occur in other countries in the near future.
Finally, there's been a substantial investment by Eisai in Cogstate technology over recent months. A multilingual version of the Cogstate Brief Battery to be branded as Cogstate, CogMate, I should say, has been developed, and that has now been launched in Taiwan and Hong Kong, as I mentioned. That version is quick-equipped with multilingual functions, which is essential for our efficient product launch into new territories. That means we're not gonna have to reproduce a different version of technologies as we now go into new territories.
It's already pre-installed with multilingual functionality. Just and now just to focus a little bit on our data strategy, an area that we're also investing in. We're investing here because we believe that this has the potential to increase the competitive moat around Cogstate, and in fact, that the database itself may also act as a source of revenue in the future. Over our history, over 2 million Cogstate tests have been administered.
Over the coming years, as we deliver against our existing commercial strategy, that number of tests has the potential to increase dramatically, thereby building a data set of brain health assessments that will be unparalleled. Through the use of advanced analytical techniques and machine learning algorithms, we believe that there is potential to increase the sensitivity of our existing assessments and also the potential to allow for earlier identification of impairment.
Success in those endeavors would position Cogstate incredibly well for long-term growth in all of our business segments. I'm gonna turn our attention now to our expectations for the second half of the 2022 financial year, and we've produced quite detailed guidance here that I want to talk you through. In our Clinical Trials segment, we expect revenue for the second half of the financial year to be in the range of AUD 19 million-AUD 22 million.
Of course, that result will be subject to the level of sales contracts that we do in fact execute over the coming half year period. We expect that the contribution margin for Clinical Trials for the second half to be in the range of 54%-57%. Again, that's subject to the revenue mix that Darren mentioned earlier, and so that margin could push higher than that 57%. That result that we're guided for would leave a full year contribution margin in the range of 58%-61% for the Clinical Trials business.
That higher full year guidance is because of that really strong first half result. The second half financial result for the Healthcare segment should be much the same as the first half. From a group perspective, when we look at the full year results, we anticipate that revenue will be in the range of $44 million-$47 million for the year, and that operating expenses will remain in the range of 31%-33% of revenue, which is what we previously guided.
Overall, we expect EBIT margin to be in the range of 20%-24% of revenue, and that would provide for full year EBIT in the range of AUD 8.8 million-AUD 11.3 million. Finally, we expect operating cash flow to improve significantly in the second half of the financial year, and we've guided for an operating cash inflow of at least AUD 4 million for the second half, taking operating cash inflow for the full year to more than AUD 5 million. Overall, our business is in really good shape.
We're extremely pleased with the half year results that we've produced, but we see the opportunity to see significant growth in the future. With that, I'll pause, and I'll open the lines for questions. Again, as a reminder, if you do have a question, there's two ways to ask it. Firstly, you can type the question in the control panel, it will be read by the moderator, or alternatively, you can raise your hand and have your line unmuted to ask the question.
Thank you so much for the presentation, Brad and Darren. Certainly, Cogstate is in a strong position, and it's fantastic to see these results and projections. We do have several questions from participants, so I will go ahead and dive right in. First, can you further explain the growth in Clinical Trials contribution margin that was achieved for the first half?
Darren, I'll let you take that question.
Yeah, thanks. Thanks, Ruth. Two key factors. Firstly, we've been able to lift the productivity within the organization. As I mentioned earlier, better work practices, investment in technology. Probably the larger contributor is the increase in the software license mix. You can see our software license mix of 23% of our revenue was attributable to software licenses.
That in itself, if you take that as a percentage of revenue, contributes about an additional 3-4 points of margin. You know, that's been the probably single largest driver to the increase in margin. Really that is a result of the large deal that we did sign in the first quarter of this financial year and the software license that was associated with that deal. That's the main reason.
Somewhat associated, on a similar train of thought, the cash flow projections that were provided for the second half of financial year 2022 are much stronger than the first half. Could you explain this difference?
Yeah. The main driver to the improved cash flow in the second half is really working capital related. It's largely associated with the timing of our invoicing, timing of collections, our Accounts payable balance. Really attributable primarily to improvements in working capital as we go forward through the second half.
Great. Thank you for those perspectives. Taking a little bit of a shift in direction, we've had a few questions regarding Aduhelm. First, wanted to just note or ask this question: regarding the limited proposed reimbursement from CMS proposed on the anti-amyloid antibody drugs, do you see that slowing pharmaceutical companies' near-term investment interest in trials in Alzheimer's?
I'll take that. Look, I think the short answer to that is that we don't. I'll refer people to the commentary that has been provided through the recent earnings calls by both, Eli Lilly and Eisai. I think what you're seeing there is that those pharmaceutical companies, they firstly lodging objections to the CMS decision in relation to reimbursement.
Secondly, given that the limited reimbursement under the accelerated approval pathway, really focusing on their phase III, clinical trial data, I think it was someone from Eli Lilly who said that, you know, at the end of the day, compelling phase III data is what is necessary here, as has always been the case. You know, we see that the reimbursement issues is something that will get solved over time. As I said, I think it gets solved by more compelling completed phase III data.
That doesn't change the situation. I think it also operates, as we mentioned, within the context of decisions by the neurology division of the FDA, which seem more accommodating to Alzheimer's disease trials and approvals. We think that has a positive impact as well, in respect of investment decisions in R&D.
A little bit on the flip side of this, there's the other side of this equation with the question on how much of your recent bookings growth has been driven by increased R&D in response to Aduhelm's approval, and when do you expect Alzheimer's R&D to begin to really accelerate industry-wide, or has it already? Yeah, wonder if you can expound kind of on that. I know you've touched on it a little bit already.
I don't think that the growth we've seen in Alzheimer's disease R&D is reflective of the Aduhelm approval as yet. I think you're beginning to see the flexible, you know, position of the FDA here that we spoke about earlier. You know, what we're beginning to see is that companies are beginning to invest in Alzheimer's disease research.
I don't think we're yet seeing that reflect in our level of bookings. You'll appreciate it takes some time to run through that investment cycle. The short answer to that question is I don't think it's really started as yet. We'll see that into the future.
Great. Next question. For the large phase III trial, at about $30 million, at what time is there a milestone assessment that might determine if the rest of the trial will proceed or terminate?
That question there implies a futility analysis. It's my understanding that this trial has not been designed with a futility analysis in mind.
Great. I have a raised hand from Elyse Shapiro. Elyse, I'm gonna go ahead and unmute your line at this point. Give me just one moment, and we'll let you ask your question. Okay, you are unmuted, Elyse. Let's see if we can hear your question.
Great. Great, thanks. Thanks, Brad, and congrats on the result. How is performance looking year to date, and what impact do you think the return to things like in-person conferences and travel to visit sites will have?
Thanks, Elyse. So look, you know, the business, as we said, is running really well with the sales pipeline as we look forward to the June half year is strong. You know, we're beginning to see a return to in-person conferences. There's an upcoming Alzheimer's disease conference in Barcelona next month that we have some Cogstate staff attending. I think it's gonna be interesting to see whether that makes any difference to opportunities. I think it makes us all feel better about getting face-to-face and talking to some people.
You know, I think the industry has been running pretty efficiently, though, in a virtual environment. We're not necessarily anticipating, you know, that to be a significant driver of new activity. I suppose we're excited by the opportunity to get there and see some of our customers again.
Indeed, we are. Next question. Any plans to list on Nasdaq so bigger audiences can invest in the growth of the company? It will also help to get more valuation for existing shareholders.
Well, there's an implication in that question that the Nasdaq listing implies a higher valuation, which I think is a hypothesis that could be tested. No. Look, we don't have any plans for a dual listing at this stage.
Great. Next question we have, I note that your market share is lower for phase III at 9% versus phase I and II at 13% and 14%. Is there an expectation that as the trials flow through, that the phase III market share will increase over time?
Yeah, I think that's a really good question and a good observation. I think the lower market share that we're enjoying currently in Alzheimer's disease in phase III trials just reflects the fact that the sort of, I suppose, more recent acceptance of our technology, the fact that it was used in those phase II studies have preceded and sort of ran into those phase III studies.
I think the, again, as you know, just to highlight the point that we mentioned earlier, we do see good stickiness in terms of the use of our technology from one phase to the other. You know, we do anticipate that if those phase II trials are successful, that we will see an increased use of Cogstate technology in those in future phase III trials.
Related to the market share question broadly, but in a different category. You highlighted that you have 13% market share in Alzheimer's clinical trials. How do you intend to gain share over the coming quarters and years? Who would you be displacing, i.e., paper and pencil, other digital assessment providers? How do you set yourself apart from the competition?
Yeah, again, a really good question. I think it's a, you know, $62,000 question, right? How do you gain market share? A lot of that is the, you know, standard blocking and tackling of how do you win sales. It's continued performance with our existing customers. It's expansion of our customer base. It's, you know, we do that through the demonstration of the quality results that we've been able to produce in large phase III studies with our existing customers.
It's, you know, through the adoption of our channel partners and the ease at which our technology can be integrated into the platforms of those channel partners. It's continued investment in the science and showing the utility of our assessments.
I think also, you know, the successful launch of our product by Eisai in the Healthcare market actually has pulled through into the clinical trials part of the business, whereby we can see our technology used as sometimes a secondary or an exploratory endpoint, with a view to the use of that technology to help identify patients once the drug gets out of trials and into market. I think it's a range of those factors.
In terms of who we're winning work from, I think it is fair to say, as highlighted in that question, that most of the work currently is conducted by a standard neuropsychological assessment. We don't see ourselves as displacing other digitized assessments of cognition, 'cause by and large, we don't see that in those Alzheimer's disease trials.
We don't see other providers in those trials as a general statement. There's a number of companies who support those standardized measures of cognition, and largely that's who we'd be seeking to displace.
Great. Thanks for that, Brad. Turns out Elyse actually had another question. I apologize for cutting you off early, Elyse. Let me go ahead and unmute you again. Here we go. You are unmuted.
Great. Thanks. Guys, do you mind typing it down? I've got a few questions, so if you just don't mind unmuting until the end. Looking at the software license mix as a component of the trials revenue, how do you see that increasing over time? Do you think that it will continue to increase as decentralized trials kind of as a thematic continue to play out? Thanks.
That's a really good observation, Elyse. I think, yeah, so as a general statement, you know, the license fee mix, obviously it's our goal to increase that mix over time. Really that comes back to the adoption of our digital measures, as more studies and as more important components in those studies.
When we look at, you know, where's the most obvious place that that can happen as trials move to the more virtual decentralized trial, there's an obvious role for digitized assessment, just because of the ease of administration and the ease of delivery of those assessments. You know, we really do see that as an opportunity or a means by which that we can increase that software revenue or that license fee revenue as part of the overall mix.
Got it. Thanks. Just looking at pipeline, would you say that there's a similar distribution of like phase I, II, and III compared to, you know, what we've seen in the first half? Or do you think it's kind of skewed more towards, you know, earlier stage trials?
When we look at the June half?
just the pipeline in general.
The pipeline in general?
Yeah. Yeah.
I think it's probably more of the historical trend. I think you know, when you look at the value of contracts signed in the first half, you know, there's obviously that huge swing to phase III. As we look forward, you know, through the existing pipeline, there is a lot of phase II work coming through, you know, and a decent amount of phase III. Certainly more phase III work coming through, I would suggest, in the pipeline than what we've seen historically.
But that's kind of our expectation as to where the business is going and reflects the growing acceptance of our solutions. Look, I think I haven't really answered your question. Look, I think there's a good mix, certainly, a majority of phase II, in terms of number of opportunities, but obviously the phase III opportunities tend to be higher in value. You know, they have an important impact on the value of contracts signed.
Yeah, definitely. Great. Just one last question. Any insights into Eisai's US launch plan on the Healthcare side?
Look, I think what I would say there is there's a lot of consideration going there really between the role of the medical device. The Cognigram, registered medical device that will be, you know, provided to clinicians, and how does that interrelate with the sort of more general consumer application, and how similar or different should those applications be? Eisai have been quite considered in their approach to launch, and we're very supportive of that.
They, because we do think it's important to get that launch right, and to be providing the right type of messaging and the right types of products to each of those markets. Look, we expect that, you know, we expect that to come onto market soon. I do note that in the U.S., they have launched the Cogstate technology into an application called My Sleep Log. If you go to mysleeplog.com, it's a website that's supporting their insomnia medications, and they've launched a cognitive test or our cognitive test through that.
They have launched in the U.S., just not in the Alzheimer's disease market. Really, as I said, that's really just thinking through exactly what they're gonna launch into the consumer market and how that should differ from what's offered to physicians.
Kind of in that realm, jumping into another question that we had in the Healthcare realm, and then we'll steer back into Clinical Trials as we have several questions in that area still. But can you give an update on the development plans for the Lila voice-based test? And could you provide any insight with respect to any new scales or tests that we're developing?
In respect to the Lila, that's a phone-based version of our International Shopping List Test. The prototype of that product is in existence and is going through scientific validation currently. We have plans to have, you know, certainly in this half year, we expect to have that technology available. We're thinking about how we'll commercialize that in conjunction with Eisai within the Healthcare market and also, internally, how we will commercialize that within the context of Clinical Trials.
That product's coming along really well, and we think that's going to be a really nice addition. In terms of newer products or newer tests, our science team is constantly working with their academic collaborators around different tests and different ideas. I would suggest there's probably more focus at the moment around refinement of existing tests than there is around establishment of or development of a whole range of new tests, the Lila application aside.
Really focused on the movement of, you know, a number of our assessments to both phone-based modalities but also to self-assessment modalities. That's really important in the context of the decentralized or virtual clinical trial, that if we can create a number of tests that could be self-administered just makes that offering more compelling.
Great. Pivoting back, yeah, into the clinical trials space. The question is, with regards to contracted clinical trials amount, historically, what is the follow-through on those contracts as a % of total? Can we see even higher contribution margin from the Clinical Trial segment down the line, or is 54%-60% optimal or maximum?
Darren, I don't know if you wanna take the first half of the question here, which is around the revenue roll-off from Clinical Trial sales contracts.
Yeah, let me comment on that, Brad. Typically, the period in which a contract signs, and it does vary depending on what kind of contract it is. We have contracts that are purely provision of software licenses, and we have contracts that include services as well. Typically on average across the portfolio, we'd expect to see something in the range of 10%-17% of new contract signings within a period yield revenue in that period.
The revenue after that typically rolls off in pretty much a straight line basis over the term of whatever the contract is. Depending on what kind of trial it is, whether it goes two years or five years, the revenue rolls off in a relatively straight line over that period. It does have some peaks and troughs, but fair to assume it's relatively consistent over that period.
In relation to the second part of the question around target margin for the Clinical Trials business. Look, I think, you know, into the next few periods, we view that sort of range of the high 50s%-low 60s% as probably where the business is sitting at the moment. You know, implied in the question is, as we accelerate revenue substantially in that business, does it in fact get more efficient? Look, I think there's the potential for that, and we are looking to invest in different technology solutions that improve the efficiency of our group.
We're also been moving our group to agile working methodologies to, you know, seek to make that group more efficient. We're always focused on that, and delivering a higher margin result in that business. I think we need a little bit more time to see whether it's possible that we can push those margins, those contribution margins into the, you know, low- to mid-60s%.
Great. Switching gears. Has the board reassessed the capital management plan on the cash balance? With over $5 million positive operating cash flow noted, what big investment project or acquisitions are the company planning to spend the cash on?
That's a good question. We've looked at a couple of different potential add-ons to our Clinical Trials business. Different technology solutions that might accelerate our plans. We haven't yet found anything that we think would substantially accelerate the business and that we think where the asking price, if you like, for the business has been justifiable from our point of view.
We're always eager to, you know, I think really focus around that Clinical Trials business, the quicker we can, you know, achieve that growth in market share or achieve, you know, and subsequently achieve growth in those revenues, the better. If we do see, you know, particularly technology solutions, bolt-ons that could help us accelerate that growth, we are very interested. We've got to find the right opportunities, and we've got to find them at the right price.
Great. We've got just a few more questions here that we're gonna take with the time we have. In previous years, EBIT margin has typically been higher in the second half than in the first half. Could you talk to any seasonality that might typically favor the second half profitability?
No, I don't. Look, I think that's, you know, if we look at the graph that I'm showing there, you can see in the second half of 2020 and the second half of 2021, that EBIT margin is higher. I would suggest that to you that's really because the revenue numbers in each of those years were higher than the first half. I think, you know, in those earlier years, I don't think the revenue was at a, you know, sustainable, you know, future level to really read too much into those EBIT margins.
I think as we, you know, as we push this revenue beyond $40 million a year, I think you start to get to a size and scale of the business where the operating leverage comes through. Yo u know, the short answer to your question, no. I don't think there's seasonality built into it. I think that just reflects the revenue growth.
Great. Thanks, Brad. We're gonna take two more questions here. The first is, given the market share estimate of around 13% for Cogstate, can you talk about the remaining market share breakdown? Is it one big competitor or extremely fragmented?
Well, I think it's a good question and one we're trying to solve ourselves. Look, certainly there's a couple of larger competitors who support standardized measures of cognition. Those competitors are Signant Health, the WCG Clinical. We see them as our major competitors in that Alzheimer's disease space.
As to what percentage market share they have, it's really hard to know. It is quite difficult for us to map to ClinicalTrials.gov to do that in respect of another provider who doesn't have their own proprietary assessments included within those trials. It's almost impossible unless you have first-hand knowledge as to who's running the trial. That's a very difficult exercise. We do know that they're, you know, from our perspective, they are our major competitors in the space, you know, focusing on the support of those standardized measures of cognition.
Great. With this, we've got a last question that is very sweeping. Where do you see Cogstate in 2025 and the next five years?
20-25 years was the question.
Oh, in 2025 or
Oh, sorry.
In the next five years. .
Sorry. I thought you meant in 25 years. In 2025. Look, I think that's a long enough timeframe that, you know, you really get the Healthcare product on market and you're really looking at the changing dynamics of the business. You know, when you look at our revenue mix currently, you know, the Healthcare business only represents about 10%, you know, or thereabouts of the Clinical Trials business. We see the Healthcare opportunity to be really large and potentially much larger than the Clinical Trials opportunity.
Over the course of the, you know, say the next 3-5 years, we expect to be able to grow that Clinical Trials business, and we talked about how we can grow market share into a growing market, particularly in Alzheimer's disease. We expect to be able to grow that Clinical Trials revenue. I think the unanswered question is how much does Healthcare revenue grow beyond the minimums that are factored into the Eisai agreement, and what are we seeing by 2025, you know, in that respect?
I think that our hope is that, by that sort of 2025 period, you've got product on market in a number of territories, you're really starting to generate you know, significant revenue from that from that Healthcare business.
The mix between the segments, I think, starts to change. The other thing that happens by sort of 2025 and 2026, which we're showing one of the last slides here that was shown in the additional information of the deck that was lodged with the ASX, is you start to see the annual cash flows that come in from Eisai, which is the blue bars across the bottom, start to really increase. Rather than just the amortization of cash that we've already banked, that starts to more reflect cash that's coming in over, particularly, years 2026, 2027 and 2028.
You're seeing a lot more free cash in the business as we push out those years. That's only at the minimums, of course. To the extent that we're successful and the revenue increases beyond those minimums, I think, you know, there's substantial upside beyond that.
Fantastic. Brad and Darren, thank you again for the presentation and perspectives. Any final words for attendees? Maybe we start with Darren.
Might have lost Darren. I will close out, Ruth.
That's great.
We think, as I said at the outset, I think the business is in great shape. You know, we're looking forward to a strong second half result. We've provided good guidance here. I think there is upside beyond that guidance. We're really driven by what is the level of contracts, Clinical Trial sales contracts that we execute through this half year period.
As we look forward to fiscal 2023 and 2024, we see a lot of growth that's already booked in terms of the strong revenue pipeline that we have, and the significant sales opportunities that are in front of us. The business is in good shape, and we expect to be able to continue to grow both revenues and profits over the coming years.
Wonderful. With that, we thank everyone for joining us today. This presentation will be made available on the Cogstate website as well as our YouTube channel. I'll also take this moment to invite you to learn more about what we do by following us on social channels and exploring our website. Again, thank you all for tuning in, and we wish you a lovely rest of your day. Thanks so much.