CogState turns focus from biotech

Melbourne-based CogState (ASX:CGS) has distanced itself from the biotech sector, in a move that CEO Peter Bick described as "bowing to popular pressure that biotechs are highly risky and expensive businesses".

"The new focus of the company is to develop software for clinical information technology," Bick told Australian Biotechnology News. "It has been the other side of our business -- what we have been making money from. The only way we see we can get our enterprise value recognised is by making the message much more simple, clearer and taking out the risk.

"This strategy removes CogState from the 'biotech' sector and puts it firmly within the healthcare IT sector... Our challenges ahead are therefore ones of distribution, product support and margin, rather than the intangibles and cash demands attendant upon drug development," Bick continued in a statement.

Sales of clinical IT software to pharmaceutical, biotechnology and food company customers earned CogState more than 75 per cent of its AUD$1 million in revenues last financial year.

CogState now plans to out-license its drug development assets, and will not seek to in-license any new drug development projects. The company will also seek to increase revenues from three other market segments: sports concussion return-to-play testing purchased by sporting organisations, an occupational health test, and an early screening test for Alzheimer's disease. These areas represented about 20 per cent of CogState's revenue in the 2004-05 financial year. "I want to make more money next year -- hopefully one of these other areas will bloom," Bick said.

As part of the restructure, CogState will expand its sales operations in the US and UK, opening an office in Connecticut and expanding offices in the UK. "Having people in Australia visiting the US is not as good as having people there all the time knocking on doors," said Bick.

As part of its new focus, CogState has acquired, from an undisclosed Canadian company, technology which develops software for voice analysis which can identify symptoms of Parkinson's disease. The software may also have applications in determining treatments for Parkinson's, schizophrenia and other disorders.

CogState will be looking for more acquisitions -- but not in drug development, said Bick. "We are always looking for acquisitions, but they will now be in the health information technology area," he said.

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