The CogState Limited (ASX: CGS) share price has been an exceptionally strong performer on Monday.
At the time of writing, the neuroscience technology company's shares are up a massive 36% to a 52-week high of $1.08.
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Why is the CogState share price rocketing higher?
Investors have been buying the company's shares this morning following the announcement of an agreement with Japanese pharmaceutical company, Eisai.
According to the release, the agreement will see Eisai exclusively distribute Cogstate digital cognitive assessment technologies in healthcare and other markets world-wide.
The agreement excludes clinical trials, where Cogstate will continue to market its offering independently.
What are the terms of the agreement?
The release explains that Eisai will provide an upfront payment to Cogstate of US$15million, which is payable within 45 days.
The pharmaceutical company will also pay Cogstate a royalty on sales. This will be determined by a range of factors including the retail market price of Cogstate technology in all regions or calculated on a per user basis.
Eisai will also fund necessary product development activities to further tailor Cogstate solutions for each territory and use case and be responsible for all commercial activities in respect of the sale and marketing of the technology in all territories.
The agreement has an initial term of ten years for each country, from its first commercial product sale on a country by country basis. Eisai has agreed to make commercially reasonable efforts to make its first sales in the US within 1 year, the EU with 3 years, and China with 4 years.
Furthermore, the agreement provides for cumulative royalties of at least US$30 million over the term of the license, unless terminated earlier.
The minimum royalties will be no less than US$10 million for the period of years one to five and then no less than US$20 million for the period of years six to ten.
What is CogState's technology?
The company's technology optimises brain health assessments to advance the development of new medicines and to enable earlier clinical insights in healthcare.
It provides rapid, reliable, and highly sensitive computerised cognitive tests across a growing list of domains and support electronic clinical outcome assessment (eCOA) solutions. These can replace costly and error-prone paper assessments with real-time data capture.
