The Resapp Health Ltd (ASX: RAP) share price fell 1.5% today after the group reported its financial results for the half-year ending December 31 2016. Below is a summary of the results, with comparisons to the prior corresponding period (pcp).
- Net loss of $7.55m, versus pcp of $1.5m
- No sales revenues
- Operating cash outflow of $1.83m, versus $1.11m in pcp
- Cash on hand of $12.1m
- Targeting a submission to FDA for its products in Q2 2017
- Claims to be developing a clinically tested, regulatory-cleared respiratory disease diagnostic test and management tool for smartphones
The stock may have edged lower to 32 cents on its results, but it is still up 137% over the past year as investor excitement appears unlimited over its potential to gain commercial approval for its diagnostic testing products for smartphones.
The idea behind the technology is that anyone feeling unwell can test themselves for a common respiratory disease such as the flu, asthma, bronchitis, pneumonia or croup without the need to visit the doctor. In theory this could save both the patient and medical practitioners time and money as the smartphone technology could replace traditional diagnosis methods such as a stethoscope or blood tests.
Due to the investor excitement the company now has a whopping market value of nearly $200 million and it would be stating the obvious to say this seems large given it has nothing in the way of sales revenues. The only significant income over the period was interest of $62,557 earned on its cash balance.
Needless to say I am not a buyer of its shares given the cash flows and speculative nature of this business that looks a long way off potentially commercialising any of its technology products.
As it is the closest it looks to commercial approval is a "premarket submission" with the U.S. drugs market regulator the FDA for its lead pediatric product. Evidently much will depend on the eventual success of this application in determining which way the stock price will swing.
If you want to speculate in the medical device space I would suggest looking to companies that are the real deal in delivering revenues and positive cash flows for investors. Two that come to mind are Nanosoncs Ltd (ASX: NAN) and Somnomed Limited (ASX: SOM), with the former looking to have especially strong potential.
