Why the Resapp Health Ltd share price is up 1,158% in the past year

The Resapp Health Ltd (ASX: RAP) share price has surged another 27% to 23.5 cents in afternoon trading today, and is now up 1,158% since a year ago.

Resapp says it develops digital healthcare solutions to assist doctors and empower patients to self-diagnose and manage respiratory disease. These diseases include pneumonia, asthma, and chronic obstructive pulmonary diseases (COPD) such as emphysema and bronchitis.

Resapp is developing apps to provide instant ‘clinical quality’ diagnostic tests and management tools.

In what sounds like something from science fiction, the apps basically use the sound of a patient’s cough or breathing to diagnose the problem – and don’t need any physical contact. It seems smartphones come with such quality microphones – which when combined with Resapp’s systems – can diagnose a respiratory disease quickly.

And the market is huge. According to the company, 13.6 million US emergency room visits each year result in a diagnosis of respiratory disease. An estimated 6.3 million Australians suffered from a chronic respiratory condition in 2011-2012 according to the Australian Health Survey.

So far, clinical studies appear highly promising, with the company reporting that in a recent paediatric clinical study, Resapp’s diagnostic tool correctly detected 80% of patients initially diagnosed as clear by experienced physicians, but later found to have a lower respiratory tract disease. It also was 99% accurate distinguishing patients with the same disease from those with no discernible disease, and 91% accurate for detecting different types of respiratory tract diseases.

Resapp has also licenced the technology developed by a research team at the University of Queensland, which is a smartphone app (PneumoFone) that provides an instant diagnosis of pneumonia.

The potential is enormous not only with providing a quick and easy diagnosis, but also the ability to capture large amounts of data from hundreds of millions of users around the world, including spread, occurrence and effectiveness of treatment options. That data could then be made available to researchers in various capacities working for the government, at universities, medical research facilities, as well as medical device and pharmaceutical companies.

Foolish takeaway

Even without understanding much about the diseases or the software, many investors can clearly see the benefits of the app, not only to patients and doctors, but the potential to bring in large amounts of revenues for Resapp.

However, there are still major risks ahead, including the potential for another company to develop a better app or process to do the same thing as Resapp’s tool as well as regulatory approval. And the company still has to find the best way of commercialising and marketing its product which will be no easy task either.

While I won’t be investing just yet, I’ll definitely be watching from the sidelines.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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