Shares in ResApp Health Ltd (ASX: RAP) remain volatile after the telehealth hopeful updated the market over the results of an Australian adult clinical study it has been conducting as to the effectiveness of its software that reportedly uses a smartphone microphone in helping diagnose respiratory diseases.
In August 2017 shares in the business lost three quarters of their value in a single trading session after the group revealed that its flagship U.S. SMARTCOUGH-C trial showed "predefined endpoints for positive percent agreement and negative percent agreement with clinical diagnosis are unlikely to be met" for various respiratory ailments.
Astonishingly, the company blamed the U.S. medical staff conducting the trial for the trial's failure in acting "contrary to instructions and training". According to the company " a high number of recordings were also found to contain a second person's cough sounds" in what sounds an unexpected outcome for a professional clinical trial.
Blaming others for the failure of a clinical trial is an ASX first as far as I'm aware and the company reports it is now preparing its SMARTCOUGH-C-2 study at US hospitals in an attempt to get the clinical evidence required to make a credible application to the US healthcare regulator the FDA for some sort of commercial approval.
Even if trial data meets its primary endpoints there's no guarantee of FDA approval for the software. Whereas downside risk comes from the possibility that the trial could once again fail to meet management's expectations.
The company also this week reported "positive results" from its Australian adult clinical trials in assisting with the diagnosis of respiratory disease.
ResApp remains a "story stock" with zero revenue for the quarter ending 30 September 2017, with an operating cash loss of $803,000. Cash on hand sits at $8.5 million, with the company likely to have significant funding costs for its upcoming clinical trial.
This morning shares are down 4% to 7.7 cents and in my opinion it has little going for it as an investment unless you buy management's claims that it can one day commercialise its technology. I would sell the stock if I owned it, although at this end of the market everyone is free to come to their own conclusions.
If you want to speculate on the share market I would suggest looking to companies with actual revenues and the potential to deliver operating profits. A couple to consider include software business LiveHire Ltd (ASX: LVH) or cognitive science company CogState Limited (ASX: CGS).
