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Why the ResApp Health Ltd (ASX:RAP) share price has been smashed today

The ResApp Health Ltd (ASX: RAP) share price has been one of the worst performers on the market on Tuesday following the release of its SMARTCOUGH-C-2 study results.

At one stage the digital healthcare company’s shares were down as much as 59% to 9 cents. They have since rebounded slightly but are still down a whopping 50% to 10 cents.

Why are ResApp’s shares crashing lower?

ResApp has been busy running a study for the diagnosis of childhood respiratory disease using cough sounds and its ResAppDx smartphone application.

Although management has labelled the preliminary results for the double-blind, prospective study as “positive”, as you might have guessed from the share price reaction, investors were expecting far better.

Management revealed that the study achieved a positive percent agreement (PPA) between 73% and 78% and a negative percent agreement (NPA) between 71% and 86%.

This is compared to a clinical diagnosis for lower respiratory tract disease, asthma/reactive airway disease (for children over 2 years of age) and primary upper respiratory tract disease.

These figures are really nothing to get excited about in my opinion and I can’t say I’m surprised to see its shares crash lower today. I was expecting something in the mid to high 80s.

Nevertheless, management intends to pursue FDA submissions for lower respiratory tract disease, asthma/reactive airways disease, and primary upper respiratory tract disease diseases in parallel to CE and TGA submissions for six diseases being prepared following the recent Australian study results.

Should you buy the dip?

While the SMARTCOUGH-C-2 study was by no means as disastrous as the original SMARTCOUGH study, it is starting to look as though the company has wasted a lot of time and resources on this one.

Overall, I would suggest that investors stay clear of the company and focus on opportunities elsewhere.

Small cap healthcare shares such as Nanosonics Ltd (ASX: NAN) and Volpara Health Technologies Ltd (ASX: VHT) could be great alternatives.

Alternatively, these exciting growth shares could be even better options for investors.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and VOLPARA FPO NZ. 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 Scott Phillips.

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