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Why the ResApp (ASX:RAP) share price is up almost 20% today

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The Resapp Health Ltd (ASX: RAP) share price has stormed higher today following a positive announcement regarding its software.

During mid-afternoon, shares in the digital health company reached an intra-day high of 14 cents. Since then, the ResApp share price has slightly retreated to 12.5 cents, up 19%, at the time of writing.

What does ResApp do

ResApp is a digital health company that specialises in developing smartphone application for the diagnostics and management of respiratory diseases. Machine learning algorithms use sound to detect and measure a variety of breathing conditions, such as breathing, snoring and coughing.

What did ResApp announce?

ResApp advised it has built a new smartphone application which has been non-exclusively licenced to biotech company, AstraZeneca Japan.

Developed over the last 12 months, the cough counting application is designed to identify coughs and background noises in everyday settings. The software records the number of coughs from the user and uploads the data in a form of time and date stamps. This is then accessible to medical and healthcare professionals to monitor in real-time.

The company noted that cough frequency is a key factor in respiratory disease progression and management. Traditional methods such as self-reporting or listening to audio recordings are said to be costly, inaccurate and labour-intensive.

The software will be used in a clinical study to monitor patients who suffer from lung cancer.

What’s the deal?

Under the agreement, AstraZeneca will pay a monthly licence fee for each patient enrolled in the initial study. In addition, a monthly support fee for the duration of the study will also be included. The program is set to start early next year and will run for two years.

ResApp noted that the number of patients and the length of their participation remains uncertain. It does not expect to generate material revenue from the program.

Looking ahead, the company is confident that the new partnership will lead to future product applications. ResApp is currently seeking new opportunities to integrate its software into a range of hardware devices. Discussions with large industry customers are ongoing and the company will update the market in due course.

What did management say?

Welcoming the development, ResApp CEO and managing director Dr Tony Keating said:

To have our technology licensed by a company of AstraZeneca’s reputation is a major achievement and provides significant validation of ResApp’s products and capability. They have some of the world’s leading scientists and researchers running clinical trials and treatment programs and we are confident that their input will enhance our technology for future commercial applications and deployments.

ResApp continues to build a strong foundation of commercial partners and this agreement is another example of the company’s ability to attract industry leaders that can assist in rapid scale well into the future.

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Returns as of 6th October 2020

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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 Scott Phillips.

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