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Why the ResApp (ASX:RAP) share price is falling 18% lower today

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The ResApp Health Ltd (ASX: RAP) share price is sinking lower today following the company’s release of its quarterly update. At the time of writing, the ResApp share price is down 18.18% to 9 cents.

Let’s take a look at why shareholders are fleeing for the hills today.

What’s impacting the ResApp share price?

Investors are selling down the ResApp share price following today’s release of the company’s quarterly figures. For the period ending 30 September, ResApp reported a worrying result to the start of the new financial year.

Receipts from customers totalled just $3,000 due to the company only receiving payments from Apple Inc (NASDAQ: AAPL) for SleepCheck downloads during June and July, not August and September. The company noted that with ResAppDx now available on select Android smartphone devices, larger revenue streams will likely follow suit.

In addition, SleepCheck is expected to be launched on the Android platform by the end of the calendar year.

Net cash used in operating activities came to $1.4 million, and the company received $1.5 million in proceeds from the exercise of options.

Research and development costs came to $377,000 for the three months, however staff expenses took a big hit at $815,000. The employee cash outflow is double that of administration and corporate costs and almost six times that of marketing costs, $317,00 and $142,000, respectively.

ResApp closed the quarter with a cash balance of $5.8 million.

Operational overview

The company touched on a number of developments that it has made over the September period. Most notably, ResApp secured a two-year service agreement with Coviu to make ResAppDx available to Coviu’s telehealth customers in Australia. Furthermore, ResAppDx also launched on Phenix Health’s telehealth mobile application.

ResApp’s SleepCheck product was promoted in a partnership with Diabetes Queensland. The company is confident the collaboration will lead to an uptake of its SleepCheck application, providing invaluable marketing and exposure.

Towards the end of Q1, ResApp signed on a 12-month agreement with HealthEngine to integrate its booking platform with SleepCheck. The deal will allow ResApp to identify a person with sleep apnoea, and book an appointment with a health professional.

Lastly, AstraZeneca plc (NYSE: AZN) Japan will use ResApp software in a lung cancer clinical study. A new cough counting smartphone application will be trialed in a number of patients undergoing treatment for lung cancer. AstraZeneca will pay a monthly licencing fee for each person enrolled in the study, as well as monthly support fee.

Management commentary

ResApp CEO and managing director, Dr Tony Keating, commented on the achievement made in the quarter. He said:

ResApp achieved a number of key milestones during the period, which have created a strong foundation for it to leverage during the current quarter and beyond.

We have secured partnerships with two of Australia’s leading telehealth platforms and will continue to work with both Phenix and Coviu to explore opportunities that will expedite the uptake of ResAppDx amongst clinicians, allowing the company to strengthen its revenue stream. 

Dr Keating went on to speak about ResApp’s latest product to the market, SleepCheck. He added:

Our national marketing campaign for SleepCheck has resulted in good uptake amongst consumers. Download rates have continued to grow strongly month-by-month and we anticipate that these will increase as more aggressive marketing continues in the UK and other countries.

ResApp has retained a strong cash balance, which provides us with financial flexibility and ample runway to scale operations over the coming months.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. 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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