ResApp Health’s takeover bid from Pfizer shaved by $53m after disappointing study results

ResApp Health’s (ASX: RAP) shares sank 30% this week after the company announced less than impressive study results on its COVID-19 cough detection app, which has resulted in $53 million being immediately erased from Pfizer’s proposed takeover bid.

The Queensland-based digital health firm caught Pfizer’s attention in April, when a March pilot study of the technology accurately detected COVID-19 cough in 92% of people with the virus.

At the time, Pfizer’s final offer reached $0.207 per share for ResApp if it was able to replicate its pilot study results – valuing ResApp at around $180 million.

However, a recent independent confirmation study showed “significantly lower” results on ResApp’s smartphone COVID-19 cough identification technology.

The test results of ResApp’s COVID-19 algorithm indicated a sensitivity of 84% and a specificity of 58%, which were below Pfizer’s minimum requirements of 86% sensitivity and a specificity of 71%.

Under the April acquisition terms, Pfizer’s bid has now dropped to $0.146 per share, which values ResApp at around $127 million – $53 million less than the highest offer.

ResApp managing director and chief executive officer Tony Keating said the lower offer was still attractive and should be backed by shareholders.

“Following the results of the data confirmation study, Pfizer’s all cash offer represents an attractive 62% premium to our share price prior to announcement of the initial scheme and removes any risk associated with the future development and commercialisation of ResApp’s technology,” he said.

ResApp Health board wants shareholder backing

Despite the reduced offer, Mr Keating said the board still “strongly recommends” shareholders vote in favour of the acquisition.

Mr Keating said the latest results weren’t a true indicator of the hard work of the company in bringing to the technology to life.

“While we remain confident that our algorithms can detect COVID-19 using cough sounds, they will require further refinement, testing and validation to ensure that they perform to the level needed,” he said.

“This work will continue with the benefit of now having over 1,300 additional cough sound recordings with gold standard PCR test results to use to train and improve the algorithms.”

Pfizer’s bid

Pfizer initial offer for ResApp was $0.115; however, this was increased after an independent expert report gave the company a preferred value of $0.207.

As a result, Pfizer’s revised offer stipulated $0.207 per share for ResApp if the confirmatory study satisfied its minimum conditions.

In the event that the study did not satisfy these conditions, the bid would be reduced to $0.146.

However, there is no guarantee Pfizer will even proceed with its acquisition of ResApp and this is yet to be confirmed.

ResApp closed trade today at $0.12 per share.