The multinational providing one of the world's leading COVID-19 vaccines has struck a deal to acquire ResApp Health (ASX: RAP), a Brisbane-based company that has been on a long commercialisation road with its respiratory disease diagnosis technology developed at the University of Queensland (UQ).
New York-headquartered Pfizer Inc's Australian subsidiary has entered a binding agreement to acquire all ResApp shares for 11.5 cents each, representing a 27.8 per cent premium to their closing price on Friday and implying a total equity value of around $100 million.
The acquisition would represent a 422 per cent return for investors who participated in the 2015 backdoor listing for Resapp, whose technology developed by UQ Associate Professor Udantha Abeyratne uses machine learning to diagnose and measure the severity of respiratory diseases from audio recordings on smartphones.
The ResApp board has unanimously recommended shareholders vote in favour of the takeover in a meeting due to be held in mid-June, provided regulatory conditions are met and an independent expert concludes it is in their best interests.
The offer is higher than any RAP price achieved since October 2020, although it is still much lower than the 38cps reached in October 2019 after ResApp's technology received CE Mark approval in the EU and Therapeutic Goods Administration (TGA) approval in Australia.
Those highs were short-lived as the price plunged a few months later with double whammy announcements of partner Sanofi not exercising an offer for exclusive negotiations, and the US Food and Drug Administration (FDA) knocking back ResApp's request for De Novo classification - an alternative pathway to classifying novel medical devices.
Those announcements coincided with the outbreak of COVID-19 and the broad-scale market crash amidst shutdowns. ResApp has struggled to return to its former glory ever since despite the technology's potential use in coronavirus testing, but there appears to have been a turnaround in investor sentiment since the start of 2022 after the company progressed with a COVID screening test clinical trial and appointed further international experts to its COVID-19 scientific advisory board.
On 22 March the company announced a 92 per cent sensitivity to detecting the virus with a new cough audio-based algorithm in the pilot clinical trial with 741 patients recruited in the US and India.
At the time, ResApp noted a vaule greater than 90 per cent is considered "outstanding", highlighting plans to target use in settings where frequent COVID-19 testing is required such as employee, healthcare worker and student screening, travel, sports, entertainment, and aged care.
"The WHO have recently warned that the pandemic is not over, that health systems globally continue to strain under the current caseload and that we should be prepared for the potential of more dangerous variants to emerge," ResApp CEO and managing director Tony Keating said last month.
"We intend to accelerate commercialisation by immediately engaging with regulators globally and we have already commenced discussions with global health and technology companies with the goal of rapidly bringing this product to market.
"These results also build our confidence in the development of patient management and monitoring tools for COVID-19 and expanding our research into long COVID."
In today's announcement Keating said the group was excited by the prospect of this acquisition by Pfizer, which under the deal would also enter into a research & development licence agreement with ResApp to collaborate on R&D for products in the field of COVID-19. This component has a $3 million up-front licence fee and the collaboration timeframe is for six months with options for two three-month extensions, as well as a $1 million milestone payment based on clinical trial recruitment.
"The proposed acquisition recognises the years of dedicated work by the ResApp team to build ResApp into a leader in audio-based analysis of respiratory health," Keating said.
"We believe that the material premium and certainty of an all cash consideration is an attractive outcome for our shareholders."
"This proposed acquisition and research collaboration add to our growing digital capabilities and bolster our efforts to pave a new era for digital health," added Pfizer chief digital and technology officer Lidia Fonseca.
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