Here’s ResApp’s CEO on what happens next, and the other ASX targets with live offers
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Australia’s global reputation as a fertile ground for innovative companies continues to attract attention from giant multinationals.
The list of global companies that have set up camp in the country includes Google, which established a presence in Adelaide’s Lot 14 technology hub in 2021.
Microsoft and Nokia have also become tenants at Lot 14 after recently partnering with the South Australian Government to conduct research into space technology and 5G telecommunications.
Our vibrant tech scene also means we’re fast becoming a magnet for those seeking to acquire a piece of our homegrown innovations.
ResApp (ASX:RAP), a company founded in 2014 to commercialise technology developed by Uni of Queensland’s Professor Udantha Abeyratne, is the latest to have been tapped by a global giant.
In April, biopharma giant Pfizer offered Resapp’s shareholders 11.5c a share to buy out 100% of the company, valuing it at $100m.
Pfizer then upped the ante in June, raising its offer price to 20.7c and valuing ResApp at $180m, pending certain confirmatory study results.
At stake is ResApp’s proprietary artificial intelligence (AI) coughing technology, a mobile app which uses the sounds of a patient’s coughs to identify and measure the severity of a wide range of respiratory diseases such as pneumonia, asthma, and even Covid.
“Pfizer is looking for expertise in cough analyses,” ResApp CEO Tony Keating told Stockhead.
Keating says that over the past seven years, ResApp has been very focused on the science, clinical trials and regulatory approvals around this technology.
“We’ve run multiple large clinical studies outside of Covid prior to the pandemic, and when the pandemic hit, we pivoted part of the company to use the same algorithms but to identify Covid,” Keating said.
He explained that the technology is able to identify the disease behind coughing patterns due to the different ways viruses affect the lungs.
“In asthma for example, the virus constricts the airway so the airways get tighter and narrower. With pneumonia, you get fluid buildup that causes inflammation in the lungs’ air sacs.”
In effect, cough sounds provide information about what’s going on inside the lungs.
With Covid for example, early work out of China showed that the SARS virus attacked the lungs in a very unique way.
“These cough sounds from patients act like a sonar ping, which bounces around in the lungs and comes out and tells us what’s going on inside the box,” Keating said.
Data collected by ResApp so far showed that cough sounds from both the Delta and Omicron variants were practically similar.
“Obviously, as we see more and more variants, we need to ensure that we keep up to date, and make sure that our algorithms are performing well across new variants,” he said.
Last week, ResApp encountered a setback after an independent study revealed that its Covid cough algorithm achieved a sensitivity of only 84% and a specificity of 58% – significantly lower than the results of ResApp’s own pilot study.
They’re also significantly lower than the thresholds specified under the acquisition terms with Pfizer, which set a minimum sensitivity of 86% and a minimum specificity of 71%.
As a result, Pfizer’s acquisition price has now been reduced from 20.7c to 14.6c, representing an equity value for ResApp of $127 million.
“From our perspective, this was a natural progression in the development of the technology,” Keating told Stockhead.
“Taking the technology from the initial pilot study through to the confirmatory study was always the next step in the process.
“And clearly, it’s illustrated the risks in developing the technology further. There’s always risks in clinical trials, but we still believe very strongly that cough sounds contain a signature associated with Covid-19,” he added.
Keating acknowledged the independent results demonstrated that his team needs to go back and refine, or even potentially retrain those algorithms.
“It’s a machine learning AI algorithm. So the more data the better the algorithm.
“And now we have more data. So it’s not the end of the line for our Covid project. It’s a bump in the road, and we’ll keep moving forward,” he said.
When asked the qualities a company would need to have in order to be acquired by a global giant like Pfizer, Keating said, “I can reflect on our journey and the things we did, because obviously that’s what someone like Pfizer is looking for.”
“I think we succeeded because we focused heavily on the science, validation, peer reviewed publications, and clinical trials. That’s how we gained respect.
“Secondly, you need create something that’s very disruptive and very unique.
“We’re a long way down here in Australia, and we’re a small market. So the only way you will get the interest of global companies is to be doing something that’s extremely unique.
“Something that has a blue sky opportunity or a moon shot as such, because they’re the things that will really attract large players.”
There are other ASX-listed companies which are currently assessing acquisition offers. They include:
In April, church tech platform Pushpay announced that it received unsolicited, non-binding and conditional expressions of interest from third parties looking to acquire the company.
It was revealed a month that later that the suitors were BGH Capital and Sixth Street, both of which have taken a combined 20% stake in PPH.
The Pushpay platform, which is an all-purpose church management platform that includes a donor tool for church members, processed US$7.6 billion in donations in FY22.
Former market darling Appen was the subject of a $1.2 billion takeover interest from Canadian telco, Telus.
But just a few hours after Appen made the announcement to the ASX, Telus spectacularly withdrew its offer with no reasons given.
Appen’s AI technology provides the necessary data for machine learning. It has an enviable list of global clients that include Google, Amazon, Microsoft, Salesforce, and many others.
The payroll tech company has just entered into a deal with global payroll company Deel Inc to buy out 100% of its shares, valuing PayGroup at $119.3 million.
Deel is a Texas-based global compliance and payroll solution that helps businesses hire anyone in over 150 countries.
PayGroup’s technology meanwhile, delivers mission-critical enterprise payroll and human capital management (HCM) solutions in over 82 countries – representing more than 8.1m payslips and over $11 billion in transactions per annum.
The online retail marketplace has been approached by Woolworths, which wants to acquire 85% of the company. The deal values MyDeal’s total cap at $272m.
MyDeal focuses on home and lifestyle goods, and currently has around 2,000 sellers with over 6 million items being sold on the platform.
The acquisition is pending approval from competition watchdog, the ACCC, and a shareholder vote.
These are some of the former ASX companies that have been acquired recently, and are no longer listed on the ASX.
In January, Block Inc (formerly Square, Inc) completed its US$39 billion acquisition of BNPL stock Afterpay, the biggest ever takeover on the ASX.
Square, which is still Block’s main brand, will integrate Afterpay into its existing Seller and Cash App business units.
Afterpay is still trying to deliver its maiden profit, and in the last H1 filing, reported an after-tax loss of $345.5 million.
The energy distribution company was acquired by Canada-based Brookfield Asset Management in February for $10.1 billion.
The takeover gave Brookfield ownership of the majority of Victoria’s transmission network infrastructure, as well as a large proportion of the state’s electricity and gas distribution network.
Sydney Airport was delisted in March after being acquired by an aviation alliance company for $32 billion.
The transaction was the largest cash takeover in Australian history, as well as the largest ever infrastructure takeover.
Crown last traded on the ASX last week after being acquired by US-based Blackstone for $8.9 billlion.
Crown’s core businesses include two of Australia’s leading integrated resorts, Crown Melbourne and Crown Perth, as well as Sydney’s latest premium hotel resort and dining precinct at Crown Sydney.