I don't know how @RedBar is faring, I don't know him and have never met him. But as a long termer, who has posted here for a few years, I feel I at least owe another post here to all that have shared the same train(wreck).
It wasn't pleasant to see ResApp get slaughtered on Wednesday morning.
It was a tough week for many, myself included: sure money doesn't make you happy, but it is unnerving to wake up to a 70% loss on the RAP portfolio.
I didn't see any immediate reason to jump onto HC and add to the 700+ posts on Wednesday. I didn't even bother to join in the investor conference the following day. Quite frankly, there was only one thing that was certain- results were bad and I had to deal with that quickly and consider my next move and its consequences for my wife and young kids.
I didn't even have to read past the first line of the announcement to know what we were in for. I have been in this game for long enough.
I immediately checked the depth and saw the pre-market sitting at 5cents.. the sharks always get first dibs don't they ?!?
I didn't sell at my first opportunity.
It was obvious it would have a dead cat bounce, or a bounce of some kind: even the really crap stocks will provide a short window of opportunity for a for pips when a shock sell down occurs. I also knew that day traders love to push stocks into double digits, as the quick gains are made when .5cent increments begin at 10.5cents.
It is hard to sell when you have been holding for 2 years or more, and I resisted the urge many times along the way to dip in and out on the way up from 1.6cents to the peak. But I had been living tight for the last few years just to keep as many RAP shares as I could in in the market. I had already been hurting hanging on till the 11th hour for the FDA results ( was hoping we might have received them months earlier).
I had to put emotion aside and ask myself, if I had cash in hand would I buy this stock at 10cents? The answer was no.
So today, when I saw the volume stalling today at around 11cents, and its was clear the bear rally was over, I knew I'd have to bail. I needed money. I wasn't prepared to risk what was left on the table while I am still paying a lot of interest on my house mortgage. By the time I got my order in the stock had slipped from 10.5 cent to 10 cents. I sold into the 3 million wall at 10cents and not long after a selling wave followed behind me and it was gone down into the 9's.
Against my better judgement, I kept my far smaller holding of RAP shares in my Super Fund ... my other half suggested that it might come good in a year or so time. Being under 40, I am still young-ish and won't be needing my super any time soon.
My thoughts on the future of RAP? Would I still hold if I didn't need the money?
Like others, I held onto my RAP shares with the pragmatic view that the Australian trials/compelling clinical evidence gave good reason to believe that the US trials results would be consistent with past performance. I didn't get conned into it by anyone else. I blame no one. I expected, at minimum, half reasonable results.
How wrong was I!
I was expecting results to be a bit lower due to it being a double blind study by a third party; yet still well and truly scraping past the 75% mark. The actual results were so embarrassingly far off the mark that they beggared belief.
In fact so far off the mark, that I doubt I'd be the first to wonder if something extraordinarily suspicious had occurred. After all, our Aussie hospitals aren't too much unlike the US hospitals. Therefore, a small part of me actually actually considered for a while that if the Aussie results were in fact true and accurate, this would have to be an act of clinic trial sabotage, perhaps in order to provoke the biggest tree shake in history.
In moments of utmost despair, the possibility of foul play couldn't but help but enter the minds of many here: after all everyone feels robbed. I have seen a few wild RAP posts on HC already and not just from those with neurotic propensities. But, so far, there is no proof of that. Logistically, there is no way that all the nurses and staff could be in on it. Apart from taking poor samples, the only other critical point at which the trial could flop is where sample ID's were deliberately or accidently swapped on either or both sides of the double blind study before ResApp got the final results.
I couldn't point a finger at RAP management, as if they knew all along this would flop- they seemed too shocked and upset. They were drunk on excitement prior to the trials: winning the World Tech fest, Apple.. Silicon Valley tour with the Woz.. it was a massive fall from grace for them as well as share holders.
Aside from the double blind aspect of the trial, the only difference between Aust and US is that the Aust trial was monitored by ResApp. The US trial was done by a third party.
So what happened? Assuming no foul, play we have two main excuses: back ground noise and failure to follow protocol.
After having given much thought to the whole ideal, I can only conclude that the true problem ResApp faces is that the third party staff just won't be as diligent as ResApp staff to ensure reasonable efforts are made to ensure a good sample is taken.
People talk about the trials needing to replicate a real life setting. But the reality is that in a real life setting, the app would be used to give a critical result. Therefore the recorder would be sure to do it properly, because an outcome matters under their watch, in the same vein as they would care about how they injected a needle into a real person vs a trial dummy. A person using the app in a telehealth setting would be sure to control their environment to ensure they don't waste their money.
Perhaps, when the heat is on in the hospital, the staff regard the trial as a mere, burdensome box ticking exercise. Though upper management may be excited to see the RAP money come in for the trials, it means little to the plebs on the ground. They don't benefit in any way; in this case they aren't treating the children with the app...just grabbing a sample... the children are hard to get to cooperate at the best of times.. The app is another speed hump in their busy day. And because they aren't relying on the app to provide a diagnosis, it is given the same diligence as that of a tradie filling in a JSA (Job Safety Analysis). TV's stay blaring... no one is told to quieten down.. lets hurry up and move along.
People can retort: "Come on it is an ED how can you reasonably expect peace and quiet?". The truth is that RAP claims it worked in Aus hospitals. Don't get started on Yanks talking louder.. I have heard nurses tell people to shut up plenty of times when it is necessary. They tell people to sit still when giving needles etc... some controls are just common sense and part of their job.
If the app was actually the approved primary diagnostic tool, and the user expected an accurate outcome, I'd be certain better efforts would have been made to ensure that there wasn't a rock concert belting in the background. But it was just a trial- an appendix to the daily grind. They were far removed from the RAP shareholders sitting on the edge of their seats.
Sure, they can nod heads and say they understand the protocol. Everyone always does. Likewise, I once demonstrated in my driving test that I always ought to keep two hands on the steering wheel at all times. That stopped the moment I received my license.
It astounds me though, that if the background noise could have been a problem, surely a decibel level meter (easily done with a smart phone) would have been incorporated into the app a long time ago. If the background noise was too high the app would reject the recording and warn "Background noise too high" prompting the user to control the recording environment and then retry. The app should be idiot-proof.
This app has been in development for many many years. Why is back ground noise suddenly a problem now? After supposed clinical compelling evidence?
My concluding concern is this: how will management be able to convince the market that, second time round, they can expect stellar results from the US trials that are on par with the much acclaimed Australian results? If the disparity is purely to be blamed on US staff regarding the trial with dispassionate indifference, how will the be sure they can gather the data with the same TLC as a that of a true blue RAP employee? No doubt performance shares for all US third party staff are completely out of the question...
Management have a very tough task ahead of them to restore confidence. It will require a true rabbit out of the hat to get this share price into the 20cent range prior to the next trials. No one will risk losing 70% (or more) again. The only hope is that the adults patients will be both more cooperative and aware of the intended outcome and thus less likely to fudge a cough. If both trials pass with flying colours then this will be the fastest train on the asx. But in the meantime the 'once bitten twice shy' principle applies to the general market.
Lastly, my Chinese friends are relieved that their acquaintances didn't dip their toes in the water pre FDA trial results. It would have wrecked them, possibly with chop sticks in the 'wrecked em'- the big boys in China don't like to be led up the garden path. At least another 12 months before they will look at this again.
Hoping this turns around for everyone. A lot of shattered dreams here.
Thankfully my lovely wife has kept a cool head- we have been through much worse together and therefore well seasoned to handle disappointment. My young kids are happy. Still eating. Moving on. Humbly grateful for the invaluable things I still have.
Kind regards,
CT
PS @MightyChina (if you are still here) I must say I have quietly appreciated your posts. You are honest, balanced, and have the hallmarks of one who has had his occasional cynicism honed from some tough real-life lessons. It is laudable that you make the time to provide balanced posts and share your wisdom. I both love and and envy your 'word-smithery'.
