The share price of Resonance Health Ltd [ASX:RHT] is continuing to soar. At time of writing, it is up 21% trading at $0.092.
It has gone up 268% for the year from a standing start:
Investors are flocking to the small-cap stock, in a period where blue chip stocks on the ASX have been struggling due to market volatility.
FDA approval sparks buying frenzy
In an announcement released on 3 December, the company declared that it had received 510(k) approval from the US Food and Drug Administration for its FerriSmart product.
510(k) approval refers to the process whereby, ‘medical device manufacturers are required to submit a premarket notification if they intend to introduce a device into commercial distribution for the first time.’
In essence, it is a crucial stepping stone for the company on the path to marketing FerriSmart in the vast US healthcare market.
FerriSmart is a machine-learning based system which quantifies liver-iron concentrations from MRI imaging.
Machine learning is an application of artificial intelligence (AI) that provides systems the ability to automatically learn and improve from experience without being explicitly programmed.
With AI set to play an increasingly important role in our lives, Resonance Health is using the technology to deliver more accurate liver-iron concentration results.
Liver-iron concentrations are useful to clinicians as, ‘iron overload is becoming increasing recognised as a complication in cancer survivors who received multiple blood transfusions as part of their cancer therapy.’
It is also useful in the treatment of sickle cell anemia and thalassemia.
Assessing the future of RHT
As with other small-cap ASX stocks that are pushing revolutionary technology/advances in the medical field like Purifloh Ltd [ASX:PO3] and Biotron Ltd [ASX:BIT], there are big price breakthroughs to be had for long-term investors.
There has been a pattern for these types of stocks. Namely a wild surge, followed by volatility as investors cash-out at various price points as more and more attention gets drawn to the stock.
However, if you are not a long-term investor it would be wise to delve into the balance sheets of the companies in question and also assess for yourself whether the technological advancement is viable long-term.
Specifically, with regards to buying Resonance Health, there are a couple key factors you may want to examine.
Will Resonance Health be able to successfully monetise FerriScan, i.e. will rebates for the product be available in the lucrative US market? Furthermore, what are its prospects in the developing world?
Answers to these questions could provide you with a better understanding of RHT’s share price movements going forward.
For Money Morning