4D Medical (ASX:4DX)<\/a> has enjoyed that commodity in shovel-loads over the last month.<\/p>\nIt all started in August when the lung scanning innovator inked a deal with the giant ASX-listed Pro Medicus, involving a $10 million loan and the hint of other liaisons to come.<\/p>\n
On September 1, 4D Medical ushered in spring with the Big One: US Food & Drug Administration (FDA) assent for its ventilation perfusion device, CT VQ.<\/p>\n
4D founder and CEO Professor Andreas Fouras describes the news as a \u201ctransformational milestone\u201d.<\/p>\n
\u201cWe couldn\u2019t be more excited,\u201d Fouras said. \u201cThis is great news for patients, great news for doctors and great news for our shareholders.\u201d<\/p>\n
Investors agreed, with 4D shares soaring up to 40% on the day \u2013 and that was only the entr\u00e9e.<\/p>\n
Two days later, the company said the US Centers of Medicare and Medicaid Services had granted public reimbursement for the device, at US$650.50 a scan.<\/p>\n
Securing payment is almost as important as the FDA approval itself.<\/p>\n
\u00a0<\/p>\n
What\u2019s all the fuss about?<\/p>\n
In short, CT VQ is the \u201cthe world\u2019s first and only non-contrast, [computed tomography]-based ventilation-perfusion imaging technology\u201d.<\/p>\n
A VQ scan is a specialised nuclear medicine procedure that evaluates both airflow (ventilation) and blood flow (perfusion) in the lungs.<\/p>\n
The test creates images showing how well air and blood flow are distributed throughout the bellows, helping doctors identify areas of imbalance.<\/p>\n
VQ scans are primarily used to diagnose pulmonary embolism (blood clots in the lungs), a potentially life-threatening condition.<\/p>\n
CT VQ can also evaluate other conditions, such as asthma and chronic obstructive pulmonary disorder (COPD).<\/p>\n
\u201cWe got a pretty rare win, in that the FDA did only one round of seeking additional information,\u201d Fouras says.<\/p>\n
\u201cThere were zero questions about our clinical trials.\u201d<\/p>\n
Fouras says CT VQ appeals on the grounds of ease of use, cost and patient benefits.<\/p>\n
As software, CT VQ piggybacks off \u2013 but does not replace \u2013 an extensive base of 14,500 US CT scanners.<\/p>\n
Unlike the standard-of-care, the scans don\u2019t involve the patient inhaling radioactive \u2018dust\u2019 and the use of potentially hazardous contrast agents.<\/p>\n
\u201cThe hospital either needs to make the dust on site, or have it delivered within a short time frame,\u201d Fouras says.<\/p>\n
\u201cNuclear medicine is an expensive procedure with relatively poor resolution.\u201d<\/p>\n
CT VQ scans suit rural and smaller healthcare facilities lacking nuclear medicine infrastructure.<\/p>\n
\u00a0<\/p>\n
LVAS is still in the building \u2026<\/p>\n
Amid the excitement about CT VQ, it\u2019s easy to overlook that 4D already has two home-grown approved products in the US.<\/p>\n
These are the lung ventilation analysis software (XV LVAS), which interfaces with current imaging techniques, uploading the images to produce a \u201crich high-resolution picture of the lungs\u201d.<\/p>\n
The technology \u2018sees\u2019 what the lung is doing and can detect conditions including emphysema, COPD, lung cancer, asthma and occupational diseases such as silicosis.<\/p>\n
In May 2020, the FDA approved XV LVAS for imaging any lung indication, with Australia\u2019s Therapeutic Goods Administration (TGA) following in September 2020.<\/p>\n
In late 2023 the FDA also ticked off CT LVAS.<\/p>\n
Unlike CT VQ, LVAS involves altering clinical workflows.<\/p>\n
\u201cWe see really big opportunities for [LVAS], but it\u2019s a process of educating the market and doctors so they see the value proposition,\u201d Fouras says.<\/p>\n
\u00a0<\/p>\n
\u2026 but CT VQ steals the limelight<\/p>\n
In the US, about US$5 billion of perfusion imaging takes place each year and of that, nuclear imaging accounts for about US$1.1 billion \u2013 4D\u2019s starting point for CT VQ.<\/p>\n
\u201cOver time, we expect to own that whole sector,\u201d Fouras says.<\/p>\n
Fouras says CT VQ can be substituted for nuclear scans with at least as good a result, but with more convenience and at a lower price (with higher reimbursement).<\/p>\n
\u201cIt\u2019s an easier sell than teaching someone about the benefits of doing something new.\u201d<\/p>\n
While the US is the home of nuclear medicine, about 60% of lung imaging is done with antiquated planar (2-dimensional) techniques.<\/p>\n
The modern method is three-dimensional, single-photon emission computed tomography (Spect) imaging.<\/p>\n
All the more reason to switch to CT VQ!<\/p>\n
\u00a0<\/p>\n
Veterans\u2019 contract is a slow burn<\/p>\n
Until recently, 4D\u2019s commentary focused on the unaddressed need to scan US veterans with lung diseases.<\/p>\n
Most notably, these ailments result from exposure to \u2018burn pits\u2019 \u2013 bulldozed holes in war zones, in which items and substances are combusted indiscriminately.<\/p>\n
The result is plumes of acrid, black smoke.<\/p>\n
Specific Biden-era legislation supports spending on veterans\u2019 respiratory illnesses.<\/p>\n
About 5.5 million US veterans deployed to Middle East conflicts have developed hard-to-diagnose diseases \u2013 such as constrictive bronchiolitis \u2013 that current methods cannot detect.<\/p>\n
4D is vying for a lung imaging contract with the sprawling Department of Veterans Affairs (DVA), which spans 176 hospitals, thousands of clinics and 400,000 employees.<\/p>\n
However military decision-making is notoriously slow and the political turmoil engulfing the US has not helped.<\/p>\n
\u201cWe under-estimated the organisational turbulence and distraction and the impact on day-to-day business,\u201d Fouras says.<\/p>\n
However, the company did anticipate \u2013 correctly \u2013 that the Republicans would boost veterans\u2019 health spending.<\/p>\n
4D\u2019s entreaties to the DVA are in league with Philips. The US$30 billion medical technologies giant provides imaging equipment to almost half of US veterans\u2019 lung screening clinics.<\/p>\n
\u201cDVA is still an opportunity, but we have stopped putting it on the front foot with investors,\u201d Fouras says.<\/p>\n
\u201cThe DVA are not fast, but they can \u2018do big\u2019.\u201d<\/p>\n
\u00a0<\/p>\n
How it all started<\/p>\n
Going back in the Tardis, Fouras\u2019 inspiration for 4D was a case of blowing in the wind \u2013 literally.<\/p>\n
A Melbourne-based mechanical engineer, he frequented Monash University\u2019s wind tunnel laboratories and realised there was a better way to measure air movement through the lungs.<\/p>\n
He founded 4D in 2012, having ploughed all of his own money into the venture.<\/p>\n
The company listed on the ASX on August 7, 2020, at 73 cents a share, after an oversubscribed initial public offer.<\/p>\n
In 2023, the company then signed a memorandum of understanding with the aforementioned Philips, which was upgraded to a reseller contract this year.<\/p>\n
In December 2023, 4D bought Imbio, a private US outfit specialising in artificial intelligence-based lung and heart analysis.<\/p>\n
4D paid US$25 million of upfront cash and up to US$20 million of earn outs.<\/p>\n
Imbio had five FDA-approved products, covering functions such as screening chronic obstructive pulmonary disease (COPD) patients for suitability for valve treatment.<\/p>\n
\u00a0<\/p>\n
What about Australian lungs?<\/p>\n
Proudly Australian, 4D is not ignoring its home turf where about 80 hospitals and clinics are using LVAS.<\/p>\n
The company expects the FDA assent for CT VQ to translate to TGA assent.<\/p>\n
This month, the company said it had signed agreements with the Royal Melbourne Hospital (RMH) and Spectrum Medical Imaging to deploy LVAS.<\/p>\n
RMH will assess 4D\u2019s full portfolio and will be the first public hospital to do so.<\/p>\n
The pilot program includes imaging for the recently initiated National Lung Cancer Screening Program.<\/p>\n
Other 4D users are Integral Diagnostics, the country\u2019s second biggest radiology imaging chain, Jones Radiology, Q Scan and Perth Radiological Clinic.<\/p>\n
But the economic reality is that in the US the company can make three times as much per scan than here, with a patient population 15 times larger.<\/p>\n
\u201cSo, you can make 45 times more money selling healthcare in the US than you can in Australia.\u201d<\/p>\n
\u00a0<\/p>\n
Finances and performance<\/p>\n
Fouras says that in carrying out an equity raising last February and March, thanks to now in-the-money options, the company inadvertently did its next one as well.<\/p>\n
4D raised $13.9 million by way of a $5.5 million placement at 42.5 cents and $8.4 million in an oversubscribed share purchase plan, at 36 cents apiece.<\/p>\n
Holders received one option for each share, exercisable at 55 cents, expiring on October 1 (next Wednesday).<\/p>\n
If all of these 41.2 million options are converted, $22.7 million will flow into 4D\u2019s coffers (some holders will forget to exercise them).<\/p>\n
On exercise, holders receive one share and one attached \u2018piggyback\u2019 option, exercisable at 75 cents by September 1, 2027. This would raise up to a further $30.9 million.<\/p>\n
Separately, 4D has 22.1 million listed options exercisable at $1.365 by December this year. If fully exercised, these would raise $30.2 million.<\/p>\n
So, there\u2019s an almost certain $52.9 million by the end of 2025, plus any \u2018piggyback\u2019 conversions.<\/p>\n
Including other options exercisable at various amounts and various times, 4D could raise up to $83.9 million over the next few years.<\/p>\n
Merely a month ago, the options weren\u2019t in the money and most holders wouldn\u2019t have bothered to exercise them.<\/p>\n
4D reported operating revenue of $5.9 million for the year to June 30, 2025, up 56%.<\/p>\n
Of that, software-as-a-service income accounted for $5.7 million, up 89%. The remainder was leasing and maintenance income.<\/p>\n
Of the revenue, 98% derived from the US.<\/p>\n
4D\u2019s net loss contracted to $30 million, from just under $36 million previously.<\/p>\n
During the June quarter, the company\u2019s software undertook 74,000 \u201cstructural and functional\u201d scans, up 35% year-on-year.<\/p>\n
As of June 30, the company held cash of $6.87 million, down 77%. But that was before Pro Medicus\u2019s $10 million, a $6 million Federal Research and Development Tax Incentive and \u201cthe oppies\u201d.<\/p>\n
Over the last 12 months 4D Medical shares have traded between 24 cents on July 31, 2025 (an historic low) and $2.31 on September 1 (pushing 4D\u2019s market cap beyond $1.1 billion). 4D shares actually peaked at $2.38 on October 9 2020, but there were fewer shares on issue then.<\/p>\n
Bizarrely, earlier this month, 4D Medical was demoted from the S&P All Ordinaries index.<\/p>\n
The index guardians evidently decided on this before 4D\u2019s September share romp, which also greatly boosted daily turnover.<\/p>\n
\u201cNo doubt the next time around they will be putting us back in,\u201d Fouras says.<\/p>\n
\u00a0<\/p>\n
Dr Boreham\u2019s diagnosis:<\/p>\n
4D now faces the hard graft of taking CT VQ to market. But given the clinical and monetary benefits, this shouldn\u2019t be too hard a sell.<\/p>\n
Naturally, 4D will tackle the biggest clinics with the highest scan volumes. These include University of California San Diego (for pulmonary embolism) and Cleveland Clinic for COPD.<\/p>\n
\u201cWe will use every lever and channel we have to get this product to market,\u201d Fouras says.<\/p>\n
\u201cThe sales teams will be beating the doors down to the hospitals.\u201d<\/p>\n
Amid the euphoria, investors should remember 4D\u2019s revenue and earnings ramp-up won\u2019t happen overnight.<\/p>\n
Broker Bell Potter forecasts revenue of $11.5 million and a $20.8 million reported loss for the year to June 2026. This improves gradually to revenue of $40 million and a $13 million deficit in the year to June 2028.<\/p>\n
Fouras hopes 4D can achieve profitability in less than three years.<\/p>\n
4D\u2019s fortuitous run is an antidote to this year\u2019s drug trial and approval setbacks for the ASX-listed drug development sector.<\/p>\n
Left to their own \u2018devices\u2019, the medtechs (medical technologies) are doing well, with EBR, Orthocell, Artrya and Nanosonics this year winning FDA approvals.<\/p>\n
\u201cWe feel it is a non-brainer,\u201d Fouras says of CT VQ take-up.<\/p>\n
\u201cWe don\u2019t see why anyone over the long term would stick to the old tech.\u201d<\/p>\n
\u00a0<\/p>\n
At a glance:<\/p>\n
ASX code: 4DX<\/p>\n
Share price: $1.81 cents<\/p>\n
Shares on issue: 500,021,335 (this will change as options are exercised)<\/p>\n
Market cap: $905 million<\/p>\n
Chief executive officer: Prof Andreas Fouras<\/p>\n
Board: Lilian Bianchi (chair), Fouras, Dr Robert Figlin, John Livingston, Julian Sutton and Dr Geraldine McGinty<\/p>\n
Financials (Year to June 30, 2025): operating revenue $5.85 million (up 56%), research and development concession\/government grants $10.6 million (down 3%), cash of $6.87million (down 77%)<\/p>\n
Identifiable major shareholders: Prof Andreas and Helen Fouras 13.1%, Paul Tomlin 0.62%, Chandler Bridge 0.5% Alex and Christine Petrou 0.5%, Dr Sam Hupert 0.4%.<\/p>\n
\u00a0<\/p>\n
\ufeff\ufeff\ufeff\u00a0<\/p>\n
Disclosure: Dr Boreham is not a qualified medical practitioner and does not possess a doctorate of any sort. If left to his own devices, he promises not to tool around.<\/p>\n","protected":false},"excerpt":{"rendered":"Tim Boreham is one of Australia’s best known business journalists. Pic: Supplied\/Stockhead You make your own luck \u2013…\n","protected":false},"author":2,"featured_media":185293,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[64,63,137,500],"class_list":{"0":"post-185292","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-healthcare","8":"tag-au","9":"tag-australia","10":"tag-health","11":"tag-healthcare"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/185292","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=185292"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/185292\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/185293"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=185292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=185292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=185292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}