4DMedical Limited (4DX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the 4DMedical Limited Market Update on Recent Developments Conference Call. [Operator Instructions] I would now like to hand the conference over to Dr. Andreas Fouras, CEO. Please go ahead.

Thank you so much, and thank you to everyone for your interest in hearing an update on our recent developments. It's been an incredible rate of progress for us over the last few months, and I'm really excited to have the opportunity to share all of this with you. Of course, we have to pay attention to the usual legals. I'll begin, for those of you on the call who aren't necessarily completely up to date, with 4D and who we are, with a brief introduction to 4DMedical. And we are a software company with an incredible software platform that allows doctors to see inside the lungs for the function of the lungs for the first time. And we're also expanding that to the development of a dedicated scanner that leverages that XV Technology platform. This technology puts us in place to target an incredible opportunity. Respiratory diseases represent 1 in 6 of all global deaths, resulting in an economic burden of over $173 billion. And in the United States alone, almost $14 billion is spent on respiratory diagnostics every year across 73 million procedures. In addition to that, the U.S. PACT Act signed in last year, just a little over a year ago, represents an additional $280 billion of funding specifically for veterans who have been exposed to airborne hazards. We have a Software-as-a-Service business model that layers us on top of existing infrastructure. That's both important to us as a company, but also to our customers. They have their existing infrastructure, every hospital across -- in every major medical center across Australia, the United States and, in fact, almost every other country around the world, has the existing infrastructure to deliver our cloud-based service. And that cloud-based service delivers for us 90% margins on our technology. And we have -- we've been starting with a preapproved pricing model that seeds us in the United States at about $170 per scan and in Australia about $160, although we've had a real breakthrough with CMS having assigned us payment of about $299 per scan. And we see a fluoroscopy imaging cost inside of that of about $35 to $45. So we think that there is significant upside on that $171 per scan. So from that introduction there, the -- sorry, we have a really brief elevator pitch of what the technology offers us, which is that there's new insights, so it's better information for the doctor, and we know that better information leads to better decisions and better decisions lead to better outcomes for patients. It's also safer for patients, which can drive patient decision-making and can be beneficial, therefore, for both the patient and the supplier and really high -- really superior results. We have the resolution of a CT scan, the functional outputs of a pulmonary function test, and the availability and cost base of x-rays. All of that in combination leads to a fast scan that's low cost and once again, is good for patients. From there, really excited to get into the core reason for today's presentation, which is to talk to you about the incredible rate of progress we've made over the last quarter. The team at 4DMedical has been -- as I like to say, they've been busy planting seeds for several years now. And the last quarter has shown what's been happening under the surface like you've never been able to see before. And so we have these 5 incredible announcements that we've shared with you, that we've been able to expand our Australian-New Zealand offering from I-MED to also include Integral Diagnostics. So we have that network agreement with them with an initial pilot in regional Victoria with really strong feedback already coming back from the doctors involved. That extends our network to multiple providers and creates a longer-term opportunity for us in New Zealand. And then the monumental outcome of having achieved CMS payment on our Category III. This provides us access to 65 million people across the United States, but it's also really worth mentioning that, that population group, those folks who are over 65, really represent the largest users of lung diagnostics in the United States and indeed around the world. This will accelerate our adoption across -- accelerate our adoption and lead to income generation for us. This is a larger payment than we were expecting, frankly, and is well ahead of schedule, once again, putting us into a cycle where this will drive more usage and the more usage will allow us to expand from that 65 million Medicare patients in across to private insurers in the United States. From there, we'll move to FDA approval of CT LVAS. Many of you will know that we have had CT LVAS available in Australia for some time. And we've been getting incredible feedback on the use of that technology. And we're really excited about unleashing this product in the U.S. market. It expands access to folks who, for example, may already be having a CT scan anyway, and so therefore, it makes sense, or perhaps are at a location where fluoroscopy is not available. And we're also particularly excited about now being in a position to -- in our 510(k) for CT:VQ being able to use this CTV approval as a predicate device, derisking and perhaps accelerating our CT:VQ approval. And if we cycle back around to our CMS Medicare reimbursement, having payment opens the door, removes barriers to customers getting on board, and we've already seen evidence of that with SaaS contracts in Detroit and Memphis. So we have outpatient practices in those locations, already signed agreements ready to go on the 1st of January when that CMS payment kicks in. And I've just recently come back from RSNA, the world's largest radiology conference, that's been in Chicago, and it's been an incredible conference. And we've just had such strong interest from so many places. But of course, the highlight for that conference for us is the Philips Memorandum of Understanding that we've signed. Philips is, of course, an iconic brand name and one of the leaders in radiology across the world. So their partnership with us will expand our reach, our ability to rapidly scale and to get to customers and bring forward the utilization of our technology. It's also really exciting that they have really prominent operations within the VA. The U.S. CEO of Philips is a West Point graduate, so a military man with strong commitment to the VA, and the VA team inside Philips are the most committed corporate VA team I've seen anywhere outside of 4DMedical. And that includes that they have already won 50% penetration into the VA, really putting us in a very strong position, as said, to leverage that scale, to leverage that size. And our initial focus will begin by looking at taking our XV LVAS to our screening solutions for veterans exposed to burn pits, but there are a whole range of opportunities for us, including with our CT LVAS product line inside the VA, but also expanding outside of the VA within North America and perhaps, over time, taking the deal global. Sorry, I've covered all of these details here on the -- sorry, on that previous slide. And as you know, we have a very strong board. Having recently elevated Lil Bianchi to Chair of our Board, having recently brought on Dr. Geraldine McGinty, a world-renowned radiologist, previous Chair of the American College of Radiology, one of the most important organizations in radiology in the United States and who have also a very large voice in the delivery of reimbursement to radiological products. Also, many of you will know that we've had long-standing support from Dr. Sam Hupert, Professor Bruce Thompson, eminent in their fields in Australia and recently appointed Dr. David Shulkin, the 9th secretary of the VA to our advisory team. In addition, we have an incredibly strong, committed, passionate management team, including Matt Tucker, recent CEO of GE Healthcare in our region, to our management team, and he's now running our commercial operations that includes sales and marketing for the company globally. So we have incredible progress from the work that we've been doing over these years. We have a great team to deliver on that. And now we have additional levers. Barriers have been taken down now that we have reimbursement. Barriers taken down now that our CT LVAS product is approved in the United States and additional muscle in our corner in the form of our Philips partnership, where we have the people, we have the resources and we've never been in a stronger position. So thank you, everyone, for listening to that presentation and happy now to proceed to questions.

Thank you. [Operator Instructions] Your first question comes from [ Paul Envis ], who asks what are the details of the MOU with Philips?

Thanks for the question. So the details are that we have a really very firm commitment with Philips to proceed to an ultimate arrangement, which has been -- which is labeled as a reseller agreement. So that will mean that Philips will be able to sell our technology with us to customers. So that will mean that those sales become a sale to Philips, and then we'll have an arrangement where Philips reimburses us across for those payments. The MOU also talks about the opportunity to expand from North America across to a global arrangement. And if I -- I should be able to just move slides here, and I can leave this up for a while, while I'm answering other questions because in those lower dot points, you can see some of those there. But I think it's also really, as I said, for me, the -- I've really been very, very pleased by the obvious level of commitment that Philips has to this partnership. And that's been evidenced by the level of attention we've received from them, including at RSNA, where we've had really long conversations with both the North American CEO and the global CEO of this very, very large business.

Your next question comes from [ Shriram Viswanathan ], who asks, given the recent MOU with Philips to improve the sales opportunity, is there any update on the revenue outlook for FY 2024 and FY 2025?

Look, I feel very confident that this partnership with Philips will accelerate and bring forward our revenues. I feel very confident about that. The -- as I say, the scale and reach of the organization is really very, very significant. They have great ties to the VA, which has been -- and to the DoD, which are key targets for us for our revenue over the next 12 to 24 months. And so yes, our outlook is substantially improved now that we have this Philips MOU achieved.

Your next question comes from [ Kazuya Wright ], who asks, when can we expect progression and signing of the VA deal?

We are expecting -- in terms of timing down that direction, we're expecting to see further conversations, further updates from us within this calendar year. And I think that, that should put us in a position this calendar year where we will have a much clearer view of how our pilot process will proceed with the VA. And then we're expecting that pilot process to take about 6 months, which puts us to about the middle of the year. And then we expect to be looking to roll out on a much wider scale across the VA in the second half of calendar '24.

Your next question comes from [ Tina Wilson ] who asks, how are the conversations with private insurers in the U.S. now that Medicare has agreed reimbursement?

Thank you. It's a really exciting area for us having been able to bring forward the Medicare reimbursement to sooner than we expected. It absolutely opens the door, and we have already been having those conversations as you would expect us to. We've grown the size of our reimbursement team. And this really sets the scene, sets the framework to bring those private reimbursements forward to operate under our CAT III code instead of having to wait for the Category I. And the general process will be whereby we have our hospital partners, our health care delivery partners putting in claims to those providers to -- as a side by side with us reaching out to talk to those insurers to bring about them adding us to their claims list.

Your next question comes from [ Vincent Nigro ], who asks, how is the AU rollout going with I-MED, et cetera, along with scanning take-up?

So we've had some really great progress here as I've already mentioned, as you've heard, that we've now bought on Integral into the process. And there are some regions that I-MED doesn't cover across Australia that Integral does. And so that's going to be very helpful in those regards. But we've also had some really great progress with I-MED. So some -- we've recently successfully run a number of GP campaigns, expanding out the level of interest from lung specialist doctors to include the GP portion of the market as well. And we're increasingly seeing really significant opportunities for us there in that GP market. We've also added on more training folks to our team and that allows us to have more conversations with doctors after they've delivered their scans and for them to be able to have conversations with someone from 4D about the scan, what it means. And that's really had a positive effect with those doctors who have been using the technology. So -- and all of that is already showing positive impact on increasing scan volumes.

Your next question comes from [ Sean Rapley ] who asks, what is the anticipated timing of converting the Philips MOU to a reseller agreement?

Thank you. So we are -- a standard time line to -- that is a several month time line, especially with the end of year in place. But we will have an intermediate opportunity to sign a teaming agreement with Philips. I think that should really put us in a position to have a much clearer view of the time frame and the final details of the reseller agreement. So look, I think several -- we'll be looking at weeks. And so we're certainly hoping to have the teaming agreement completed this calendar year. And then early in -- early next year to convert that across to the reseller agreement, but with an update in that in-between period when we complete the teaming agreement.

Your next question comes from [ Syed Ap ] -- apologies, [ Syed Apak ] who asks, how is the Department of Defense pilot processing? You mentioned that you were very eager and expected to sign agreement possibly in a 3- to 4-month time period back in May. How close are you to finalizing that deal?

Look, we feel very close on that. And the -- we've had multiple discussions with the team. I think we absolutely can call that pilot a success. Department of Defense have been very interested and very pleased with the outcomes of that pilot. And we've -- we're well into discussions to see what we can do for the -- for an additional step there.

Your next question comes from [ Dan Stewart ], who asks, does 4DMedical view companies such as of Optellum, who apply AI to CT scans to identify lung problems, as competitors?

The short answer is, in general, we don't. I mean we do keep a close eye on all of these companies, especially when they operate on or have a focus on the lungs. So -- but the 4DMedical technology focuses principally on function. And so we measure how the lungs work. And that's information right now that's not available from any of these other technologies. In general, AI companies offer a technology that allows a radiologist to do what they already do, perhaps quicker, perhaps with less risk of error or omission, and so -- but our technology offers radiologists and doctors new information, new things that are not available anywhere else. And in addition to that, we have a fantastic patent moat around our technology, about 75 patents now and counting. And so where we sit with our technology offering, there really isn't an opportunity for anyone else to offer that.

Your next question comes from Tom Godfrey, who asks, have recent developments improved the time frame for CPT-1? Any updates?

Yes. So I'm really excited about this because 2 things have happened. And one of them is that we think the opportunity to accelerate CPT-1 has materialized here with this, but also at the same time, that we need CPT-1 much less than we did before. The previous driver to get to CPT-1 is because that's the only place that you can be assured of gaining the payment code. But now that we do have a payment code in our CPT-3, we're certainly interested in looking at perhaps even dwelling here a little longer. There's plenty of examples of folks who have been very successful in CPT-3 and perhaps even withdraw their CPT-1 applications because if they're able to gain first CMS reimbursement as we have and then bring on private payers as well, then that's really an excellent outcome and one that we ought not to delay. So I think as I said, we've always put ourselves in a position to get there easier, but actually, we need that -- we don't really need that anymore. We're in a really great place where we are right now.

Your next question comes from [ Shriram Viswanathan ], who asks, are you exploring, including the 4DMedical lung scan procedure, in the Australian Medicare cover?

Yes, absolutely. It's absolutely our goal to get our technologies reimbursed in Australia as well. And we're doing everything that we can to bring that to fruition.

Your next question comes from [ Nicholas Boston ], who asks, what are the challenges in education, GPs, in promoting adoption of new technology?

I think that there's really a multistage conversation for us to have with the community. And I think we've done a really great job in getting the technology out there and many, many more folks, many more GPs, many more lung specialists know about the technology than did even just 6 months ago and certainly many, many more than a year ago. But then we're also doing specific campaigns, e-mail campaigns, advertising campaigns and the appropriate literature and also attending conferences and meeting these folks face to face, giving them the opportunity to see the technology and meet our team and discussing it. And then really, there's a slightly different value proposition for the technology for GPs versus specialists. And so we've been working hard to rearticulate what that value proposition is and how this can help GPs in ways that are subtly different to the way that the technology helps specialists. So we've been articulating that, putting that together and getting that out there in the messaging.

Your next question comes from [ Kevin Leong ], who asks, what is the time frame for getting a second authority to operate at VA? And from there, what is the likely timing and process for national ATO?

We have multiple applications pending with the VA. And the -- we feel very comfortable that those applications are in a good place. But the VA doesn't give transparency on progress for those applications when they're pending. And so it's really very hard to give specificity on when those applications will come out. But we've got multiple applications in place. We really only need one of those to come through to be able to then convert to a national ATO. And so while we don't have details, we've got -- with multiple applications in our previous success under our belts, our growing strong relationships with the VA, we do feel very comfortable that a second ATO will be imminent and that then we'll be in a good position to convert that to a national ATO. And at that point, I note that it's now half past and the scheduled time on this has elapsed. So I think we might call that as the last question.

Thank you. That's all the time we have for our question-and-answer session. I'll now hand the conference back to Mr. Fouras, for closing remarks.

Thank you. So we've been really working hard doing all of the work to build 4DMedical into a very significant global business that can deliver health care to millions of people. The progress we've been able to make over the last few months really has been, I feel, quite dramatic. We're really in a very strong position here. Barriers have been knocked down. Muscle has been added to our corner. And I really feel incredibly excited about where we can get to over the next few months and we feel very excited about being able to keep up the pace of news flow that we've had so that you can all follow on that journey with us. Thank you very much for your interest. Thank you for listening today.

That does conclude our conference for today. Thank you for participating. You may now disconnect.