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

Hi, everyone. Welcome to our another 4DMedical Information Webinar. I appreciate your interest and thank you for joining us today. I think we can skip some of this material and get into the meaty part. So, we have -- our recent momentum has been built on top of a number of key achievements, building success across the VA, the successful acquisition and integration of Imbio, winning reimbursement for both XV LVAS, CT LVAS, expanding across Australia, Qscan to the North, Perth, radiology clinics to the West and Jones in South Australia. And of course, we'll be talking to some more today about Philips and the continued progress there with that. And of course, recently, if I focus on some of our more recent achievements with the FDA approval of IQ-UIP and now reimbursement for IQ-UIP, U.S. DoD defense agreement, growing footprint of credible sites, reference sites and IPOC, CT:VQ and of course, that ties back around to Department of Defense as well. So, our recent revenue momentum has been hard fought for. And we see an underlying 16.5% growth in revenue half-to-half with some of that being masked by minimum payments from Philips, which is, of course, a positive for us. But I think the thing that is not visible in the top line numbers because, of course, quite a lot of this takes time to flow through the system. For example, if we have a contractor on 90-day terms, then that's a full quarter of payment terms that we won't see. And we are proud of the hard [ thought fall ] wins of getting to over 300 sites at the end of the last quarter. That's 24% up half-on-half, proud of the 37% scan volume growth and the 12%, so the continued growth of average XV fee per scan. So, we're growing our number of sites, our scans per site and our fee per scan for our core technology. And at the same time, as we're doing that, as the business continues to mature and evolve, we're also -- we're well and truly past peak spend at 4D and have 18 -- revenue -- sorry, operating expenditure down half-on-half by 11% over this last half period. Also recently, we have had 2 announcements in terms of CT LVAS approval in Canada and IQ-UIP exciting product, our IQ-UIP product approved in the United States and then now also approved for reimbursement for Medicare. That reimbursement win is really very exciting. I think I'm calling you today from the Society of Thoracic Radiology, one of the key radiology conferences in the United States, in fact, the key radiology conference in the United States for those of us who are interested in the lungs and lung health. And we've been getting really strong feedback on IQ-UIP, also being -- having really strong feedback on their level of excitement of finding out not only that it's now FDA approved, but also that there is $650 reimbursement for that technology. As you're all aware, we have a $12.5 million placement and underwritten SPP happening right now. And we've really worked very hard to structure this deal such that such that it is as favorable as possible to our investors and in particular, to our retail shareholders in the business. So, every part of the structure of this deal both allows us both to put ourselves on the road to success, but also giving the shareholders maximum opportunity to participate in that success. And so if you look through to the deal and think about it, this is underwritten to a minimum of $12.5 million. But if you pull out your abacus, you'll be able to -- you calculate, you'll be able to have a look and see that, that $12.5 million minimum also relates to an $18 million minimum downstream on the success of VQ. So, by structuring these prices with incremental growth through each of these milestones and gives investors the opportunity to share in the value of those milestones and also to put their money in incrementally and upon the success of hitting those. So, we really think this is a great structure that benefits the retail shareholder in the way that's maximum -- in the most maximum way possible. These dates are all on record. And of course, you have the presentation on the ASX. So, I think I've gone through a lot of this here before, but I will come in again, but perhaps a little bit more briefly than last week. There is a 31 -- a USD 31 billion, in excess of AUD 40 billion opportunity in the lung space. And that by far, the biggest market opportunity for us is the United States with the USD 13.7 billion opportunity just in the United States alone. These are concentrated into 4 technologies; X-ray, PFT, CT and Nuclear Medicine VQ. Pulmonary function test invented in the 1800s, along with X-ray technology and CT and nuclear medicine are closer to the middle of the 1900s. This technology does have some gray hair on it, is a little out of date and is not serving doctors or patients. These -- frankly, these diagnostics are failing us. And we can say across whether it's lung health care screening, where these diagnostic tools are not detecting COPD, the fourth largest cause of mortality in the world while it's in its treatable stage, but 4DMedical technology does, whether it's unexplained dyspnea, so shortness of breath where you go to your GP and say, hey, doc, when I walk up the stairs now, I get puffed, I didn't use to. Without 4DMedical technology, there isn't a solution. None of those 4 technologies that I showed on the previous slide are able to help the GP make that right decision and send you to the right doctor so that you get treatment early on time and at the right cost. None of those technologies allow folks in the VA to see unexplained dyspnea or to see deployment-related respiratory disease in veterans here like [ Leroy Torres ] that you can see in the picture, 6 million service personnel currently without 4DMedical technology because none of those 4 technologies on the previous slide allow us to see whether or not someone's been impacted by those airborne toxic hazards. The only viable solution is expensive and difficult biopsy. However, 4DMedical technology is able to differentiate between not only health and disease, but a variety of different diseases and deployment-related respiratory disease. So, we have these key problems amongst dozens more in lung health that are not being served by the current technologies and 4DMedical technology is able to make that difference. Here, unfortunately, I'm unable today to play you these videos, but I believe you have access to them where you see airflow flowing through the lungs in the left on ventilation or blood flow flowing through the lungs as the heartbeats in the perfusion technology, which we'll have coming on to market later this year. These technologies, as with all of our technology, take existing images typically from CTs and add dramatic value to those images so that we can, as I said, so we can detect COPD early so that we can help a GP find the right specialist for someone who walks in looking for triage or we can help a veteran in need who is looking to understand have they -- are they suffering from deployment-related respiratory disease as a result of their exposure to hazards. And we do that through this portfolio of products. And in fact, I've just been looking at the screen today, as I said, I'm at a conference where I've had the opportunity to be talking to radiologists all day and this is the screen that we use to talk through what our complete and comprehensive chest diagnostic suite is. And I do say to them that proudly that we have the most comprehensive offering of any company, large or small, in the chest. But those same products, I think, are easier to explain here where we have them divided up into pulmonary function. These are technologies that show things the radiologists that they could not see no matter how long they looked at that CT, allow them to see, for example, with CT LVAS, airflow in the lungs, with CT:VQ airflow and blood flow or with functional LVA air trapping in the lungs. Or our pulmonary structure products, which perhaps the radiologists could see the outputs from these pulmonary structured products, but it would take them a long time to do that. And when they did so, they wouldn't be able to intuitively do that quantitatively. So when our technology identifies, for example, there's fibrosis, it tells you exactly how much there is it quantifies it. It allows the radiologists to get there sooner with certainty and makes their day easier, quicker and more efficient. And then we have our cardiovascular products. And the short answer for why they sit there so neatly is if you have a CT of the lungs, you can't help it. You also have a CT of the heart. It's right there in the middle of the lungs. And so there's plenty of opportunity, for example, when you're doing lung cancer screening to get a coronary artery calcification score on that -- on the heart that lays right there. Altogether, as I said, this is the complete lung health solution. And this complete lung health solution sits there as part of our detailed commercialization strategy. We have a clear comprehensive commercialization strategy. We segment it by customer type and territory and for large-scale growth to attack each of those individual market opportunities, each of which we think has a compelling story behind them. Now as you've seen, we've been -- we've had rapid growth in our revenue, in particular, over the last 2 years. And some core factors behind that revenue growth over the last 2 years has been that we have cracked the code in terms of how to sell the product. We've built the right team to deliver that. And additionally, we've realized that we need to reduce the friction of sale by having a comprehensive portfolio. Doctors don't want to buy just one widget. They want to buy it together in -- they want to buy it together in one piece. And so by putting that portfolio together, we've really had those rapid growth, that growth in scans, number of sites growing to over 300 sites, scans per site and price per scan across that. And we've been able to do that with a sales force of just 10 folks. And now that we have -- now that we have Philips in place and now that we have continued to grow that portfolio and including the recent FDA approval and reimbursement for IQ-UIP, which, as I said, has been getting really strong interest from this radiology conference that I've been at this weekend, we're in a position to place that with Philips and to take all of the success that we've built, the formulas we have, the portfolio that we have that's grown from minimal sales revenues to over $6 million recurring run rate with 10 people and have 250 people behind -- get behind those products and sell them. And I can also say that we've had a number of meetings. We're constantly back and forth now. Every single day, there's multiple people from 4D dealing with working with folks from Philips to take our products to market jointly with them. I can share they're getting incredibly excited as they get positive feedback from their customers about the technology. We're constantly hearing back from folks in the Philips team about how excited they are and how excited their customers are about what our technology can do for them. And in addition to that Philips layer, we're also incredibly excited about VQ. VQ has an immediate opportunity to displace the $1 billion nuclear VQ market. And through uptake, we think that, that market that we uniquely have the opportunity to grow that market quite considerably beyond and above that $1.1 billion opportunity. And the reason for this is that nuclear VQ is plagued by logistical and technical challenges. And for those who haven't heard this before, in order -- I've gotten a nuclear VQ scan myself. I've been through the procedure. So firstly, I had to go down to a nuclear medicine, which is actually quite away from the other core parts of the hospital. And I'm given a container that has a radioactive powder in it and I'm asked through a tube to [ pent ] into that tube, which is connected to this container effectively of radioactive dust, which is then kicked up through that tube and deposited to the lining of my lungs to give a nuclear ventilation image. And then I need to get a nuclear perfusion image taken. So, after I've had the imaging done, I've laid down in the detector for about half an hour, I then require an injection of that same radioactive material. But now because my lungs are already radioactive, they have to inject a dose about 10x greater than is stuck to the lining of my lungs into my blood. And then we get that perfusion image there. And certainly, there's a range of technologies for delivering that. So, planar scintigraphy all the way up through to SPECT imaging and there's a range of different contrast agents that can be used. But by and large, the there are results, there are variation in results, but these are considered good quality images for that space. And here, we have our images compared side by side to those. And the simple sales pitch for us to doctors, to pulmonologists and radiologists who get incredibly excited by this is that our images can give you superior image fidelity but without the logistical challenges. So, we can take that important procedure that the United States health care system is spending over $1 billion a year on right now and take it from the least logistically convenient place in the hospital and bring it right into the most logistically beneficial place, which is right on that CT scanner, where a scan just takes a couple of minutes and is done routinely all day, every day. But there's something a little bit new today. So, here are some new images that I don't believe we've shared anywhere before, which shows -- previously, we showed black and white images without CT fusion. But here, we've shown -- we're showing images rendered in -- nuclear perfusion images rendered in color and with CT fusion. So, this is the state-of-the-art and -- but also, of course, standard for CT:VQ. And to put it simply, it doesn't really matter. This is about as good as it gets. As I said, it's very rare for images to be any better than this. And I think whether in black and white or in color, floating in space or rendered on a CT, our images just look better every time. There's just no way around it. And they have that without any of the logistical challenges, without you requiring to coat the inside of your lungs with radioactive powder, have radioactive die injected into your blood or for you to go away for 45 minutes down to the basement of the hospital. How image can be created with software only from the CT that you were going to get anyway that took you 3 minutes to get. And because of the fact that there's such logistical improvements and we know we've learned day in, day out that making life easier for the hospital is the way to win business. So, we can increase the reimbursement that the hospital can get. We can reduce the cost that they pay, reduce the logistical challenges, make the patients happier, deliver a superior image to the doctors involved. It's just win on all fronts and it's so incredibly rare that you have those kinds of wins stacked up on every single axis in health care. So, for that reason and the reason that we're replacing a product for the first time, not convincing folks about the need to do something slightly different, but simply, you can replace -- if you wanted VQ, you can still have VQ. You just don't have to do it in nuc med. You can get that same VQ that you wanted on the CT scanner. That's why at least I hope I've done a decent job of explaining why we're so excited about what this is and how it -- what it can do for us. And that's some of that information there on that slide. So really, the summary for us here is that we've been -- we've had our XV LVAS approved for about 4, 4-plus years now. And we've been establishing our foundations. We've been learning our lessons. The -- we've been learning our lessons. We've learned to streamline workflows for radiologists to make our software convenient, so it just flowed through their workflows. We've learned to package our portfolio up into a comprehensive portfolio of technology so that doctors don't have to buy one widget from one company, but they can buy the 8 widgets they want all from the one provider. They don't have to have multiple IT connections. We've learned how to put that together, how to build the right team to take it there. And over the last few years, that's really started to generate the runs on board. We've gotten ourselves up to $6 million run rate and that's already -- that does not include the revenues flowing through from customers that we've won in the last 100 days or so, of which there are many. So, we've built those foundations and that's been -- that really has been growing very rapidly, very successfully for us over the last 2 years. Now on top of that, we have 25x multiplier on the people having 250 people from sales -- from Philips sales selling our technology. And then additionally, multiplier #2, having this blockbuster product in VQ, something for the first time that allows our sales team to sell a replacement product instead of a new product with all of those advantages that stack up behind each other. So for all of those reasons, incredibly confident about where this is going to take us. And I really appreciate your interest and support of the company. So thank you very much. I think that's it for the -- well, that is definitely it for the presentation. And I know some of you were also interested in asking a question. So, I'll hand back over so we can have our question time.

Thank you. [Operator Instructions] Your first question comes from [ Luke Bryan ]. Luke asks, revenue seems to be very flat currently and the cash burn far outweighs your revenue. Why is it then that you have decided to raise only 1 to 2 quarters of cash in the recent placement and SPP? Do you anticipate revenue to ramp up to the point where no further cap raises are needed?

Look, thanks for the question. But I'm not sure I completely agree with all of what you said. So, we have grown our revenue 4x over the last -- or more over the last 2 years. And as I've been explaining to you for the last little bit, that $6 million run rate of revenue doesn't include a whole bunch of the wins that we've had over the last 100 days or so. It takes them some time to filter through into the system and for you to see them in our numbers. And additionally, some of that is being held back by minimums such as the minimum on the Olympus contract we have that's hiding that's masking some of that growth in revenue. But nevertheless, we are, of course, spending more money. We're not making a profit right now. We're spending more money growing the business than we are bringing in. Although, I'll also just very quickly remind you, we also are well and truly past our peak spend at 4DMedical. We -- our spend dropped over the last half, and we expect to continue to be able to bring further reductions in the spending as we continue to grow the revenue. So, I think that's an important part. We are growing the revenue. The costs are coming down. And then the next piece of the puzzle is we've built into this capital raising deal, those quite attractive options. And on the back of getting VQ FDA approved, we estimate in September of this year, we feel incredibly confident the share price will be well and truly past that the $0.54 mark that was there for those options. And so even at the minimum rate of this current capital raise of $12.5 million, there's another $18 million coming downstream down the pipeline for us. So -- which is, as I said, being created and structured to be as beneficial as possible to give the maximum opportunity for our retail shareholders to participate. So that if you factor all of those things together, that it's not $12.5 million, it's really more like $30 million that our revenue is indeed growing and that our costs are coming down rapidly, we really feel comfortable that this is absolutely the capital we need to take us all the way through to breakeven on the business. But thank you for your question.

Your next question comes from [ Dan S ]. Dan asks, why do you do an SPP instead of drawing down on the at-the-market funding?

Yes. Look, thank you for that question. And I can see that that's a really very -- that's very easy to understand why that question comes up. And in fact, it comes up quite a bit when I'm talking to our investors. I love the at-the-money facility because it gives CEOs like myself, the opportunity to get modest amounts of capital really efficiently without much disruption and at a share price without much discount. And so there's a lot to be said for those types of facilities. And we've quite grown to like the idea of those -- of the at-the-money facility. However, it's -- I don't believe it's a substitute for traditional capital raising when you want to raise significant amounts of money. So, when you do want to raise the type of money to turn the business all the way through to -- from our current position through to breakeven to raise like $30 million amounts as we're currently raising, the at-the-money facility just isn't structured in a way that allows you to do that without really being a drag in the market. So, while I like it and excited by this technology effectively coming across from the United States to Australia, I don't think that it's the right thing to use to do what it is that we're doing now.

Your next question comes from [ Joshua Murphy ]. Joshua asks, when can contracts and meaningful revenue be expected as a result of the Philips reseller agreement?

Look, we're very -- we're quite interested in -- we're paying close attention to that ourselves as well, right? I think that we have the luxury, I guess, that you don't have of being able to be in constant communication with our friends at Philips and sitting in joint sales calls that have been happening every single week since we got -- every single day, sorry, since we got on to the catalog last week. And so those meetings are absolutely giving us confidence that we'll absolutely see contracts and meaningful revenue this financial year. So before June 30, we'll be able to -- we'll see that on our books.

Your next question comes from [ Matthew Steven ]. Matthew asks, why has the Australian revenue significantly decreased from last year, although it is very pleasing to see the U.S. revenue significantly increase?

Yes. So there's some effectively some accounting matters that are at play there. We had a contract, a large contract for effectively legacy technology, legacy products, a leasing contract with a partner that just rolled out off the books as we move our focus from hardware to focus more on our software products. So that has rolled off the books. And -- but at the same time, we have managed to significantly grow the Aussie business -- we're now -- we've grown that Australian business by something like 40% over the last part of 2024. But we're still waiting for those new sites to become active and to roll in and to start to become visible where you'll be able to see them in the quarterlies. So, Australia is growing. There was a legacy contract rolling off the books that does make it look like we're going backwards there, which is regrettable. But Australia is, in fact, growing at least as well as the U.S., although, of course, it's a much, much smaller market. I think we all understand that the U.S. is where 4DMedical is going to be successful. We're pleased and proud to be here in Australia. We're proud of the Aussie company, Aussie employees, Aussie investors and we're excited about servicing that Aussie community with our technology. But I think we all agree that the growth in the U.S. is informed by the growth in Australia, but it's the growth in the U.S. that is going to lead to our success.

Your next question comes from Joshua Murphy. Joshua asks, what is the current status of engagement with the VA? Have you found it difficult to deal with the new Trump administration and their cost cutting?

I think that the across the board right now, there's -- everyone can see and we watch as closely as possible. We have folks on the ground in D.C. doing the work and being in communication with both the VA and the organizations that are around the VA. And we certainly -- it's certainly difficult to engage directly with them right at this moment while there's so much turbulence and change going on. But we have long-standing connections with large parts of the organization, many, many folks who have been there in and around the VA for decades. And that's not going to go overnight away overnight especially since we absolutely believe that this administration, like all administrations before it, has a genuine commitment to servicing -- to serving American veterans who supported them in war. So, I think really, we do need to wait a little bit for some of the dust to settle before we make any big moves. But that doesn't mean we can't make some meaningful moves. We can't -- we have our sales team on the ground talking to VAs. In fact, can I say jointly with Philips all the time right now. And so I think those opportunities are still there. And we do need the dust to settle before we can make some further progress with the big swing at something like a national rollout.

Your next question comes from Dan S. Dan asks, as of today, how many pilot programs do you have currently have underway that will result in additional scanning locations in the near future to drive revenue?

So, we've -- I think that right now, the biggest increase that we have coming down the pipeline are actually pilots that we've recently wrapped up that we've converted into paying customers. We've had in the history of the company, only 1 pilot ever not fully convert into being a paying customer. So, we've been able to be quite successful in those. We do have -- we absolutely have a few still in place. But really, the bigger wins are those pilots that converted like IPOC, UCSD, Qscan, those are the ones that I think that are coming online that we signed up in the last quarter or the last half and we expect to start delivering revenue. Now, we do have a few more and some of them are commercial in confidence. I can't share with you the names of all of those sites, but we've been converting them really strongly quite recently. And I think there's -- so some of those are fully converted as we speak. And I expect that we can get some more done over the next quarter.

Your next question comes from Joshua Murphy. Joshua asks, the Australian lung cancer screening program is to commence this year. Is 4DX likely to be engaged in this program? And what is the likely commercial effect?

Look, I think that lung cancer screening is an important health care program for all Australians. And 4DMedical is -- 4DX is extremely well placed. We're having conversations with the right folks, and we're explaining to them that, in fact, with that portfolio that I was so proudly sharing with you before, with that program that I was so proudly sharing that we have the most comprehensive portfolio of lung diagnostics. That means that when someone goes in to get their lung cancer screening, the biggest burden on the screening program is, in fact, what they call those other things that are noticed during that screening that get picked up that aren't lung cancer screening. So those incidental findings are the biggest issue for health care providers. And we have a comprehensive portfolio of those things. So for example, coronary artery calcification, emphysema detection, interstitial lung abnormality detection. So, we have the capacity to really be right there and support the doctor and the patient and it's very compelling. So, we're making good progress in progressing that. I think that the -- Australia is a relatively small market and the Australian government is not putting a ton of cash into lung cancer screening. But nevertheless, I think it is going to be great for us as a business. It's great to be part of a really important health care program. And the -- additionally, I think it will really substantially grow our reputation here across Australia across with all health care providers, provide opportunity not just to pick up the business of assisting directly with lung cancer screening, but to help doctors and patients as they navigate through those incidental findings. And we are -- also, I think another thing that's worth mentioning, that's important not only in places like the Australian Lung Cancer Conference, where our team was present last week, but also at conferences like the one I'm at here in the United States, where there is a strong reputation that folks know that Australia does cancer screening really well. And if something is part of a winning formula for cancer screening in Australia, then that technology should probably be picked up and applied to lung cancer screening in the United States.

Unfortunately, that does conclude our time for questions today. I'll now hand back over for any closing remarks.

Look, thanks. Really appreciate. I can't tell you, as the founder, I really deeply appreciate your interest and your support of 4DMedical. Thank you so much for being on the call today. We've been working tirelessly for years to get ourselves to the position where we have the growth, we have the formula as to how to get that growth. 25x the sales personnel coming online last month -- sorry, this month with Philips, blockbuster $1 billion product coming down the pipeline, likely to be FDA approved in September and selling this year and $30 million through this capital raise structure that we've put in place here. We're in a really great position and I strongly encourage you to consider whether or not you want to participate. But either way, I really appreciate your support and your interest here today. Thank you so much.