4DMedical Limited (MQ7.F) Earnings Call Transcript & Summary

Hey, everybody. It's really great to have such a big crowd on here today. Such strong interest in continuing to stay in touch with the 4DX story. So thank you, thank you very much. We have the usual legals. I'm going to spend a little time taking everyone back to the core of where we are. And we are a Melbourne-based company that is here to bring imaging software to the world. And we have a portfolio of structural and functional imaging technologies protected by 100 patents and represented by 9 FDA-cleared devices. We are a small but mighty team of 130 people where our U.S. folks are concentrated on our customer-facing efforts, and Australia covers the engineering, R&D and support capabilities with overwhelming majority of folks being based out of Australia. We have incredible technical and clinical expertise, and we have great brands supporting our distribution. Here is the portfolio of products. And we spread now across the heart and the lungs. And we have a combination of products that cover the entire portfolio. And one of the lessons we've learned over the last -- over our years of being in the market, and I'm sure that most of you recognize and acknowledge that it's really been since our generation 3 product CT:VQ has been to market that we've really had our breakout moment. But we've been working hard in the years before that. And one of the key lessons that we've learned is by having a full service offering, by having the full coverage of everything that a hospital needs to cover lungs or as much as possible heart and lungs, reduces the friction of sales and makes business easier, and in fact, will lead to more V/Q sales. So what is CT:VQ? CT:VQ is the first and only technology that's FDA approved to measure blood flow in the human body without the use of injected contrast. And in fact, CT:VQ measures ventilation and perfusion from a routine CT that folks are getting all day every day. And we see that our initial target market for V/Q is to displace right now the nuclear V/Q market. And so let's jump in and take a little bit of a look at that. In the United States, there are about 1 million nuclear V/Qs done every year. And 2/3 of the U.S. market still uses technology that would be considered out of date for much of Australia and Europe, something called planar scintigraphy. And that gives you the type of images you have here on this image. The V mage there on the left representing ventilation and the Q on the right are perfusion. And I've had one of these scans myself. And so I think it's worth just quickly describing that process. So these scans are most commonly used for folks who are undergoing some kind of procedure, for example, a surgery. And when -- in my experience, I went down to nuclear medicine, went into a special room, was given a container of radioactive powder to breathe in, huff and puff on the container for that to stick to the inside of my lungs. I then go down, lay in the scanner and have that V image taken. So that's an image of how my lungs are radioactive showing where that powder stuck to my lungs. I then had an injection of radioactive dye and then another scan showing where that dye was from the injection, which shows the blood flow. So you get this ventilation and perfusion image that look very much like the ones you see here. And you can absolutely -- I encourage you to jump in and Google planar scintigraphy V/Q to see just how these images look. And what CT:VQ and 4DMedical are offering here is the opportunity for that surgeon and that patient that we're just talking about, instead of having to go and send that patient off to go and get an appointment to get that nuclear V/Q scan, to take the CT that was already used for planning that surgery and apply our software to get the V and the Q images that you see here. Of course, without going somewhere else, without inhaling radioactive material, without injecting. And in some ways, while that's great for the patient, for us or for shareholders, the even bigger value add is that it is not inconveniencing the surgeon by having to send that patient out to go and get another procedure that can interrupt the flow, interrupt their flow and their planning. So you see we have here this transformational milestone where CT:VQ becomes the world's first and only noncontrast CT-based perfusion imaging technology with FDA clearance, that we have an opportunity to target 1 million -- displacing 1 million nuclear V/Q scans annually in the U.S. for a really significant opportunity, and that we can do so with a gross margin in the ballpark of 99%. And on top of that, we have this instant scalability given by the fact that for every nuclear V/Q instrument in the United States, there are 10 CT scanners. And for every one of those CT scanners that they have -- that they can do 4 or more patients per hour versus 1 patient per hour on that nuclear equipment. So it's something like 40x the availability of the asset base for a transformational new disruptive technology. Incredibly rare confluence. And we are confident. We have been saying, we've been taking -- what I recognize is an extraordinary claim, but one that I'm confident to make to all of you again, which is that we see CT:VQ taking 100% of that market share. And why is that? That is because every single decision driver, every reason for change points in the same direction. You can imagine, typically in health care, that there may be a new drug, and it's great, it has better results, but there's some side effects that patients don't like or there's a new treatment, it's a little bit expensive, it's twice as expensive, but 15% better results. These types of compromises are absolutely common in health care. And we have an incredibly rare circumstance where every reason to change points in the same direction. Improved patient -- better for the patient; shorter scan times; no contrast; better for the referring doctor; it uses the CT they were going to order anyway. They don't have to send the patient out. They don't have that delay, better value for the imaging provider. Simplified procedure; improved diagnostic accuracy; better value for the hospital; resource optimization; taking a scan from somewhere that it takes an hour and putting it on a CT that only takes 5 minutes, but in fact, you're going to do anyway, so really take 0 new minutes to get the scan done; or freeing up the spot in nuclear medicine where previously they get reimbursed about $500 for a nuclear V/Q, but they can get reimbursed, say, $2,250 for a cardiac scan; incredibly rare circumstance where every single stakeholder in this decision has the same reason to change to move to our technology. Here, we have also a really exciting value of having the muscle of Philips Healthcare standing in behind us, supporting us and amplifying our capacity to take this technology out to market. And once again, through our Philips partnership, we have this incredible opportunity to win big with the VA. And I'm not going to talk very long on this. I could talk for 1.5 hours on the VA opportunity. It's really significant. We continue to invest in it, and we remain confident that we are going to get a win here. But while we face a $1 billion a year market opportunity at 99% margin and we're making daily progress towards that, I think I'm going to leave this here. It's in the slide, which is up on the ASX platform, and I'm going to progress on from my confidence that we're going to win this and step to continue just to talking about V/Q and where that's going. And here, you see us sharing for the first time in 4DMedical's history, some data and some information on pipeline and where we see things going here with this product. And we're using this well-established process. I think we've been talking very clearly, communicating very clearly that our key pathway for success in the United States is by building our reference sites. This is something that has been used to great effect, for example, by the Pro Medicus team winning these reference sites and then using that as the lever to win the rest of the network. And on top of that, these do tend to be rather large sites that pay well as well. So here for us, as we're saying, these surgeons, these folks doing the procedures or interventional pulmonology, they're a key customer group for us. We already have 15% of the top 20, and we have 45% already quoting or already in our active funnel. And then in the broader top 20, we already have 10% of those and once again, 45% of them in our active funnel. We have -- this is -- and for those of you who perhaps are not regular health care investors, this speed from having this type of funnel and this type of market share within just a few months of FDA approval is phenomenal. It's incredibly exciting. It's incredibly validating to all of us who have worked on V/Q for so long and gives us the type of confidence we need to be this excited about taking this forward. So we have our technology validated, hundreds of patents, FDA approvals. We have this full suite with V/Q sitting at the top of that as the flagship product. We have the expertise that we've built up over the years of navigating U.S. health care, and we have the muscle behind us with Philips ready to go in, a bursting pipeline of unstoppable momentum, opportunities with the VA. So really very excited about we are, we're in a fantastic position that's been hard forward for over years and appreciate your support in getting us to this position, which takes us to the news of last week. Institutional placement successfully raised $150 million at $3.80. We had really -- we had amazing demand from new global long-only fund managers, incredibly strong brand names with very large balance sheets behind them and that we're able to limit the dilution down to 3.86%. So -- and the I'm excited about having access to this capital. We've built this to where we are today with significantly less capital than that. And I'm excited to have these resources to deploy to accelerate further our U.S. commercialization of CT:VQ to build out sales, marketing and business development capabilities, to expand across those AMCs that we've been talking about that are both incredible customers in their own right and also the key to open up the entire market. The resources to fund us to continue to stay out in front on technology and provide balance sheet to capture growth opportunities and, of course, have maintained working capital and the support of the market. Also, we're excited that we were able to leverage this block of nearly 19 million shares, this Alpha block, so which allows us to bring in a really significant amount of capital for really very limited dilution of under 4%, which is an incredible outcome for all shareholders. And I'm sure everyone appreciates us keeping an eye on the dilutionary effect. Finally, here is the time line. The top half of the table, obviously, in the past, there in gray. But Wednesday, we get the new shares and the block trade. And then on Thursday, normal trading of the new shares; and then on Friday, the same for the block trade shares. So as I said, we have been working tirelessly at 4DMedical to build the foundations of a generational -- a once-in-a-generation opportunity. And we've been learning, we've been working, and we've been growing our capabilities. And then now with V/Q there and with this capital at our backs, this is now our time to get started. And that's really how I feel about where we are. We are bursting out of the blocks here with incredible momentum, and it's going to be an exciting 2026. I appreciate your support and your interest here today. I will now have some time for questions.

[Operator Instructions] Your first question today asks, is there a requirement to demonstrate financial viability to obtain major U.S. government contracts? And did that requirement play a part in the decision to raise more money?

Look, it certainly doesn't hurt. Let's say that, right? It's -- there's -- I think we've all heard stories in the paper about companies that have won incredible -- incredibly large contracts that draw some doubt or some confusion around government agencies. So I think it's absolutely a plus in that front. But it's also worth pointing out that we have been working from the beginning to cover that off with our partnership with Philips. Philips is a large multinational, multibillion-dollar corporation. And so we have access to their muscle, their contracting capability and their credibility in terms of winning a big contract as well.

Your next question asks, congratulations on your progress to date. My question is about the DoD pilot with the CT:VQ. Was that pilot a 12-month duration? And if so, are there any negotiations happening around the contracting that we're likely to hear about in the next quarter? In that same space, is there any progress on the VA front? Or is the continuing bureaucracy likely to have veterans waiting several more years before something concrete is done?

So I've been in active conversations with folks on the DoD pilot. All I'm able to say to you is that they're very excited by the technology. They like it. And they're very interested to see what it can do and if something can be done there in that space. On the VA front, I have a bit more to share. We have continued to invest here. And the -- and we've been really very pleased by the level of investment and engagement that we've had from Philips all the way up to very senior leadership. And so I think this is -- that VA opportunity is indeed a really significant opportunity for us. And we'll be working hard to get that to happen. But the reason that we put it towards the back of the slides as well as that the timing is tricky. I'd hate to give you an answer about when that timing would happen. But I'm certainly doing everything I can, and I know the folks at Philips are doing the same to make sure that veterans don't have to wait a few more years before they can get access to the best technology.

Your next question asks, could you provide some context on the experience to date for the length of time to negotiate terms with the hospital and then the length of time it takes to install software and go live? Further, is there a rough estimate for what 4DX expects to make per CT:VQ scan? It isn't clear from the investor pack as to whether the scan revenue includes money to go to the hospital and other parties.

Yes. Look, I think I'll start with the back part of that first, which is that we've been -- I think we've been quite open in terms of saying that -- in fact, I think I have something for you that I can -- yes, I think this is the slide you were talking about in the investor pack. So I want to be clear that if you're looking at the left-hand side of this where you can see that there's $150-odd for the hospital reimbursement to do the CT and then there's $650 for CT:VQ, we feel that it's entirely fair or appropriate for the hospital to keep about $150 of that of that $650 for them -- for doing that -- for doing the CT:VQ component. And that would mean $500 on our side of the ledger outside of the hospital's $150. So that's the economics for them, for the hospital. It's a great deal because they get to double the cash flow that flows in without buying a second CT scanner, in fact, without even doing a second CT scanner on the same piece of infrastructure. And so they don't have to hire new people, they don't have to buy new equipment, but they get double the effective revenue through that. And for us, at $500 per CT:VQ with about $4 cost, that puts the -- our initial TAM of displacing the first million as a $500 million opportunity at 99% margin. So really exciting core or start for us in that space. I'll then -- there are multiple parts to the question, I recall. So look, it typically takes months to do each of those steps, right? Months to win a customer, months to get through contracting, months to do an installation. And that's certainly been our experience that 5 or 6 months is a perfectly reasonable time to convert someone into a commercial customer. But at the same time, here we stand today, much less than 6 months after the approval of CT:VQ with 4 of the best hospitals in the country in the United States as our customers. So I think that things will be -- there's certainly opportunity for things to go faster quite often on CT:VQ than they do. But there's also going to be some times in some clients, especially the larger ones, that do take that kind of time line to get across the line.

Your next question asks, what R&D is happening with XV technology? Are there opportunities above and beyond CT:VQ, for example, on the heart, bladder or other areas where blood and other liquids move in the body?

Yes. I mean it's a very exciting position to be that we have this door to unlock measuring blood flow in the human body without the use of injections. And the -- our first play or the center of the bull's eye, our initial target market, as I've been saying, is to displace nuclear V/Q. And that's that initial market opportunity, let's -- as we just discussed to us, of $500 per scan for those million scans. Additionally, we are very confident that at large numbers of sites across the United States that there is significantly more demand than that in there. So we think that additionally, we can grow beyond those million tests. The next play, I think, or the next logical step to take this capability, this technology is in a really close space to that, still inside the lungs, to display something called a CT angiogram or a CT pulmonary angiogram. That's, once again, where a CT is done with an injection to see blood flow inside the lungs. And we see an opportunity there to displace about 4 million scans a year. So to be clear, a market there that's initially about 4x bigger than our displacing nuclear V/Q. Beyond that, exactly as you say, the sky is the limit. There are a whole bunch of places that we can take the technology. I think the heart is something that's very interesting. We're certainly spending a lot of time looking and thinking about what we can do in the heart. And it's worth noticing or thinking that every time we get a CT of somebody's lungs, we get a CT of their heart right in there in that. So we have, I think, technology that's applicable in that space. And that market is, once again, significantly bigger than the lung market. So we are in a really strong place. We have a great platform. And with this capital behind us, we have the opportunity to stay as global leaders in terms of the technology.

Your next question asks, Andreas, I've been a shareholder for the last 12 months, and I'm really stoked how well the company has performed, but I've seen some analyst recommendations that fair value was $3. What are your thoughts on this given all the momentum and large cap rates?

Look, I have seen those thoughts and views. And I guess I will start by saying, I think as Founder and CEO of the company, it's generally not really my view or my place to speak about the share price of the company. But I have taken a really good look at the analysis there that I believe that you're talking about. And I feel that there are some assumptions in there that are quite conservative. Those assumptions are, for example, that we will get to something like 50% of market share over 20 years or over 10 years. I am incredibly confident that in substantially less than 10 years, we'll have 100% of this V/Q marketplace. It doesn't factor in opportunities to win by getting reimbursements from private payers that can significantly exceed dollars of Medicare and Medicaid. So look, I think that it's great for us to have great analyst coverage. I'm pleased to have that. But in my view, those assumptions there that have led to that view are quite conservative. Of course, if you take the conservative view, then you get a smaller number. I also think, just from a personal view on this, too, I think that there's been a number of folks who continue to call out comparisons between 4DMedical and Pro Medicus, which has been such a leader in Australia and has been so incredibly successful in terms of doing what they have done. And I certainly recall that there were a lot of analysts with sell recommendations on that stock for quite a long time. So it really just continues -- adds one more point of comparison between us and PME.

Your next question asks, after securing the $30.2 million options underwrite, Andreas was quoted to say this agreement ensures that we have the more sufficient capital to execute our plans to commercialize CT:VQ and to lead the company through profitability. Can you please explain what's changed then for the $150 million then to be raised?

Look, I think I really appreciate the question. But I want to respectfully say nothing has changed. Both of those things can be true at the same time. I'm absolutely convinced that the cash that we had before we conducted this raise was sufficient to take us through to profitability and to break even. And I'm just going to -- I'll just bring up -- sorry, I apologize turning away from the camera, trying to bring up the slide with the use of funds and not doing a good job of it at all. Isn't that embarrassing. There we go. Sorry. So look, I think that the -- as I said, both of those things can be true. We had sufficient capital to take the company through to profitability and to break even. But the additional funds can accelerate that and expand that. And those additional funds can allow us, as I was saying, to maintain technology leadership and be in a position to more quickly go after the second play of CT angiography and the third play perhaps of going into the heart and also give us the flexibility to capture other opportunities that come on by. And if the capital we're sitting there and needed to be kept there to allocate to bring us to breakeven, it's not, by definition, not available to be used for additional opportunities that come past. So -- and I think given that we're able to raise such a significant amount of capital, bring in really great international long-only funds into the stock and to do so for less than 4% dilution, I think, made it a great deal for investors.

Your next question asks, can you please explain what you mean by active funnel?

Yes. Look, our active funnel is companies that we have -- sorry, hospitals, customers that we're actively engaged with and engaged in the process of converting them into a customer.

Your next question asks, how far away do you think the Australian TGA approvals are? And how are we looking outside of the U.S. for additional approvals and sales?

Yes. Look, it's a great question. I think I'll have a couple of pieces to this. So firstly, I'm convinced that right now, the best ROI for our shareholders is to continue to invest in the U.S. or the North American market. However, for a bunch of reasons, right, notwithstanding not the least of which is most of our shareholders are in Australia and our team is in Australia, we're in a proudly Australian company. We'd love for Australians to make sure that they can get access to benefit from this technology. So we are absolutely working as hard as we can to get the technology approved in Australia for those reasons. And in fact, it turns out that the best way to do that may be to get our European approval and then get it approved here in Australia. But for a bunch of reasons, the etiquette, and I don't want to be superstitious, it's not usually not good to talk about approval processes and timing. Sometimes the regulators feel like that's putting them under pressure to -- and we know which they don't like. But certainly, we feel pretty confident it will happen in this calendar year, and we're doing everything we can to get that to happen as promptly as we can.

Your next question asks, to be clear, the $500 per CT:VQ scan to 4D is in U.S. dollars, so approximately AUD 750?

That's exactly right. It's beautiful, right? So yes, so AUD 750 million opportunity on those 1 million scans at 99% margin.

Your next question asks, why did you not open the recent capital raising to all current shareholders instead of restricting the capital raising to some of the clients of a preferred stock broker?

Yes. Look, I hear this loud and clear, and it was something that was very important to me. And I hope that everyone's experience of -- with 4DMedical and certainly, if you go -- for those of you who are newer shareholders, we'll be able to see if you go back and see, we have always gone out of our way to be -- to show the loyalty and respect to us that our retail base has -- deserves as a result of how supportive they have been of 4DMedical. I take that very personally. And as an example, we were -- we've -- back to backgrounds, we've opened up that to the widest possible retail base of participation. This deal, it made sense, and I think it was appropriate and in the best interest of all of our shareholders to do this one this time in this way. We started getting -- as the new year rolled around, we had really strong inbound interest from really top-tier investors for us to get something done. But there's volatility out there in these markets. And it really also made sense for us to move quickly and promptly and get this deal locked away safe and sound in the shortest possible time. So we made the difficult decision to do this quickly and efficiently. And I know that meant some investors couldn't participate, but I think that, that was a decision that we had to make in the best interest. And I sincerely hope that everybody had certainly large parts of our shareholder base had the opportunity to participate in earlier rounds at significantly less than $3.80.

Your next question asks, what milestones should shareholders expect that clearly demonstrate this capital is being translated into growth? Are there any scenarios in which further equity raises would be required? Or does this placement fully fund the current strategy?

Yes. Look, we are absolutely fully funded with flexibility there. The -- as I said, I stand by the claim that the cash we had before this was sufficient to take this company through to profitability. And I think that the -- we've laid out for you really very clearly that the pipeline of academic medical centers is really the clearest way to keep tabs on how well 4DMedical is doing here. I think by looking at that list of where we're going with academic medical centers across the board, but also those -- really those key leaders in the United States, places like Cleveland Clinic and that we have already -- and UCSD that we already have signed up as paying customers, I think that is really the key way because that's the key resource. They are both bigger hospitals, bigger customers than most customers, but also, they will be the folks that everybody else looks up to see, okay, well, if Cleveland Clinic are doing it, if UCSD are doing it, then it's a no-brainer for me to do it at my site. And I think that's really the -- that's certainly how we'll be measuring ourselves over the next 6 months.

Thank you. This, unfortunately, concludes our time for questions today. I'll now hand back over for any closing remarks.

Look, I really appreciate having all of you here. I think the level of interest and support in 4D has been phenomenal. As the founder, I'm really grateful for that support and that interest. And we will be working around the clock to make all of this happen because as I've said a few times now, we're really just getting started. Thanks a lot, everybody.