4D Medical (ASX:4DX) could become the next Pro Medicus, and its taken some important strides in 2025!

There’s not many Australian radiology companies that seek to conquer the USA, but 4D Medical (ASX:4DX) is one of them. Another one was Pro Medicus (ASX:PME), and everyone knows how that story turned out – that stock is now worth over $11bn, all because of runaway success in the US market. 4D Medical shareholders inevitably hope that it can follow in its predecessor’s footsteps, but there’s a long way to go.

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Introduction to 4D Medical (ASX:4DX)

4D Medical has lung imaging technology called XV. It is no ordinary piece of technology, enabling doctors to see the lungs breathing and normally, and to see through them. The company can also use existing lower-value scans (such as X-rays) and transform the images, charging fees on a SaaS basis.

4D Medical began in 2013, founded by Dr Andreas Fouras who still heads the company today, having guided it through clinical trials, FDA approval and its ASX listing in 2020. Yes, it is FDA approved, with the green light received in May 2020. The company has a deal to supply Australian diagnostic imaging clinic operator I-MED and counts Pro Medicus founder Sam Huppert as a clinical advisor.

The US market is a tough cookie to crack

The company believes there are 400m procedures worth more than US$30bn annually, and a significant proportion of these are in America. Of course, while FDA approval is a necessary pre-requisite for selling a medical device in the USA, the world’s largest healthcare market, that doesn’t automatically it will be a success.

Business development hasn’t been as easy for 4D Medical as investors expected and the share price has been under pressure as a consequence. Living with government grants and tax incentives as a primary source of revenue can only last for so long.

4D Medical secured its first ever SaaS contract with the University of Miami back in April 2023. At the end of CY23, it acquired Imbio, a company with an AI platform that can transform chest CT studies into visual lung maps. While 4D Medical provides functional analysis, by assessing lung ventilation, Imbio provides structural analysis in the form of assessment of lung anatomy.

The company’s investment thesis in buying Imbio was that having two views helped to make a better, more informed clinical decisions. The idea was tat this could be the launching pad 4D Medical needed.

Big contracts will be game changers

The company’s operating revenue for FY25 was $5.9m, up 56% in 12 months. Of this, $5.7m was Saas revenue, and the company’s gross profit was $5.4m. It took strides to reduce its costs and its EBITDA came in at -$24.9m whilst its net loss was -$30.1m (down 17%).

In our view, the key will be commercial contracts at a pace similar to Pro Medicus. By pace, we don’t necessarily mean a large size (although big deals would be good), but new clients adopting it on a regular basis. By ‘major contract’ we mean a deal with one of the top US providers, for 5-10 years and worth at least US$20m, in our view. It may take just one of these to cause investor sentiment to take off. Look at one of the more recent deals – a 3 year contract from the University of Michigan Medical Centre, worth A$155,000 cumumatively in 3 years. It clearly has got some way to go to reach Pro Medicus.

But there have been some strides made in recent weeks.

More money from PME and a new green light from the FDA

At the end of July, the company got a $10m investment from Pro Medicus – debt rather than equity. Investors welcomed the news. The idea was that it would help 4DX fund its commercial pipeline and advance a new technology for FDA clearance – CT:VQ (Computed Tomography Ventilation Perfusion). The investment was structured as an upside-sharing payment if 4DX performed well and PME may gain distribution rights to 4DX’s profits.

Only yesterday, it was revealed that CT:VQ got FDA approval. It is the world’s first non-contrast imaging modality capable of delivering quantitative ventilation and perfusion analysis directly from standard chest CT scans. VQ scans are a nuclear medicine procedure evaluation airflow and bloodflow in the lungs, so doctors can identify imbalances. This is used to diagnose PE, the same indication Cylopharm is going after.

Currently, the procedure needs 2 scans, in a process taking 90 minutes. But with CT:VQ, the whole data can be extracted from routine CT scans without contrast agents or radiotracers. The company believes one million of these scans are performed across the US with an average reimbursement of US$1,150 per scan, translating to an initial addressable market of US$1.1bn annually. 4DX already has commercial contracts for research use, but now the challenge is to find commercial partners.

Perhaps this could be what 4DX needs to properly ‘take off’ in the US market.

Conclusion

What’s the answer to our question in the title of this article? We’ll know the answer for sure over the next couple of years. The challenge for 4D Medical will be potentially weak investor sentiment, as well as growing at the top line while making its was towards profitability.

There’s no doubt that there’s market demand and need for the type of product that it has, but whether or not it can follow the same trajectory (or even a similar one) to Pro Medicus remains to be seen.