Pro Medicus (ASX:PME) writes a A$20m cheque into Echo IQ

A 12.5% convertible note and a US reseller deal point to a quiet platform pivot

Pro Medicus (ASX:PME) has done something we have not seen it do at scale before. It has signed a binding Heads of Agreement to take a strategic stake in Sydney-based AI cardiology company Echo IQ, with an initial A$10 million subscription for secured convertible notes and an option to put another A$10 million in once Echo IQ’s heart failure algorithm clears the US Food and Drug Administration.

Pro Medicus also becomes the proposed US reseller of Echo IQ’s EchoSolv product suite, plugging an AI-powered cardiac diagnostic tool into the same hospital network that already runs the Visage 7 imaging stack. Definitive documentation is being finalised, with completion expected in the coming weeks.

On paper this is a small ticket for a company carrying a market cap in the tens of billions. The signal underneath the size is the part worth thinking about. Pro Medicus has historically built its moat through its own software, not through investing in third-party AI.

The convertible note terms reveal what Pro Medicus actually thinks of the risk

The economics here are not soft. Pro Medicus is putting in money as secured convertible notes at 12.5% per annum compounding daily, with security over Echo IQ’s aortic stenosis and heart failure algorithms. That is venture-style pricing, not a friendly strategic handshake.

On top of that, Pro Medicus gets 0.75 options for every note at a A$1.35 exercise price, and a conversion cap at A$1.05. The structure protects the downside if EchoSolv stalls, and gives Pro Medicus meaningful equity upside if the FDA clears EchoSolv HF and the reseller arrangement gains traction.

We think the terms tell you what Pro Medicus management actually believes. They like the technology enough to commit capital and channel access, but not enough to write a clean cheque. The deal is engineered so Pro Medicus wins on conversion and is largely protected if it does not.

Why the reseller leg matters more than the A$20 million

Pro Medicus has spent the past 18 months landing landmark Full Stack contracts with names like Trinity Health, UCHealth and Beth Israel Lahey, with cardiology modules increasingly attached at first sale. The TidalHealth deal we covered earlier this year was the clearest signal that cardiology cross-sell is becoming the default motion.

Bolting EchoSolv onto that distribution gives Pro Medicus an AI diagnostic layer it does not have to build, sitting natively next to the workflow its customers already use. The skeptical read is that this is a small experiment with a junior partner. The constructive read is that Pro Medicus has just acquired a low-cost option on AI-led cardiology imaging without diluting its own R&D narrative.

Our concern is that every legacy PACS vendor in North America is now racing to add AI partners. Pro Medicus is moving from a position of strength, but the window in which an exclusive-feeling reseller deal carries meaningful competitive value is narrowing.

What this signals about the broader Pro Medicus growth story

Pro Medicus shares have spent much of the past year unwinding what was an extreme valuation, even as the underlying business has continued to grow first-half revenue 28% and lift operating margins past 73%. The investor debate has shifted from whether the Visage platform works to whether the next leg of growth comes purely from new logos.

Today’s announcement quietly opens a second leg. If Pro Medicus is willing to invest in third-party AI and resell it, the platform stops being just an imaging stack and starts looking like a distribution channel for adjacent clinical AI. That is a materially different long-term story to model.

The Investors Takeaway for Pro Medicus

We think the importance of this announcement is not the A$20 million, it is the precedent. Pro Medicus has historically grown by selling its own code into the largest US health systems. Today it signalled willingness to use the balance sheet to bring third-party AI onto the platform, with reseller economics attached.

The two things worth watching from here are whether EchoSolv HF actually clears the FDA in the near term, which triggers the second tranche, and whether more partnerships of this shape follow. If they do, the valuation debate stops being about contract cadence and starts being about platform optionality. Investors can read our most recent take on the company at stocksdownunder.