$4DX published its 4C earlier this week, and we've seen a bit of a pullback from recent highs, even before it was published.

Let's think about why that might be.

First up, as I write, this business has a market cap of $2.3bn.

In the 9 months YTD, it's operating revenue has been $5.0m, up 12% to pcp. That's an annual run rate of $6.7m. So that means today, the business is trading on a current revenue multiple of 343x.

And in the 4C while there lots of newsflow, including trials with several leading AMC, other agreements and sales, a EU/UK approval, and a deal with Glaxo, the detailed 4C report is conspicuous by the absence of one important factor for this type of business: Contracts with disclosed minimum values.

So at this point, you might say that it is early days - and you'd be right. You might also say that the revenue is coming because the CMS reimbursement was granted soon after FDA approval of CT:VQ. And a lot of commentators are pointing to that.

But there is where it is important to understand how the US healthcare system works.

Without getting into the details, the current US CMS reimbursement code is for a trial technology. It means AMCs and other facilities can use the product and get reimbursed for a limited period. Trial reimbursement also doesn't fit into the standing imaging workflow. And that's a big commercial barrier. Often, in order to process the claim, specific evidence/reports have to be attached to the submission.

Providers (specifically, the VACs that are gatekeepers within providers) will be reluctant to grant approvals for routine use given the temporary validity of the reimbursement and the non-routine workflow required.

And that's why I believe $4DX cannot disclose $-value contracts, ... because they don't yet exist.

We might be entering a phase now where $4DX is trialled by the leading AMCs, and these trials might run for 6 months, a year, maybe more.

Why do I know this --- well if you track back to the early days of $PME in the US, that was a similar journey they followed.

So what about the impressive numbers scans in the report: 477 site, +32% yoy, a quarter of 86,200 scans, up 79% in the Q and 240,000 scans YTD?

Well, at $5.0m revenue, that represents $21 per scan, not the US$1,150 opportunity touted for CT:VQ scans. Which means, the lion's share is coming from the legacy products, not the high value CT:VQ.

So, what's my point?

I think the market had turned $4DX into something of a meme stock. Some time ago I predicted that as the revenues fail to materialise at the rate implied by the valuation, there was a high likelihood it would come back down to earth.

Don't get me wrong, I think the tech is great, and in time, this might offer a great investment opportunity. (And of course, I am salty because I offloaded it at $1.90, when I felt it was already grossly over-valued, and wanted to bank my 10+-bagger.)

However, as each quarter unfolds, there is a risk that the revenue will fall short of the promise, and the stock continues to re-rate....downwards.

Fortunately for Andreas, he was smart and raised a ton of capital. (I can imagine Sam whispering in his ear: "Dude, there is a Valley of Death you now have to cross, cash up while you can.") And to Andreas' credit, he did. And so the board and management can ignore the share price, hopefully for long enough for the revenues to materialise. So, I remain poised for the "shoe to drop" ...

And I think Sam is on top of this too - he was super clear at the last $PME results to make sure everyone was focused on the PME "underlying" result, as the $4DX holding promises to bring a little volatility to the bottom line of that business.

Disc: Not Held (I hold $PME)