Piqued my interest an wanted to jot down a few thoughts:
Reasons this could be a great company!
- No capex required by hospitals can use existing equipment
- Essentially just software = ability to generate software margins
- Recent significant decline in market cap with general market conditions.
- Seems to be just reaching the point of potential commercialisation.
- Cool new medical tech (I am an ICU doctor)
First some physiology:
Picture the lungs as giant sponges that inflate and deflate as blood is pumped through the lungs into tiny blood vessels past tiny gas pockets designed by eons of evolution to maximize surface area to ensure efficient diffusion of carbon dioxide and oxygen. Your breathing increases and decreases to match the amount of blood coming out of the heart and vice versa and the amounts tend to remain synchronised and in balance in a healthy person. This is ventilation and perfusion and is often considered together as a ratio "V/Q".
This ratio should be roughly 1. If ventilation is too low for the blood flow (diseased lung) this number goes down. If Blood flow is too low for the ventilation (blocked vein) then this number goes up. Both are bad and are suggestive of different diseases.
4DX reckon their technology can use equipment that hospitals already have with some new software to look for this V/Q mismatch.
This is a great business model. Software margins highly likely with almost zero capital expenditure required.
Potential indications:
The big money here would be diagnosing (or more commonly ruling out) pulmonary emboli (lung clots) however, there are several issues I have with this technology and this particular indication.
Firstly the good news; there is no way to diagnose pulmonary emboli in patients other than doing a scan. The symptoms of a lung clot are the same as many other conditions and require a very specific treatment that has significant enough associated risks that you can't really give it without a pretty definitive idea of if there is a clot or not.
Gold standard is CT pulmonary angiogram.
Unfortunately 4DX scans wont displace this. Squirting radio-opaque dye into the pulmonary veins and then bathing the lungs in 360 degrees of radiation is always going to be a more sensitive scan. I'm not an expert but I probably look at at least one of these scans per week and can usually see if there are any clots well before the radiologist report comes through.
Other scans like a VQ scan or a contrast free pulmonary angiography as they are developing here wont be as good and because the information is somewhat inferred it will be reported as a probability which unfortunately wont instil confidence and unless its very clear will likely just make us want to do a CTPA to know for sure.
Unfortunately CTPA isn't perfect. It may not be the imaging of choice in young people who we want to avoid radiation where possible or in people who have poor kidney function due to the supposed toxic effects of contrast on the kidneys (this isn't actually a thing but it is a widely held belief in medicine to the point where is may as well be).
Currently in these situations we do a V/Q scan which is basically a process of photographing a patient with a gamma ray camera while they huff radioactive aerosols and also have a small dose of radioactive fluid injected into vein.
If 4DXs scan proves a viable alternative to VQ scans which can be hard to get, needing nuclear medicine facilities Vs an X-ray then I imagine that people would order them. These scans are not fantastic.
Unfortunately V/Q scans are not used for much beyond identifying PE's (and not for that much anymore)
- Monitoring lung function following lung transplant.
- Provide preoperative estimates of lung function in lung cancer patients, where pneumonectomy (Chopping the lung out) is planned.
- Can identify shunts (blood bypassing the lungs)
There will more than likely be some other niche indications for this scan that become apparent over time. I could 100 percent see it becoming part of an extended investigation panel mainly ordered by respiratory specialists along with lung function tests etc. This could take a really long time to permeate the industry though without a hard and fast need to do indication. Currently it seems a bit like a solution looking for a problem.
It must be noted that given the market size a bit of traction could go a long way. To quote the company's own presentation "Given the large market size even low market penetration could see substantial revenue generation with high growth margin"
Seasoned investors will approach the old "if we could just snag x% of $$$$$ market we will make $$" with the level of skepticism it deserves.
