I see many people compare 4D Medical to Pro Medicus, time and time again, always saying how similar they are, however there are some very significant differences which I have never seen discussed. I am quite familiar with both businesses having bought PME at $2 and still holding a sliver of my original holding (and also having recommended it to a few friends along the way) and having followed 4DX since their IPO.

1) Customers go all in PME or not at all

If a customer decides to implement Pro Medicus' solution (Visage), they can't trickle it in, trial it and see how it goes then gradually increase their use. Visage competed with other image processing solutions which were already being used. The first customer to choose Visage chose them as a result of a competitive tender process where it proved to be better than the competition, and therefore that customer installed Visage as their entire solution for medical image processing. Because it was the entire solution, which was installed in place of the prior solution, it was a significant win and a significantly valuable contract. The penguin was fully committed to being in the water and all the other penguins could stand on the edge and watch what happened, then the other early innovators quickly began to follow suit.

4DX is very different in this respect, there is no requirement for a new customer to fully commit to switching from existing scanning methods to 4DX scans. New customers such as University of Miami (their first, and only so far, SaaS contract) can trial the scans for years, gradually increasing their use for certain use cases as they see fit, as research from clinical trials is published, continuing to use the old tried and tested methods in parallel. Visage being strictly a replacement of existing software as opposed to a potential complementary option, makes the nature of the 2 businesses very different. It means 4DX will have a much slower start with very low contract values such as that of Uni of Miami (AUD$1m to AUD$1.5m over a 5-year term) where hospitals will only be interested in using the scans for certain conditions which have sufficient published research to show how the scans can be used for diagnosis and tracking how a condition reacts to treatment.

2) Visage requires back-end change only

Visage is just a change in the back end, which improves capability of image viewing, but doesnt change the images themselves. The nature of this change makes it a no brainer once it is proven to outperform its competition. Doctors and radiologists don't need to learn any new skills in order to use Visage, their existing skills are just enhanced. Hence why they win every competitive tender they take part in. On the other hand, 4DX are producing very different images than existing technologies. Yes they are far better, show way more detail, less radiation, less time, less patent discomfort, etc. however they require new skills and new standards. Doctors can look at an MRI or an XRAY or the results of a biopsy and they know whether to diagnose a patient with a condition and/or prescribe a certain medication, but when they look at a 4DX scan, even someone who is familiar with 4DX scans probably can't tell you which scan shows CB or COPD and which doesn't. We need detailed research on each condition which the scans can detect and monitor. I am certain that 4DX scans will have WAY higher capability to diagnose lung conditions than existing tech, maybe the MRI looks totally fine and the doc says, "yeah, all's good, go home and get some rest and you will recover" but if they looked at a 4DX scan they would say "You actually have this condition and I can prescribe this medication which will allow you to recover" but at the moment they can't because they have never even heard of 4DX and don't know how to interpret a 4DX scan - and nobody will until a heap more clinical research is completed.

To conclude, this is a very different beast to PME, and I think the story will play out very different to PME's for these reasons. I think when Uni of Miami signed that deal many thought it was the first penguin jumping in the water and others would quickly follow. I think 4DX tried to sell that story as well and hiding the contract value until momentum had already built was very deceptive and manipulative, then they raised capital... In actual fact Uni of Miami are paying for 3-4 scans a day (max contract value equates to $AUD822/day), i.e. probably they are paying for scans they are completing for research purposes only. Currently I suspect these are the only sort of contracts 4DX are eligible for. These contracts are only a sign of penguins dipping their toes in the water though, maybe if they sell a few of their physical scanning machines, not for clinical trial use, this would be a sign more indicative of a penguin ready to go for a swim. Rather than hoping for new contracts to be awarded, I think investors should be looking to the release of positive clinical trial results. However, considering the nature of their business model and current revenue potential, I think they are dramatically overvalued.

Founder CEO Andreas Fouras presented at the Bionics Institute 2023 Innovation lecture.

https://youtu.be/M3RRqH7W5NM

He is introduced at 41.10 and finishes at 1.13.50

It was more focussed on the process of innovation in australia than on business which I thought gave the preso a bit more of an insightful flavour.. most detailed overview I have seen so far of the product. Seems super obvious to me that this business will be extremely successful, the more I read, the more I like, huge de-risk with the recent capital raise.

So we have some big moves from 4dx in the last 6 trading days since they announced their first SaaS contract with minimum financial commitments with Miami University last Wednesday. The share price is currently up 186% to 90c representing an undiluted market cap of $265m. Pretty big for a company that reported cash receipts of $739k in the most recent quarter and an $11m+ operating cash outflow before considering their $14.6m received in grants. They have $46m left in the bank.

So what is going on?

They announced a contract with minimum guaranteed fees of AU$1 - 1.5m over 5 years with the University of Miami. On the surface it doesn't seem like a lot, but it is huge validation of the technology. The announcement quoted the University of Miami's Chief of Pulmonary and Sleep Medicine, Professor Naresh Punjabi; 'We have had a long-standing relationship with the team at 4DMedical. Over that time, we have gained invaluable expertise in applying XV Technology® across various use cases and patient populations. We believe XV Technology® holds enormous potential to enhance clinical outcomes. I’m thrilled to be at the forefront of this ground-breaking technology and believe that XV LVAS® has the potential to revolutionize the way we diagnose and manage respiratory conditions."

Hold up... so what is this XV Technology good for?

4DX summaries the problem very succinctly in the announcement: "Joint clinical research is underway demonstrating the clinical value of XV Technology® across a range of indications, including Chronic Obstructive Pulmonary Disease (COPD). COPD represents a significant worldwide health problem, and according to the World Health Organisation (WHO) it is the third leading cause of death worldwide. The Australian Lung Foundation states that around 1 in 7 Australians over 40 have COPD, and around half of these don’t know that they have the condition. However, if diagnosed early enough (prior to the occurrence of structural changes in the lungs), COPD is a treatable condition."

I think one of 4DX's biggest value propositions is the ability to diagnose a condition with scans which would otherwise require a surgical procedure to diagnose. This hints at another branch of opportunity for 4DX which I won't get into here.

Seems a reasonable enough financial opportunity and a very ethical endeavor.. so who are University of Miami?

From their website's about UM page: "With more than $413 million in research and sponsored program expenditures annually, the University of Miami is one of the nation’s top private research universities." The University of Miami's hospital network is based in Florida, "UHealth's comprehensive network includes three hospitals, more than 30 outpatient facilities in Miami-Dade, Broward, Palm Beach, and Collier counties, with more than 1,200 physicians and scientists."

Who else is 4DX running trials with and likely to be in the process of writing up financial contracts with?

As you can see from the figure taken from 4DX's investor presentation in November 2022, they are not just running clinical trials for COPD but also pneumonitis, lung transplant, CB, BLVR, PH, and Paediatric CF.. and with some big names. At the time of this presentation University of Miami were also only at the "Imaging in Progress" stage of their clinical trial which is still underway.

Although the implementation of 4DX's technology is quite quick and frictionless, with scans able to be used from existing hospital hardware such as Xray and CT scanners, processes need to be changed, radiologists need to learn how to take the scans and doctors how to interpret them and diagnose based on them, so it won't be a rapid adoption process. I see these institutions who are carrying out trials as the most familiar with the technology and likely the first movers, sign more SaaS contracts with 4DX in the near future.

So how big of an opportunity are each of these institutions? Over to ChatGPT:

"The patient volume of each of these institutions is as follows:

- Cleveland Clinic: Over 7 million patient visits annually

- Johns Hopkins: More than 2.5 million outpatient visits and over 100,000 hospital admissions each year

- Oregon Health and Science University: Over 1 million outpatient visits and more than 22,000 hospital admissions per year

- University of Miami: Over 1 million outpatient visits and more than 47,000 hospital admissions each year

- Duke University: Over 900,000 outpatient visits and more than 41,000 hospital admissions annually

- Vanderbilt University: Over 1 million outpatient visits and more than 40,000 hospital admissions per year

- Temple University: Over 400,000 outpatient visits and around 23,000 hospital admissions annually

- Alfred Hospital Melbourne: Over 56,000 admissions each year

As you can see, Cleveland Clinic has the largest patient volume by far, followed by Johns Hopkins, Oregon Health and Science University, and the University of Miami. Vanderbilt University, Duke University, and Temple University all have similar patient volumes, while Alfred Hospital Melbourne has a smaller patient volume compared to the others."

4DX is often compared to Pro Medicus, who recently signed a huge $25m 7 year contract with University of Washington. For comparison (courtesy of ChatGPT) UW Medicine treats over 1.4m patients annually across all its facilities which makes it smaller than Cleveland Clinic (which is actually the largest in USA) and Johns Hopkins and roughly the same size and the next 2 institutions. It's worth noting ChatGPT has ranked Alfred Hospital at the bottom as it only found admission numbers which actually place it 3rd on the above list.

As you can see, 4DX has it's eggs spread across many baskets, with numerous significant institutions completing clinical trials on a range of lung related conditions. With 70 million people a year in the US getting some kind of lung test (according to 4DX CEO in recent interview) and 4DX scans going at roughly US$150 a go, it seems to only be a question of how quickly more contracts will be signed, how quickly revenue will scale up and under what terms will more capital be raised?

Did some more research ahead of upcoming quarterly results and thought I'd elaborate on the straw added by Bear77

4DMedical have 8 hospital partners carrying out clinical trials

• 4 of them are top 10 ranked US hospitals (#2, #3, #4 & #8)
• 2 were contributing to 4DX revenue before the software obtained FDA approval, 
• clinical trial results are expected from up to 4 of them during FY21
• these 8 hospitals alone represent an estimated US$132m revenue opportunity
• this represents approximately 1% of the US market opportunity

page 28 of investor presentation

Given I do not know what deals if any 4DX has with these hospitals for post-FDA approval and I don't expect scans to scale up until after these trials are completed, I can't imagine the Q1 results will be amazing. I'd expect operating costs roughly on par with last year (US$16.1m) so around 4.25m and 0.5-1m revenue excluding other income.

I certainly hope to see some improvement of revenue during FY21 either via additional partner trials with revenue agreements, additional contracts with new and existing hospitals or increased # scans in the paid trials, however more so expecting explosive growth in FY22 as these hospitals work to integrate XV LVAS scans as the new normal in place of CT scans