Update: 5 September 2025

I have withdrawn my SM $4DX valuation. I am keeping the illustration here, below, unchanged for transparency and my own learning.

The reason is that in seeking to independently verify management's $1.1bn market sizing claim for NUC:VQ in the US, I am finding several observations that cause me to lose confidence:

• The market is likely significantly smaller, if I exclude sources that trace back to $4DX or the reference they've cited.
• Primary source analysis of US CMS databases confirms @Chagsy's observation that the procedure count decline in NUC:VQ and which can be confirmed as a US-market wide trend as reported over the period 2004-16 in the JAMA article I cited earlier, can be observed to continue over the period 2020-24. The decline is material and appears to be ongoing.
• An initial market size analysis driven by publicly-reimbursed procedure counts and reimbursement rates, and scaled for likely public-private splits and rates, leads to a conservative estimate of US$230m (AUD354) and a more balanced estimate of US$365m (AUD561m).

Again, the above numbers might also contain errors, but at least I have transparency of them to primary source data of procedures actually report. I am not reliant on some consultant's TAM report.

Thus, there is a potentially material error in my illustration of the potential value of $4DX that is attributable exclusively to CT:VQ displacing NUC:VQ.

As I have not completed my market deep dive, nor assessed the other value drivers for $4DX, I do not at this time have a valuation update to replace those posted yesterday. However, from the above notes, you can see the numbers will be very different.

Again, I want to emphasise that my analysis was solely focused on the NUC:VQ opportunity. There is a lot more to $4DX than that. It's just that I don't have a number for that yet!

Meanwhile, the SP soars upwards relentlessly, +25% today at the time of writing. (HC rules!)

And, as ever, this is not advice and you must do your own research.

Disc: Held, but I will be taking some profits in RL today (I'll let it run on SM for fun!)

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Original Straw: 4 September 2025

Having realised I didn't allocate nearly enough capital to $4DX 5 weeks ago, even though I had a reasonable idea it was about to hit a transformational milestone, the question obviously arises "when should I be prepared to allocate more"?

It is of course important to not get caught up in the market reaction and hype and I find no better antidote than diving into ... yes, you guessed it ... a spreadsheet.

There's massive uncertainty around this business, but equally, there are some pretty solid facts to ground the valuation on. So, in this Straw, I'll layout how I've made some estimates of valuation.

In this case, I've reverted to a DCF, because the economics of the business are really quite simple, and I will go with that.

1. The Market

Quite simply, CT:VQ will over time replace NUC:VQ. It is as effective, much cheaper and more accessible. (I haven't assessed second order effects such as, the potential to increase the demand for CT facilities, which seems logically to folllow. @Scoonie already having flagged the negative impact on demand for nuclear medicine facilties.)

$4DX have estimated their TAM as 1.1bn in the US and 1.5 bn in RoW.

So, I will run three adoption scenarios, Slow, Moderate, Fast, where in the US 80% of the NUQ:VQ market is displaced, and in Row only 50% is replaced, as a lagging rate.

Rather than describe each scenario, here's what they look like in terms of market penetration.

Obviously, there are scenarios where the maximum penetration achieved is significantly lower. However, based on the data presented, this is really looking like a true technology replacement modality. Nonetheless the residual 20% in the US and 50% in RoW present some conservatism in the long run numers that drive the NPV.

2. Revenue

Calculating revenue is then simply the TAM x % market market penetration x Gross to Net.

I've assumed a GTN of 20%.

How reasonable is this?

Well in medical devices there are several possible supply chains:

$4DX - Hospital - Patient

$4DX - HMO - Hospital - Patient

$4DX - PACS Vendor HMO - Hospital - Patient

$4DX - Equipment Vendor - HMO - Hospital - Patient

Depending on the model the manufacturer ($4DX) can end up with anything from 10% to 40% of the revenue, skewed to the lower end.

However, $4DX is a breathrough technology, there is no alternative using CT methodology, and the modality offers significant advantages over the standard of care.

Therefore, in the direct sales model, $4DX should be able to keep 30+% of the $650 per scan, and even in the distributed chains, it should be able to negotiate better than the market norms.

So, I think 20% GTN is a reasonable assumption.

The resulting revenues are shown below:

3. Costs

I'm essentially assuming COGS are $0 (actually $4 per $650 scan). No a biggie for this guesstimate.

3.1 Opex

Opex is currently running at about $48m p.a. - that's a lot - although they have recently implemented some cost savings, to significantly reduce the burn rate.

However, I think they need to step up US sales and marketing, so I am going to step them back up to $50m in FY26 and inflate at 5% p.a.

3.2 Capex

Most of the develop costs appear to be expensed, however, I am going to put in $5m capex p.a., escalating at 5% p.a..

Other Assumptions

I have ascribed not value to $4DX's other products, other than the base $5m revenue from 2025, which is assumed to contine.

SOI - I assume capital will be raised soon to bring FY26 SOI to 500m, and thereafter to grow at 1% p.a.

WACC - 10% (sensitivity run at 15% discount rate)

Tax - 30%

DCF model run to 2040, with continuing value growth of 3% p.a.

4. Valuation Outputs

(in parenthesis I've added a sensitivity with a 15% discount rate)

Scenario1: Slow = $1.26 ($0.44)

Scenario 2: Moderate = $1.64 ($0.69)

Scenario 3: Fast = $1.92 ($0.91)

Conclusions

These are just one set of illustrations for what this business might do in the success case.

However, the potential is exciting enough that when the current froth blows off, I'll consider adding more around $0.70.

In terms of my SM valuation, I will put in the "Slow" senario of $1.26, and for the range around this I will put $0.50 - $2.00, as guesstimates.

Disc: Held in SM and RL

ASX Announcement

Two days after receiving its 501 FDA approval CMS has agreed Medicare/Medicaid reimbursement for CT:VQ at US$650 on top of the providers standard chest CT payment.

I can't remember when I last saw a reimbursement approval come through so quickly - it usually takes months, and sometimes over a year ... or years!

Even for $4DX this is phenomenal - I think it took about 6 months for CT:LVAS.

I have no doubt this is because CT:VQ is a breakthrough disagnostic that is much cheaper and more accessible than the existing standard of care.

I wonder to what extend this will turbocharge commercialisation. It will certainly make $4Dx's channel partners sit up and pay attention, and I think it will give Andreas the confidence to make sure $4DX gets a decent share of the pie in the distribution and sales agreements. (I just hope he kept some powder dry in the $PME and Philips negotiations!!)

Pass the popcorn!

Good news and a few weeks earlier than I expected - FDA approval for the CT:VQ technology.

ASX Announcements

Their Highlights

• 4DMedical’s ventilation-perfusion product, CT:VQ™, receives U.S. Food and Drug Administration (FDA) 510(k) clearance

• FDA submission for CT:VQ™ was supported by a compelling clinical validation package across multiple lung conditions

• CT:VQ™ is the world’s first and only non-contrast, CT-based ventilation-perfusion imaging technology

• With over one million nuclear VQ scans performed annually in the U.S., CT:VQ has an initial addressable market of USD $1.1 billion

• 4DMedical believes it can rapidly capture a significant part of this market, and over time expects to displace 100% of all nuclear VQ scans

• Potential to grow the current ventilation-perfusion market into new applications in disease monitoring and screening, due to the wide availability of CT infrastructure globally

• 4DMedical will hold an investor webinar tomorrow, Tuesday 2 September 2025 at 11am AEST 

My Assessment

This is major good news, and singificantly enhances $4DX's clinical offering.

(I'm on the $RUL call at the moment, so will write more later. I have put a further small offer in at $0.65, but I expect the SP will blast past that. I don't want to go crazy, however, and their will be a pull back over the months ahead, most likely!)

Disc: Held in RL and SM

Lung imaging software firm $4DX has announced its FY25 results.

ASX Announcement

Their highlights

• Operating revenue for FY2025 was $5.9m, up 56% vs FY2024, with gross margins >90%

• Underlying SaaS revenue for FY2025 up 95% vs FY2024

• Cost reduction program initiated in Q3 FY2025 has delivered $6.5m in annualised savings and focused resources on revenue generation

Secured $10m strategic investment from Pro Medicus (ASX:PME), a leading global medical imaging software company

• CT:VQ™ FDA 510(k) submission filed in May 2025 and progressing towards clearance within anticipated timelines

• Announced the signing of a Reseller Agreement with Philips under which 4DMedical’s combined product suite was added to Philips’ product catalogue in Q3 FY2025

• Accelerating commercial progress in the U.S. with new contracts signed at key reference sites (UChicago Medicine and UCSD Health) and renewals at Cleveland Clinic, Stanford University and University of Michigan

• Contract wins in Australia included Integral Diagnostics (ASX:IDX), QScan and Perth Radiological Clinic (PRC)

• 4DMedical is now delivering SaaS products at 388 sites globally, up 60% YoY, and produced over 74,000 structural and functional scans in Q4 FY2025, up 35% QoQ and 105% YoY

My Assessment

Quick high level thoughts only: I'm expecting that FY25 and early FY26 will prove to be a pivotal period for $4DX. Should the 501K for CT:VQ be granted in a few week's time, then that will be a significant catalyst.

Of course it is very early days and $4DX is seriously burning cash, hence the timely assistance from $PME was important, and no doubt allowed $PME to extract a good deal.

In the 4 weeks since I took an initial speculative 0.5% RL position, it has grown to a 1.0% position. Part of me thinks I should be bold and increase ahead of the 501k decision, given their track record on 501s over the last few years has been pretty good.

That said, it is not cheap, and it will clearly be giving a lot of value away in its deals with Phillips, $PME. and others. However, good distribution deals accelerate the GTM and we have seen elsewhere, that these imaging companies can burn a lot of cash over many years as they try to grow via a direct strategy (e.g., $M7T and $VHT).

Patience required here, and I will take a risk averse approach initially, but increase with continued progress. The good news is that the SP is quite volatile, so picking your days to buy can make quite a difference.

Disc: Held in RL and SM