07 Aug Australian Financial Times: 4DMedical float set to sizzle, as funds pile in
Aug 6, 2020 – 4.17pm
by Yolanda Redrup
In the eight years since former Monash University professor Andreas Fouras founded soon-to-be listed lung imaging medical technology company 4D Medical, he has put everything on the line to get his business to where it is today.
When the company floats on the ASX on Friday with a market capitalisation of $193 million and an issue price of 73¢ per share, it will vindicate the decision by Dr Fouras and his family to sell their house, put all their savings into the business, give up their lives in Australia and move to the US.
“It's honestly surreal … I was originally the inventor and for me the challenge was to prove the technology worked,” Dr Fouras, the company's chief executive, told The Australian Financial Review.
“I realised there was no one else that could take it and make a difference with it. It was a chance to touch millions of lives and genuinely make a difference and that's a bigger opportunity than many inventors dream of.”
Dr Fouras was previously a Monash University mechanical engineering professor, specialising in wind tunnel imaging, but left his academic career and moved to Los Angeles to develop 4D Medical, which was until recently named 4Dx.
The company's lung imaging device leverages Dr Fouras' background in aeronautical engineering to highlight if there are parts of the lungs receiving less air, helping in the early diagnosis of diseases such as asthma, chronic obstructive pulmonary disease (COPD) or lung cancer.
Current imaging techniques just give an overall picture of the amount of air lungs are taking in.
Before the float, the business had raised almost $19 million through equity capital raises and an additional $17.4 million in convertible notes.
When the company lists on Friday, it will have the support of funds including Perennial Value Management, Ryder Capital, Pendal Group, EFM Asset Management, OC Funds Management and Quest Asset Partners, which have all bought into the IPO.
Dr Fouras said the listing was oversubscribed, but would not say by how much. However, he said no investor had received the full allocation they had requested and the company had needed to increase the size of the capital raise to $55.8 million from its target in June of $45 million, to account for the interest.
Perennial's head of smaller companies and micro caps, Andrew Smith, said since his fund bought into 4D in November 2019, its business case had improved after it was granted broad FDA clearance for the use of its device for any disease affecting the lungs.
“As a result the addressable market is much larger than we first anticipated, hence we are happy to make an even larger bid into the IPO as the investment case had improved and de-risked significantly,” he said.
“Post FDA clearance we are clearly very focused on the progress 4D Medical makes in the US, which is by far the biggest market in the world. Beyond that we are interested to see the broader implications for the technology moving from monitoring air flow to blood flow and the like.”
When Mr Smith was introduced to the business, he was attracted by the involvement of Dr Sam Hupert, the co-founder and CEO of medical imaging company Pro Medicus and a member of 4D's advisory board.
Mr Smith was optimistic the company could grow to be a medtech success story like Cochlear or ResMed and he believed it could get there more easily, since it had its roots in technology.
“It is really a software company, not a device company, so it should require less capital to grow and have higher margins. Given this quality earning stream, if product adoption is rapid then we expect the market would put a high value on the business,” he said.
Like Mr Smith, Ryder Capital chief investment officer Peter Constable is optimistic about 4D's future, but said it was important for investors to be patient and take a long-term outlook.
He also backed the business in 2019, having been introduced to Dr Fouras in 2017.
“Those overnight Australian success stories are 20-plus years in the making, as will 4D Medical's future success, so it's not one for the impatient,” he said.
“We originally invested on the basis of some obvious use cases for the XV technology [non-invasive imaging tech] in relation to traditional lung diseases … however, more recently we have been actively thinking through the application of the XV technology in the diagnosis and treatment of COVID-19, particularly during the recovery phase, as some of the early evidence points to COVID-19 causing long-term damage to the respiratory function of many patients.
“With XV technology able to sit on existing X-ray infrastructure, it could provide a timely, cost-effective solution to assist the world scale in its diagnosis, treatment and monitoring of COVID-19-induced lung disease.”
The application of its technology in the current pandemic is something Dr Fouras considers an immediate priority and will form part of its sales push into the US later this year.
“Our tech is very safe. It has much lower radiation than a CT scan and provides the ability to follow-up patients and do scan after scan, which means I'm confident we're best placed in the market for the follow-up of COVID patients,” he said.
“We know there is lung damage even for those who don't end up in hospital, and for those who are in the ICU and come out, they're still unwell for months after.”