Posted: 12 December 2023
Respiratory imaging technology company 4DMedical Limited (ASX:4DX, “4DMedical”, or the “Company”) today announces that it has signed a binding agreement (Merger Agreement) for the acquisition of Imbio (Acquisition), a U.S.-based medical technology company that uses artificial intelligence (AI) to turn standard-of-care CT scans into personalised medicine for transforming the way patients are diagnosed, treated, and managed.
Transaction summary
Imbio will be acquired for an upfront purchase price of US$25 million (approximately A$38.5 million), plus a contingent earnout including one tranche of up to US$10 million in CY2024 and two tranches of up to US$5 million each in CY2025, all conditional on the achievement of key milestones as outlined in Schedule 1 below. Subject to obtaining shareholder approval, 4DMedical intends to settle any contingent earnout payable via the issue of new 4DMedical shares.
The upfront cash component of the Acquisition will be funded by the capital raise, raising A$35 million by way of a placement (Placement) of approximately 44.3 million new fully paid ordinary shares (New Shares) within the Company’s existing placement capacity, under ASX Listing Rule 7.1. The offer price of A$0.79 per Placement Offer Share (Offer Price) represents a 17.3% discount to the last closing price on 6 December 2023, being the last day the Company traded its securities prior to the Placement.
Subject to obtaining shareholder approval, participants under the Placement will be issued one free attaching option (Option) for every two New Shares issued, with an exercise price of A$1.365 and an expiry date of 31 December 2025. Subject to meeting the ASX quotation requirements, 4DMedical intends to apply for quotation of the Options on the ASX.
4DMedical Founder and CEO Andreas Fouras said:
I am extremely excited to join forces with the incredibly talented and committed Imbio team. Imbio’s market-leading suite of AI solutions provide life-changing insights from CT scans, and perfectly complement 4DMedical’s functional imaging technology. We now offer a comprehensive cardiothoracic imaging solution set to providers and their patients. Importantly, the Imbio acquisition also significantly boosts our capacity to improve the respiratory health of Veterans, especially for those impacted by toxic exposures during service.
Placement
The Lead Managers to the Placement were E&P Corporate Advisory Pty Limited and Bell Potter Securities Limited (the Joint Lead Managers).
The Placement raised A$35 million through the issue of approximately 44.3 million New Shares. Subject to obtaining shareholder approval, participants under the Placement will be issued one free attaching option (Option) for every two New Shares issued under the Placement.
The Offer Price of A$0.79 per New Share represents a 17.3% discount to the last close price of 4DMedical shares of A$0.955 on Wednesday, 6 December 2023.
The proceeds of the Placement will be used to partly fund US$25.0 million (subject to customary acquisition adjustments) reflecting the upfront cash consideration of the Acquisition and costs of the transaction.
Following the completion of the Placement, 4DMedical’s pro forma net cash as at 30 September 2023 will be A$53.9 million.
ASIC rules limit retail offerings via share purchase plan (SPP) in any 12-month period. Following the SPP during the May 2023 Capital Raise, an SPP was not possible again this year.
Acquisition highlights
Imbio is a leading medical imaging AI company transforming how patients with lung and cardiothoracic conditions are detected, diagnosed and treated. Physicians are provided with comprehensive information extracted from standard-of-care CT scans, optimising diagnoses and patient care outcomes through the use of Imbio’s visual and quantitative reports.
The Acquisition aligns with 4DMedical’s growth strategy by providing physicians with four additional lung diagnostic tools, thereby offering a comprehensive suite of products combining structure and function in assessing lung disease, effectively ‘owning the lung’. Furthermore, the acquisition of Imbio will accelerate 4Dmedical’s commercialisation of XV Technology® in the US, opening up exciting opportunities for patient screening programs for chronic obstructive pulmonary disease (COPD), interstitial lung disease (ILD), lung cancer and heart disease, in the Australian and US markets.
Operating extensively through market leading channel partners within their Companion Diagnostics and General Radiology business units, Imbio expects to report revenue of US$3.0 million in CY2023. Imbio is forecast to generate revenue of US$6.3 million in CY2024, driven by contracted revenue and significantly expanded pipeline. Gross margin as a percentage of sales is forecast at 84%, with further margin accretion expected. The Acquisition accelerates 4DMedical in its pathway to profitability, with Imbio expected to be cashflow positive in its first full year of integration.
In addition, the Acquisition also presents significant revenue and cost synergies, with the combination of complementary products, extended reach of 4DMedical products, a sophisticated platform and technical efficiencies.
Finally, Imbio also provides another entry point into the United States Department of Veterans Affairs (VA), with an established program/agreement, and the combined product offering creates further opportunities to deliver comprehensive diagnostics screening programs.
Solving the clinical conundrum for doctors across multiple care areas
Imbio’s current portfolio provides validated and market-leading insights, working with a subset of highly specialised healthcare providers. By combining this toolset with 4DMedical’s novel technology and automated point-of-care radiology workflows, 4DMedical will revolutionise lung disease diagnosis by making it simultaneously more comprehensive, objective, personalised, and, most importantly, more widely available.
The combined technology offering holds the potential to turn standard-of-care chest CTs into a much broader cardiothoracic analysis, immediately providing functional, structural, and risk-based analysis for both lung and heart disease.
Firstly, improving the triage of unexplained dyspnoea (shortness of breath) presents a powerful opportunity to address the needs of a large population currently undergoing incomplete or inappropriate evaluations. These evaluations often rely on outdated technologies like spirometry and lack standardised workflows, leading to significant dissatisfaction among both doctors and patients. This ultimately results in inefficient utilisation of frontline medical resources, escalating healthcare costs, and longer wait times for specialised referrals in thoracic medicine and other fields.
A second major category is lung cancer screening (LCS), which experts predict will be the primary driver of increased thoracic CT scan volumes globally for the next two decades. Notably, despite being fully reimbursable in the United States by law since 2015, estimates suggest that take-up rates are as low as 10-15% of eligible patients.
Australia and other countries plan to implement LCS, with Australia set to commence by July 2025. Established guidelines are constantly expanding the pool of eligible patients as evidence of cost savings and mortality benefits accumulate. This expansion is fuelled by reduced age and smoking requirements, inclusion of patients with occupational exposure to toxins, and consideration of regions with declining air quality.
For each confirmed case of lung cancer detected through LCS, a significantly larger number of early-stage structural cardiothoracic diseases are identified, leading to a considerable number of unreported non-cancerous lung and cardiac findings. These findings, including cardiovascular atherosclerosis, aortic aneurysms, and early stages of COPD, ILD, and pulmonary hypertension, could be automatically identified, quantified, and flagged for further evaluation by 4DMedical’s comprehensive technology platform. Early detection and intervention for these conditions could potentially prevent more costly and debilitating complications.
Finally, the combined development of product roadmaps using our joint clinical and engineering approaches will radically transform cardiothoracic perfusion assessment, leading to a deeper understanding of lung and cardiac disease. This will also open new avenues for drug and device development, as well as create exciting opportunities for contract research organisations (CROs). Additionally, the democratisation of this technology through the study of lower-dose and/or hybrid CT technologies (e.g. mobile settings, photon-counting, dual energy, etc.) holds promise for wider accessibility and broader application.
Outlook – growing momentum
4DMedical enters calendar year 2024 with accelerating momentum, with not only a transformational acquisition, but also on the back of landing significant achievements in 2Q FY2024:
- U.S. Medicare reimbursement for XV LVAS®, from 1 January 2024 (well ahead of schedule), will drive accelerated adoption of the technology;
- Immediate signing of contracts with radiology clinics in Memphis and Detroit;
- FDA clearance for CT LVAS™, broadening the accessibility of XV Technology® in the U.S., while also significantly de-risking the regulatory approval process for CT:VQ; and
- Signing a MoU with Philips, providing an accelerated and expanded pathway for commercialisation.
Philips, Imbio and the VA
4DMedical recently announced the signing of a Memorandum of Understanding (MoU) with Philips, a leading global healthcare company, which has an initial focus of offering 4D lung imaging as a critical screening solution for Veterans exposed to toxic burn pits. Philips has a has a long-established partnership with both the VA and DoD, providing over 35% of the critical care information systems across the VA as well as imaging solutions in over 50% of VA clinics.
4DMedical’s products will be added to the Philips’ catalogue and offered as a third-party solution. The intention is to expand access to both software and hardware solutions, including to other U.S.-based Federal agencies and commercial organisations in North America.
The acquisition of Imbio will greatly enhance the patient screening offering by providing both function through XV Technology® and structure through Imbio’s product offering.
