Dr Boreham’s Crucible: Homegrown imaging hero Pro Medicus eyes a big slice of the American pie

In a lengthy post-results briefing last week, Pro Medicus (ASX:PME) co-founder and CEO Dr Sam Hupert went a long way to explaining why the radiology imaging group’s market valuation stands at a seemingly staggering $30 billion-plus.

Put in context, that makes Pro Medicus the 18th biggest ASX-listed company.

One answer is that the US-focused company has a contracted pipeline of close to $1 billion of unrealised revenue over the next five years.

That’s only one leg of the company’s “multifactorial” growth strategy.

Other strands are a digital pathology variant – in ‘soft’ launch stage – and an extension product for cardiologists.

In the meantime, Pro Medicus still accounts only for about 10% of its core US radiology market.

Hupert dubs the financial year to June 30, 2025 as “the most successful year in the company’s history by any measure”.

Investors reacted to the news by pushing Pro Medicus shares up as much as 7%, the best one-day rise in four years.

About Pro Medicus

A home-grown hero, Pro Medicus provides diagnostic imaging, practice management and image archiving software to radiology practices.

The company was founded by Melbourne general practitioner Hupert and his technologist friend Anthony Hall in 1983, when mullets and perms were all the rage and digital imaging was by way of a raised forefinger.

Pro Medicus listed in October 2000, raising $23 million at $1.15 apiece. Initially, the company focused on practice management systems for doctors.

These days, Pro Medicus’s products cover image viewing, archiving and streamlining radiologists’ workflows.

The rise and rise of Pro Medicus has been driven by the burgeoning data requirements for radiology examinations and the imperative to move from on-site hardware and storage to the internet ‘cloud’.

The initial workflow product, Radiology Information System (RIS), remains the company’s key offering in Australia.

In the US – which accounts for about 90% of the company’s revenue – the company mainly sells the Visage 7 viewer.

Visage 7 enables users to consolidate information requiring multiple views into a customised single platform.

The image storage tool Visage Open Archive was introduced in 2017, with Visage Workflow Management emerging in 2020.

Intriguingly, Pro Medicus acquired Visage from a distressed seller in 2009, amidst the global financial crisis.

The price? A princely US$5 million.

Someone got whacked with the lucky stick, didn’t they?

Expanding beyond the ‘sandstone’ clients

Pro Medicus has signed up 11 of the top 20 ‘sandstone’ teaching hospitals in the US. These include the Mayo Clinic, Johns Hopkins University, New York University and Harvard Medical School’s Massachusetts General Hospital.

But there’s a bigger market in the integrated delivery networks (IDNs) hospital networks that can span many states.

In its biggest client win to date, the company last year signed up not-for-profit IDN Trinity Health, in a $330 million, 10-year ‘full stack’ deal.

Pro Medicus competes with hardened incumbents including Siemens, Philips and GE Healthcare.

But so far, 100% of its clients have renewed.

Hupert says more customers are buying the full stack, which does not refer to Whopper Burgers but signing up for the company’s image viewing, archiving and workflow tools.

Hungry for data

Pro Medicus has been spurred by the radiology sector’s insatiable need for faster access to imaging, the ability to do more with these pictures and the capacity to manage humungous slabs of data.

With new imaging modalities and devices emerging, the need for extra data capacity continues unabated.

“Some of our clients are dealing with petabytes of data a year and ‘cloud’ is also a key part of the equation,” Hupert says.

“Breast cancer [imaging] is usually the canary in the coal mine. In the past, two-dimensional (2-D) mammography was a couple of hundred megabytes. Now 3-D breast tomosynthesis requires as high as six gigabytes for high resolution.”

Hupert says Pro Medicus differs from its rivals because they use a technology known as ‘compress and send’.

“The files come from a scanner and are compressed as much as they can, without losing fidelity,” he says.

“The file is sent to a workstation that unpacks the file and does the enhancements”.

Pro Medicus’s method involves streaming files from a central spot.

“The visualisation is done in real time via streaming and the file is not moved.”

Crucially, the image can be accessed in less than one second, compared with “many minutes” for compress and send.

“It’s a huge differentiator, particularly as organisations get larger and more distributed and pretty much every radiologist wants to work at home for part of the week.”

Pathology is the next frontier

Pro Medicus has started showcasing its digital pathology, also based on the same Visage 7 platform, to potential clients.

“It’s a work in progress, but we believe we will have it out to the market this calendar year,” Hupert says.

He says the pathology sector is about two decades behind radiology, in terms of migrating from film to digital.

“So, we are at the beginning of a new cycle, whereas with radiology it is a replacement cycle because everyone went digital 20 years ago.”

The bulk of pathology flows are bio-chemical tests and not imaging. But the images are in color and high definition, which means file sizes of six gigabytes to eight gigabytes.

“The big drivers for digital pathology are around artificial intelligence (A.I.) and specialization,” Hupert says.

“You can’t have a melanoma specialist at every (location), so the ability to remotely read has become more acute.”

While one analyst suggests the pathology market could be two-thirds the size of the radiology sector, Hupert says it’s too early to tell.

Cardiology images in a heartbeat

In July this year, the company implemented its first cardiology product, with the Colorado-based UC Health (a merger of University of Colorado Hospital and Poudre Valley Health System).

Cardiology is not a stand-alone product: the module was part of a broader 10-year, $170 million Visage 7 contract with the not-for-profit network.

Hupert says the company’s first port-of-call is ultrasounds (cardiac echograms).

“We are also seeing more cardiac [computed tomography] CT as a screening test, instead of angiography.”

In dollar terms, he believes cardiology could be 15 to 20% of the total radiology market.

“Far fewer tests are done, but each test is more expansive,” he says.

“We think we will be able to sell it to existing clients and we are putting it out in conjunction with the full stack that clients can take from the get-go”.

In late 2024, the company announced a US$5 million investment in cardiac CT A.I. company, Elucid. Not to be confused with rapper of the same name, the private, Boston-based Elucid has won US Food and Drug Administration clearance for a coronary plaque detection algorithm.

Finances and performance

Hupert describes a “record year of new contract wins, contract renewals and sales of additional modules”.

Pro Medicus posted full year revenue of $213 million, up 32%. Net earnings surged 39%, to $115 million.

Margins rose from 72% to 74% and are “more than any of our competitors by multiples”.

Revenue rose in the three key jurisdictions of the US, Germany and Australia, but North America led the way with a 36% increase.

During the year, Pro Medicus won $520 million of new contracts.

Yep, that’s a record.

The monster Trinity Health compact aside, the company also renewed two large contracts worth $130 million and won $39 million of upgrades.

For instance, Duke Health and New York University Langone Health added extra modules to their existing contracts.

In late 2024, the company won a slew of contracts, including Trinity, Bay Care and the University of Kentucky.

Hupert says only two% of the value of these contracts was recognised in the 2024-’25 year.

That means the company has $948 million in forward contracted revenue over the next five years, compared with $624 million a year ago.

Hupert says the contracts are based on 80% of the clients’ estimated exam volumes, which implies “material upside” if these projections are correct.

As of June 30, the debt-free Pro Medicus held cash of $210 million.

The company is likely to pay higher dividends and undertake share buybacks, while keeping a weather eye on possible bolt-on acquisitions and investments.

Over the last 12 months Pro Medicus shares have ranged between $147 (late August last year) and the July 17, 2025 all-time peak of $330.

Amid the Trump tariff turmoil and health system upheaval, the shares lost 40% of their value before recovering.

Hupert and Mr Hall each own about 24% of the company.

Pro Medicus is in the highly unusual position of having a mere 4.4% more shares on issue than the 100 million at the IPO a quarter of a century ago.

Yes, that is correct. The company has NEVER done a capital raise and has bought back 250,198 shares since 2016.

It has issued a handful of shares as long-term incentives, but who’s counting?

‘Calm your farm’ on 4DX

In late July, ASX-listed lung imager 4D Medical announced a $10 million “strategic investment” from Pro Medicus.

By way of a hybrid debt and equity loan, the funds will help 4D Medical to commercialise its approved products, whilst advancing its ‘computed tomography ventilation perfusion’ (CT VQ) to FDA clearance.

CT VQ offers a non-nuclear imaging alternative to both ventilation and perfusion within the lungs.

Hupert says on one level the investment was merely that – an investment.

But Pro Medicus has a particular interest in CT VQ and it’s A.I. capability, which “could be useful on our platform”.

4D Medical shares have more than doubled since the announcement, but Hupert says: “I wouldn’t read any more into it than that.”

Mr Hupert knows 4D Medical well: previously he was on the company’s advisory board – and recused himself from the Pro Medicus board’s 4D determinations.

Dr Boreham’s diagnosis

Given the company’s 10% market share, Pro Medicus presents a ‘glass half full’ thesis in terms of its established US market.

Hupert won’t be drawn on the prospect of further gains but says that about 85% of the remaining market is attractive commercially.

“We don’t have a fixed target in mind, our aim is to get as big a percentage market share as possible,” he says.

“Importantly, we do not see any technical or capacity-related reason why we will not continue to increase our market share materially from here.”

Your simple columnist has always been a tad perplexed as to how the imaging giants enabled an Aussie battler to slip into their home turf.

The answer is that they had their head in the proverbial clouds, while Pro Medicus seized the actual (internet) cloud opportunities.

Hupert describes rival systems as the “non cloud cloud”, because they still require on-premises hardware.

Still, Pro Medicus needs to be well-attuned to emerging competitive threats – particularly with the advent of artificial intelligence.

Ultimately, Pro Medicus will thrive by offering quantifiable productivity benefits to cash-strapped hospitals lashing out for a premium product.

With a 100% renewal rate, evidently, they are happy campers.

Beyond that, the other ‘ologies’ beckon.

At a glance

ASX code: PME

Share price: $303.44

Shares on issue: 104,462,909

Market cap: $31.7 billion

Chief executive officer and co-founder: Dr Sam Hupert

Board: Peter Kempen (chair), Hupert, Anthony Hall (co-founder and executive director), Anthony Glenning, Dr Leigh Farrell, Deena Shiff, Alice Williams

Financials (year to June 30, 2025): revenue $213 million (up 32%), net profit $115.2 million (up 39%), underlying earnings $157.7 million (up 40%), cash $107.5 million (up 79%)

Identifiable major shareholders: Dr Sam Hupert 24%, Anthony Hall 24%