Health Check: 4D Medical investors – and burns pit victims – can breathe easier after US lung-imaging deal

Lung imaging house 4D Medical fleshes out its US opportunities after seminal deal with Philips
Clinuvel Pharmaceuticals seeks Canadian approval for rare skin intolerance disorder
Biome wastes no time reporting September quarter revenues, so they must be good

Health Check is renowned biotech journo Tim Boreham’s daily wrap covering morning movers and shakers of note in the ASX Healthcare sector, Monday through Thursday.

Lung imager 4D Medical (ASX:4DX) expects first revenue from its long-awaited US distribution deal with Philips to start flowing this calendar year, with one analyst estimating an initial US$300 million US “revenue opportunity” across 12 million scans annually.

In a presentation this morning, the company cited a global lung imaging market of US$30 billion per annum, but it’s targeting the US veterans’ market via its Philips tie-up.

Announced last Friday, the deal confers the medical device giant with exclusive five-year distribution rights to US government contracts and non-exclusive dibs on other scans.

Philips takes a 20-35% cut on sales, with undisclosed minimum sales to maintain exclusivity.

“This is an absolutely incredible opportunity to scale up the muscle and the firepower we have to deliver these sales in an unbelievably rapid fashion,” enthuses 4D Medical founder and CEO Professor Andreas Fouras.

The government contracts refers to expected deals with the US Veterans Affairs and Department of Defence – and that’s no small thing.

More than six million vets deployed to Middle East conflicts have developed “deployment related respiratory disease” such as constrictive bronchiolitis, which current methods cannot detect.

The chief culprit is the use of ‘burn pits’, which involves digging a large hole and incinerating anything unwanted amid plumes of toxic smoke.

A bit like your dad’s backyard incinerator of old.

Washington finally is taking this scandalous state of affairs seriously: in March Congress signed off on a US$280 billion measure – the PACT Act – to address respiratory illnesses and cancers borne by veterans.

A supplement to conventional x-rays, computed tomography (CT) and magnetic resonance imaging (MRI), 4D Medical’s algorithmic tools produce a high-resolution picture of the lungs, thus enabling a better understanding of air flow through the bellows.

“None of those tools are able to diagnose deployment-related constrictive bronchiolitis,” says Fouras.

The company’s core CT LVAS (lung ventilation analysis software) scans are subject to US$650 per-scan reimbursement under the Medicare/Medicaid system.

Broker Ord Minnett estimates a US$350 net revenue share to 4D, US$150 to Philips and US$150 to the providers.

The firm estimates 80 million lung scans per year, 12 million of which are relevant for the company – an addressable market of US$7.8 billion a year.

The US$300 million initial revenue opportunity assumes 2% market penetration, overlaid with 10% coverage of burns pit-related patients.

4D Medical reported operating revenue of $3.8 million in the 2023-24 year, $2.7 million of which related to the acquired Imbio, which specialises in AI heart and lung analysis.

“Over the last 12 months 4D Medical has come out of its cocoon and we have a comprehensive suite of imaging diagnostics [for] the chest,” Fouras says.

Ord Minnett forecasts current year revenue of $18.2 million and a chunky loss of $28 million, morphing into revenue of $94 million and a $7.5 million profit in 2026-27.

4D Medical shares jumped 50% on Friday and Monday, but this morning took an, er… breather and were 5% lower at 64 cents.

Clinuvel Pharmaceuticals seeks Canadian skin drug approval

The skin disorders house Clinuvel Pharmaceuticals (ASX:CUV) has chalked up impressive revenue growth since its drug Scenesse was approved in the US five years ago, for the rare sun-intolerance disease erythropoietic protoporphyria (EPP), which affects about one in 140,000 people.

Clinuvel recorded revenue of $95 million in the year to June, up 15% and almost entirely from US Scenesse sales, with a net profit of $35 million (up 16%).

Yet Clinuvel shares aren’t feeling the love, down 10% over the last six months and only a one third of their September 2021 peak level of $43 a share.

As well as seeking approval for other indications including the more common vitiligo, Clinuvel’s challenge is to grow Scenesse sales in non-US geographies.

This is a roundabout way of reporting that the company has lodged an approval application with Health Canada for EPP.

Some of Canada’s estimated 280 EPP sufferers have been treated under a pre-approval special access scheme and – notably – received insurance coverage.

Scenesse is also approved for EPP in the European Union, but the reimbursement arrangements are not as attractive.

Clinuvel shares this morning gained 2% to $14.29 apiece, ascribing a market cap of $733 million (supported by $183 million of cash).

Quick out of the blocks

The probiotic supplements supplier Biome Australia (ASX:BIO) must be taking its own medicine, as it certainly has a spring in its step in its reporting September quarter revenues.

Only hours after the quarter ticked over, Biome this morning reported record unaudited revenue for the stanza of $4.25 million, 55% higher than a year previously and 12% up on the June quarter.

The sales takes Biome’s annualised revenue run rate to $17 million.

As we reported yesterday, Biome has an ambitious plan to almost quadruple revenue over the next three years, $75-85 million in the next three years, compared with a cumulative $22.5 million in the last three years.

Biome shares gained 2% to 72 cents.