In a few weeks time respiratory diagnostic company 4DMedical (ASX:4DM) will list on the ASX.

The company’s technology, XV, helps physicians monitor lung performance and identify disorders utilising less radiation and no dyes at all.

4DMedical has launched a $50m IPO and is expected to list on Friday August 14. It hopes to expand its reach in the US market.

Stockhead spoke to the company last October, when it was known as 4DX and had passed a clinical trial.

Since then it completed a pre-IPO funding round and got the green light from the Food & Drug Administration (FDA) to enter the US market.


No waiting for FDA green light

FDA approval is critical for small caps because in many health care markets the US is the world’s biggest opportunity.

And the respiratory diagnostics market is no different with 73.5 million procedures annually and the market worth $US13.7bn ($19.7bn), representing 40 per cent of the global opportunity.

Additionally, the degree of scrutiny the FDA gives candidates fuels belief among companies that if it can make it in America it can make it anywhere.

4DMedical founder & CEO Andreas Fouras said having FDA approval before listing was proof 4D could deliver and also de-risked the company.

A large chunk of health companies join the ASX before they’ve obtained any kind of regulatory, including FDA, approval which is not guaranteed and can take years.

“The FDA is the world’s most significant health-care regulator — we’ve got their seal of approval,” Fouras told Stockhead.

“What also helped was that the FDA’s approval was a little broader than we expected…which is at their discretion.

“A lot of companies don’t have [FDA approval] and are on the bourse looking to get it. But the investors know we already have it.

“We’re not the oldest company but we’re over seven years old now. So we’ve got track record of delivering and we’re very proud of that.

“Some of our investors have been with us for a while and they’ve seen it in person. But the rest of them can see that we more or less do what we say we’re going to do. So I think that reduces risk for investors.”


Second biggest cause of death

Being a respiratory disease, COVID-19 has raised awareness of diseases generally. But even before the current pandemic, lung diseases were a major killer.

“Lungs are the number two cause of loss of life globally, but if you look at investment they haven’t been number two,” Fouras said.

“So I think coronavirus has maybe helped focus the market’s attention that the number two loss of life could be a key area of investment.”

The FDA’s approval of XV included use in COVID-19 — a trait Fouras said was very helpful.

While the company clarified in May that XV was not intended to replace molecular tests as the primary method to diagnose, ventilation reports of lung activity will help doctors follow up patients who have the virus or are recovering from it.


Virtual roadshow challenging but efficient

Like many other companies raising capital during the pandemic, 4DMedical had to roadshow virtually and conduct its recent extraordinary general meeting over Zoom.

Fouras said this had its pros and cons.

“I think that has its own challenges, its always nice when you’re trying to build a relationship with someone to look them right in the eyes,” he told Stockhead.

“But at the same time it was quite efficient in that we were able to do meetings in Melbourne, Sydney, New York, Hong Kong, London and to do all of that from Melbourne certainly did have its upside.”

Although the company intends to enter New Zealand and Australia, with Therapeutic Goods Administration approval anticipated next year, the US will remain the key market for 4DMedical, and the capital will primarily be used to penetrate deeper into that market.

“The US is where it is at and I think how the company goes will be determined by how well we do in that US market,” Fouras said.