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4DMedical (4DX, $1.58)
Market capitalisation: $418 million
Three-year total return: n/a
Analysts’ consensus target price: $1.70 (Thomson Reuters)

Imaging company 4DMedical (4DX) surged on to the ASX screens in its August float, at a 100% “pop.” Issued in the prospectus at 73 cents, the shares opened for trade on August 7 at $1.47, and reached $1.70 in August before settling lower: 4DX currently changes hands at $1.58.

4DMedical is actually a software company, that aims to disrupt the respiratory diagnostic imaging market with its unique four-dimensional lung imaging technology. The unique 4Dx technology accurately and quickly scans lung function as the patient breathes, to provide sensitive, early diagnosis and to monitor changes over time. At the heart of the process is a proprietary technique 4DMedical has developed, inspired by wind-tunnel technology, that combines fluoroscopy and advanced visualisation to generate high-resolution images of the motion and airflow of lung tissue.

The patients breathe under fluoroscopy and the 4DMedical technology quickly and accurately scans the lung function as the patient breathes, recording the motion of the tissues. From this image, the clinician can quantify a number of things, like ventilation. Depending on the nature of the disease, it may be easier to see the disease through an image of the ventilation, or it may be easier to see it on the airways themselves where the clinician can see the airflow going through the tissues.

The software-as-a-service (SaaS) delivery model means that no special equipment or software needs to be purchased or installed. Once hospitals subscribe to the service, cinefluoroscope sequences are acquired from patients on existing hospital imaging equipment, and sent to 4DMedical. In a secure cloud-based environment, 4DMedical analyses the images to measure air flow throughout each of the lungs’ airways, and applies to the images its proprietary algorithms to measure and quantify the air movement. The XV Technologyâ„¢ process generates a report that enables the client hospital’s clinicians to diagnose and treat respiratory diseases earlier, less invasively and much more effectively. Moreover, the process uses lower levels of radiation than traditional methods.

In May 2020, 4DMedical’s Lung Ventilation Analysis Software (XV LVAS) obtained 510(k) clearance from the US Food and Drug Administration (FDA). This regulatory clearance followed a major confirmatory clinical trial of the XV Technology, conducted at Cedars-Sinai Hospital in Los Angeles, California.

The clinical trial showed that XV gave clinicians much more detailed information than the commonly used pulmonary function test (PFT) and computed tomography (CT) imaging methods, confirming 4Dx’s belief that the unique and non-invasive XV technology enables unprecedented insight into pulmonary functioning, which is critical in the analysis and treatment of respiratory diseases.

The clinical trial demonstrated that XV not only matched the performance of current ‘gold-standard’ measures and other clinically available measures, it was more predictive than other measures in assessing the onset of conditions such as radiation-induced pneumonitis and/or pulmonary fibrosis.

In addition, XV was clearly superior to the major incumbent testing technologies, PFT and CT, in detecting loss of regional lung function associated with early-stage disease progression, both in terms of sensitivity to structural changes in the lung (where it was compared to CT) and in standard lung function tests (where it was compared to PFT.) 4DMedical says XV is a break-through medical technology and a potentially world-changing advance in better and more timely diagnosis – and thus, improved treatment outcomes – for all lung disorders, including asthma, chronic obstructive pulmonary disease (COPD), cystic fibrosis and cancer.

Now that it has FDA approval and has successfully settled on the ASX, 4DMedical will be looking to start putting runs on the board in terms of commercialising its SaaS product, with the US$13.7 billion ($18.8 billion) US respiratory diagnostics market the initial focus.

LBT Innovations (LBT, 13.5 cents)
Market capitalisation: $39 million
Three-year total return: -24.2% a year
Analysts’ consensus target price: n/a

Adelaide-based medical technology company LBT Innovations is another company trying to disrupt the diagnostic space. LBT came up with a way of speeding-up the process by which microbiologists sift through hundreds of agar culture plates to find significant bacterial colonies. The company partnered with The University of Adelaide’s Australian Institute of Machine Learning to develop its automated plate assessment system (APAS), which became the world’s first artificial intelligence (AI) diagnostic medical device to receive US FDA Class II clearance in 2016. This process involved a 10,000-patient clinical trial performed in Australia and the US.

The APAS Independence instrument automatically analyses and interprets growth on microbiology culture plates, enabling faster and more efficient diagnosis and reporting of infectious diseases. The device can read and interpret up to 200 plates per hour, which is at least three times quicker than the average microbiologist. LBT says no competitor product can image and interpret plates like APAS Independence. Using the testing and data that supported the product’s FDA clearance – which included a 10,000-patient international clinical trial – the company applied for CE Mark certification, which would clear the APAS instrument for sale in the European Union: this was granted in September last year.  

APAS remains the only FDA-cleared AI technology for automated imaging, analysis and interpretation of culture plates.

In June, the prestigious Johns Hopkins Hospital in Baltimore completed an independent evaluation of the APAS Independence with the MRSA (methicillin-resistant staphylococcus aureus) analysis module, involving over 6,000 test samples. The data from this independent review was published at the American Society of Microbiology’s annual conference, ASMMicrobeOnline, and supported the claims made regarding the instrument’s ease, usability and accuracy. Importantly, the APAS Independence achieved no false negative results, and identified a further three MRSA samples that had been missed by the microbiologists in their manual plate reading.

In the same month, LBT announced the first sale of an APAS Independence unit in the US, to the Hennepin County Medical Center (HCMC) in Minnesota. In July, an APAS Independence unit was installed and commissioned at the Health Services Laboratory (HSL), a state-of-the-art facility located within the Halo building, part of London’s life sciences hub, “Medcity.” HSL will conduct a clinical evaluation of the APAS technology. HSL’s head of infection sciences said that “application of assisted intelligence in a high-volume lab like ours has the potential to streamline laboratory workflows bringing benefits to staff, quality, turnaround times and consequentially patient outcomes.”

This year, the company has added an AMR analysis module to APAS, to be used for antibiotic susceptibility testing (AST) and assessment of antimicrobial resistance (AMR). This is part of a strategy of building a menu of analysis modules that are sold to customers as a separate annual software licence, thus increase the recurring revenue potential for each APAS instrument sold.

In July 2020, the Company appointed global diagnostic leader Beckman Coulter, Inc. as its marketing agent for Europe. LBT expects this appointment to significantly expand the customer reach through an expanded sales presence and trusted brand.

The APAS technology is finally breaking-through for sales – it’s a case of watching for further positive news flow for LBT Innovations shareholders.

Compumedics (CMP, 37.5 cents)
Market capitalisation: $66 million
Five-year total return: +7.2% a year
Analysts’ consensus target price: $1.15 (Thomson Reuters)

Compumedics has been a major disappointment. The share price is where it was five years ago. Yet the company keeps putting products into the marketplace, and it is profitable.

Compumedics creates medical devices for monitoring and diagnosing sleep, brain and blood flow. Its products range across sleep diagnosis, clinical electro-encephalogram (EEG) scans, brain monitoring and ultra-sonic blood-flow systems. Products include Grael and Siesta for sleep, Neuvo LTM for neurology, and Neuroscan, Synamps RT and Curry for brain research. It owns Germany’s DWL Elektronishe GmH and US-based Neuroscan. The company’s customers are a who’s who of global health leaders such as the Mayo Clinic, and its products are market leaders in sleep markets in Australia, Japan and China.

The business develops and makes devices for:

• Diagnosing sleep disorders;
• Monitoring neurological disorders, including long-term epilepsy monitoring (LTEM);
• Ultrasonic monitoring of blood flow through the brain (transcranial Doppler, or TCD); and
• Highly sophisticated brain research.

The core Diagnostic Medical Devices business encompasses the technology and products currently sold globally for the diagnosis and/or monitoring of sleep disorders and neurological disorders, and for brain blood flow monitoring. It also includes products and technology used in advanced brain function research.

The Medical Innovation business includes technologies and products for the consumer monitoring of sleep and subsequent treatment of sleep disorders.

The business has serious stature in its major markets. Compumedics is:

• The number one sleep and neurological diagnostics device supplier in Australia;
• The number one sleep diagnostics device supplier in Japan;
• The number one sleep diagnostics device supplier (to premium facilities) in China, and the number one TCD device supplier; and
• The number three sleep diagnostics device supplier, and number three supplier of neurological monitoring devices, in the US.

The Diagnostic Medical Devices business generates 97% of the revenue, and all of the profit. In FY20, a $3.7 million net profit in the Diagnostic Medical Devices business was eroded by a $1.9 million net loss in the Medical Innovation business, which saw the company report a net profit of $1.8 million, or 1 cent a share. The non-cash write down of intangible assets by $7.7 million took the reported net loss to $5.8 million.

In February this year, Compumedics won US FDA approval for its Orion LifeSpan magneto-encephalography (MEG) neuroimaging technology, which maps brain activity by recording magnetic fields generated by the brain’s natural electrical currents. MEG, regarded as the most reliable form of brain imaging. This followed the approval Compumedics already had for Orion LifeSpan components including amplifiers, the simultaneous electroencephalogram (EEG) subsystem, and the integrated co-registration, neuroimage processing and source estimation software, CURRY. The full approval paves the way for the MEG technology to be used routinely in a clinical setting – primarily for epilepsy and pre-surgical brain function mapping – and more importantly, have insurers billed for the scan.

The company also sells its world-leading computerised medical monitoring systems in the US, from its neurological monitoring system, based on its Grael product range, and also its cloud-based Nexus360 diagnostic platform.

The other major technology platform is the Somfit consumer health platform, which tracks fitness and sleep quality.

The sharemarket has struggled to “get” Compumedics – but analysts think there is plenty of scope for the share price to rise, particularly as the MEG business builds on the first US installation, at Barrow Neurological Institute in Phoenix, Arizona. MEG could be a truly transformational technology for CMP. Home to the Muhammad Ali Parkinson’s Centre, Barrow is considered number one in the US for both neurology training and neurological vascular surgery: Compumedics won the Barrow deal after a nine-month fight with rival Electa, which was widely expected to get the nod, as it already provided cancer scanning equipment to Barrow. During FY21 Compumedics will complete the installation at Barrow, and hope to kick-off more sales – at up to $5 million a unit, it would not take much in the way of new MEG orders to galvanise revenue.