Sizing the market for 4DX

Not financial advice. Do your own research.

I was interested to see what the potential of 4DX is with commentary surrounding revenue projections and lack of disclosure from AF in yesterdays meeting. The Phillips deal is just scratching the surface and yesterdays sell-off certainly let me consolidate my position.

From the 4DX report; 73.5M (USA), 5.3M (AUS) annual respiratory diagnostic tests performed annually.

Just taking the USA & AUS; 78.8M procedures annually. Note that currently the XVLVAS and CT VLAS are FDA Cleared already.

The applications for technologies in a clinical practice: (from presentation page 7)

1. A complex clinical presentation - CT LVAS
2. Restrictive diseases - XV LVAS
3. Obstructive diseases - CT LVAS & XV LVAS
4. Intervention and pharmaceutical - XV LVAS

More work will need to be done to understand how these applications 1-4 are split across the 78.8M procedures in the US & AUS. For now, let's assume 25% each and for obstructive diseases, they will need to get both CT LVAS & XV LVAS.

We now have 75% of the population who could get a XV LVAS scan (60M) & 50% of them available to get a CT LVAS SCAN (40M).

Looking at the reimbursement (XV LVAS - $299 & CT LVAS $650). For simplicity, we will not take the transfer margins from phillips as we are looking at the bottom line impact for 4D. However, we can use the 20% margin from XV LVAS & 30% margin for CT LVAS to assume that 4D will receive margins of 30% & 45% respectively for those tests. These are probably way too conservative but with some rounding it gets us to ~$90 EBITDA for XV LVAS scans and $300 for CT LVAS.

XV LVAS: 60M x $90: $5.4B
CT LVAS: 40M x $300: $12.0B

The numbers are ballooning quickly. If 4DX is able to capture even 5% of this from the US & AUS, $17.4B x 5%, 870M EBITDA.

Medical device EV/EBITDA range ~20x (21.44 from 122 companies by NYU Stern)

I don't need to do the rest of the calculations* (guestimations) to see that there could be significant value ahead.

GLTAH