Thank you for standing by and welcome to the 4DMedical Limited market update on recent developments. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question via the webcast, please enter it into the Ask a Question box and click submit. I would now like to hand the conference over to Dr. Andreas Fouras. Please go ahead.
Hi everyone. Thank you so much for your interest. No doubt most of you are here today to hear about the announcement from yesterday. But just before I get into that, I'm going to give a brief introduction, update on progress made so far this calendar year, including financial performance, and then get right into talking about just how excited I am following the CMS announcement of yesterday. We are absolutely delivering according to our plan. If I start with Imbio integration, the integration is proceeding extremely well. One of the things you don't know before you get into an acquisition is really just the quality of the people. I'm incredibly pleased to say that we've been pleasantly surprised by having brought in a really fantastic team from Imbio.
In terms of bottom line and top line, we are pleasantly surprised also that both the revenue and cost synergies are shaping up to be greater than expected. This will lead to both great growth in our revenues but also continuing downward pressure on the OpEx of the company. Philips resale agreement is progressing very well. Many of you will know about the MOU last year and then the teaming agreement signed up in January. We're already working against that teaming agreement to deliver revenue, and we're working as a team with Philips responding to opportunities and looking to build business there in addition to our core efforts to drive success in the VA that I'm sure everyone on this call is well aware of. The reseller agreement is close to finalization.
We've passed through all the core hurdles, and we are on track for signing this financial year. So in the next month or in June at the latest, methodically working through all of that documentation. And on the topic of revenue synergies from the Imbio acquisition, we are including the Imbio product pipeline portfolio in that Philips agreement. Additionally, we're expanding our opportunities for sales of the product in addition to Philips. So we inherited two distribution agreements from Imbio and have added a third with the Blackford distribution agreement this year. Those distribution agreements can be very important pathways for the selling of AI radiology infrastructure, particularly to those sites that don't have the appetite to establish individual IT connections to each of their providers.
Commercialization continues to gain momentum with an increase in site locations, referrals, and scans performed throughout the network across Australia and the U.S. during this quarter. Imbio have also secured additional contracts during the quarter, expanding the reach and coverage of its technology. The VA is, of course, a massive opportunity for all of us and remains at the center of our attention. We have allies in this battle. I think it really speaks loudly for the reputation that 4DMedical and our technology has that there was specific language that the U.S. Congress in their budget for the VA specifically included language.
And I'll quote, "The committee directs the department to submit a report no later than 90 days after the enactment of this." So they in Congress who funds the VA has said, "Look, we really need you to come back to us and tell us how we're going." Then further to that, on the 15th of April, for the attention of the U.S. Secretary of VA, urging the VA to expedite the implementation of PACT. Through our Detroit lab that we announced this year as well, we've had multiple veterans undertaking XV LVAS scans. And we are using this to explore whole new opportunities to both put pressure on the VA to establish a rollout as well as directly generate revenue. And I think that's an area that will also be particularly impacted by yesterday's news.
We are continuing to build and strengthen the breadth of our research, sorry, our relationship across or relationships across the VA with three research agreements established this year. One with Vanderbilt, the pivotal burn pit research grant that was won there, and we are delivering our technology into that. In fact, a key outcome of that grant is further research demonstrating the value of our technology for both the clinical and research activities relating to burn pits. Additionally, Houston VA, a research agreement to demonstrate the use of the LTA technology for the screening for people who are undergoing lung cancer screening for additional conditions. In this particular case, screening them for pulmonary fibrosis.
Then just recently, earlier this week in LA, a research agreement to understand our technology in the application of dyspnea, which is so shortness of breath, which is really a key symptom that veterans have who have toxic exposures or burn pit issues. The revenue streams have been transformed over the last 12 months, up 300% on last year and on a pro forma basis, up 28%. Also, we have strong cost controls in place with strong downward pressure on OpEx, which was so our last quarterly result was favorable by AUD 2 million, 14.5%, sorry, on the last half. And strong cash position, especially through the prism of rapidly growing revenues and shrinking cost base of AUD 41.7 million, putting us in a great position to hit our target of break even with cash currently at hand. Let's get into the news of yesterday.
I believe this is the biggest commercial news that 4DMedical has been able to announce in its history, that the AMA CPT editorial panel notified us that there are two existing codes, which is part of the excitement generated. Because those codes are existing, we don't have to wait until the 1st of January for them to come online. As such, from today, we have two existing Category III CPT codes for the tracking of the use of our technology. Furthermore, that those codes are already associated with a reimbursement of $650 per scan. That's an absolutely phenomenal result and is going to very rapidly transform the company and transform our LVAS product lines. The reason being this now sets a benchmark level. This is a payment, and it's a payment at a level that allows it to drive behavior change.
This payment is, for example, separate to the cost of delivering a CT. So a radiology provider will already be paid for their CT. The Medicare across the United States is in the ballpark of $160 for delivering a CT. We are in the ballpark of 4 times the cost of delivering a CT, which will allow us to substantially incentivize those providers and overcome friction and drive change in the marketplace with that. Additionally, it's really, I think I'm really excited about the opportunity that this creates for us with the VA, both at external clinics such as the ones that we put in place earlier or additionally a whole range of additional clinics to provide that opportunity. Additionally, when we're inside the VA, we now have a new level set on our pricing. The Medicare has established the value of our technology here.
We're really, frankly, looking at double the commercial opportunity for us with the VA than we had before. Also worth noting that our experience in the Australian market has been that CT LVAS has much lower levels of friction in terms of rolling out to the market. It's much easier to bring on new customers. Radiologists, once again, can read the CT, get paid for doing the CT in addition for our efforts. There are approximately 15,000 CT scanners in the United States. 15,000 CT scanners in the United States who are being used day on day to deliver healthcare to patients specifically in the lung space. So I think additionally, this also is none of this is lost on Philips, who are very strong partners for us.
I think many of you will have heard that as we were building this partnership, we've met across the senior leadership of Philips, multiple meetings with the CEO of Philips USA, and including a meeting with the global head of Philips, which just really demonstrates the strength of the partnership that we have. And they absolutely understand the value that effectively 2.5 times the capacity to generate revenue in the VA that this announcement from yesterday brings. So as I said, this is a game-changing announcement between the combination of it being through the CT platform and just simply the behavior-changing scale of this payment really will be able to drive the change that we need for our LVAS products and substantially both increase the chance of success in the VA and drive the revenue that we can create there.
So I think I'll wrap up my remarks there and be very happy to move to questions.
Thank you. If you wish to ask a question via the webcast, please type your question into the ask-a-question box and click submit. Your first question comes from Michael Porter. Well done on U.S. developments. Is it possible to project the financial flows and timing from the recent U.S. government approvals, IPPS, HOPPS, etc.?
Look, we are working in a really disciplined manner with a few key providers, and it's extremely exciting news. However, we've only been aware that this was coming over the last 10 days. Not with standing that, we've been working very hard, building a network of providers that working with several groups prior to this reimbursement news. The groups are all very familiar with processing claims. And while we can't predict when they'll be in a position to set up their systems and engage with patient recruitment, I think for all the reasons that I articulated earlier, this is going to be a much more rapid process than we've experienced in the past. Nevertheless, I think you can understand that I'm not going to give a forward projection at this early stage, just two days after the announcement.
Thank you. Your next question comes from [Uncertain] . What is 4DX margin from $665 per scan?
Look, we are looking at an incredibly attractive margin on the basis of a $650 per scan. Our cost of goods, our cost of product delivery is under $10 per scan on these. Now, of course, there will be cost of sales associated with that, such as if the scan is sold through Philips. But nevertheless, we are looking at incredibly attractive margins on this product.
Thank you. Your next question, it comes from Rick Woodman. I feel management are doing a great job seeking an indicative comment on break-even date for company based on business foundations in place and sales pipeline.
I'm sorry. I think I had a small technical glitch. I really apologize to everyone. Could you please repeat that question?
I feel management are doing a great job seeking an indicative comment on break-even date for company based on business foundations in place and sales pipeline.
Look, thank you very much. I really appreciate your support. We have been building this business with the view to drive significant revenues and, in particular, to focus on being able to drive those revenues at excellent margins and with really strong scalability. We have done that. We have been doing that work. We are now getting to the point, thankfully, where we're reaping the rewards of those efforts. So yeah, so thank you very much for your support. It's much appreciated.
Thank you. Your next question comes from [Uncertain] . Given recent developments, how confident are you in being able to slow the cash burn? Would you be able to rule out a capital raise? How quickly will 4DMedical and Philips rollout across the U.S. following signing reseller agreements? Will this be specific to VA or other sites as well?
Thanks. Look, there's a few pieces in that. But we have been working. And as I said, if you look through our last few 4 Cs, you'll see we have been very successful in continuing to reduce the operational expenditures of the company. And a key area of that has been with our current status and our current product pipeline, we are able to put significant downward pressure on our R&D costs as we now have multiple products in market. And one area, for example, is we're able to reduce the clinical trial costs, having really validated the products well already in those key markets. So I think the also, you talked about the opportunity for revenues this year with Philips. I think Philips also share the same sense of urgency and the same requirement to respond to their investors as us.
I can assure you they're absolutely feeling a sense of urgency to be able to deliver revenues from this deal. So we will be working with them. I think we can expect those early revenues to come quite promptly following the reseller agreement in the next month or two.
Thank you. Your next question comes from Michael L. Can you please provide an update on progress made on U.S. private health insurer reimbursement discussions? Are we well progressed on any such discussions?
We are working continuously on bringing private insurers to the Medicare party that we've got happening right now. Those conversations are progressing very well. We've grown our reimbursement team. You can probably guess that from the acceleration we've had in the time to bring reimbursement to bear on the CT LVAS versions of the product. So I think that's a key part. But I think also, it's worth noting that really, the VA should also be considered as an additional insurer in that US market. Our work with the VA is also progressing very well. So we have multiple shots on goal across multiple insurers and the VA. All of those are progressing to the pointy end.
Thank you. Your next question comes from Dan S. What is the latest on the second ATO for the VA network? Is it still important, and how long will it take?
Look, it is important. There is value. However, it's no longer absolutely required for us to progress through to meaningful revenues as a result of this news today. That's both because this news today creates additional opportunities to go through private providers to service VA customers. But nevertheless, in fact, there was a key meeting on that second ATO yesterday. And we are indeed making excellent progress on that ATO just right now. We've certainly had some delays on that ATO. But at the moment, they seem to be unblocked, and it's progressing very nicely. I think if I may, sorry, just to jump back there a moment as well, when we're talking about the VA - and obviously, we are talking about ATOs and so on - the VA will absolutely accept that Medicare is setting the benchmark.
It is setting the low watermark of a minimum price that will be paid for our scans. And so we will effectively have a 2.5x multiplier on that VA revenue opportunity as a result of this.
Thank you. Your next question, it comes from Alexandra Lemaistre. Thanks for all your help, as always. Looks like everything is moving in the right direction. Can you please elaborate how the announcement yesterday will increase capacity to create revenue within the VA?
Yeah, thank you. Look, and let me get right into that. So we are now in a position to add two products as our capacity to service the VA side by side specifically on the task of burn pits. And now, we're able to charge significantly more for the CT LVAS product, which we see as a great tool to put out in front as a triaging type tool. So you can imagine someone may come in experiencing shortness of breath to visit the VA. And we can immediately have them receive access to a CT scan, which will make the doctors feel safe and secure that they're using a standardized technology that's already currently part of their workflow. We can stack on top of that the CT LVAS technology.
That then gives the doctor right in the door this really great understanding of exactly what's happening in that patient's lungs. Now then, if they want the next level, the most sensitive technology, they may add, in addition to that, the XV LVAS technology on top of that. So by nature of being able to put the CT out in front, which has significant advantages in terms of numbers of CT instruments and so on in the system, we really just make it easier for the VA to roll out the technology. In addition, just due to the sheer scale or the excellent size of this reimbursement, it really opens the door for us to go to external radiology providers, motivate them, incentivize them to deliver this CT LVAS technology into VA customers.
Thank you. Your next question comes from Costas Mylonas. Does Dr. David Shulkin, appointed last year, 13 April 2023, require assistance to actually drive the VA to be a success?
Dr. Shulkin is an incredible resource and asset to us in our efforts. In fact, I've been on email conversations with Dr. Shulkin today. Just earlier in the week, I've spoken to him on several phone calls. He is actively engaged, highly motivated to drive this. He sees that the resolution of solving healthcare issues associated with burn pits as something like unfinished business from his tenure as both Under Secretary for Health and then Secretary of the entire VA. Dr. Shulkin's incredibly confident, capable, and really giving us advice. He's helping to steer us and to shape us so that we can deliver opportunities or we can deliver proposals and focus our efforts on the VA in the way that's most likely to be successful. Joining us in resourcing that advice or resourcing efforts based on Dr.
Shulkin's advice, we have in that team the really extensive Philips healthcare team. Just for the size and scale of Philips, they have 18,000 employees in the United States. They have the biggest Veterans Affairs healthcare team of any company in the U.S. So those resources are there both from 4DMedical and Philips in taking those efforts to the VA. They are really progressing very, very well.
Thank you. Your next question comes from Tom Godfrey. Majority of work to date with VA has been structured around XV LVAS. Can you speak to how you can reposition CT LVAS as the frontline screening product given higher pricing?
Yeah, thanks for that question, Tom. So right now, sort of the established technology for when someone walks in the door saying, "Look, I have trouble walking up the stairs. I'm short of breath," or, "I need supplemental oxygen to get through my day without crushing headaches," there are standard legacy type technologies that can be applied. And those legacy technologies are a pulmonary function test and a CT scan. And so by being able to offer a technology that's directly attached to one of those two core frontline technologies, we.
And so by being able to offer a technology that's directly attached to one of those two core frontline technologies, we now allow the VA to, in a much less with much less friction, put out technology right up out in front. So now, when someone walks in the door, they can get a CT scan and the CT LVAS immediately. And once again, so it just really makes it really very easy for that to happen. And that's additionally supported by just the volume of CT scanners across the United States. And then if there's additional information, there can be additional scans. And that might then be, I think, a great sort of tertiary scan to follow up with might be XV LVAS. And that will additionally be supported if that patient requires, say, follow-up scan every six months or scan after scan.
XV LVAS fits really perfectly into that both for the extra sensitivity that it has but additionally because of the reduced radiation that it's delivering as well. And this is something that somewhat of a model that we've seen from our experiences of putting CT LVAS and XV LVAS side by side in the US market sorry, in the Australian market through our efforts with I-MED and others in Australia.
Thank you. Your next question comes from Kevin Liang. Please update on timing of submission and timeline for CT:VQ.
Look, that's another incredibly exciting pivotal piece for us. The work on the CT:VQ product has progressed extremely well. And over the next 2 weeks, so from the 19th of May, 4DMedical will be at the ATS Conference, American Thoracic Society. That's the world's number one academic lung health conference. And we have, I believe, 5 presentations that we'll be making at that conference demonstrating the power and capability of CT:VQ. And I'm excited because taking that information public at that setting will allow us to share those updates about how powerful that technology is. It looks extremely strong, incredibly strong in the clinical trials that we have. And that effectively means we are more or less ready. We're writing up an FDA submission.
We will definitively be submitting that to the FDA this year, which will mean in the first half of next year, first half of calendar 2025, we'll have that product in market. That is a billion-dollar market opportunity. We are really excited about how quickly that CT:VQ can penetrate into that opportunity because the alternative is, for example, a nuclear medicine scan that requires two contrast agents, requires 45 minutes of imaging time. Or instead, you can have a CT and software that takes just a few minutes to run on top of that.
Thank you. Your next question, it comes from Michael L. Are there currently any advanced discussions on providing lung cancer screening in Australia given that the program is due to begin in July 2025?
Yes, absolutely. I think we're in a great position here on this. We have a big part of the philosophy that drove to seeing the value of the acquisition of Imbio last year was to be able to create this full-service offering. So through that acquisition, we have a nodule or a lung cancer screening product directly. But many folks may not know or may not understand that actually simply detecting the presence of the cancer is really just the beginning with a lung cancer screening program. So much of the work that comes to the healthcare system as a result of doing lung cancer screening is that you often see other things. People who are undergoing lung cancer screening are at very high risk for emphysema. They're at very high risk for pulmonary fibrosis. They are at high risk for heart disease.
So having this entire full-service offering between the LVAS technologies,[uncertain] , LTA, RV/LV, and so on means that we have this complete full-service offering there. Additionally, we've been doing our groundwork as well. We've been talking to leaders in this space trying to understand exactly what the needs are to best serve both the Australian public and also to be able to work with providers. So we've been talking to leaders across organizations in respiratory medicine such as Lung Foundation Australia. And one of the things that we're seeing when we talk to leaders in this space is they're excited by the prospect that perhaps this technology for this rollout could be delivered by an Australian company. So I think that's an exciting prospect for me. And I think certainly from what I've heard, a lot of the doctors we talk to are excited by that idea as well.
Thank you. Your next question, it comes from Nicholas Bolton. At a local level, what is the progress with IMED and other radiology clinics and creating awareness with GPs, etc., in order to drive volumes? Are you seeing an exponential increase? Also, is there any progress with Medicare reimbursement codes?
Right. Sorry. Sorry for interrupting you there. There was, I guess, a few parts of that. We are really getting better and better at this ground game here in Australia. And we are really seeing the results of that. We are seeing very rapid growth in Australia. So we see more radiologists partnering with their referring physicians, which is exactly the kind of relationship that leads to or facilitates our technology changing patient outcomes. We're providing information previously wouldn't have been available into that space. We have campaigns going to expand GP volumes in specific regions. For example, we've had advertising marketing campaigns, radio campaigns in some regions really allowing us to test out these options, what's working. And they are seeing incredibly good results.
I think we certainly also see the potential for Medicare success in Australia such as what we've had in the United States to really be a game changer here in Australia. We have a number of very exciting options that we're playing on. But I think it's really just too early for us to be public about what those options are on getting Medicare. However, I do think and I think we're getting close on time here, but we're a little over time. But it is worth mentioning that this $650 per scan in the United States is a phenomenal result. And I just want to temper market expectations that that kind of figure is just not going to happen with Medicare in Australia.
In fact, I think I'm not sure that there are other healthcare sort of software companies that will be able to deliver the kind of win such as what we've had in the United States. If you're going to get it somewhere, it's certainly best to get it in the world's biggest market. Look, I think just sort of looking at the screen here, I can see that we've gone a little over time. We've had 40 questions. I really want to thank everybody for all of their interest in hearing about this. I really appreciate the questions and very much appreciate your ongoing interest and support for 4DMedical. Thank you.