Why Evidence Can Compound Faster Than Earnings
4DMedical has barely begun generating meaningful revenue. Yet the market has already valued it in the billions. Is that irrational exuberance—or is the market pricing something the income statement cannot yet show?
WWC Investment arm, Polygon Aegis, first invested in 4DMedical (ASX:4DX) in the second half of 2025, when the company started achieving major milestones in the USA (eg FDA clearances for medicare reimbursement and announced partnerships with world leading Medical establishments and hospitals). At the time, the market remained deeply uncertain about whether its remarkable lung-imaging technology could ever become a commercial success.
Much has changed since.
4DMedical’s flagship CT:VQ™ lung imaging technology can extract quantitative ventilation and perfusion information from an ordinary non-contrast chest CT (on existing CT machines which are very widely used globally in radiology practices & hospitals) —without radio(active)isotopes, contrast agents or specialised nuclear-medicine equipment. It integrates into existing radiology workflows and potentially turns the installed base of roughly 14,500 US CT scanners into functional lung-imaging infrastructure. FDA clearance and Medicare reimbursement have removed two of the largest barriers to US commercialisation.
The technology has subsequently received regulatory clearance across the EU, UK, Canada, Australia and New Zealand. Leading US medical institutions have begun adopting it, while the recently introduced bipartisan AIR CARE for Veterans Act proposes a US Department of Veterans Affairs pilot using FDA-approved four-dimensional functional lung imaging.
Meanwhile, 4DMedical is broadening its ambitions. Its product portfolio now extends beyond CT:VQ into quantitative respiratory and cardiopulmonary analysis, while its acquisition of Contextflow establishes a European commercial platform and adds AI-enabled chest CT and radiology workflow capabilities.
We increasingly think 4DX is trying to become something much larger than a lung-imaging product company:
A platform for quantitative lung imaging and AI-enabled respiratory workflows.
That distinction matters.
Evidence Compounds Faster Than Earnings
The financial statements haven’t caught up.
4DX still generates tiny revenues relative to its valuation. Earnings are further away again.
For a conventional business, that would make valuation extraordinarily difficult to defend.
But category creators don’t initially compound earnings.
They compound evidence.
A regulatory approval makes reimbursement more valuable. Reimbursement makes hospital adoption easier. Prestigious medical institutions generate clinical evidence. Clinical evidence encourages other physicians to adopt. Greater adoption produces more data, publications and real-world validation. That evidence strengthens reimbursement arguments and eventually influences clinical guidelines.
Each success increases the value of the next.
The progression looks something like:
Technology → Regulatory approval → Reimbursement → Reference institutions → Clinical evidence → Routine utilisation → Guidelines → Standard of care → Earnings
The mistake is looking only at the last item while the first eight are rapidly accumulating.
Bayesian Repricing
This is where markets become fascinating.
When we first bought 4DX, the market had to assign meaningful probabilities to failure at almost every stage.
Would the technology receive FDA clearance? Would Medicare reimburse it? Would major hospitals adopt it? Could 4DX finance commercialisation? Would physicians actually use it?
Those uncertainties justified a substantial discount to the enormous theoretical value of success.
Then evidence arrived.
FDA clearance and Medicare reimbursement were particularly important. CT:VQ became the first FDA-cleared non-contrast CT-based V/Q technology, with CMS reimbursement available under Category III CPT codes in addition to reimbursement for the underlying CT scan.
Nothing dramatic happened to revenue that day.
But something dramatic happened to probability.
That is Bayesian repricing.
Markets continuously assign probabilities to possible futures. When important new evidence arrives, those probabilities change. And sometimes the probability of future success changes much faster than current revenue.
The share price therefore moves ahead of the financial statements.
4DX experienced precisely that phenomenon.
Why We Think the Shorts May Be Looking at the Wrong Thing
The short case isn’t absurd.
4DX has a multi-billion-dollar valuation and comparatively negligible current revenue. Commercial adoption could disappoint. Reimbursement could develop more slowly than expected. Hospitals are notoriously slow-moving institutions. Competition will inevitably emerge.
At this valuation, substantial success is already priced in.
We acknowledge all of that.
Where we differ is in what we believe should be measured.
If you value 4DX primarily on today’s revenue, the company looks extraordinary expensive.
If instead you ask:
What probability should we assign to this technology becoming a global standard of care?
the analysis changes completely.
CT:VQ requires no injected contrast, no radioisotopes and no dedicated nuclear-medicine infrastructure. It operates using existing CT equipment and delivers quantitative ventilation and perfusion maps directly into existing radiology workflows. 4DMedical estimates the existing nuclear V/Q market alone at more than US$2.6 billion globally—and that excludes potential expansion into indications for which traditional V/Q imaging is presently impractical.
And the opportunity is no longer confined to one product.
4DMedical increasingly offers a suite of quantitative imaging products covering ventilation, perfusion, lung density, pulmonary hypertension, coronary artery calcification and other cardiopulmonary applications.
If this develops into a respiratory imaging platform, today’s revenue may tell us remarkably little about the ultimate economics.
The Pro Medicus Lesson
There is an obvious Australian precedent.
For years, Pro Medicus looked absurdly expensive on conventional valuation measures.
What the market eventually recognised was that Visage wasn’t simply another radiology software package. Leading medical institutions were adopting a superior platform, embedding it into workflow and progressively validating its competitive advantage.
Revenue followed adoption.
Margins followed revenue.
And earnings followed both.
We are not saying 4DX will become another Pro Medicus (although it might).
We are saying the pattern is worth understanding.
The most valuable stage of a category creator can occur between technological validation and financial maturity—when evidence is compounding faster than reported earnings.
That is precisely where we believe 4DX sits today.
Volatility Be Damned
Our investment has already experienced both extraordinary appreciation and substantial drawdowns.
We expect more of both.
We bought early, when uncertainty was much greater and valuation dramatically lower. We have subsequently watched the market capitalise a significant portion of the success we originally anticipated.
That means the risk/reward equation has changed.
But our thesis hasn’t weakened.
If anything, the evidence supporting it has strengthened.
Our investment case today is therefore not that 4DX is obviously cheap.
It is that we believe the probability-weighted value of the eventual opportunity may still exceed what the market is pricing—perhaps substantially—if CT:VQ progresses from innovative technology to routine clinical practice and ultimately to global standard of care.
That is why we continue to hold.
And why volatility, by itself, doesn’t particularly concern us.
What Would Change Our Mind?
Our monitoring has therefore shifted away from regulatory milestones and towards commercial evidence.
We are watching whether scan volumes accelerate; whether major academic institutions move from evaluation to routine utilisation; whether community imaging networks replicate that adoption; whether private and international reimbursement expands; whether clinical publications ultimately translate into guideline inclusion; and whether 4DMedical successfully integrates its expanding portfolio into a coherent respiratory imaging platform.
Those are the variables capable of changing our thesis.
The daily share price isn’t.
Category Creation Is Messy
Every truly new category looks overvalued before it becomes obvious—or ridiculous when it fails.
That’s the uncomfortable asymmetry.
By the time revenue and earnings conclusively demonstrate that a new category has been created, much of the uncertainty has disappeared—and so has much of the original opportunity.
Investors therefore face a difficult choice.
Wait for certainty and pay for it.
Or invest while uncertainty remains and accept the volatility that accompanies being early.
We chose the latter with 4DMedical.
We admit 4DX is not for the faint of heart. It is risky
So far, the evidence continues to compound.
The earnings can come later.
#4DMedical #4DX #ASX #Investing #MedTech #Healthcare #WWC #CapitalAllocation #WeathandWellnessCode #PolygonAegis #JamesPolyzoidis
Disclosure: The author has a beneficial interest in 4DMedical Limited (ASX:4DX). This article reflects personal investment views and is provided for general information only. It does not constitute financial product advice or a recommendation to buy or sell securities. Investors should undertake their own research and consider their individual circumstances before making investment decisions.
