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4DMedical (ASX:4DX) has climbed to a lofty valuation just short of $4.80 on Wednesday morning, bringing the biotech darling to a market cap above A$2.5 billion; posting 1Y returns of +780% and one-month +150%.
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At the same time, the company is making zero revenue. So far, it’s sent its next-gen lung imaging tech software to three universities for demonstration and lab testing: Stanford, Miami U, and, as of today, UC San Diego Health.
Management is calling these contracts “anchors” as part of 4DX’s overall commercialisation strategy, and that’s entirely legitimate. The company needs to see its devices used and troubleshooted, and if this can be done in a high-quality university setting (these universities operate health campuses), then what better place to send them?
That part of the calculus is uncontroversial. But it could perhaps be an unwelcome risk for some to see 4DMedical running so hard in recent weeks, up to a $2.5B market cap no less, with zero actual dollars coming in through the door.
Those who’ve spent enough time in the market can probably see where this will go. 4DX is definitely a frothy stock, widely watched, hotly loved, and because of that, perhaps you could call it the new Droneshield.
And, while the Australian market can stay irrational longer than a cynic can stay solvent, it’s obvious that at some point there will be a pullback.
Even accounting for 4DX’s legitimate value prop – it’s ultimately offering the world a medical scan solution for imaging lungs without the need for radioactive isotopes – it’s hard to see that a rational process has priced in so much value, with shares right now selling at around $4.80/each.
And if retail keeps on pushing the price higher and higher, well, that’s going to do one thing: attract short sellers. As of Tuesday, December 30 – public data lags a week behind for shorts – only 0.01% of the company’s shares are covered by shorts. That feels like both a blessing and a curse, to this finance journalist.
(Editor update, Tuesday, Jan. 12: This 4DX article originally mentioned the company’s “hardware,” when it should have been imaging “software.” We apologise for this copy mistake, which has now been rectified.)
4DX last traded at $4.79/sh today.
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