What's happening at EIQ? Find out today at 11am AEST / 9AM AWST at this webinar

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,645,432 EIQ Shares and the Company’s staff own 112,000 EIQ shares at the time of publishing this article. The Company has been engaged by EIQ to share our commentary on the progress of our Investment in EIQ over time.

Our Artificial Intelligence medical tech Investment EchoIQ (ASX:EIQ) is now commercialising its AI technology that helps detect heart diseases.

EIQ’s tech works alongside cardiologists, helping increase detection rates for serious heart conditions that might otherwise get missed.

EIQ recently raised $17.3M at 30c to support its USA commercialisation plans.

So EIQ is cashed up, has FDA clearance, it's tech already being used in hospitals AND it's going after the big US market.

EIQ has been one of our best performers over the last 6 months, and has high potential to keep moving up now that they are funded for accelerating commercialisation of their medical technology.

How does EIQ make money?

Whenever EIQ's product is used by a hospital, the cost is not paid by the patient, but rather the health insurance pays the hospital and EIQ takes a portion of the revenue.

EIQ makes money through a “reimbursement scheme” of which EIQ receives a % of funds reimbursed by an insurer.

There are three reimbursement codes EIQ can can progressively apply for, each one better than the last - "Miscellaneous", “Category III”... and the best one “Category I”

EIQ was already approved for a “Miscellaneous” Code in December last year - so EIQ is already able to generate revenues.

In February, EIQ made a submission to get approved for more lucrative “Category III CPT code” - which would mean higher reimbursement rates (and more revenues to EIQ).

(Then the next stage after that is the best one - the Category I re-imbursement code...)

Basically the higher the re-imbursement category code, the more revenue EIQ makes:

Earlier this week EIQ was informed they needed to resubmit their application with “more information” to be granted its Category III CPT Code.

EIQ says they are resubmitting this application for a decision in September.

So there is a bit of a delay. EIQ needs to resubmit the application with the additional info (which is a fairly common thing to have to do), to get its Category III CPT code and move on to eventually applying for the highest revenue generating Category I CPT code...

No big deal right?

The problem was that the market found out about EIQ’s unsuccessful submission on the American Medical Association website...

... BEFORE EIQ had a chance to make an ASX announcement about it.

(Due to an unread email about the submission decision in an EIQ team member’s inbox who was sick on the day)

So EIQ missed the chance to provide the market with context on the unsuccessful submission and next steps to resubmit the application, that it's only a few months delay and not actually that uncommon to happen.

The market and internet chat rooms, with no context, assumed the worst and EIQ’s share price got smashed from above 30c to touch a low of 22.2c.

EIQ quickly released a clarifying announcement and the EIQ share price recovered to 28.5c. It’s now around 27c.

Storm in a teacup? Yes, probably.

What happens next?

EIQ’s CEO Dustin Haines will be running a webinar today to go through exactly what happened at 11:00am AEST (9:00am AWST), what comes next, and answer everyone’s questions.

And provide a general update on the EIQ business.

We will be on the call to hear management's take.

Click here to register for the webinar at 11AM AEST / 9AM AWST TODAY (23rd May 2025)

For anyone who misses the webinar, the recording will be posted here after the webinar

If you are reading this email AFTER the webinar has already happened:

Click here to watch the recording

So in summary, we don’t see material changes to the overall plan for EIQ.

You can read our EIQ investment Memo here which we wrote when we first Invested in EIQ in September last year. That page has all our past content on EIQ and why we are Invested.

Our EIQ Big Bet:

“EIQ re-rates to a >$1BN market cap on successful commercialisation of its heart disease detection technology and/or an acquisition at a multiple of our Initial Entry price”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our EIQ Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What’s next for EIQ?

🔄 Commercialisation updates for Aortic Stenosis AI tech - we want to see EIQ integrate its Aortic Stenosis tech into more hospitals in the US.

🔄 Reimbursement code application for Aortic Stenosis tech - We will now be looking forward to the outcome for the application from which a decision is due in September this year.

(Source)

🔄 Strategic partnership updates - we want to see EIQ advance discussions in this area to help rapidly roll out the company’s tech, grow EIQ’s revenue and build market share.

We did notice this comment in yesterday's announcement so maybe there will be newsflow on this front soon:

🔄 Australia and NZ pilot program - this program is with a ”leading global structural heart innovation company” - this will advance EIQ’s licensing revenue pathway and be a “proof of concept” study that EIQ can take into the US.

🔄 Heart Failure validation study with US based Group - EIQ expects the study to start this month and be completed by the middle of the year. This will be the precursor to FDA clearance, which is expected later this year.

🔲 CE Mark and TGA applications - this is so that EIQ can sell into Europe and Australia.

What could go wrong?

At this stage of EIQ’s journey a big risk for the company is sales risk.

With FDA clearance secured and an extremely high-margin product, EIQ’s growth is now directly dependent on its ability to convince hospitals to integrate and use its product.

Sales/Commercialisation risk

EIQ is reliant on its partners, both under the licensing and reimbursement strategy, to use EIQ’s product. If EIQ’s product is not used (because it doesn’t add value back to the provider), then it won’t be able to generate revenue. There is no guarantee that EIQ’s product will be used by its partners and, therefore, no guarantee of revenue.

Source: “What could go wrong” - EIQ Investment Memo 6 Sept 2024

There is also an element of “regulatory risk” as well.

From a revenue perspective, the reimbursement code assigned to EIQ’s software will determine how much the company makes each time its software is used.

Unfortunately, this risk materialised on Monday when EIQ’s initial application was rejected.

We are hoping that the next application is successful, but are mindful of the risk that EIQ may get knocked back again.

Regulatory Risk

EIQ has applied for FDA clearance under the 510(k) pathway for aortic stenosis and will apply for FDA clearance for heart failure. There is no guarantee that the FDA will provide clearance, and the application may be rejected. Also, EIQ’s strategy is reliant on securing reimbursement for its product. If EIQ is not able to secure a reimbursement deal then its commercialisation strategy may need to pivot.

Source: “What could go wrong” - EIQ Investment Memo 6 Sept 2024

Our EIQ Investment Memo:

In our EIQ Investment Memo, you can find the following:

• What does EIQ do?
• The macro theme for EIQ
• Our EIQ Big Bet
• What we want to see EIQ achieve
• Why we are Invested in EIQ
• The key risks to our Investment Thesis
• Our Investment Plan