Stock report
tfreeman2017
OpcoInititationReport-September15.pdf
EQUITY RESEARCH
INITIATION OF COVERAGE
Suraj Kalia, CFA 212-667-5387 [email protected]
Mike Ott, CFA 312-360-5947 [email protected]
Disseminated: September 15, 2020 06:00 EDT; Produced: September 15, 2020 05:59 EDT
September 15, 2020
Stock Rating:
PERFORM 12-18 mo. Price Target NA NNOX - NASDAQ $49.21
3-5 Yr. EPS Gr. Rate NA 52-Wk Range $66.67-$20.26 Shares Outstanding 44.8M Float 30.8M Market Capitalization $2,202.4M Avg. Daily Trading Volume NA Dividend/Div Yield NA/NM Book Value $1.36 Fiscal Year Ends Dec 2020E ROE NA LT Debt $0.6M Preferred NA Common Equity $40M Convertible Available No 52-week range since 8/20/2020 IPO.
Revenue ($/mil) Q1 Q2 Q3 Q4 Year Mult.
2020E 0.0A 0.0A 0.0 0.0 0.0 NM 2021E 0.0 1.0 2.8 7.5 11.4 NM 2022E 13.4 21.0 33.2 47.1 114.7 NM 2023E -- -- -- -- 171.2 NM EPS GAAP Q1 Q2 Q3 Q4 Year Mult.
2020E (0.26)A (0.21)A (0.13) (0.13) (0.66) NM 2021E (0.09) (0.25) (0.29) (0.34) (0.97) NM 2022E (0.13) (0.26) (0.23) (0.17) (0.78) NM 2023E -- -- -- -- (0.24) NM
Oppenheimer & Co Inc. 85 Broad Street, New York, NY 10004 Tel: 800-221-5588 Fax: 212-667-8229
For analyst certification and important disclosures, see the Disclosure Appendix.
Stock Price Performance
1 Year Price History for NNOX
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Company Description Nano-X Imaging Ltd. develops medical imaging systems, both hardware (Nanox.ARC) and software (Nanox.CLOUD), utilizing a unique cold cathode technology.
Suraj Kalia, CFA Mike Ott, CFA: 212-667-5387 312-360-5947
HEALTHCARE/MEDICAL DEVICES
Nano-X Imaging Ltd. Disruptive Play in Digital X-rays; Initiating with Perform SUMMARY Nano-X Imaging, based in Israel, is building on Sony's previous efforts in field-emission flat-panel display technology, and adapting the MEMS-based cold-cathode technology to X-ray diagnostics. This approach "could" potentially disrupt the X-ray imaging space by: 1) mitigating issues with traditional heat-based X-ray filament technology, potentially providing better resolution at lower radiation, and 2) introducing an MSaaS (Medical Software as a Service) subscription model in lieu of high up-front cap-ex. Nano-X (Nanox) boasts nine signed MSaaS contracts backed by letters of credit, totaling 5,150 units over the next three to four years, thereby ensuring a revenue stream in various geographies at $14/scan. The technology is exciting; however, prudence dictates we recognize execution risk inherent in any early-stage company. Hence, our initial Perform rating.
KEY POINTS
■ Global X-ray Market: X-rays are the preferred modality in ~70% of the millions of diagnostic scans/year worldwide. The global X-ray scanning market is estimated to be ~$22B, with medical diagnostics constituting ~52%, growing at a 4-5% y/y clip, and the industrial segment growing at 8-10%. GE, Philips, Siemens, Toshiba, Hologic, etc. dominate the medical diagnostics space.
■ Traditional Thermionic X-ray Technology: X-rays generated by the traditional thermionic tungsten-based filament heating process are the current industry standard, having undergone refinement over the last 100 years. Despite inherent process limitations such as excess heat, longer radiation exposure times, motion artifacts, cost, etc., the industry has adapted well, and in fairness, thermionic emission has been well-validated in critical applications such as oncology.
■ Nanox's Cold-Cathode Field Emission Technology: The promise of cold- cathode X-rays resides in digital toggling for field emission with no heat, increasing photon flux density, thereby improving image quality at lower exposure times. Nanox has applied for US 510(k) clearance for its single-source X-ray. Logic dictates the FDA will require small studies for CT/3D breast tomosynthesis use.
■ Execution Risk: Execution risk is key with this story given the technology's early-stage nature. While exciting, it has yet to be validated in real-world settings. Consistent manufacturing must be demonstrated. Workflow logistics to implement guaranteed contracts must be worked out. Consistent outcomes must be showcased, and validation vs. thermionic systems shown. All this takes time.
■ Valuation: Different system configurations such as CT, 3D breast tomosynthesis, etc. all present different complexities. For example, electron emission reliability in cold-cathode needs to be coupled with a good detector and software, and "system fine-tuning" will be needed. Our pro forma models, therefore, heavily discount forward revenues dictated by guaranteed contracts, in part to reflect execution risk.
5-YEAR PRICE PERFORMANCE
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NNOX
Source: Bloomberg
INVESTMENT THESIS
Nano-X is building on Sony's previous efforts in field-emission flat-panel display technology, and adapting MEMS-based cold- cathode technology to X-ray diagnostics. NNOX is attempting to fundamentally disrupt the X-ray imaging space: 1) alleviate traditional issues with heat-based X-ray filament technology, potentially providing better resolution at lower radiation; and 2) introduce an MSaaS (Medical Software as a Service) subscription model in lieu of high upfront cap-ex. Nanox boasts nine signed MSaaS contracts backed by LOCs, totaling 5,150 units over next 3-4 years for commissioning in various geographies at $14/scan. The technology is exciting; however, prudence dictates that we recognize the execution risk inherent in any early-stage company. Hence our initial Perform rating.
BASE CASE ASSUMPTION ■ Commercial contracts perform as intended. ■ 510(k) clearance requires no significant new testing. ■ Mass production starts in 2H21.
CATALYSTS ■ FDA 510(k) clearance. ■ Additional contract signings.
UPSIDE SCENARIO ■ Commercial contracts perform better than expected. ■ 510(k) clearance requires no new testing. ■ Mass production starts before 2H21.
DOWNSIDE SCENARIO ■ Commercial contracts perform worse than expected. ■ 510(k) clearance requires significant new testing. ■ Mass production starts after 2H21.
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Table of Contents Investment Thesis 4
Company Overview 7
Product Portfolio 7
Regulatory 10
Market Opportunity 14
Electron Emission in X-rays—A Primer 16
CNT Cold Cathode X-Ray Technology 34
Nanox Technology—A Primer 38
Potential Benefits of Nanox MEMS X-ray technology 41
Intellectual Property 44
Competition—Cold Cathode 45
Competition—Thermionic Cathode 48
Analysis of Contracts 49
Financials 52
Management 56
Valuation/Risks 57
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Investment Thesis
Diagnostic X-Ray Market Is Large and Concentrated
The global X-ray market, both in medical diagnostics and industrial screening, is
estimated to be ~$22B worldwide, with the medical segment constituting ~52% of overall
sales. The industrial X-ray screening market, including segments such as airport and
baggage screening, as well as non-destructive testing for product testing and E&P
applications, continues to grow at a healthy 8–10% year/year clip worldwide due to robust
demand in de novo geographies. At the same time, the medical diagnostics segment is
relatively well established and is predominantly a replacement market in developed
nations, growing at a 4–5% clip. We estimate ~60–70% of all medical diagnostic scans
worldwide are done using X-rays. While there has been a gradual shift worldwide from
analog to digital X-rays, the industry by and large is still driven by heavy cap-ex spend,
and fundamental issues with work logistics given limitations of technology. A core
component of X-ray scanners is the tube, which is based on a thermionic electron
emission process as described later in this report. This process, while well-established
over the last 100 years, inherently creates issues with poor efficiency, sub-optimal
workflow management, shorter equipment life-span due to tube burnout, and artifacts
introduced in image analysis due to motion introduced by the X-ray source. For these very
reasons, a sub-sector has sprung up over the last 10–15 years that caters to system
components given the wear and tear associated with inherent technology limitations.
However, so far, there hasn’t been a credible alternative to alleviate some of the
technological issues in the field, and the landscape continues to be dominated by players
like GE, Siemens, Philips, and Toshiba, among others. Aggregate pricing for traditional,
thermionic emission-based X-ray systems is ~$60,000-$2.2M, depending on the
application. Barriers to entry are high, but not insurmountable.
Nanox Cold-Cathode Technology Presents a Paradigm Shift
The promise of a cold cathode that delivers an “easily tunable” and relatively more robust
electron emission profile, leading to greater photon flux density during each X-ray image
shoot, therefore reducing radiation exposure and improving device life, has been the holy
grail for many years. Nano-X (Nanox), albeit in the early stages of its life cycle, is
attempting to fulfill this promise with its MEMS-based nanocone technology using
molybdenum as a source material. This MEMS device (Nano Spindt) was part of the flat
panel display made by Sony, before it was abandoned in 2011. Nanox’s key employees
were part of this R&D process, and have since morphed the technology for application
into X-ray diagnostics. The underlying premise of Nanox’s technology is relatively
straightforward—a proprietary manufacturing process on 300mm silicon wafers that yields
100 chips/wafer. Each chip has millions of thin film-etched and chemical vapor-deposited
molybdenum nanocones. Each nanocone is capable of individually being “triggered” to
emit electrons using digital toggling, and the resultant electrons are accelerated through
vacuum under 40–120 kVP. Preliminary testing is suggesting a higher photon flux density
of X-rays, therefore “potentially” reducing radiation/scan exposure and alleviating issues
with tube burnout.
At the same time, Nanox is configuring its system to implement “multiple” X-ray sources
into a single device, for example in 3D digital breast tomosynthesis, in an attempt to get
rid of artifacts introduced into images because of X-ray source motion in different planes.
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Nanox claims that the core technology has had 20,000 hours of operation life-cycle testing
in a glass substrate. If the platform can receive regulatory clearance, can be reliably
manufactured at acceptable yields, and can provide consistent images over prolonged
use, then Nanox “potentially” could present one of the biggest disruptions in the global X-
ray scanning space.
However, Nanox Will Have to Navigate Numerous Challenges
The biggest challenge to any disruptive technology is inertia in the marketplace. Nanox
has to go through numerous hurdles to realize the potential of its cold-cathode technology.
For starters, the company is relatively early in its life cycle, and critical real-world
experience with this technology is lacking. The Nanox.ARC system will have to be reliably
manufactured at acceptable yields, and quality control will be critical prior to launch. The
company can manufacture the core X-ray tubes at COGS that are orders of magnitude
smaller than those of traditional thermionic tubes. Hence, yield might not be that important
in the initial stages. Thereafter, the actual performance characteristics of each tube will
need to be validated. Per company reports, the Nano Spindt has been tested for 170
hours using a glass tube, and more recently, the company has been evaluating the use of
a ceramic tube base to allow for functionality in CT scanners. Durability of performance in
life-cycle testing will be critical.
Nanox, has to its credit, signed numerous guaranteed contracts with various third parties
to operate its Nanox.ARC and Nanox.CLOUD system in various geographies for $14/scan
for 7 scans/day at 23 days/month. These contracts are initially designed to allow for
penetration in geographies where hand-to-hand combat with the big players will be
avoided. This subscription model is intriguing on many levels, not the least of which is the
apparent ripple effects it can send through the industry. Finally, we note the most obvious
. . . cold cathode technology has been tried in the past, mostly in the form of carbon
nanotubes (CNTs). CNTs have not had a promising history, much of which is presumably
due to the method of manufacturing which could result in not-reliable product in the field.
By our estimate, over $1.2B has been spent on various efforts in cold-cathode
technologies over the last 15 years (mostly in flat panel displays for television, though). If
Nanox is able to successfully adapt this technology originally intended for flat-panel
displays into X-ray diagnostics, it would represent a game-changer in the space, we think.
Financial Assumptions
While the company has its own internal pro forma assumptions based on a certain
interpretation and expectation of launch dates and commercialization, we believe it is
prudent to be on the conservative side, especially given the inherent execution risks in
Nano-X’s early-stage nature. The contracts guaranteed by letters of credit (LOCs) are a
positive, but we believe our 50–60% discount from company expectations is prudent
given:
Real-world validation will need to be performed
Expectation is that it will take 45-days to commission a system
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How does the Nanox CLOUD work? Is there a workaround? How reliable will the
Nanox CLOUD be?
The logistics of who will do the scans (preventative or otherwise) need to be
worked out. At the same time, how do you contract with local radiologists (or
otherwise remote radiologists) to do the readouts? How do you ensure liability
risk is adequately managed?
The contracts specifically call for 7 scans/day for 23 days/month. How does the
credit enforcement mechanism work if a particular center falls short of these
metrics?
How does revenue recognition happen when any covenants/minimum amounts
get tripped?
What happens in the event of a default?
Valuation
We are initiating coverage of Nano-X Imaging with a Perform rating. Nano-X’s MEMS-
based cold-cathode digital X-ray technology represents a potentially disruptive play in the
medical diagnostics and industrial screening sector. Cold-cathode technology has long
been thought to mitigate some of the traditional issues with conventional X-ray machines
that use thermionic emissions at the core, issues such as heat generation, device lifetime,
lower throughput, and image artifacts due to source motion. Preliminary evidence
presented by Nano-X is encouraging, with phantom images suggesting equivalent or
better images than conventional predicate devices on the market. However, the company
is in the early stages of its life cycle, waiting on 510(k) clearance, and then implementing
manufacturing and subsequent launch. Hence, prudence mandates conservatism in our
modeling outlook. The stock has more than tripled since its August 2020 IPO, which leads
us to a Perform rating.
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Company Description Nano-X Imaging, based in Israel, is an emerging company in the digital X-ray diagnostics
space. The company has developed the Nanox.ARC 3D Tomosynthesis system using its
cold-cathode electron emission technology, and has recently negotiated contracts with
various third parties in key geographies around the world for the deployment and
utilization of its digital X-ray systems. The company is a relative startup, and is awaiting
510(k) clearance for its system, which should help it jump-start regulatory discussions
around the world. Nano-X’s value proposition is in “potentially” providing a digitally
controlled, X-ray generation mechanism (similar to flat panel TV displays) that can be
used for medical diagnostics and industrial X-ray screening. The real-world validation of
this technology still has to be conducted, but if successful, Nano-X “could” disrupt the
global X-ray market by providing a “better” X-ray source, all while eliminating up-front
capital sales by implementing its MSaaS subscription model which allows for a per-scan
fee for the end-user. The company currently employs 27 people, primarily in Israel, and is
heavily dependent on third-party contracts to implement the necessary sales and
marketing.
Product Portfolio Nano-X’s core technology has its roots in field emission display (FED) technology. FED
technology was originally developed by Sony with other technology partners, for television
screens and monitors, offering a novel way of lighting screen pixels compared to
traditional cathode-ray tubes that were based on a one-source electron gun beam. The
FED innovation used multiple nano-scale electron guns to achieve a much higher quality
image with significantly reduced motion blur effects. In 2009, after having invested
substantial resources in the development of this technology for over a decade including
through a joint venture called Field Emission Technologies, Inc. (FET), Sony ceased
development of the project. In 2009, FET dissolved and transferred certain assets to FET
Japan Inc. Scientists from FETJ use this expertise to develop non–display-related
applications, including Nanox’s X-ray source technology. From 2011 onward, Nanox spent
eight years developing a cold-cathode digital X-ray source for the medical imaging
industry that could be produced on a commercial scale.
Exhibit 1. Nanox.ARC
Source: Company Reports
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The first configuration of the Nanox System is supposed to be a 3D Tomosynthesis
system with two integrated components—hardware (Nanox.ARC) and software
(Nanox.CLOUD). Nanox has developed a prototype of the Nanox.ARC, which integrates
its cold-cathode X-ray source. This X-ray source is a MEMs-based semiconductor cathode
that achieves electron emission by a non-thermionic low-voltage trigger to approximately
100 million nano-scale molybdenum cones that act as multiple electron “guns,” instead of
a single heated filament. The cathode is housed in a customized X-ray tube.
Exhibit 2. In order: Close-up of MEMS silicon board; Cold cathode tube
Source: Company Reports
Subject to receiving regulatory clearance, the first version of the Nanox.ARC that the
company expects to introduce to the market is a 3D tomosynthesis imaging system that
produces a 3D reconstruction of the scanned human body part, as illustrated in the image
in the previous exhibit. The Nanox.ARC, using the cold cathode X-ray source, is being
designed to produce partial and full-body scans, with remote operation capability, and to
have a full kVp/mA energy throughout range as per industry standards, multi-spectral
imaging range, as well as quiet operation, cloud connectivity and standard compliance
safety mechanisms. It is being designed for easy setup and operation with multiple
stationary X-ray tubes arranged around the patient. The substantial majority of operational
software used to run the Nanox.ARC will be cloud-computing based and integrated with
the Nanox.CLOUD.
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Exhibit 3. Nanox Workflow
Source: Company Reports
Nanox expects to be able to offer the Nanox System for a substantially lower cost than
existing medical imaging systems, which fits its strategy of making early-detection medical
imaging systems more accessible globally. The company is laying the groundwork for
multiple system configurations for applications ranging from run-of-the-mill applications
such as broken bones and chest X-rays to more sophisticated ones such as CT scanning
and 3D breast tomosynthesis. Admittedly, the technology is still in the development stage
and has not been cleared by the FDA, but the argument of removing motion blur with
multiple X-ray sources that utilize a cold cathode rather than a single thermionic X-ray
source, digital switching of electron emission with potentially greater photon flux density,
all on a subscription-based approach is intriguing, in our view. “Assuming” this
development program can be commercialized in a reliable manufacturing way, it is not too
far-fetched to envision a rapid adoption of such a technology in new geographies and new
sockets around the world.
A key component of Nanox’s strategy is the MSaaS model (Medical Software as a
Service) wherein the end-user is charged on a per scan basis. This has two real-world
implications—1) By eliminating the up-front capital expense component, Nanox presents a
compelling economic rationale for quick initial adoption, especially in underserved areas.
2) By allowing for a new technology to be adopted relatively quicker, it allows for
“validation” vs. established modalities such as thermionic emission X-rays. The MSaaS
model is based on a $14/scan net to Nanox, with a minimum of 7 scans/day for 23
days/month for regional exclusivity. As we explain later in this report, Nanox has signed
guaranteed minimum contracts with various third parties based on a certain schedule of
unit placements and scans/month. Implementing an MSaaS model would, in our view, be
the first of its kind in an industry that relies heavily on capital equipment sales. Hence,
Nanox’s technology presents an intriguing opportunity for mass disruption, if and when it
can be reliably manufactured and real-world tested in the field.
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Regulatory (Source: Company Reports)
Nanox has applied for 510(k) clearance from the FDA for the single source X-ray system
via a third-party reviewer. The company states that it does not believe that the Nanox
digital X-ray source will require regulatory approval or clearance because it falls within a
category of radiology vacuum tubes converting electrical input power into X-rays that
utilize the same energy levels, radiation types, and throughputs as already existing and
approved X-ray tubes applied in a wide range of radiology medical procedures. As a
result, Nanox expects that there will be no novel claim or methodology related to the X-ray
radiation produced by the digital X-ray source. In addition, Nanox claims that it does not
believe that the Nanox.CLOUD will require regulatory approval or clearance because it will
utilize software modules already cleared by the FDA for purposes of image transfer,
upload, display and review. As a first step, Nanox submitted a 510(k) application to an
Accredited Review Organization under the Third Party Review Program in January 2020
to seek clearance of a medical imaging system that incorporates a single digital X-ray
source. The submission was based on a predicate filing for an equivalence claim to an
existing FDA-approved X-ray imaging system by another market participant.
Exhibit 4. In order: Phantom image comparison using Nanox system; Philips system
Source: Company Reports
Because the digital X-ray source incorporated into the Nanox system generates X-ray
radiation that is measurably identical in all key characteristics to the X-ray radiation
generated by the analog X-ray source incorporated into existing FDA-cleared X-ray
imaging systems, Nanox made no new claims as to the operation, image quality, or
functionality of this system versus the predicate device. As part of the review process, in
March 2020, Nanox received an additional information request, referred to as a major
deficiency letter (MDL), from the Review Organization. The request, among other things,
required the company to provide additional data and other information to complete the
application and to address certain deficiencies highlighted by the reviewer, including the
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results of certain performance tests. In response to the feedback received from the
Review Organization, Nanox conducted additional product testing and is expect to submit
the results from these tests, along with its response, in 3Q20. The original timeline for
completing the application was delayed due to the impact of COVID-19 on the external
labs on product testing. Nanox will continue to optimize and develop further features of the
Nanox.ARC, and plans to submit an additional 510(k) application under the Third Party
Review Program with respect to the multiple-source Nanox.ARC during 4Q20, which, if
cleared, will be the commercial imaging system. To date, Nanox indicates that it has not
obtained feedback from the FDA regarding the regulatory pathways for any of its product
candidates. The regulatory timeline expectations are shown in the exhibit below.
Nano-X filed a Form 6-K on 9/10 which states, “On September 3, 2020, NANO-X
IMAGING LTD (the “Company”) submitted its official response to an accredited Review
Organization under the U.S. Food and Drug Administration’s (“FDA”) 510(k) Third Party
Review Program (the “Third Party Review Program”) as part of the Company’s 510(k)
application process for a single-source version of the Nanox.ARC. The submission served
as a reply to the additional information request received from the Third Party Review
Program. The response includes additional data and other information to complete the
application and to address certain deficiencies highlighted by the reviewer, including the
results of certain performance tests, and was submitted within the required time frame.
The company submitted its original 510(k) application under the Third Party Review
Program in January 2020 and received the additional information request in March 2020.
The submission was based on a predicate filing for an equivalence claim to an existing
FDA-approved X-ray imaging system by another market participant, and no new claims
were made as to the operation, image quality or functionality of the Nanox.ARC versus the
predicate device. The company’s original timeline for completing the application was
delayed due to the impact of COVID-19 on the external labs it works with to complete its
product testing. Nano-X plans to continue to optimize and develop further features of the
Nanox.ARC, and plans to submit an additional 510(k) application under the Third Party
Review Program with respect to the multiple-source Nanox.ARC during the fourth quarter
of 2020. The information contained in this report is hereby incorporated by reference into
the Registration Statement on Form S-8, File No. 333-248322.”
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Exhibit 5. FDA Regulatory timeline
Source: Company Reports
Key to the Nanox story will be the life-cycle testing and real-world performance that will
result with the steps that are being taken currently. We detail here key components of the
testing and performance characteristics that the company is currently undertaking. It is our
understanding that the 510(k) submission will have various components of this testing
package:
There are two types of tube materials being evaluated; one is an off-the-shelf Hitachi
glass tube with the Nanox X-ray source. The newer version is the ceramic tube being
jointly developed with Vatech, a Korean company with deep expertise in ceramic high
efficiency tube manufacturing. These ceramic tubes are designed to withstand
10kVP–120kVP.
Manufacturing yields currently are ~50-60%. The company’s Japanese partner at the
University of Tokyo is processing 10–20 wafers/month. Each wafer generates ~100
chips. Yield currently is ~50 – 60%. Thus, the company is averaging ~500 X-ray
sources/month. Assuming each Nanox system utilizes 5–6 X-ray sources, and there
is a 10–20% yield loss from system assembly, the math suggests each wafer is
capable of yielding 5–7 Nanox systems. Stated otherwise, current manufacturing
capacity is ~50–140 systems/month, and the Japanese partner has been
manufacturing for the last few months (exact amount of inventory unclear to us).
Nanox utilizes VIVIX-D 1717G Detector for its final product configuration, including
power supply sources, PLC controllers, and currently Foxconn is responsible for
sourcing these parts. However, given the uncertainties around COVID-19, Nanox will
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be assembling the first 60 systems in Israel, and then move to Foxconn. Full mass
production is expected in 2H21.
As part of the 510(k) submission, Nanox is required to submit life-cycle testing, which it
contends is sufficient for regulatory clearance. As we understand it, the silicon-based
MEMS device inside the X-ray tube was tested for 170 hours of operation on prototype
tubes. The company has also performed additional tests for longer times on a different
customer tube for 1,000 hours. Nanox is planning on lifecycle testing with a new ceramic
tube. The manufacturing method produces system architecture completely different than
CNT-based cold-cathode technology since the similarity of the nanocones and the sheer
number of nanocones allow for redundancy in the electron emission sources. Based on
internal testing conducted by the company, there is some level of degradation seen in the
signal over time (although not clear to us after what time), and this requires compensation
with the gate voltage. The system continuously measures the current level at the anode,
and degradation in current level triggers a 0.1–0.5V adjustment in gate voltage to maintain
consistency.
Exhibit 6. One Sample Life-Cycle Testing Configuration
Source: Company Reports
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Market Opportunity The main categories of current medical imaging systems with which Nanox expects to
compete are CT, mammography, fluoroscopy, angiography, and dental. The market
opportunity comparison is somewhat complicated given that current sources utilize analog
thermionic X-ray systems. The global market, defined as the sum total of capital sales and
services, is estimated to be ~$22B, with the medical diagnostic X-ray market constituting
~52%, and growing at a CAGR of ~4–5% y/y. The industrial segment is currently
estimated to grow at a CAGR of ~8–10%. The US constitutes the largest market in the
medical segment, and is for the most part, a replacement market.
Exhibit 7. In order: Worldwide X-ray market; Geographic Split of Medical Diagnostic X-ray market; Split within Medical X-ray market
Source: Oppenheimer and Co., estimates
Latin America US EMEA APAC
Medical Industrial
Mammography CT Dental Fluoroscopy
Geographic Split in Medical Diagnostic X-ray market
Split in Medical Diagnostic X-ray market by modality
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A key component to market analysis is the split within the medical diagnostics X-ray
market between the various players, since it defines the strategy that newcomers like
Nanox will be adopting. Nanox’s technology “could” be disruptive on three different
fronts—1) its MEMS-based digital X-ray machine “could” be the first of its kind for mass
deployment, if manufacturing, and real-world testing validate what initial results seem to
be suggesting (post regulatory clearance, of course); 2) the company’s MSaaS
subscription model would be the first of its kind that we know of that “could” upend this
intense “capital sales” and heavy up-front cap-ex model; 3) finally, Nanox is attempting to
make its technology available to larger strategic partners for key applications in various
geographies based on an exclusivity model, for an up-front fee and a 5% or so royalty fee
on future sales. This approach is designed to short-circuit any copycat approaches, and
hopefully jump-start mass-scale adoption while reducing the sales and market investment
needed to “push” this product into the market.
Exhibit 8. Medical Diagnostics X-ray Market Shares Worldwide
Source: Shimadzu Corporation
Siemens Philips GE Toshiba Shimadzu Other
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Electron Emission in X-rays—A Primer (Source: Parmee et al., Nano Convergence, Vol 1, 2014; Fred Huffman, Encyclopedia of
Physical Science and Technology, 2003; Zhu et al., Micromachines, Vol 8, 2017; etc.)
Fundamental to almost all commercial X-ray sources is a source of electrons. Emitted
from a cathode, these electrons are directed in a high vacuum toward an anode to which a
positive voltage is applied. Emission of electrons will occur from a metal surface when
subjected to a high electric field. To stimulate appreciable electron emission the electrons
must either be excited from the Fermi level over the potential barrier, or tunnel through the
potential barrier. This gives rise to three principal forms of electron emission;
photoemission (PE), thermionic emission (TE), and field emission (FE).
Photoemission (PE)
PE occurs where the metal is irradiated with an optical source: where the wavelength is
selected such that it defines an energy greater than the work function (Φ) of the emitter,
which typically lies in the ultraviolet range. As a result, electrons are excited and pass over
the potential barrier. PE electron sources have a low efficiency. Much of the incident
optical radiation is absorbed in the bulk material of the emitter with only a small proportion
of the photon population contributing to direct emission. Although PE sources have the
potential to achieve extremely fast response rates, and correspondingly high bandwidths,
PE has gained very little traction in most electron emission applications as only very low
emission currents are possible.
Thermionic Emission (TE)
X-ray tubes, both for medical and for industrial applications, can essentially be thought to
be a form of energy converter. A typical X-ray tube receives electrical energy and converts
it into two other forms—X-ray radiation and heat. The heat is an undesirable byproduct.
The science of X-ray tube production focuses on maximizing the production of X-rays and
dissipating heat as quickly as possible. From a simplistic perspective, a typical X-ray tube
is a vacuum tube that has two principal elements—a cathode and an anode. As the
electrical current flows through the tube from the cathode to the anode, electrons undergo
energy loss, which results in generation of X-rays. A cross-sectional view is shown in the
following exhibit.
Cathode Assembly
A typical cathode assembly consists of the filament, focusing cup, and associated wiring.
The filament is a small coil of thin corrugated tungsten wire. This is where electrons for X-
rays are emitted. Some tubes can have two filaments to allow for a greater variety of
exposures.
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Exhibit 9. In order: Typical X-Ray Tube; Typical Cathode Assembly
Source:http://whs.wsd.wednet.edu/faculty/busse/mathhomepage/busseclasses/radiationphysics/lecturenotes/chapt
er6/chapter6.htm
The basic function of the cathode is to expel the electrons from the electrical circuit and
focus them onto a well-defined beam at the anode. At any given instant of time, only one
filament is designed to work. Smaller filaments are designed to be used with relatively
small parts while larger filaments are used when larger body parts are being X-rayed. The
structure which supports the filaments is known as the focusing cup. It is designed and
shaped so that when the X-ray machine is powered up, electrons will literally boil off the
filament. It glows white hot, and electrons hover around the filament in a space charge
until the moment of exposure, and then they accelerate very rapidly toward the anode
which is not far away. This process is called thermionic emission. Thermionic emission
occurs when the technologist begins to make an exposure by pressing the “ready” button
on the machine. This action initiates the boost phase, which in turn helps “concentrate” the
electron stream in a pre-determined area on the anode target area known as the focal
spot. The filament has its own circuit powered by a relatively low voltage and 4–6A circuit.
The shape of the focusing cup and the resultant projectile electron beam become critically
important in X-ray tube design. As can be seen below, in the first cup design, electrons
repulse each other, and as soon as they leave the structure, they tend to spread out. This
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would not be conducive to good X-ray production. The spread of electrons occurs
because the focusing cup is not negatively charged. In the second instance, the focusing
cup is negatively charged. This charge then forces the electrons together as they exit the
cathode structure, thereby ensuring that the electron stream does strike the focal spot in a
relatively tight area.
Exhibit 10. Focusing Cup in X-Ray Tube
Source:http://whs.wsd.wednet.edu/faculty/busse/mathhomepage/busseclasses/radiationphysics/lecturenotes/chapter6/chapter6.htm
The anode is the other key component with which X-ray radiation is produced. It is a
relatively large piece of metal that connects to the positive side of the electrical circuit. The
anode has two primary functions: 1) to convert electronic energy into X-rays, and 2) to
dissipate the heat created in the process. The material for the anode is selected
specifically to enhance these functions. The ideal situation would be if most of the
electrons created X-ray photons rather than heat. The fraction of the total electronic
energy that is converted into X-ray radiation (efficiency) depends on two factors: 1) the
atomic number (Z) of the anode material and the energy of electrons. Most X-ray tubes
use tungsten, which has an atomic number of 74, as the anode material. In addition to a
high atomic number, tungsten has several other characteristics that make it suited for this
purpose. Tungsten is almost unique in its ability to maintain its strength at high temps, and
it has a high melting point and a relatively low rate of evaporation. In recent years, an alloy
of tungsten and rhenium has been used as the target material but only for the surface of
some anodes. The anode body under the tungsten rhenium surface on many tubes is
manufactured from a material that is relatively light and has good heat storage capability.
The use of molybdenum as an anode base material is primarily in mammography
applications, since its atomic number (Z = 42) produces characteristic X-ray photons with
energies suited for this particular application.
Most anodes are shaped as beveled disks and attached to the shaft of an electric motor
that rotates them at relatively high speeds during the X-ray production process. The
purpose of anode rotation is to dissipate heat. Not all anode rotation though is involved in
heat production. The radiation is produced in a very small area on the surface of the
anode known as the focal spot. The dimensions of the focal spot are determined by the
dimensions of the electron beam arriving from the cathode. In most X-ray tubes, the focal
spot is approximately rectangular. In general, small focal spots produce less blurring and
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better visibility of detail, and large focal spots have greater heat-dissipating capacity. Focal
spot size is one factor that must be considered when selecting an X-ray tube for a
particular application. Tubes with small focal spots are considered when high image
visibility of detail is essential, and the amount of radiation needed is relatively low because
of small and thin body regions as in mammography. Most X-ray tubes have two focal
spots (small and large), which can be selected by the operator according to the imaging
procedure.
Exhibit 11. Angle of Target and Focal Spot Creation in a Dental X-ray Tube
Source: https://pocketdentistry.com/1-physics/
In general, the distance between the cathode and the rotating anode disc is very small.
This is designed this way to ensure that the projectile electron stream has a reasonably
good chance of arriving at the anode in a relatively tight pattern. If the electrons were
permitted to spread out, then the X-ray production process would become very inefficient.
As can be seen in the exhibit above, two operating conditions influence the X-ray
production process. The number of electrons that are released will directly influence the
number of X-rays that are generated and therefore the dose of radiation also. While these
diagrams show just a few electrons, the reality is that there are countless billions of
electrons that are typically released during any exposure. This diagram shows how a low
mA will result in fewer X-rays being produced and a high mA will result in a greater
number of X-rays.
The anode is attached to a cylindrical part known as the “rotor.” The rotor is actually part
of a motor that is made to rotate at very high speed. In most X-ray tubes, the revolutions
per minute is usually at 3,200 for standard technique settings, however if the technologist
selects exposure factors that are considerably larger and therefore very hot, then the rotor
can rotate at a much greater speed exceeding 5,000 rpm. The rotation of the anode
ensures that not any one spot will receive successive pulses of electrons. If there was no
rotation, then it is very likely that the anode face would be damaged due to high heat. It is
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important to note that the metal used for producing X-rays must not only have good
thermal qualities, but must also be able to easily produce X-rays. To ensure that the
projectile electrons have an excellent probability of X-ray production, the atoms must have
a high atomic density or a good concentration of electrons. Tungsten is an excellent metal
for this. This increases the probability of “brems” and characteristic radiation. It has a very
high melting point and can dissipate its heat by radiating it out through the glass.
The focal spots which are embedded in the rotating anode disc are angled in such a way
that when the electrons strike the anode focal track, the angle makes it easier for the X-
rays to be emitted in a downward direction. While the projectile electrons do not “bounce”
away from the target, the angle at which it is positioned allows more X-rays to be directed
toward the image receptor or film. The actual dimensions of a typical focal spot may be 1
mm X 2 mm along the focal track; however, depending on the angle of the anode face,
this will change the appearance of the focal spot as seen from below or where the X-ray
image receptor is positioned. The anode angle and the resulting appearance of the focal
spot as it would appear from the image receptor are known as the “Line Focus Principle.”
As the angle decreases, machine operators actually see less of the focal spot dimensions,
and this will actually enhance the recorded details on the image. In general, the smaller
the focal spot is, either real or as changed by the line focus principle, the better the detail
will be on the finished image.
Exhibit 12. Actual vs. Effective Focal Spot in X-Rays
Source: https://rrcmrt.wordpress.com/2012/06/30/line-focus-principle/
The third key component in an X-ray tube is the envelope. The anode and the cathode are
contained in an airtight enclosure, called the envelope. The envelope and its contents are
often referred to as the tube insert, the part of the tube that has a limited lifetime and can
be replaced within the housing. The majority of X-rays have glass envelopes, although
tubes for some applications have ceramic and metal envelopes. The primary function of
the envelope is to provide support and electrical insulation for the anode and cathode
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assemblies and to maintain a vacuum in the tube. The presence of gases in the X-ray
tube would allow electricity to flow through the tube freely, rather than the electron beam
only. This would interfere with electron beam production and possibly damage the circuit.
The housing, on the other hand, provides several functions in addition to enclosing and
supporting the other components. It functions as a shield and absorbs radiation, except for
the radiation that passes through the window as a useful X-ray beam. Its relatively large
exterior surface dissipates most of the heat created within the tube. The space between
the housing and insert is filled with oil, which provides electrical insulation and transfers
heat from the insert to the housing surface.
X-Ray Tube Design—A Complex Balance
X-ray tube design is a complex balance between materials chemistry and
thermodynamics. In addition to enclosing and supporting other components, the X-ray
tube also functions as a shield and absorbs radiation, except for radiation that passes
through the window as the useful X-ray beam. Its relatively large exterior surface
dissipates most of the heat created within the tube. The space between the housing and
the insert is filled with oil, which provides electrical insulation and transfers heat from the
insert to the housing surface. Different applications have different design requirements.
Different customers have different requirements. In CT imaging for example, clinicians
want crisper images at faster speeds. The CT scanner should be able to provide a high
throughput without breaking down. An industrial X-ray scanner at an airport does not have
such stringent requirements. The intricate knowledge needed to make these tubes, and
make them in an economically efficient manner, makes this space an interesting one.
Here are the intricacies that go into X-ray tube design (in no particular order):
X-Ray Circuit
The energy used by the X-ray tube to produce X-ray radiation is supplied by an electrical
circuit as illustrated below. The circuit connects the tube to the source of electrical energy
that in the X-ray room is often referred to as the generator. The generator receives
electrical energy from the electrical power system and converts it into the appropriate form
(direct current, or DC) to apply to the X-ray tube. The generator also provides the ability to
adjust certain electrical quantities that control the X-ray production process. The three
principal electrical quantities that can be adjusted are:
kV (the voltage of electrical potential applied to the tube);
mA (electrical current that flows through the tube); and
S (duration of exposure or exposure time, generally a fraction of a second).
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Exhibit 13. X-Ray System
Source: www.sprawls.com
Voltage Differential in X-ray Production
The first step for X-ray production requires free electrons to be available in the evacuated
environment of the X-ray tube insert to allow electrical conduction between the electrodes.
Electron accumulation occurs at the filament surface in the tube, creating a buildup of
negative charge that prohibits further electron release because of repulsion forces. The
electron cloud distribution is maintained at equilibrium by the surrounding negatively
charged focusing cup. The second step involves the application of a high voltage, typically
ranging from 50,000 to 150,000 V (50–150kV) supplied by the X-ray generator to the
cathode and anode. Upon activation, electrons are immediately accelerated to the
electrically positive anode along a path determined by the filament and focusing cup
geometry. Continuous electron emission continues from the filament surface at a rate
dependent on the filament temperature (i.e., the filament current) during the exposure.
When electrons arrive at the anode, they carry potential energy. The amount of energy
carried by each electron is determined by the voltage, or kV, between the cathode and the
anode. For each kV of voltage, each electron has 1 keV of energy. By adjusting the kV,
the X-ray machine operator actually assigns a specific amount of energy to each electron.
After the electrons are emitted from the cathode, they come under the influence of an
electrical force pulling them toward the anode. This force accelerates them, causing an
increase in velocity and kinetic energy. This increase in kinetic energy continues as the
electrons travel from the cathode to the anode. As the electrode moves from the cathode
to the anode, however, its electrical potential energy decreased as it is converted into
kinetic energy all along the way. Just as the electron arrives at the surface of the anode,
its potential energy is lost, and all its energy is kinetic energy. A 100 keV electron reaches
the anode surface traveling at more than half the speed of light. When the electrons strike
the surface of the anode, they are slowed down quickly and lose their kinetic energy; the
kinetic energy is converted either to X-ray radiation or heat.
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Exhibit 14. X-Ray Production by Energy Conversion
Source: J. Nucl. Med. Technol. 2004;32:139-147.
Tube current, defined as the number of electrons traveling between the electrodes, is
expressed in mA units. Typical tube currents for CT operation have a selectable range of
50–300 mA, depending on the type of examination and required image quality. Each
electron attains a kinetic energy (in keV) equal to the applied tube voltage, which typically
is set to a single value that ranges from 50 to 150 kV depending on the examination. (In
CT operation, 120 –130 kV is most often used, but 80-, 100-, and 140-kV settings are also
available on some CT scanners.) Thus, the tube voltage (kV), tube current (mA), and
exposure duration (s) are user-selectable parameters for X-ray production. Often, the
combination of tube current and exposure time in milliampere-seconds (mAs) is provided
as part of the technique or protocol. For instance, with CT scanner operation, typical
acquisition techniques are quoted in kVp and mAs/slice. X-ray production occurs when the
highly energetic electrons interact with the X-ray tube anode (also known as the target).
Targets used in X-ray tubes are generally made of tungsten, which has 74 protons in the
nucleus. In rare (0.5%, or 5/1,000) events, an electron comes in close proximity to the
nucleus of a target atom and experiences attractive forces due to the positive charge of
the protons in the nucleus.
Electron Energy
The combined positive charge decelerates and changes the direction of the electron, the
magnitude of which strongly depends on the Impact parameter distance, as 1/distance. As
to the magnitude of this distance, the tungsten atom has a spherical shape with a radius of
about 10 -8
cm, and its nucleus has a radius of 10 -12
cm, indicating that the atom is
comprised of mostly empty space. The interaction distance for a deceleration event by the
incident electron is thus on the order of 10 -12
cm. Kinetic energy lost is converted to
electromagnetic radiation with equivalent energy in a process known as bremsstrahlung (a
German term meaning “braking radiation”). Closer interactions with the nucleus cause a
greater deceleration and result in higher X-ray photon energy, but the probability
decreases as the interaction distance decreases. In extremely rare instances, the incident
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electron gives up all of its kinetic energy when stopped by the nucleus, producing the
maximum X-ray energy possible.
The output is a continuous spectrum of X-ray energies with maximum X-ray energy (in
keV) determined by the peak potential difference (in kVp). A larger number of lower
energy X-rays are produced in the output spectrum, simply due to the lower probability of
interaction closer to the nucleus. The lowest probability of interaction is a bull’s eye (e.g.,
incident electron totally decelerated, producing the highest X-ray energy), and moving
outward, the annular rings emanating from the center become larger and accommodate
more darts at greater distance (e.g., electrons are decelerated less and produce greater
numbers of lower X-ray energies). Thus, a spectrum of X-rays is produced with a
minimum number at the peak energy, and linearly increasing in number with decreasing
energy (the unfiltered bremsstrahlung spectrum). However, lower energy X-rays are more
easily attenuated (filtered) from the beam exiting the X-ray tube port, and the measured
spectrum peaks at intermediate energy and goes back to zero at the lowest X-ray
energies, for several spectra produced with different acceleration voltages. The average
X-ray energy in a typical X-ray spectrum is about one-third to one-half peak energy,
dependent on the amount of filtration placed in the beam.
Exhibit 15. In order: Different Types of X-Rays; Effect of kVp on X-Ray Efficiency
Source: https://radiologykey.com/plain-radiographic-imaging-2/; https://www.studyblue.com/notes/note/n/final/deck/15711325
The high end of the spectrum is determined by the kilovoltage (kV) applied to the X-rays.
This is because kV establishes the energy of the electrons as they reach the anode, and
no X-ray photon can be produced with energy greater than the incident electrons. The
maximum photon energy, therefore, in keV is numerically equal to the maximum applied
potential in kV. In addition to establishing the maximum X-ray photon energy, the kVp has
a major role in determining the quantity of radiation produced for a given number of
electrons. Since the general efficiency of X-ray production by the bremsstrahlung process
is increased by increasing the intensity of the bombarding electrons, and the electronic
energy is determined by the kVp, it follows that the kVp affects X-ray production efficiency.
Changing kVp will change the bremsstrahlung spectrum, as shown below. The total area
under the spectrum curve represents the number of photons or quantity of radiation
produced. If no filtration is present, where the spectrum is essentially a triangle, the
amount of radiation produced is approximately proportional to the kV squared. With the
presence of filtration, however, increasing the kV increases the relative penetration of the
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photons, and a smaller percent is filtered out. This results in an even greater increase in
radiation output.
Another possible interaction of incident electrons with the target is the removal of inner
shell electrons from the tungsten atom. These characteristic X-rays generate the
monoenergetic spikes added to the continuous spectrum. As the tube voltage is increased
above the minimum value, characteristic X-ray production becomes a greater fraction of
the X-ray spectrum. The anode in most diagnostic X-ray tubes is composed of tungsten,
chiefly because of its high atomic number (Z = 74) and extremely high melting point—
necessary for efficient X-ray production and tolerance of high power deposition,
respectively.
Heat Capacity and Cooling
One of the fundamental issues in X-ray production is the relatively large amount of heat
that must be transferred from the tube. Only a small fraction (less than 1%) of the energy
deposited in the X-ray tube is converted into X-rays; most appears in the form of heat.
This places a limitation on the use of the X-ray apparatus. If excessive heat is produced in
the X-ray tube, the temperature will rise above critical values, and the tube can be
damaged. This damage can be in the form of a melted anode or ruptured tube housing.
The heat produced during X-ray production can be a limiting factor:
In the use of small focal spots that are desirable for good image detail;
In CT, especially with spiral scanning of relatively large anatomical regions.
Heat is produced in the focal spot area by bombarding electrons from the cathode. Since
only a small fraction of the energy is converted into X-ray radiation, it is usually ignored in
heat calculations. In a single exposure, the quantity of heat produced in the focal spot
area is given by:
Heat (joules) = w * kVp * mAs
Where kVp = peak kV value; w = waveform factor; and mAs = milliamp seconds (duration
of exposure)
Although a joule is the basic unit of energy and heat, it is not always used to express X-
ray tube heat. The special heat unit (SHU) is a commonly used metric and is defined as
Heat unit = 1.4 * heat (joules)
The rate at which heat is produced in a tube is equivalent to the electrical power and is
given by:
Power (watts) = W * kVp * mA
The total heat generated in a particular exposure is the product of power and the duration
of the exposure. In X-ray production, the goal is to never exceed specific critical
temperatures that produce damage. This is achieved by keeping the heat content below
specified critical values related to the tube’s heat capacity. In most X-ray tubes, there are
three distinct areas with critical heat capacities. The area with the smallest capacity is the
focal spot area, or track, and is the point at which heat is produced within the tube. From
this area, the heat moves by conduction throughout the anode body and by radiation to
the outer tube housing. Heat is also transferred by radiation from the anode body to the
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tube housing. When the tube is in operation, heat generally flows into and out of the three
areas. Damage can occur if heat content of any area exceeds its maximum heat capacity.
Excessive heat production and subsequent wear are the primary reasons for X-ray tube
wear, and life cycles for each tube range from 1 to 1.5 years.
Anode Design
Two major anode designs include a simple, fixed geometry or a more elaborate, rotating
configuration. Most prevalent is the rotating anode, comprised of a tungsten disk attached
to a bearing-mounted rotor within the X-ray tube insert and stator windings outside of the
insert. The rotor and stator comprise the induction motor that rotates the anode disk at
angular frequency of 3,000 or 10,000 revolutions/min. When the X-ray tube is energized, a
delay of about 1–2 seconds allows the anode to reach operating speed before high
voltage is applied. Rotating the anode allows a large surface area over which heat is
spread, providing an ability to tolerate greater heat deposition and to produce more X-ray
photons per unit time compared with a fixed anode. The focal spot is the area of electron
interaction and emanation of X-rays from the target surface. Typical dimensions are
nominal sizes of 1.0- to 1.2-mm (large) and 0.3- to 0.6-mm (small) focal spots, where
nominal encompasses a range of focal spot sizes that are specified as acceptable
according to manufacturer standards.
Ideally, the use of small focal spots is preferred to minimize geometric blurring of patient
anatomy with magnification. However, the small focal area constrains X-ray tube output
and heat loading factors, mainly due to heat concentrated in a small area. Larger focal
spots have higher instantaneous X-ray production capacity and are preferred, as long as
blurring does not adversely affect resolution. CT scanners usually have larger focal spots
(e.g., 1.2-mm nominal size), which still provide good geometric resolution that is
compatible with the sampling resolution of the discrete CT detector array. Focal spots vary
in size with projected image location (“the line focus principle”) and, because of the
reflection geometry of X-ray production, radiation intensity across the projected X-ray field
in the cathode-to-anode direction varies from high to low intensity (“the heel effect”) and is
most severe on the anode side of the field, to the point that the X-ray beam intensity is
reduced to zero (field cutoff). These two phenomena are consequences of the anode
surface angle made with respect to the central axis of the emitted X-ray beam. The anode
angle is a fixed value ranging from 7° to 20°, the choice of which depends on the required
field coverage at a particular focal spot to detector distance.
Orientation of the X-ray tube cathode–anode axis in fixed X-ray tube/detector systems
considers the field intensity variations caused by the heel effect. In CT scanners, for
instance, the tube is mounted so that the heel effect is minimized by orienting the
cathode–anode axis in the slice acquisition direction (perpendicular to the tube travel
direction). A collimator assembly, constructed with movable lead shutters, is situated
adjacent to the X-ray tube output port to define the X-ray beam shape incident on the
patient. For CT, the collimator shutters determine the slice thickness setting for a specific
examination. A collimator light or laser beam positioned at a “virtual” focal spot location
provides a visible indication of the X-ray beam. Important for CT operation is the
coincidence of the slice thickness defined by the collimators to the light beam and the X-
ray profile transmitted to the detector array, which must be periodically verified for
accuracy during regular quality control checks. X-rays are emitted in all directions from the
anode structure, but only a small fraction of the reflected X-rays that emerge through the
collimator-defined area are used for image formation, and all other X-rays must be
attenuated.
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While numerous variables allow for characterization of X-ray tubes (constant potential;
three-phase, etc.), we note that these descriptors are variants of the factors described
earlier. Ultimately, X-ray tube design is a complex balance between specific requirements
(speed of imaging/quality of imaging) and type of application. Different applications will
determine different design requirements. What might be acceptable in an industrial
application could certainly be a non-starter in a medical imaging application, and vice-
versa.
Field Emission (FE)
Field emission is another concept in electron emission, originally pioneered for flat screen
TVs, and then morphed for medical diagnostic applications such as X-rays. The use of FE
cathodes is a practical method for delivering a high current density from field emission
cathodes without substantial thermal, optical, or electrical power. FEAs, with their high
current densities and fast turn on, have been envisioned to be capable of improving the
performance of many devices such as microwave amplifiers and enabling new devices,
e.g., field emission flat panel displays and fast power switches, without decreasing
cathode lifetime.
Within the context of flat-panel displays, the FED is a vacuum device, sharing many
common features with the cathode ray tube (CRT) that has been the foundation of TV
screens over many decades. Just like in a CRT, the image in an FED is created by
impinging electrons from a cathode onto a phosphor-coated screen. In a CRT, the
electron source is made up of three thermionic cathodes. A set of electromagnetic
deflection coils rasters the electron beam across a phosphor screen, typically held at a
potential of 15-30 kV. In an FED, by comparison, the electron source consists of a matrix-
addressed array of millions of cold emitters. This field emission array (FEA) is placed in
close proximity (0.2–2.0mm) to a phosphor faceplate and is aligned such that each
phosphor pixel has a dedicated set of field emitters. In addition to the anode and cathode,
a FED contains ceramic spacers to prevent the structure from collapsing under
atmospheric pressure, a frame coated on both sides with low-melting glass frit, a getter
used to remove residual gases inside the package, row and column drivers, and an anode
power supply. The FED was particularly attractive to start-ups and to large companies not
already involved in LCD manufacturing. The rationale was that the FED, with its promise
of better performance at a lower cost, would allow these companies to leapfrog already
established LCD manufacturers.
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Exhibit 16. Field Emission Display Concept in Flat Screen TVs
Source: https://steemit.com/steemstem/@darmawanbuchari/development-of-field-emission-display-fed-based-on-the-idea-of-lightning-rod-
49205429faab2
Field emitters have the following unique properties:
Emission current density from single tips can be much larger than 10 8 A/cm
2 . A
current of up to 49 mA has been shown to be obtained from a single tip of
approximately 90-m radius of curvature in a pulsed mode. The tip approximates
a point source.
Emission current densities up to 2400 A/cm 2 have been observed from arrays of
field emitters.
Emission can be turned on with low gate voltages (~100 V). The field emitter
cathode can be compact and simple to operate.
Emission can be temporally modulated at high frequencies. Frequency
modulation by gate voltage has been demonstrated up to 10 GHz.
Emission can be spatially addressed in the x-y plane.
Electron emission is cold-field emission. The power required to produce the
emission is low. This is an important factor for compact devices.
Many organizations worldwide have shown that they can reliably fabricate and
operate FEAs using a variety of techniques and materials. Field-emission tips
and edges have been successfully fabricated from silicon, gallium arsenide,
zirconium carbide, hafnium carbide, titanium, niobium, tungsten, lithium,
diamond, carbon nanotubes, and many other materials. There have been
significant advances in the fabrication techniques, particularly in precision
patterning of arrays of small holes over large areas at low cost, and in exploiting
a wide variety of deposition and etching techniques.
For low current density and low duty cycle applications such as field-emission flat
panel displays, there have been significant advances over the years. For high
current density applications, more experience is needed with processing and
operation in a vacuum tube environment.
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However, despite the obvious benefits, implementations of FED have been plagued due to
manufacturing to scale, and unreliable durability, leading companies such as Sony,
Toshiba, etc. to walk away despite spending billions in R&D. FE sources are yet to be
adopted in demanding applications because of emitter tip radius variation across an array,
which results in spatial and temporal variations of emission current. To address the issues
of reliability and uniformity, various approaches have been developed over the past few
decades to outperform competing cathode designs. Various materials have been
investigated as candidates including graphene; carbon nanotubes; metals such as
molybdenum (Mo), tungsten and cobalt; metal oxides such as barium oxide (BaO), MoOx,
and cuprous oxide, etc.
Among these materials, Mo has great potential owing to its desirable mid-gap work
function, exceptional thermal and chemical stability, and excellent mechanical properties.
Efforts have been made on the fabrication of Mo micro/nanostructures in order to optimize
their field emission performance, such as conventional Spindt array with Mo micro-sized
cones and Mo nanowires. Pursuits in FE array fabrication include sharp emitter tips,
alignment, size uniformity, which result in high emitter density, low turn-on field, high field
enhancement factor and good emission stability.
For the fabrication process development of the FE devices, the standard process of Spindt
cone-growth provides the aspect ratio of the emitter cones, which is typically unity. The
emission current for stable operation in excess of 12,000 h is 20 A per tip. For high-
emission-current condition, a maximum emission current of 1 mA has been measured
from a single Spindt emitter tip for an applied inter-electrode (diode mode) field of 300
V/cm. However, Spindt arrays are subjected to unreliable behavior, which is associated
with flashover along the oxide walls and field stress of the tip or the vacuum arcing,
triggered principally by emission from the triple junction at the emitter base. Post-
supported conical tips have been demonstrated to minimize flashover; though not
immediately associated with overheating or emitter sublimation, enhancement of the
emitter’s thermal stability stands to immediately improve high field operation, particularly
when coupled to the use of high temperature stable refractory metals. Thermal loading is
likely the main cause for tip degradation and subsequent decline in emission current with
time. Since these interrelated effects are current-dependent, the height, location, and tip
radius of the emitter arrays are controlled to optimize all FEAs for high current and time-
stable emission.
At this stage, it is important to reference the intricacies of manufacturing FE emitters using
the Spindt techniques. We highlight a sample FE emitter manufacturing process in a
paper published by Zhu et al. (source: Micromachines, 2017). We note that details on
Nanox’s manufacturing process are proprietary; hence, we reference this paper only to
detail the steps that need to be undertaken to demonstrate consistency and durability in
commercial applications.
In this paper, the authors report on the fabrication of highly uniform FEAs with an
integrated self-aligned extraction gate from bulk Mo. All critical dimensions of the emitter
tip were determined by a single process step of Inductively Coupled Plasma (ICP) etching
and a new fabrication process of large-area self-aligned gated FEAs developed to improve
current emission and reliability. Thick gate insulators were used to prevent gate dielectric
breakdown. Exhibit 17 below depicts the self-aligned gated field emitter. The bulk Mo
emitter and the surrounded aluminum (Al) gate are isolated by a dielectric silicon dioxide
(SiO2) stack. The electric field surrounding the tip is generated by applying a bias voltage
between the extraction gate and the emitter. A sharp emitter tip and the presence of the
gate in close proximity are necessary to achieve field emission at low voltage.
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Exhibit 17. Representative Molybdenum-based FEA in Zhu et al. Paper
(a) Schematic and (b) Cross-sectional view of the self-aligned gated field emitter ;(c) Simulation of the electric field distribution; (d)
Simulation of the relationship between electric field at the emitter tip and height difference for different gate aperture radii
Source: Zhu et al, Micromachines, 2017
The authors then investigated the average transmission efficiency through a 3D self-
consistent ray tracing simulation of the particle trajectories. This can predict the emission
current leakage considering unavoidable space charge effects. The simulations showed
that the field-emitted current was intercepted by the gate structure, resulting in a gate
leakage current of around 20% and the average transmission efficiency of around 80%,
which is independently corroborated by the authors’ empirical studies. Due to the lack of
an integrated extractor gate, these devices operate at high extraction voltages, and 60%
of the total emitted current is intercepted by the extraction gate. The authors then added
an integrated gate to improve the robustness of the device, and then a higher-current
density beam and lower power consumption can be expected.
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Exhibit 18. Simulation Verification of Gate Leakage Phenomenon; Electron Trajectories
Source: Zhu et al, Micromachines, 2017
We next highlight the FEA fabrication process more so to showcase the delicate steps that
are a necessity and will likely determine commercial success. The fabrication process flow
of self-aligned-gate Mo-FEA’s is shown in the exhibit on the next page. The whole process
requires one single lithography mask. The fabrication steps comprise deposition of SiO2
and Al layer, anisotropic etching of gate aperture, and isotropic etching of emitter cone
and removal of sacrificial SiO2/Al stack. The substrate is a 4-inch high purity double-sided
polished Mo wafer, with a thickness of 400 m. First, a SiO2 layer with a thickness of 1 m
was deposited as the gate dielectric using plasma enhanced chemical vapor deposition.
Next, a 500 m Al film was deposited by magnetron sputtering on top of the oxide layer as
shown in Exhibit 19, panel 3b. This Al film was patterned by dry-etching in CH3F plasma
as defined by a photoresist mask. The patterned Al film concurrently functions as the SiO2
etching hard mask and also latterly as the gate electrode. The patterned
SiO2/Al/photoresist stacks on the bulk Mo. The perimeter shadowing of the gate aperture
is attributed to the preferential directional bombardment of reactive ions in the dry etching
process. The center of the emitter tip, relative to the gate electrode, is thus self-aligned
during this process. SEM graphs (false color) of the device at different steps of the
fabrication are also shown.
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Exhibit 19. In order: Fabrication process flow of the bulk Mo-FEAs a) PECVD SiO2; b) Deposition of
Al layer; c) Spin coating with PR; d) Lithography and gate-stack etching; e) Strip photoresist; f) ICP
etching of Mo emitter cone; g) Ultra-sonication; SEM images including a) gate-stack etching; b)
Inductively coupled plasma; c) Emitter cone releasing by ultra-sonication
Source: Zhu et al, Micromachines, 2017
The FEA after photoresist stripping shows a flat surface with no noticeable residues. The
Mo FEA tips were etched by SF6/Ar dry etching. Optimized ICP etcher process conditions,
such as pressure, plasma power, and gas flows were used as reported in literature. In the
last process step, ultrasonic agitation of 15 W was used to remove the sacrificial SiO2/Al
stack. Here, device yield is defined as the sacrificial stack goes off and the exposed tip is
sharp. A device yield of 90% was therefore obtained. The final ultra-sonication principally
limits the attainable yield here, and the authors note that future wet-etching is perhaps one
good alternative, provided that the selectivity between the gate metal and bulk Mo is high.
A completed FEA is shown in the final image in the previous exhibit, where an enlarged
view of a single emitter is shown in the inset. Mo-FEAs with various geometries of patterns
were investigated to control the geometry of the resultant tips. For all patterns, the
effective radius of the mask geometries was in the range of 2.5–5.0 m; gate apertures
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were in the range of 5–15 m due to the limitation of fabrication and the cost; and the pitch
was in the range of 10–30 m.
Exhibit 20. (a) Electron micrographs of the measurement configuration consisting
of the anode, gate and ground landed electrodes, and (b) Magnified view. (c)
Measured I–V characteristics of one gated Mo field emitter, and (d) the
corresponding Fowler–Nordheim (F–N) plots
Source: Zhu et al, Micromachines, 2017
Emission characteristics as a function of gated voltage were studied in-situ using an SEM
equipped with four tungsten micro-anode probes, operated with an anode–cathode
separation of approximately 50 μm and at a base pressure of 3×10 −5
mbar. The emission
current was measured for arrays consisting of approximately 2500 tips. The electron
emission from the cathode was investigated using a tungsten probe anode carefully
placed adjacent to one Mo tip as shown in (b) above. Mo-FEAs of field emitters 6 μm in
height with 20 μm pitch were tested. The emission current gave a mean per tip emission
of 33.6 nA/tip measured at the gate voltage of 110 V, and there was 6.7 nA leakage
current at the gate. The average area of each emitter is 20 μm X 20 μm, such that the
current density was about 8.4 mA/cm2. Average transmission efficiency was
approximately 80%, which was consistent with the simulation. This specific example
highlights the intricacies of FEA manufacturing, which have bedeviled the industry
and been the Achilles’ heel for “commercialization.”
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CNT Cold-Cathode X-ray Technology (Source: Avachat et al., Radiation Research, Vol 193, 2020; Parmee et al., Nano
Convergence, Vol 1, 2014; Tolt et al., Journal of Vacuum Science Technology, Vol
26, 2008; Carestream DRX Nano Whitepaper, etc.)
Basics of CNT X-rays
The only other cool-cathode technology in development/partial commercialization
that we know of is the carbon nanotube (CNT)-based approach. The typical layout
of a CNT field emission X-ray tube is shown below. It is composed of a high
vacuum enclosure, often sealed, in which a cold electron gun, which consists of a
CNT cathode and an extraction grid, and a metallic target face each other.
Electrons are emitted by the electron gun (cathode) and accelerated toward the
target (anode) by a high voltage electric field (tens to hundreds of kilovolts)
depending on the application. X-rays are produced by the collision of the high
velocity electrons on the target. The extraction grid is held in close proximity to the
CNT cathode.
Exhibit 21. Rendition of a CNT-based Cool-Cathode X-ray Tube
Source: https://aetjapan.com/english/hardware_detail.php?micromini_xray_source
When it is biased positively relative to the cathode, the electrical field between the
grid and the cathode extracts electrons from the cathode. A host of criteria need to
be met in order for a CNT cathode to be qualified for commercial X-ray tube
production. Having a low extraction field for electron emission and delivering
enough current are only a small part of it, and had been the major concerns in CNT
cathode development. However, emission stability over both the long and short
terms is critical. Short-term emission stability has more often been neglected in
CNT cathode development while, in practice, it is essential for an X-ray source in
any instrument to be able to deliver a specified dose of X-ray over the data
acquisition time period. In addition, if the electron beam is to be focused, the angle
at which electrons launch from the cathode surface is important for the spot size of
the beam. All those cathode emission characteristics are also somewhat affected
by the cathode preconditioning.
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Emission performance alone, however, cannot qualify a cathode. It also has to be
able to survive the standard vacuum tube production processes. The
manufacturing process also has to factor in high baking temperatures, sometimes
at 450 °C, for an extended time to achieve a vacuum of 10−9 torr (units of
pressure) in the envelope. The baking process is done to allow the cathode to age
in a controlled manner up to one and a half times the tube operation voltage, and
to prevent any loose carbon particles being pulled out by high electrical stresses.
As a result, the CNT cathode has to have a high thermal and mechanical stability.
Any loose carbon or other particles induced from the cathode at the end of
processing and during emission will cause arcing or current leakage, and therefore,
a failed tube, even if it is the smallest amount of particles undetectable by any
means.
Manufacturing CNT-based Cathodes
CNTs have some of the highest attainable aspect ratios, high thermal conductivity, low
chemical reactivity in non-oxidizing atmospheres, highly parallelized en masse fabrication,
a low sputtering cross-section, a low secondary electron coefficient, and insensitivity to
direct ion-bombardment. CNTs are becoming increasingly inexpensive with the release of
new, ever larger growth reactors. However, field emitters require ultrahigh vacuum (<10 −8
mbar) to provide stable operation. This limits their practical application as the material
platform on which the emitters are fabricated largely dictates the tip robustness toward
poor or compromised vacuum conditions which result in aggressive local ionization. CNT
have been manufactured over the last 10–12 years using a variety of techniques such as
thin film deposition, electrophoresis, chemical vapor deposition, Drop cast and spray
techniques, etc. The choice of the manufacturing technique profoundly influences the
emission characteristics of the specific CNT. A complete description of the different
techniques is beyond the scope of this report, but Parmee et al. (Nano Convergence,
2014) provide a detailed manuscript on the same.
Exhibit 22. Methods of Manufacturing CNT Thin Films Used in X-rays
Source: Parmee et al, Nano Convergence, Vol 1, 2014
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Performance Characteristics of CNT-based X-ray Tubes
A snapshot of the performance characteristics of various CNT-based cool cathode X-rays
tubes developed over the years is shown in the exhibit below. Each of these endeavors is
marked by some incremental change in the manufacturing, operational, or design
parameters. As can be seen, the performance metrics are relatively widespread, pointing
to the challenges of consistently manufacturing CNT-based, cool-cathode X-ray tubes.
Exhibit 23. Performance Characteristics of Some CNT cool-cathode X-ray Tubes
Source: Parmee et al, Nano Convergence, Vol 1, 2014
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Key Performance/Design/Manufacturing Issues
Key issues from a design, manufacturing, and commercialization perspective need
to be considered (for any cool-cathode technology):
A necessary step in X-ray tube design is electron optics modeling. The
modeling of electron trajectories requires an understanding of the initial
conditions at the surface of the emitting cathode. Models have existed for
thermionic cathode emission but none for monolithic CNT cathode
emission.
How is the manufacturing process “optimized” to get CNTs (or for that
matter, other materials) consistently “formed” in a certain “aspect ratio”
that determines emission characteristics? How do you maintain
“homogeneity” and “stability” of the various emitters, while preventing
“noise” and “edge effects?” How do you reduce temporal instabilities?
Electron beam density and photon flux density will depend on the incident
current on the cathode, coupled with the electric field applied between the
two electrodes to accelerate the electrons. The question then remains . . .
how do you employ digital switching to generate enough electrons to get
adequate X-ray exposure to get a clear image?
In thermionic sourced X-rays, the emission is intimately dependent on the
filament temperature—as increasing the emitter temperature allows for
much of the electron population to pass over the surface barrier—such
tubes enable analog control over the magnitude of the emission current.
This beam current is controlled by monitoring the anode current and
adjusting the inferred filament temperature using a closed-loop control
system. The intrinsic finite thermal inertia of the heated coil, when coupled
to the lagging response of such feedback control results in a
comparatively slow time response, often several hundreds of
milliseconds. In addition, care must be taken to limit the filament drive
current to prevent excessive power dissipation, with subsequent damage
or destruction of the filament. Issues with severe electron migration can
be a significant challenge. How does such a “feedback” loop exist in a
closed-loop system?
What does life-cycle testing for the system look like? Under what
conditions has the system been stress-tested?
How do electron beam dynamics look like? How do you account for edge
effects and asymmetries?
How does software compensate for some of the system shortcomings?
For a certain focal spot, what does the exposure-time and digital toggling
sequence look like for a certain mA current and kVP electric field level?
How does durability of the system look under repeat wear-tear
conditions?
For any emitter, what is the redundancy factor built in?
How do you ensure “consistency” in product manufacturing? To point out
the obvious, images delivered by any system have to be consistent,
accurate, and artifact-free.
Finally, how do you compare images developed with CNT-based (or for
that matter any cool-cathode technology based) source to conventional
thermionic systems, especially in critical applications such as oncology?
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Nanox Technology—A Primer (Source: Company Reports)
Nanox is developing the first cold cathode stationary nanoscale field emission (FE)
technology, akin to “digital ignition” for the “engine,” i.e., the X-ray tube. We have not been
able to glean the specifics of the manufacturing process for the Nanox ARC FE array
using Molybdenum. The company’s Form F-1 specifically states that it has “optimized the
MEMs proprietary manufacturing process and currently is using its own equipment in the
clean rooms located at the University of Tokyo to manufacture the MEMs X-ray chip.”
Exhibit 24. In order: Silicon Chip with MEMS-based X-ray emitter; Close-up nanocone Electron Firing
Source: Company Reports
The few specifics that we have gleaned are (source: company documents):
Proprietary MEMS techniques to fabricate millions of nanoscale gates and diode
phase shifters (DPSs) on each silicon chip. Nanox emitters are more uniform
than carbon nanotubes, and smaller than conventional Spindt-type cathodes.
High efficiency due to sturdy gate design, millions of nanogates manufactured on
a nanoscale chip, and no risk of tungsten metal deposition on work function.
Longevity: Limited metal edge exposure, high efficiency and longevity.
Uniformity & Stability: High tip uniformity and low burn off due to only tip cone
exposure.
Maximizes power management (<50 V).
Nanox’s cold cathode can generate a certain current irrespective of the anode
voltage. The Nanox gate electrode practically “ejects” the electrons from the
cathode and controls the amount of X-ray radiation, enabling independent control
of the X-ray current (mA tube current) and the energy (KVp), that is set at the
anode. The graphs show that the current is not influenced by the anode voltage,
if it is higher than 10kV, and therefore it can be controlled only by the gate
voltage independently from the anode and can be switched within microseconds.
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Exhibit 25. In order: Schematic of FE gate in Nanox System; Current Voltage
Independence; Emission Effectiveness with Low Gate Voltage
Source: Company Reports
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The crux of Nanox’s success will be in its secret sauce for MEMS manufacturing
techniques, and the scalability to put a consistent and durable product in the field. As the
company further expands its business in connection with the commercialization of its
technology, it expects to obtain access to other clean rooms provided by third parties. The
company plans to retain its core X-ray source technology production activities for the
foreseeable future, and expects to expand manufacturing capacity, including through the
establishment of a wholly owned subsidiary in Korea with the support of SK Telecom, to
meet anticipated needs.” Nanox also expects to rely on third-party manufacturers for the
commercial production of the other components of the Nanox.ARC, if cleared or approved
by the requisite regulatory authorities. It expects to manufacture a small number of
Nanox.ARC units in Israel that will be used for the acceptance tests under its MSaaS
agreements. Moreover, it has entered into a contract manufacturing agreement with
Foxconn (FITI) to manufacture the Nanox.ARC, with a goal to enable the commercial
production of ~15,000 Nanox.ARC units that Nanox plans to deploy over the next 3-4
years. Under the contract manufacturing agreement, FITI will negotiate and subcontract
with other third parties for the commercial supply of the components of the Nanox.ARC in
accordance with the pre-approved supplier list and on the terms to be agreed upon by
both parties, except for the MEMs X-ray chip and the X-ray tube.
Consistency in manufacturing the cold cathode, scale-up in manufacturing, and
reliability of the core technology under actual performance conditions will be
critical to this story. The company contends that it has the necessary infrastructure
and expertise to implement the above key ingredients, although we note that scale-
up and actual performance testing will only happen over time once units are
deployed and tested in the field.
Exhibit 26. In order: Nanox Cold-Cathode Tube; University of Tokyo Manufacturing Lab
Source: Company Reports
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Potential Benefits of Nanox MEMS X-ray Technology (Source: Company Reports)
Key Comparative Metrics
The table below provides a qualitative picture of the “potential” benefits of Nanox’ cold-
cathode X-ray technology. We specifically use the word “potential” given that this is a pre-
regulatory approval story, and real-world field testing has not been done yet.
Exhibit 27. Approximate Comparison between Thermionic vs. Nanox X-ray Source
Source: Company Reports; Oppenheimer estimates
Improving on Motion-induced Blur
The fundamental process of X-ray generation using thermionic emission creates certain
limitations to device design, which in turn lead to compensatory efforts that need to be put
in place in terms of software, hardware, and operator techniques. Almost all thermionic
Thermionic Systems Nanox MEMS Cool Cathode Systems
Cost $300K - $2M depending on application $10 - $40K depending on application
Tube length 50mm + 35mm
Voltage 1kV <50V
Current density 0.5 - 2.0A/cm 2 depending on usage >2.5A/cm
2
Switching No switching Digital switching within microseconds allows for
manipulating x-ray intensity
Motion 5 revolutions/sec in typical CT scanner
Rotating gantry in some cases
No motion. Multiple x-ray sources.
Radiation Exposure 0.02 - 7.0 mSc effective dose for
x-rays of chest - barium enema.
Theoretically 8 - 80% lower radiation dose
depending on application
2 - 10.0 mSc effective dose for
CT scan
Average life span of x-ray
tube
1 - 2 years Not Known. Theoretically, life span will be dictated
by nanocone design and emission criteria.
Anode Heat Capacity 100 - 10,000W depending on general x-ray to
CT use
No cooling required
Throughput Few hundred thousand patients Theoretically, 1M or more patients
Response time 2 - 4 secs Few hundred microseconds
Correlation between applied
voltage and electron current
Direct correlation Independent
Multispectral Imaging Depth of capture possible with increasing x-ray
dosage and longer duration of exposure
Using different kV's, multipspectral imaging is
easier.
Typical scan time 15 secs 0.5 secs
Patient Wait times 15 - 20 mts between sessions, depending on
application
Theoretically no wait times due to digital switching
and cold cathode technology
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digital radiography sources employ only one X-ray source, and a large amount of the effort
in design is then spent on thermodynamics and heat transfer to allow for faster scan times
and more accurate images. There also remains a constant balancing act between the total
radiation levels and exposure times needed to reconstruct the area of interest. One of the
fundamental issues that operators have to deal with in diagnostic imaging is that of
mitigating artifacts, or in other words, any interference that will reduce image quality and
make the diagnostic assessment more problematic. The artifacts can arise due to patient
motion, surrounding objects, inherent patient characteristics, the diagnostic modality being
used and the device design itself. Importantly though, the specific parameters of images
also have an effect of the sensitivity and specificity. A sharp image requires a small focal
spot by definition. Blurring is caused by a large focal spot due to penumbra, i.e., blurring at
the edges of the image. The actual size of penumbra (P) depends on the focal spot size
(F), focus-object distance (H) and object-film (image receptor) distance (h) and is given
by:
P = (F x h) / H
.
To reduce patient motion blurring, the exposure time is made extremely short, and this
can be achieved only by using rotating tubes. Here, the actual focal spot is a small area,
but the heat produced by electron bombardment is dissipated over a very large circular
annular area. In conventional or digital radiographic units, the exposure time is kept down
to a few tens of milliseconds but in CT scanners, the exposure time is more (1 or 2
seconds at best) because the X-ray tube rotates around the patient. Multi-detector CT
scanners cover a larger patient area (with greater number of slices per scan) in a small
exposure time. The spin rate of ~120 revolutions/minute introduces motion-induced
artifacts that require compensation in the reconstructed images. A cone beam spiral CT is
a glorified example of the limitations of thermionic emission technologies, and the
“surrounding infrastructure” that needs to be implemented to correct images.
Exhibit 28. In order: Step & shoot mode in GE mammography unit; Continuous
Mode in Hologic Breast tomosynthesis unit; Image reconstruction due to motion in
a CT scanner
(exhibit continues next page)
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Source: https://www.slideserve.com/eze/basic-principles-of-computed-tomography; Company Reports
The interconnected issues of thermionic emission restricting use of multiple X-ray sources,
and that necessitating motion of the X-ray source to capture images and reconstruct on
the other end (2D to 3D, etc.) are what cold-cathode technology such as Nanox’s MEMS
approach “could” potentially address. However, as we have noted multiple times before,
the technology needs to be validated in the real world after being shown to be
manufactured reliably.
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Intellectual Property (Source: Company Reports)
A snapshot of Nanox’s IP portfolio is shown in the exhibit below. As is the case
with any technology, certain manufacturing techniques and processes proprietary
to any company are specifically intended to make replication more difficult. In
Nanox’s case, as stated before, we do not have a grasp on numerous aspects of
the manufacturing process, which is ultimately what will determine commercial
success of this technology. At the same time, Nanox’s business strategy to
“license” the core technology to strategic partners for a particular
indication/geography can be viewed in a somewhat benign manner as an attempt
to avoid getting drawn into IP litigation battles, while promoting adoption of its cold-
cathode technology.
Exhibit 29. Nanox IP portfolio
Source: Company Reports
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Competition—Cold Cathode (Source: www.vecimaging.com; www.medidensha.com; www.carestream.com)
Most of the cool cathode X-ray technology being developed, in various forms, is
that of carbon nanotubes (CNT). Most prominent programs in the development of
CNT cool cathode technologies are highlighted below.
VEC Imaging
VEC Imaging was formed in 2019 as a joint venture between Varex Imaging and
H+P Advanced Technology. Not much is publicly available on VEC’s technology
specifics, although we have been advised by Varex Imaging that VEC has made
considerable progress in “life-cycle” testing of CNT-based cool-cathode
technology, and is currently working with large OEMs on beta-testing the
technology. As discussed in the earlier sections, the inherent challenges of
manufacturing consistent CNT has stymied the commercialization of this
technology, and it will be interesting to see how VEC overcomes some of these
challenges. A key component of VEC’s proprietary technology has to do with a
proprietary manufacturing process with improved chemical and thermal stability,
better electrical and thermal conductivity, and enhanced field emission properties
(high emission current and higher emission stability). VEC Imaging’s process is
based on curable liquid adhesives, instead of rigid adhesive tape. This process is
stated to be not highly sensitive to process parameters that are difficult to control,
such as the adhesive strength and applied pressure. Instead, activation results can
be controlled with greater accuracy by controlling easily controllable process
parameters—curing temperature and time. The applications for this CNT-based
cool-cathode approach are in the entire domain of Varex’s current customer
base—CT/dental/mammography/industrial/NDT/oncology/etc.
Exhibit 30. 3D Renderings of VEC’s Breast Tomosynthesis and C-arm Imaging
Source: https://www.vecimaging.com/tomo.php
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Carestream
Carestream, based in California, is a private company providing digital X-ray
imaging solutions to hospitals, imaging centers, medical group practices, women's
healthcare and dental practices. Pertinent to the discussion of Nanox is
Carestream’s DRX Nano Dental X-ray system based on CNT technology (shown
below) developed by Micro-X in Australia. We do not have access to the current
commercial uptake numbers for DRX Nano; hence, we refrain from speculating on
commercial uptake rates and consistency of product performance.
Exhibit 31. Carestream DRX Nano Dental X-ray Scanner with CNT Technology
Source: www.carestream.com
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Meidensha Corporation
Meidensha Corporation, based in Tokyo, Japan, claims to have developed a CNT-
based cool-cathode technology with a dramatically reduced footprint for the X-ray
tube, and applicability across the spectrum of X-ray scanning needs. The
company’s website states that, “according to a Meiden study, the product is smaller
than half the size of conventional hot cathode products and thus expected to
downsize and lighten X-ray inspection system.” We highlight the tube configuration
from the company’s website, while stating the obvious that there is no publicly
available data to parse through on the “consistency” and “durability” of the
technology.
Exhibit 32. Meiden Cool-cathode X-ray Tube
Source: https://www.meidensha.com/news/news_03/news_03_01/1231258_3190.html
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Competition—Thermionic Cathode (Source: Philips; Siemens; GE; Hologic; Toshiba; etc.)
The thermionic X-ray based market is dominated by key players such as Philips, GE,
Toshiba, Siemens, Hologic, Carestream, Canon, Fujitsu, etc. A complete description of
the intricacies of each and every type of X-ray device is beyond the scope of this report.
Suffice it to say that the each device format is catered to the specific application, therefore
bringing a certain flavor to device design and performance. The incumbents are well
financed and well accepted in the marketplace, and the logistics of image procurement,
reimbursement, and services are finely tuned in the marketplace. Hence, for a disruptive
player like Nanox to make inroads, the “validation” required to make it equal or better than
the incumbents will have to be initially in run of the mill applications such as broken bones,
chest X-rays, preventative screens, etc.
Exhibit 33. In order: Philips’ Line of X-ray Machines (Partial List); GE X-ray Machines; Siemens
Source: Company Reports
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Analysis of Contracts (Source: Company Reports)
Guaranteed Contracts backed by LOC
A key component of the Nanox story is the existence of negotiated guaranteed minimum
annual contracts signed over the last few months with various third parties in different
geographies. These contracts serve as a backdrop of a certain stream of revenues over
the next three years. Nanox has entered into nine MSaaS Agreements to deploy 5,150
Nanox Systems in 12 regions as described in the exhibit below. Under the terms of each
agreement, Nanox has granted the other party a limited, non-transferable, exclusive, sub-
licensable right to access and operate the Nanox System in the region indicated for such
party. Nanox will provide the specified number of Nanox Systems to each entity as
indicated based on agreed shipment schedules, subject to local regulatory approval and
material compliance with acceptance test protocol. The other party undertakes to deploy
the systems to provide a minimum number of scans per year (based on 7 scans per day
and 23 days per month) on a pay-per-scan basis at a minimum of $14 per scan, and to
pay a minimum annual fee (including payments to its partners) in the amount indicated
below. The payments are expected to be guaranteed by a standby letter of credit in the
amount equal to the minimum annual fee in favor of NNOX after receipt of the conditions
precedent. Title to the Nanox Systems provided under each agreement remains with
Nanox, and the other party will only have a limited license to use the Nanox Systems.
Nanox will undertake billing, radiology, and maintenance services and provide training for
a local medical professional workforce to operate the Nanox.ARC. Our read of the MSaaS
agreements with Golden Vine International Company, Ltd. and APR 1998 S.L. does
stipulate an escape clause based on market evidence after launch, or a 6-month trial
period, respectively.
Exhibit 34. Key Contract Terms Signed by Nanox with Third parties
Source: Nanox F-1 filing and press releases
Entity Date of MSaaS
Agreement Region
Number of NNOX
Systems to be
Provided
Min. Annual Fee and
Amount of LOC
Initial
Term
Renewal
Term
The Gateway Group, Ltd. 11-Feb-20
Australia, New
Zealand and
Norway
1,000 $58M 3 years 3 years
Golden Vine International
Company, Ltd. 28-May-20
Taiwan and
Singapore 500 Up to $29M 5 years 5 years
Promedica Bioelectronics
s.r.l. 29-May-20 Italy 500 $29M 4 years 3 years
JSC Roel Group 29-May-20 Russian
Federation 500 $12.6M 5 years 5 years
Clarity Medical Solution, a
division of “Grodnobioproduct”
LLC
4-Jun-20 Belarus 100 $3.7M 3 years 4 years
Gold Rush 16-Jun-20 South Africa 500 $15.5M 3 years 3 years
LATAM Business
Development Group Ltd. $4.8M ($9M LOC in Yr 1
$14.5M Year 2;
$24.2M Year 3
APR 1998 S.L. 25-Jul-20 Spain 420 $11.4M 5 years 5 years
SPI Medical 9-Sep-20 Mexico 630 $17M 7 years Not Spec.
TOTAL 5,150 $181M
6-Jul-20 Brazil 6 years 3 years1,000
49
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Nanox has also entered into certain business development agreements with finders to
obtain MSaaS agreements in specified countries. Once the standby letter of credit (LOC)
has been issued in connection with each MSaaS agreement above, Nanox will grant
warrants to purchase its ordinary shares to the finder who caused such MSaaS agreement
to be signed between the company and the entity. The warrants will be granted in an
amount equal to 30% of the amount of the standby letter of credit divided by 35.36 and
have an exercise price equal to the fair market value of the company’s ordinary shares at
the time of the grant. The finder will also be entitled to 5% of the gross amount that NNOX
receives from scans made by the Nanox Systems under the MSaaS agreement. If a finder
causes an MSaaS agreement to be signed with a minimum of 23 scans per day at a
minimum of $30 per scan, once the standby letter of credit has been issued, Nanox will
grant the finder warrants to purchase ordinary shares in an amount equal to 5% of the
amount of the standby letter of credit divided by the fair market value of the ordinary
shares at the time of issuance of the warrant. If a finder causes a letter of intent to be
signed with an entity that will cooperate to deploy Nanox Systems, Nanox will grant the
finder warrants to purchase ordinary shares in an amount equal to $300,000 divided by
the market price of its common shares.
Other Agreements
USARAD
Nanox entered into a non-exclusive collaboration agreement, dated January 22, 2020,
with USARAD. Under the terms of the agreement, USARAD will use best efforts to contact
official public health authorities of governments and/or medical center operators in the US,
to facilitate the closing of commercial agreements between Nanox and the third parties for
the deployment of 3,000 Nanox Systems and to promote the Nanox.CLOUD services with
radiologists for joining the Nanox diagnostics services platform. Nanox is expected to
provide the deployed Nanox Systems on a pay-per-scan subscription basis using the
Nanox.CLOUD. Subject to FDA clearance and a satisfactory Nanox System pilot testing
by the Medical System Operator, USARAD undertakes to use best efforts to engage
Medical System Operators that will undertake an annual subscription to a minimum
number of scans per year. USARAD also undertakes to establish connections with the
radiologist community in the US. USARAD will receive a fee-per-scan, which will be
subject to an upfront subscription commitment and fees. Nanox will fully finance the cost
of the Nanox Systems to be deployed in accordance with any commercial agreements
with the end customer and their ongoing maintenance, as well as to provide training for
the Nanox System operations. USARAD undertakes to make introductions to local
maintenance contractors that are qualified to maintain medical equipment for the purpose
of providing ongoing maintenance services for the Nanox Systems on the company’s
behalf. The agreement will be in effect for 12 months from the date of the agreement and
will be automatically renewed for additional 12-month periods. The agreement may be
terminated by 90 days’ advance written notice by either party, by notice of the non-
breaching party in case of a material breach of a party's material obligations, or by either
party in case of the bankruptcy or insolvency of the other party.
50
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
SK Telecom
On June 4, 2020, Nanox entered into a collaboration agreement with SK Telecom,
pursuant to which the company and SK Telecom will further explore and engage in good
faith to develop a definitive agreement within six months of the date of the agreement for
the deployment of 2,500 Nanox Systems in South Korea and Vietnam. Further, Nanox will
use commercially reasonable efforts to establish a wholly owned subsidiary in South
Korea with the support of SK Telecom for the purpose of manufacturing MEMs X-ray chips
for the Nanox.ARC.
AI Partners
In 2019 and 2020, Nanox entered into collaboration agreements with certain artificial
intelligence partners, including Brainomix Limited, CureMetrix, Inc., IMedis AI Ltd. and
Qure.ai Technologies Pyt. Ltd. In 2020, it entered into non-binding agreements with Lunit
Inc. and VUNO Inc.. CureMetrix will support the development and testing of Nanox’
technology together with medical imaging scans, in a diagnostic advisory capacity.
Brainomix, IMedis and Qure.ai will each collaborate with Nanox in the testing of the
Nanox.ARC and the Nanox.CLOUD together with proprietary AI algorithms used for the
analysis of brain damage caused by stroke, chest and abdomen X-rays, and chest and
head X-rays, respectively, in medical imaging scans. Lunit and VUNO will each cooperate
with Nanox to jointly conduct research and development for commercializing medical AI
solutions based on digital X-ray and CT technology.
A-Labs
Nanox has signed a consulting agreement with A-Labs for services in connection with
various transactions. Per the agreement, Nanox has agreed to pay A-Labs an advance
payment of $1M, and the agreement calls for 1.5% cash payment for a Triggering Event,
defined as an IPO or an M&A transaction. If Nanox receives proceeds exceeding $150M
in the Triggering Event and has a pre-transaction valuation of at least $400M, A-Labs will
be entitled to 2.5% in cash of all amounts received. In addition, Nanox has granted A-Labs
an amount of warrants to purchase Nanox’s ordinary shares equal to 2.5% of all shares
issued in the IPO. A-Labs has agreed not to sell or transfer any of the ordinary shares
during the one-year period commencing from the closing of this offering. The agreement
will be in effect until December 31, 2020.
Suffice it to say, how these contracts are executed will determine the success of the
Nanox story, post-regulatory clearance and commercial manufacturability.
51
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Financials As Nanox has referenced in its Form F-1, the three key pillars of its business strategy are:
Subscription Model
The foundation of the subscription model is an integrated offering of the Nanox.ARC and
the Nanox.CLOUD. Under the subscription model, the company expects to sell the Nanox
System, if cleared or approved by the requisite regulatory authorities, either at low cost or
at no cost, and to receive a portion of the proceeds from each scan as the right-to-use
licensing fee, and fees for usage of the Nanox.CLOUD, artificial intelligence capability and
maintenance support, with the remaining amount allocated among its partners, including
the local operators, radiologists, cloud storage providers, medical AI software providers
and others, on a case by case basis. While the actual pricing charged by local operators
may be greater than our suggested retail price, the retail price per scan in all markets
other than the US is still expected to be substantially less than the global average of
approximately $300. In the US, Nanox expects the retail price to represent a significant
reduction compared to the $3,275 average cost of a CT scan. The Nanox System will be
operated by local operators independent from the company, but there is the possibility to
contract with third parties to provide day-to-day maintenance of the Nanox System.
Accordingly, Nanox plans to produce and deploy approximately 15,000 Nanox.ARC units.
Key to the subscription model, and the basis of our entire pro forma model based on the
signed guaranteed contracts, is the $14/scan for 7 scans/day for 23 days/month minimum.
The overall cost of these scans is expected to be ~$40/scan in the subscription model,
and the expected distribution of this amount is shown in the exhibit below.
Exhibit 35. Approximate Cost Breakdown @$40/scan for the Nanox Subscription Model
Source: Company Reports
We caveat Nanox’s expectations below with the same points as mentioned earlier—these
are predicated on successful regulatory clearances, sustainable manufacturing, and
durable and consistent real-world results. The company’s early-stage nature necessitates
a redundant qualification of these inherent risks in the story. As mentioned in the F-1, the
company expects the initial wave of revenue to come from deploying ~15,000 Nanox.ARC
systems globally, which is primarily comprised of eight signed MSaaS long-term contracts
Nanox royalty 35%
Regional service
provider cut 25%
Radiologist fee 40%
52
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
(four to six years), for 5,150 Nanox.ARC units to be deployed across 12 countries as
described in the earlier section. Along with these 5,150 systems to be deployed with
guaranteed contracts backed up by letters of credit, Nanox has also signed two
collaboration agreements in the US and in South Korea/Vietnam for deployment of
additional 5,500 units through USARAD and SK Telecom. Under the executed contracts,
Nanox, expects to receive a contracted fee of ~$14 per scan that covers right-to-use plus
AI, cloud storage and maintenance. The contracts specifically call for minimum 7
scans/day backed by customer SBLC.
While the company has its own internal pro forma projections based on a certain
interpretation and expectation of launch dates and commercialization, we believe it is
prudent to be on the conservative side, especially given the inherent execution risks in the
early-stage nature of the company. The contracts guaranteed by LOC are a positive, but
we believe our 50–60% discount from company expectations is prudent given:
Real-world validation will need to be performed.
Expectation is that it will take 45-days to commission a system.
How does the Nanox CLOUD work? Is there a workaround? How reliable will the
Nanox CLOUD be?
The logistics of who will do the scans (preventative or otherwise) need to be
worked out. At the same time, how do you contract with local radiologists (or
otherwise remote) to do the readouts? How do you ensure liability risk is
adequately managed?
The contracts specifically call for 7 scans/day for 23 days/month. How does the
credit enforcement mechanism work if a particular center falls short of these
metrics?
How does revenue recognition happen when any covenants/minimum amounts
get tripped?
What happens in the event of a default?
Licensing Model
For some market participants, Nanox expects to provide an intermediate solution through
which they will adopt its X-ray source technology for their existing systems. Under the
licensing model, Nanox would be engaged to tailor its X-ray source to the specific systems
of medical imaging device manufacturers or to license its X-ray source technology to them
to develop new types of imaging systems for a one-time, licensing fee upfront for the X-ray
source, as well as recurring royalty payments of ~5% for each system sold. The licensees
would be responsible for the operation of the medical imaging systems integrating
Nanox’s X-ray source. Although the company expects to initially rely on the licensing
model, in part, it views the licensing model as a transitional phase, aimed at maximizing
the commercial value of its technology and strategic buy-in from market participants.
FUJIFILM Corporation was the first medical imaging device manufacturer to participate in
Nanox’s licensing model. The terms of the commercial agreement are intended to cover
the exclusive, worldwide licensing of certain patents and know-how related to
mammography medical devices and solutions owned by Nanox to FUJIFILM Corporation
to develop, manufacture, market, distribute, operate and use mammography equipment
and services. As of the writing of this report, Nanox is in discussions on the terms of a
potential commercial agreement with FUJIFILM. We note that in our pro forma model, we
have not included “any” licensing revenues for the next four years, in line with our
approach of prudence given Nanox’s early-stage nature.
53
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Sales Model
In certain countries, such as China, Nanox intends to commercialize its technology using
the sales model to accommodate specific local regulatory requirements. Under this model,
it expects to sell the Nanox System, if cleared or approved by the requisite regulatory
authorities, for a one-time charge. This retail price is expected to be higher than the up-
front sales price under the subscription model but still substantially lower than the cost of
existing medical imaging systems. Nanox also expects to enter into arrangements with
third-party cloud vendors which will be responsible for providing Nanox.CLOUD services,
and be paid separately by the owner-operators of the Nanox Systems. In addition, the
company expects to contract with third-party service providers to provide maintenance
services for the Nanox Systems at the owner-operators’ own costs. The key construct of
the sales model includes a certain up-front capital expense structured for a local
geography. However, the lack of specifics on the ASP and on potential unit sales in key
geographies forces us to “not” include any revenues from this business strategy also.
To account for all of the above, our pro forma revenue profile is significantly lower than
company expectations. We prefer being conservative at this stage.
Exhibit 36. In order: Unit placements; Quarterly Revenue Profile ($, MM) from Various Business Segments
Source: Company Reports; Oppenheimer estimates
0
100
200
300
400
500
600
700
800
900
1000
Q1-21E Q2-21E Q3-21E Q4-21E Q1-22E Q2-22E Q3-22E Q4-22E
Latam buisness developmen group Ltd. APR JHB / SA Clarity Medical (Oil & Food) ROEL Group Golden Vine (Liao Family) Promedica Gateway Group
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Q1-20A Q2-20A Q3-20E Q4-20E Q1-21E Q2-21E Q3-21E Q4-21E Q1-22E Q2-22E Q3-22E Q4-22E
Licensing Revenues Non-Contracted Revenues Contracted Revenues
Regulatory Clearance starting Q1-21; Full Manufacturing and deployment assumed 2H21.
54
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
In most countries, other than the US, Nanox expects to primarily market through local
partnerships with national branding and operational market participants in the target
region. These local partners would be engaged in deploying and operating the Nanox
systems, training and recruiting a local medical professional workforce to operate the
systems and, providing medical imaging diagnostics for the systems’ scan results. In the
US, the game plan is to deploy the systems to urgent care units, outpatient clinics, and
retail locations could potentially become medical imaging service providers with the
support of the appropriate partners and radiologists. The company has already initiated
discussions with some of the largest urgent care units, private clinic chains, and retail
locations.
Admittedly, there are various moving parts in the story that make precise estimation
problematic. Our overall approach to the story has been that the science makes sense,
the potential opportunity remains significant, and the presence of guaranteed minimum
contracts is encouraging. However, execution risk is high—both on the manufacturing and
deliverability side, as well as on the post-launch logistics and implementation side. For
these reasons, our pro forma revenue projections are 50–60% lower than “potentially”
possible under these contracts. At the same time, we are being conservative in
forecasting our op-ex profile, modeling in ~$100M in op-ex in FY22. Again, this is
significantly higher than company projections, but we believe it is prudent to create a
buffer given the inherent uncertainties in logistics once the product is launched.
Exhibit 37. Quarterly Op-Ex Profile
Source: Oppenheimer & Co. estimates
Our pro forma models do not envision profitability until at least FY24, given the inherently
conservative assumptions made. To the extent that the company can alleviate any launch
hiccups, and manage commercial manufacturing and launch relatively smoothly, the op-ex
profile should come down. We do not envision additional capital raises for at least two to
three years.
$0
$10
$20
$30
$40
$50
$60
Q1-20A Q2-20A Q3-20E Q4-20E Q1-21E Q2-21E Q3-21E Q4-21E Q1-22E Q2-22E Q3-22E Q4-22E
Q u
a rt
e rl
y E
xp e
n se
P ro
fi le
( $
,M M
)
Other G&A Marketing R&D COGS
55
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Management Ran Poliakine, CEO
Ran is founder of Nanox, and is Chairman of the Board of Directors. Mr. Poliakine
has served as Chief Executive Officer since September 2019, and served as CEO
of Nanox Gibraltar since August 2018. Prior to that, he served as Chief Strategy
Officer of Nanox Gibraltar from June 2015 to August 2018. Mr. Poliakine is a serial
entrepreneur and has founded numerous companies over the past two decades,
including SixAI Ltd. and its controlled subsidiary (51%) Musashi Ai Ltd., Powermat
Technologies Ltd., Wellsense Technologies Ltd., Tap Systems, Inc. and Illumigyn,
Ltd.. Mr. Poliakine is a member of the board of directors of SixAI Ltd., Powermat
Technologies Ltd., Musashi and CLKIM Ltd. In addition, he currently serves as a
member of senior management of Illumigyn.
Itzhak Maayan, CFO
Itzhak Maayan has served as Chief Financial Officer since November 2019. Prior
to joining Nanox, Mr. Maayan served in different finance leadership roles at Perrigo
Company from 2007 to 2019, including Vice President, Financial Services and
European Investor Relations, Vice President, International Finance, and Vice
President and CFO, Perrigo Israel. Prior to Perrigo Company, he held various
finance leadership roles at Cisco Systems Israel from 2003 to 2007, Xtivia, Inc.
from 1999 to 2003, Kulick & Soffa from 1995 to 1999 and Elscint Ltd. from 1993 to
1995. Mr. Maayan received his bachelor’s degree in economics and accounting
from Haifa University, and is a certified public accountant in Israel.
Tal Shank
Tal Shank has served as Vice President of Corporate Development since
September 2019. Mr. Shank has served as Head of Corporate Development at
Illumigyn from 2017 to date. From 2016 to 2017, he was responsible for the
corporate and governance aspects of Head Start, a company supplier of services
to technology portfolio companies related to Ran Poliakine. Prior to that, Mr. Shank
served as Deputy CEO & Legal Counsel of Speech Modules Holdings Ltd. from
2014 to 2015. From 2009 to 2014, Mr. Shank worked at Guy, Bachar & Co. Law
Firm, where he started as an associate and became partner in 2011. He has
practiced corporate and securities law in Israel since 2003, and holds an M.B.A.
and a LL.M. from Tel Aviv University.
Yoel Raab
Yoel Raab has served as Chief Technology Officer since September 2019. Mr.
Raab serves as CTO of Six-Eye Interactive Ltd., of which Ran Poliakine is the sole
owner, and served as Vice President of Research and Development of Wellsense
from 2014 to 2018. Prior to that, Mr. Raab served as R&D manager and CTO of
Powermat Technologies from 2007 to 2014. He also served as VP of Research &
Development at Magink from 2006 to 2007. From 2003 to 2006, Mr. Raab served
as a consultant and managed the gamma detectors department at Orbotech
Medical. Prior to 2011, Mr. Raab worked at Intel as a process engineer and served
in various development and engineering positions from 1982 to 2001. He received
his bachelor’s degree and his master’s degree in applied physics, microelectronics
from the Hebrew University in Jerusalem.
56
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
Valuation We are initiating coverage of Nanox Imaging with a Perform rating. Nanox’s
MEMS-based, cold cathode, digital X-ray technology represents a potentially
disruptive play in the medical diagnostics and industrial screening sector. Cold-
cathode technology has long been thought to mitigate some of the traditional
issues with conventional X-ray machines that use thermionic emissions at the core,
issues such as heat generation, device lifetime, lower throughput, and image
artifacts due to source motion. Preliminary evidence presented by Nanox is
encouraging, with phantom images suggesting equivalent or better images than
conventional predicate devices on the market. However, the company is in early
stages of its life-cycle, waiting on 510(k) clearance, and then implementing the
manufacturing and subsequent launch. Hence, prudence mandates conservatism
in our modeling outlook. The stock has more than tripled since its IPO, which leads
us to a Perform rating.
Risks Execution Risk
We believe execution risk is by far the greatest risk to this story. Not only does the
company have to garner regulatory clearance for its cold-cathode X-ray technology
in different geographies, but also it has to then manufacture the product on a
consistent basis, and show stability in signal and durability of images produced.
Then, commercialization requires working out various logistics such as device
placement, ensuring throughput per the covenants in its guaranteed contracts,
creating an enforcement mechanism of contracts, revenue recognition, etc. We
bucket all of these issues together into what we define as “execution risk.”
Competitive Risk
Nanox is attempting to disrupt a $22B global X-ray diagnostics market with a new
technology that “could” render the traditional cap-ex model employed by bigger
players such as GE, Philips, Toshiba, Siemens, etc. obsolete. It is to be expected
that there is going to be pushback from the larger players. How Nanox navigates
the competitive landscape given its limited experience and resources will be critical
to long-term success.
Market Risk
Market risk, broadly speaking, is categorized as the uncertainty introduced with the
presence of COVID-19 and the strain on capital budgets worldwide. Nanox’s
MSaaS model seems to be designed to alleviate some of these cap-ex strains in
key geographies worldwide. However, the devil will be in the details, and investors
are advised to factor in market risk.
57
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Nanox Imaging (NNOX) Suraj Kalia, CFA Statement of Operations
Fiscal Year ends Dec
Quarterly income statements
Numbers in MM (except per share) FY18A FY19A Q1-20A Q2-20A Q3-20E Q4-20E FY20E Q1-21E Q2-21E Q3-21E Q4-21E FY21E Q1-22E Q2-22E Q3-22E Q4-22E FY22E FY23E
Contracted Revenues $0.0 $1.0 $2.8 $7.5 $11.4 $12.5 $19.5 $30.7 $43.3 $106.0 $142.5
Non-Contracted Revenues $0.0 $0.0 $0.0 $0.0 $0.0 $0.9 $1.5 $2.5 $3.8 $8.7 $28.7
Licensing Revenues $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Sales Revenues $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Revenues $0.0 $0.0 $0.0 $0.0 $1.0 $2.8 $7.5 $11.4 $13.4 $21.0 $33.2 $47.1 $114.7 $171.2
Cost of Sales $0.0 $0.0 $0.0 $0.0 $2.0 $4.5 $10.0 $16.5 $13.0 $15.0 $23.0 $29.0 $80.0 $85.0
Gross Profit $0.0 $0.0 $0.0 $0.0 ($1.0) ($1.7) ($2.5) ($5.1) $0.4 $6.0 $10.2 $18.1 $34.7 $86.2
R&D $0.7 $2.7 $2.4 $1.8 $2.0 $2.0 $8.2 $1.0 $1.0 $1.2 $1.5 $4.7 $1.5 $2.0 $2.2 $2.5 $8.2 $10.0
Marketing $0.2 $1.6 $1.0 $0.8 $1.0 $1.0 $3.7 $5.0 $5.5 $6.0 $7.0 $23.5 $6.8 $7.5 $8.0 $10.0 $32.3 $35.0
G&A $1.0 $18.3 $4.0 $3.9 $4.0 $4.0 $15.9 $4.0 $4.2 $4.6 $5.0 $17.8 $6.0 $6.5 $7.0 $8.0 $27.5 $30.0
Other $2.0 $2.2 $2.5 $3.0 $9.7 $4.0 $4.5 $6.0 $7.0 $21.5 $25.0
Total Operating Expenses $1.9 $22.6 $7.4 $6.4 $7.0 $7.0 $27.8 $5.0 $12.9 $14.3 $16.5 $48.7 $7.5 $20.5 $23.2 $27.5 $78.7 $100.0
Operating Income ($1.9) ($22.6) ($7.4) ($6.4) ($7.0) ($7.0) ($27.8) ($5.0) ($13.9) ($16.0) ($19.0) ($53.8) ($7.1) ($14.5) ($13.0) ($9.4) ($44.0) ($13.8)
Financial (income) expenses, net $0.0 ($0.0) $0.1 ($0.1) $0.1 $0.1 $0.2 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Pretax Income ($1.9) ($22.6) ($7.4) ($6.4) ($7.1) ($7.1) ($28.0) ($5.0) ($13.9) ($16.0) ($19.0) ($53.8) ($7.1) ($14.5) ($13.0) ($9.4) ($44.0) ($13.8)
Taxes $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Net Income ($1.9) ($22.6) ($7.4) ($6.4) ($7.1) ($7.1) ($28.0) ($5.0) ($13.9) ($16.0) ($19.0) ($53.8) ($7.1) ($14.5) ($13.0) ($9.4) ($44.0) ($13.8)
EPS ($0.09) ($0.90) ($0.26) ($0.21) ($0.13) ($0.13) ($0.66) ($0.09) ($0.25) ($0.29) ($0.34) ($0.97) ($0.13) ($0.26) ($0.23) ($0.17) ($0.78) ($0.24)
Weighted Avg. Shares (MM) 20.8 25.2 28.9 29.6 55.0 55.0 42.1 55.0 55.2 55.5 56.0 55.4 56.2 56.4 56.7 57.0 56.6 58.0
Margins FY18A FY19A Q1-20A Q2-20A Q3-20E Q4-20E FY20E Q1-21E Q2-21E Q3-21E Q4-21E FY21E Q1-22E Q2-22E Q3-22E Q4-22E FY22E FY23E
Gross Margin NM NM NM NM NM NM NM NM NM NM NM NM 2.73% 28.64% 30.79% 38.37% 30.24% 50.36%
Operating Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM
Pretax Margins NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM
Net Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM
Assumptions FY18A FY19A Q1-20A Q2-20A Q3-20E Q4-20E FY20E Q1-21E Q2-21E Q3-21E Q4-21E FY21E Q1-22E Q2-22E Q3-22E Q4-22E FY22E FY23E
Revenue Growth - - - - - - - - - - - - - - - - - 49.33%
R&D as % of Rev - - - - - - - - 98.59% 42.38% 19.96% 41.37% 11.22% 9.52% 6.62% 5.31% 7.15% 5.84%
Marketing as % of Rev - - - - - - - - 542.25% 211.90% 93.16% 206.86% 50.88% 35.68% 24.07% 21.25% 28.17% 20.44%
G&A as % of Rev - - - - - - - - 414.08% 162.45% 66.54% 156.69% 44.89% 30.92% 21.06% 17.00% 23.98% 17.52%
Tax Rate - - - - - - - - 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Source: Oppenheimer estimates; Company Reports
58
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
Nanox Imaging (NNOX) Suraj Kalia, CFA Balance Sheet
Fiscal Year Ends Dec 31
$ in 000s Dec Dec % chg
2018 2019
Assets
Cash and cash equivalents $5 $8,072 NA
Prepaid expenses and other current assets $0 $1,564 NA
Related party prepaid expenses $1,694 $0 -100.0%
Total Current Assets $1,699 $9,636 467.2%
Restricted cash $0 $145 NA
Property and equipment, net $156 $228 46.2%
Deferred offering costs $0 $1,197 NA
Operating lease right-of-use asset $0 $526 NA
Other non-current assets $0 $139 NA
Total Non Cur Assets $156 $2,235 1332.7%
Total Assets $1,855 $11,871 539.9%
Liabilities
Accounts payable $82 $475 479.3%
Accrued expenses and other liabilities $0 $1,828 NA
Related party liability $8,157 $17,820 118.5%
Current maturities of operating leases $0 $140 NA
Total Cur Liab $8,239 $20,263 145.9%
Non-current operating leases $0 $386 NA
Total Long-Term Liab $0 $386 NA
Ordinary shares $58 $75 29.3%
Additional paid-in capital $11,596 $31,748 173.8%
Accumulated deficit ($18,038) ($40,601) 125.1%
Total Shareholders Deficit ($6,384) ($8,778) 37.5%
Tot Liab & Share Def $1,855 $11,871 539.9%
Source: Oppenheimer & Co. estimates; Company Reports
59
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Stock prices of other companies mentioned in this report (as of 9/11/20): Canon Inc. Sponsored ADR (CAJ-NYSE, $16.59, NOT COVERED) Foxconn Technology Co., Ltd. (2354-TAI-Taiwan, $1.80, NOT COVERED) Fujitsu Limited (6702-TKS-Tokyo, $126.17, NOT COVERED) Hitachi Ltd Sponsored ADR (HTHIY-USA-US OTC, $69.82, NOT COVERED) Hologic, Inc. (HOLX-NASDAQ, $62.04, NOT COVERED) Koninklijke Philips N.V. Sponsored ADR (PHG-NYSE, $47.12, NOT COVERED) Meidensha Corporation (6508-TKS-Tokyo, $15.85, NOT COVERED) Shimadzu Corporation (7701-TKS-Tokyo, $31.35, NOT COVERED) Siemens AG Sponsored ADR (SIEGY-US OTC, $69.13, NOT COVERED) TOSHIBA CORP Unsponsored ADR (TOSYY-US OTC, $14.13, NOT COVERED)
Disclosure Appendix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.
Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by Oppenheimer & Co. Inc: Stock Prices as of September 15, 2020 General Electric Co. (GE - NYSE, $6.15, PERFORM) Varex Imaging (VREX - NASDAQ, $11.18, PERFORM) Sony Corporation (SNE - NYSE, $77.72, OUTPERFORM)
Rating and Price Target History for: Nano-X Imaging Ltd. (NNOX) as of 09-11-2020
70
60
50
40
30
20
10 2018 2019 2020
Created by: BlueMatrix
60
Nano-X Imaging Ltd. NNOX (PERFORM) - NA
Rating and Price Target History for: General Electric Co. (GE) as of 09-11-2020
30
25
20
15
10
5 2018 2019 2020
10/23/17 U:NA
06/26/18 P:NA
Created by: BlueMatrix
Rating and Price Target History for: Varex Imaging (VREX) as of 09-11-2020
45
40
35
30
25
20
15
10 2018 2019 2020
10/21/19 I:O:$40
08/13/20 P:NA
Created by: BlueMatrix
Rating and Price Target History for: Sony Corporation (SNE) as of 09-11-2020
90
80
70
60
50
40
30 2018 2019 2020
03/17/20 I:O:$70
08/05/20 O:$100
Created by: BlueMatrix
All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer & Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price histories, please write to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager.
Oppenheimer & Co. Inc. Rating System as of January 14th, 2008:
Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months.
Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months.
Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months.
61
Nano-X Imaging Ltd.NNOX (PERFORM) - NA
Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential conflict of interest.
Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008:
Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments, and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector.
Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/ or will perform less well than higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy, aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere.
Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group.
Distribution of Ratings/IB Services Firmwide
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
OUTPERFORM [O] 405 65.53 189 46.67
PERFORM [P] 211 34.14 67 31.75
UNDERPERFORM [U] 2 0.32 0 0.00
Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Note: Stocks trading under $5 can be considered speculative and appropriate for risk tolerant investors.
Company Specific Disclosures In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for NNOX.
In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for NNOX.
In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from NNOX.
Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from NNOX.
Additional Information Available
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all Oppenheimer & Co. Inc.-covered companies by logging on to https://www.oppenheimer.com/client-login.aspx or writing to Oppenheimer & Co. Inc., 85 Broad Street, New York, NY 10004, Attention: Equity Research Department, Business Manager.
Other Disclosures
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Nano-X Imaging Ltd. NNOX (PERFORM) - NA
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Nano-X Imaging Ltd.NNOX (PERFORM) - NA
