Micro-X has signed a long-term strategic collaboration with Varex Imaging Corporation, the world’s largest independent manufacturer of x-ray technology components.

The collaboration comprises of an exclusive global license for a non-refundable fee of $7.5m (US$5m), enabling Varex to use Micro-X’s NEX Technology for multi-beam x-ray tubes, and an equity subscription to achieve a 9.9% Micro-X holding, totalling $7.5m at a 10 per cent premium to the 15-day VWAP.

Key points:

  • Long-term strategic relationship formed with Varex Imaging Corporation, the largest independent manufacturer of x-ray components globally with annual sales over US$0.8b in 2021.
  • Micro-X to provide exclusive global licence to Varex to use proprietary NEX technology in multi-beam x-ray tubes – not used in the Company’s current four business units – for US$5m (AUD$7.5m).
  • Varex to take 9.9% strategic stake in Micro-X – investing AUD$7.5m at a 10% premium, subject to 12-month escrow
  • Initial 4.9% placed immediately with remainder subject to FIRB approval.
  • A$15m funding strengthens Micro-X balance sheet and extends runway into 2024 – supports planned launch of Argus in 2022 and completion of Checkpoints development in 2023.

Under the terms of the ongoing agreements, Varex can design, manufacture, and sell multi-beam x-ray tubes using Micro-X’s proprietary NEX Technology. Varex will pay Micro X a once-off fee for this licence of US$5M (A$7.5M), payable in five milestones commencing on the date of signing and over coming months as the technology transfer is achieved from Micro-X’s Adelaide team to Varex’s facility in Salt Lake City.

Micro-X Managing Director Peter Rowland said the deal was a validation of Micro-X’s leadership in the field.

“This investment recognises the value of Micro-X’s world-leading technology with Varex, one of the world’s most innovative x-ray technology companies, validating the future importance of cold-cathode x-ray technology,” Mr Rowland said. “This long-term investment will continue to promote Micro-X on the world stage, as a leader in innovative products and technology that is designed to make lives better.

“This collaboration contributes hugely to our future growth and allows us to continue to focus on future medical and security imaging applications for our proprietary NEX Technology.”

The Licence is limited to x-ray tubes with multiple beams – an area of application not currently used in any of Micro-X’s four business units. The termination provisions within the agreements are for any uncured, material breach of the agreements including use of Micro-X IP outside this limitation and failure to pay any amounts due.

The money to be received under the collaboration consists of five equal milestone payments of $1.0m each, with the initial payment due on execution of the contract. The following four milestones, which are expected to be achieved approximately evenly across the following 12 month period, relate to staged technical achievement of goals validating the technology transfer to Varex for manufacturing of multi-beam tubes in Salt Lake City.

Strategic partnership & benefits

Varex sells x-ray tubes and associated components to x-ray imaging systems manufacturers world-wide for a range of medical and industrial applications. Each year Varex produces over 25,000 x-ray tubes and 20,000 x-ray detectors. In 2021 Varex reported over US$818M in revenue with their top five customers for that year being: Canon Medical, General Electric, Elekta, United Imaging and Varian Medical.

The strategy underpinning the collaboration is to enable Varex to offer multi-beam x-ray tubes to their global radiology systems customers for incorporation into new imaging products across a range of imaging applications. The collaboration will provide Varex with the right to use Micro-X’s intellectual property under an exclusive licence to commercialise multi-beam emitter technology. This represents a commercial opportunity for Micro-X to monetise an area of its core technology without impacting Micro-X’s existing or future plans.

Varex Imaging Chief Executive Officer Sunny Sanyal said Varex has long believed in the future importance of cold-cathode x-ray technology.

“We are pleased to continue to invest in nanotube technology to not only diversify but also deepen our expertise in this area,” Mr Sanyal said. “With several hundred carbon nanotube-based systems in the field, Micro-X is an ideal company to collaborate with and further advance adoption of these technologies.”

The global medical imaging market is forecast to continue to grow in value as a result of the rising incidence of lifestyle-related diseases, rising demand for early detection tools, technological advancements to speed up turnaround times, increased government investment, and the expansion of new facilities in developing countries. Varex’s credibility as a trusted supplier and its scale of manufacturing opens the potential to accelerate global market uptake of Micro-X technology across a range of industries.

Micro-X’s commercialisation strategy remains unchanged as a supplier of high-value imaging products and, as such, a collaboration with a leading edge, high technology x-ray component supplier has many strategic benefits in maintaining product innovation. As part of the collaboration Micro-X will investigate how Varex’s photon-counting detectors might extend the performance of its emerging CT products.

Equity investment & funding

Under the Subscription Agreement, Varex has also agreed with Micro-X to subscribe for a placement of 50,709,000 ordinary shares at a price of A$0.147 per share, representing a 10% premium to today’s 15-day VWAP (and also a 9% premium to the last closing price), giving Varex a 9.9% shareholding in the Company on completion. Varex has also entered an escrow agreement restricting dealing in or disposing of its shares in Micro-X for a period of 12 months.

The placement shares will be issued in two tranches under the Company’s available placement capacity, with 23,780,000 shares representing 4.9% of Micro-X, for an amount of A$3.5m, to be issued within three days. The balance of the placement shares for A$4m will be issued at the same price upon Varex receiving approval from the Australian Government’s Foreign Investment Review Board (FIRB). FIRB approval is being sought due to Micro-X’s activities being considered a defence industry and is expected to be received by 31 December 2022.

As part of Varex’s equity investment, a nominee will be invited to join the Micro-X board, bringing international commercial radiology market experience, and expanding the Board’s global reach and expertise.

The total funds of A$15m to be received by the Company will significantly strengthen the Company’s balance sheet. This funding will be critical to support ongoing activities including final preparations to launch the Argus product in coming months and continue significant developments in the Checkpoints programme with the DHS.

Media contact: Rebecca Puddy, Head of Corporate Communications, [email protected]