'Lunit Secures Foothold for Entry into US Market with Acquisition of Volpara'

New Zealand-Based Multinational AI Company
Acquired for 252.5 Billion Won... 97% of Sales in the US
Lunit's 3 FDA-Approved Products Also Gain Momentum for Entry

Medical AI company Lunit is making a direct entry into the US AI healthcare market through the acquisition of New Zealand-based multinational company Volpara Health Technologies.

[Photo by Lunit]

On the 14th, Lunit announced that it had signed a contract to acquire Volpara, which supplies AI solutions to more than 2,000 medical institutions in the US, for $193.07 million (approximately 252.5 billion KRW). The target of the contract is all 254.37 million shares issued by Volpara, which is listed on the Australian Securities Exchange (ASX), and Volpara will become a 100% subsidiary of Lunit. The price per share is AUD 1.15, which is a 47.4% premium compared to Volpara's previous closing price of AUD 0.78.

This acquisition marks Lunit's first overseas acquisition of a promising medical AI company since its founding. Through this acquisition, Lunit will begin generating sales in the world's largest healthcare market, the US, while securing its own AI solution sales network within the country.

Seobum Seok, CEO of Lunit, said, "Lunit's acquisition of Volpara is the fastest and most effective way for Lunit to enter the US market and an opportunity to accelerate the development of powerful solutions for early cancer diagnosis." He added, "During the acquisition process that began in the third quarter of this year, we confirmed the strong commitment of both companies to conquering cancer, which I am confident will serve as a solid foundation for strengthening cooperation and pioneering the global market in the future."

This acquisition of Volpara is interpreted as a move following Lunit's announcement in August, on its 10th anniversary, to seek 'inorganic' growth through mergers and acquisitions (M&A), moving away from traditional growth methods. In a shareholder letter, CEO Seobum emphasized, "It is extremely rare for a startup in the medical AI field to acquire another startup, and it is very rare for a domestic listed company to acquire a global company."

Lunit (left) and Volpara Health Technology logos
[Photo by Lunit]

Volpara, founded in 2009 in Wellington, New Zealand, is an AI platform company specializing in breast cancer screening. Although a New Zealand company, 96.5% of its current sales come from the US market. Last year's revenue was NZD 26.1 million (approximately 21 billion KRW), and as of the end of March, when the 2023 fiscal year ended, this year's revenue grew 34% year-on-year to NZD 35 million (approximately 28.2 billion KRW). It is said to have an average annual growth rate (CAGR) of 63%.

This acquisition is expected to be a signal for Lunit, which holds three US Food and Drug Administration (FDA)-approved products but has not yet fully entered the US market. Currently, Lunit has three FDA-approved products: the 3D breast tomosynthesis AI image analysis solution 'Lunit Insight DBT,' which recently received premarket notification (510k), the AI emergency disease automatic classification solution 'Lunit Insight CXR,' and the mammography AI image analysis solution 'Lunit Insight MMG.'

Volpara's products are used in more than 20,000 medical institutions, accounting for one-third of all mammography screening facilities in the US, and it has established a solid position in the US market with a 42% market share as of last year. Additionally, since its revenue structure is based on annual subscription models such as software as a service (SaaS) through long-term contracts with hospitals, it is evaluated that stable revenue streams can be maintained in the future.

However, Volpara has recorded operating losses due to significant investment in research and development (R&D) since its establishment. Lunit stated, "However, the loss amount has decreased from NZD 16.4 million (approximately 1.32 billion KRW) last year to NZD 9.8 million (approximately 790 million KRW) this year," adding, "After acquiring Volpara, we will do our best to accelerate the turnaround to profitability through business and financial synergies between the two companies."

Lunit's AI imaging analysis solution for mammography, 'Lunit Insight MMG'
[Photo by Lunit]

In particular, this acquisition is expected to contribute not only to market entry but also to the advancement of AI medical device products that Lunit and Volpara already possess. Volpara holds about 100 million mammography images of Western women, including those from the US, to develop precise AI models specialized in breast cancer screening. Lunit plans to continuously secure an additional annual data volume of over 20 million images after acquiring Volpara.

Considering that Lunit trained its breast cancer diagnosis AI solution with 300,000 images, utilizing the data held by Volpara is expected to widen the gap with competing products. Lunit plans to use this data to enhance the Lunit Insight MMG and Lunit Insight DBT products and actively apply it to build autonomous AI through large-scale AI models.

Teri Thomas, CEO of Volpara, said, "The Volpara board unanimously agreed that this acquisition contract is in the best interest of shareholders and accepted the acquisition proposal." She added, "This acquisition contract will enhance shareholder value, mitigate business risks, and provide an opportunity to develop products that no other company can replicate, serving as a stepping stone for both companies to become global leaders in cancer screening."

Lunit plans to fund this acquisition of Volpara through external borrowing and other means. According to the contract, Volpara is expected to hold a shareholders' meeting by the second quarter of next year and complete the final procedures with 75% shareholder approval, with the merger expected to take about 3 to 6 months. After the final acquisition of Volpara, Lunit plans to delist Volpara from the Australian market to optimize resources and focus on business development.

This content was produced with the assistance of AI translation services.