A confused press release by Nanox points to fraud

Yesterday Nanox issued a press release and filed a 6-K about its premarket submission to the FDA for a device called Nanox.Arc.  The press release contradicts numerous claims made by Nanox in the past, and contains at least one red herring.

510(k) means the device is not novel

Nanox had repeatedly claimed in the past that the Nanox.Arc device is novel.  Here is another instance, not covered previously:

Nanox.ARC, in collaboration with its companion cloud-based software Nanox.Cloud, is a novel digital x-ray device intended to provide end-to-end medical imaging services ..., according to Nanox founder and CEO Ran Poliakine.

Here is another:

...to use the Nanox ARC system on site for developing novel early-detection and screening protocols to promote global preventive healthcare practices.

The problem is a that a novel device, by definition, cannot be cleared.  Clearance aka pre-market submission aka 510(k) submission is simply a submission made to the FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, to a legally marketed device (section 513(i)(1)(A) FD&C Act) - definitely not novel.  The FDA explains:  

Novel devices include those brought to market through the premarket approval (PMA), humanitarian device exemption (HDE), and De Novo pathways, as well as a subset of those that are brought to market with 510(k) clearance or Emergency Use Authorization (EUA). Of the thousands of 510(k) clearances every year, the FDA considers only those devices with a breakthrough designation to be novel. In addition, in 2020, we are including first-of-a-kind devices authorized under our EUA authority as novel devices. Novel or innovative does not simply mean “new.” They address an unmet need, or may be safer or more effective than currently available alternatives. For FDA-approved and FDA-cleared medical devices, innovation, and safety are two sides of the same coin.

Nanox has not requested a breakthrough device designation.  The 510(k) submission therefore contradicts the claim that Nanox.Arc is novel.

510(k) confirms the RSNA 2020 demo was illegal

Nanox claims to have demonstrated Nanox.Arc version 2.0 at the "virtual" RSNA 2020 trade show last December.  Today's press release confirms the device had no clearance pending at the time of the demo.  This article explains:

A device that lacks FDA marketing clearance is considered "investigational," and therefore the company cannot promote, advertise or accept orders for it. The FDA considers such activities to be “commercialization of an unapproved device." The FDA does make some exceptions for trade shows, however,... [only if the device] is the subject of a pending 510(k) application. It cannot take orders or be prepared to take orders that might result in contracts for sale for the device unless limited to research or investigational use.”

So, since the submission was announced just yesterday, there was no clearance pending in December, which means the device was marketed illegally in December.

This can't be the first version of the "multi-source" Nanox.Arc

According to Nanox technology webpage, the first version of the multi-source Nanox.Arc looks like this:

That device is completely fake.  It is has no x-ray tube, no x-ray detector, no ability to scan - in fact, it is just a mock-up plus an LED light and a battery.  Version 1.5 on that webpage does not look less fake.

At RSNA 2020, Nanox CEO insisted that the design of the multi-source Nanox.Arc has been finalized (in its version 2) - he was just confused whether the device had 5 or 6 x-ray tubes:

The design was changed again in February 2021 - version 2.5? - and the device had no x-ray tubes or a detector.

The device, even if cleared, is not meant for shipping

The press release states:

We are excited to take this next step in our regulatory process as we move toward future versions of the multi-source Nanox.ARC, which will fulfill current and future contracts with service providers and collaboration agreements and allow us to achieve our global vision.

Apparently, the device, as submitted for clearance, is not meant to be delivered or commercialized.  So, why has then Nanox submitted a pre-market notification, that is 510(k)?  Why hasn't Nanox submitted a device that can actually be used? 

 

Nanox.Arc can scan only one human "body part"

The press release states:

Nanox.ARC is a 3-D tomosynthesis imaging system that produces scans of a human body part.  

Just one "body part?"  Which one?  There aren't many "body parts" that can be properly imaged in the supine or prone position using 3-D tomosynthesis.  None are considered "usually appropriate" by the American College of Radiology Appropriateness Criteria.

The "a" is a subtle change from the "the" on page 62 in the annual report, where Nanox claims:

 

Subject to receiving regulatory clearance, the first version of the multi-source Nanox.ARC that we expect to introduce to the market is expected to be a 3D tomosynthesis imaging system that produces a 3D reconstruction of the scanned human body part...

Not much use for a device that can image only one human body part, even if the device were available for free.  

Tomosynthesis is a failed modality

The press release claims there

 

exists a significant unmet medical need globally for a more accessible and cost-effective medical imaging solution

Presumably, a tomosynthesis device like the proposed Nanox.Arc could meet that need.  However,  tomosynthesis is a failed modality, with possible exception of digital breast tomosynthesis (DBT), which Nanox.Arc cannot do due to its design.  Tomosynthesis (also known as tomography, not to be confused with CT or computed tomography) has existed since the 1930s in one shape or another, but its share (DBT excluded) has been less than 1% of unit shipments of diagnostic x-ray devices in the United States and probably even less in the world (based on a preliminary and unpublished analysis of FDA's x-ray assembler data files).  Yes, it is cheap (maybe 10-20% more expensive than plain old x-ray devices - sometimes just a software update is required), but from diagnostic point of view, it is not much better than taking two or three plain radiographs, and it cannot compete with the "gold standards" such as CT or other non-x-ray technologies.

Nanox.Arc is not designed for easy setup and operation

The press release states:

The system is being designed for easy setup and operation with multiple alternately-switched X-ray tubes arranged around the patient.

However, the RSNA 2020 demo revealed that the device requires an external high-voltage generator.  Also, the annual report states that need for 

potential customers to invest in the required safety infrastructure, including customary X-ray shielding, to allow the Nanox.ARC to be safety operated.

The device, as demoed at RSNA 2020, is slow.  The scan of a simple "body part," a phantom hand, took about 45 seconds.  Imagine holding your breath or lying completely still for 45 seconds to prevent image blurring.

The single-source Nanox.Arc transformed into Nanox.Cart

The press release reiterates:

Nanox received FDA clearance of its single source Nanox Cart X-Ray System in April 2021

But that April clearance was initially supposed to be for the single-source Nanox.Arc (Prospectus, Page 1).  To this date, Nanox has never shown a picture or photo of the "Nanox Cart X-Ray System" anywhere.

Nanox has not developed a commercial-grade digital X-ray source

The press states that Nanox 

is developing a commercial-grade digital X-ray source designed to be used in real-world medical imaging applications

In other words, it has not developed it yet.  So what x-ray sources are used by Nanox.Arc, the one just submitted for clearance?  All signs point to regular (but poorly crafted) hot-cathode x-ray tubes.  

The press release never mentions any cold-cathode x-ray tubes.  The cold cathode is supposedly the core Nanox innovation, but the CEO is apparently unware that x-rays were discovered in 1895 using a cold-cathode x-ray tube. and that tube was completely driven off the market by the invention of the hot-cathode tube in 1913 by GE. 

Summary notes

The Summary of the 510(k) submission by Nanox for its Nanox.Cart device was published last week.  Here are some observations, in no particular order of importance (yet).

The name of the predicate device is wrong

The name of the predicate device, cleared under K021016, is AMX-4 Plus Mobile X-Ray System, not AMX-4 Mobile X-Ray System as claimed by the Summary.  What else is incorrect, if Nanox cannot even get the name of the predicate device right?  The "Plus" system is the upgraded model.  The predicate of the Plus model is AMX-3 Mobile X-ray System, K802047, another GE system.  The chair of Nanox Advisory Board is a former GE executive.

A micro-controller Arduino Mega 256 does not exist

Table 1 claims that Nanox.Cart uses a micro-controller Arduino Mega 256 that "controls the Nanox Cart X-ray System's functionality and GUI display."   No such micro-controller exists.  There is an Arduino Mega 2560 micro-controller board designed for hobbyists that uses the old and cheap ATmega2560 micro-controller released more than 15 years ago.  Quite novel.

The target angle of 0 degrees in Table 1 is non-sensical (a typo) and contradicts the 16 degrees value in Table 2

The target, or anode, angle is a very important characteristic of an x-ray tube, as it determines focal size and beam width, strength and composition.  At zero degrees, the tube will be completely unusable.  It is one mistake that Nanox should not have made, if its "X-ray source technology [were] the basis of [its] business" (page 9, annual report).

The maximum tube voltage for the predicate device in Table 1 is incorrect

Table 1 claims that the maximum tube voltage for the predicate device is 100 kV, which clearly contradicts the 125 kV value from the "kV range" section in the same table.  The actual value is 130 kV (from the tech specs of the HRT09 tube).

The power output of the reference device is annoying

Table 2 states that the power output of the reference device is 4.8 kW @ 104 msec, which is incorrect (a typo) and it should be "@100 msec," which is the standard (for example, IEC 60613:2010). 

The x-ray source used by Nanox.Cart is still a mystery

There is no mention in the summary of any of the non-sensical descriptions that Nanox typically uses for its proposed x-ray source - digital, MEMs, silicon, semi-conductor, novel, etc.   Table 2 claims that the "Nanox Tube" is similar to "Xinray CNT Tube," but that is incorrect based on the data in Table 2, as the CNT tube is 60x as powerful (4.8kW vs 0.08kW), capable of substantially higher tube voltage (110kVp vs 40kVp) and current.  Table 1 mentions that Nanox.Cart uses a "Nano-x's Cold Cathode tube" in the system description, but the tube type/model in both Table 1 and 2 is given as "Nanox Tube" (no cold-cathode here) and there is no tube model (Nanox' web site shows at least 4 completely different and incompatible "Nanox tubes" that look remarkably similar to regular industrial/dental hot-cathode tubes).

The mention of an x-ray source in the intended use is non-sensical

The description of the device's intended use begins with the non-sensical statement

The product is intended as an X-Ray source for diagnosis. 

The product is a mobile x-ray system - FDA product code IZL - not a x-ray source (which almost exclusively means an x-ray tube in the context of modern diagnostic equipment - other sources could be radioactive isotopes, synchrotrons, etc).  The product is supposed to include many more components other than an x-ray tube, as confirmed by the "system components" section in  Table 1, for example,  It appears this statement was intentionally inserted by Nanox to confuse investors and possibly subvert the 510(k) clearance process.

The single-source Nanox device is cleared only for hands, wrists, and fingers, on adult patients only

Both Table 1 and Table 2 claim that the intended use of the device is similar to that of the predicate and reference devices.  But that is incorrect and contradicts the actual description of the intended use, as the device is cleared for a very limited subset of examinations, while both the predicate and reference devices can do all general purpose X-ray diagnostic procedures.  In fact, the limitation for use explicitly states:

This device is not intended for general radiographic X-Ray examinations other than the indicated use...

So much for Nanox curing cancer.

The Nanox device is cleared to work with only one detector model, which appears unsuitable and has to be purchased separately

There is a bit of problem with the tech specs of the detector that Nanox has chosen to work with its device.  The summary states:

The Nanox Cart is specified and designed to operate only with a Flat Panel Digital X-ray Detector Model EVS3643, manufactured by DRTECH Inc.

The summary of the detector clearance specifies that the X-ray system using it must have tube voltage equal or higher to 40 kVp, so Nanox.Cart barely complies (its tube voltage is fixed at 40 kVp per Table 1 and 2). What is more troubling is that the generator "mA Range" used in the detector clearance is specified as "10mA ~ 1000mA," which Nanox Cart fails to meet, as it cannot deliver more than 2mA (implied by 0.08 kW power output and 40 kVp tube voltage).  

More importantly, this detector cannot be used for diagnostic purposes on a live subject by the proposed multi-source Nanox.Arc device, as it is too slow and takes about 5 seconds to capture and transfer an image.  A 45-image tomosynthesis of a wrist, for example, would take at least 4 minutes, if the RSNA 2020 demo were anywhere close to reality.

Finally, the lowest quote for this detector, obtained in the gray market - new, but from unauthorized distributors and without warranty - is about $20,000.  So much for being "cheap."

Many of the images supposedly made with the single-source device in the annual report and in investor presentations are likely fake

According to the annual report, 

[Nanox has] generated the images below with the Nanox.ARC using a single X-ray tube on an imaging phantom (page 61).

 

However, none of these images were generated by the device that received clearance, as the device tube voltage is limited to 40 kVp (so the 50 kVp tube voltage in the images is impossible).  Moreover, the device is not cleared for ankle/foot examinations.

Here is another image, from Nanox investor presentations, that is impossible to create by the device that got cleared.  

First, the device is not cleared for shoulder examinations.  Second, the 2.5mA reading exceeds the maximum device tube current of 2mA.

The mobility of the device is questionable

The device is cleared under the IZL product code, but it is not truly mobile/transportable.  The device description states:

The system facilitates X-ray examinations in situations where it is not possible or feasible to transport the patient to a ward with fixed equipment

But the device has no battery, unlike its predicate - it is as mobile as the length of the cord (less mobile than a regular vacuum cleaner). 

The device is "similar" to the predicate device, except that it is not

The section "Substantial Equivalence Discussion" is somewhat confusing.  The section argues that the device is equivalent except that it is not. 

The technical characteristics of the System are not different from the predicate device except for the fixed Source-to-image Distance, Field of view, aperture, focal spot size, and the fixed tube voltage and reduced maximum exposure current-time product. 

Virtually all technical characteristics of the two devices are significantly different, and, it can be argued, raise many questions of effectiveness.  Table 1, for example, confusingly states that the fixed tube voltage and current exposure time product (or charge) are similar to the significantly wider ranges that are needed in practice and can be obtained from the predicate device.  For example, typical "technique charts" for digital detectors stipulate tube voltages of least 46 kVp for the intended use (adult fingers/wrist/hands), above the 40 kVp limit of the device.

The device requires cooling fluid

This must be surprising to Nanox investors who are led to believe by the CEO that a cold-cathode tube, even if real, runs somehow cooler than a regular hot-cathode tube of the same power.

The intended use contradicts the disclosures in the SEC filings

Nanox implies in its SEC filings that the device will not be commercialized, and so the statement that the indented use is to perform diagnostic radiographic examinations is misleading.

Specifically,  Nanox states in its SEC filings:

the multiple-source Nanox.ARC [rather than this cleared Nanox.Cart device] ... will be our commercial imaging system (page 2, Prospectus). 

Nanox has further revealed that, while not intending commercial distribution of the cleared device, it is using the 510(k) submission as part of its regulatory strategy, a step in 

a multi-step approach to the regulatory clearance process (page 1, Prospectus), 

where the apparent ultimate goal is to induce the FDA to clear the "the multiple-source Nanox.ARC" device by first creating a predicate out of the Nanox.Cart.

Therefore, any statements by Nanox about "indications for use" or intended use or intent to market the cleared device, other than an admission that the device is not intended to be marketed and the submission is simply a step in Nanox regulatory strategy, are problematic.

Update:  Here is a cheap (dental) tube, Toshiba/Canon D-081B, that is used in other devices cleared under the IZL  product code, that is smaller but much more powerful and much more useful than the proposed "Nanox Tube."

Update:  Replaced "implied by 2mAs and 1 second" with "implied by 0.08kW power output and 40 kVp tube voltage" as it is the correct derivation for max tube current (sustained for 0.1s) - in this case, both derivations result in 2mA tube current.

Update:  Nanox predecessor claimed in 2016 that the chip that forms its cold cathode can do 2.5A/cm2 (Nanox CEO was a Chief Strategy Officer at the time).  If Nanox had made no improvements since, it means that the active area of its "chip" is now 0.0008 cm2 or a square of about 0.3 mm x 0.3mm.  So why do the chips shown in Nanox annual report (page 66) and in a March 2021 tweet look much larger, at least 10 mm x 10 mm?  Each covering an area that is at least 1000x the supposed area claimed in 2016 ...

 

Of course, as discussed elsewhere on this blog, Nanox has been unable to manufacture such a chip commercially (and so the proposed Nanox Tube is almost certainly not using any chip or any cold cathode), contrary to claims in its annual report (the University of Tokyo labs, which Nanox claims to rent, prohibit commercial use).

Update May 11, 2021:  Replaced the image of the wafer from the annual report with an image from a tweet that shows the chip next to a ruler.   

Update May 14,2021: Garage Blitz TV @Youtube makes a great point about the reference device using a CNT tube, which according to the Nanox annual report cannot work.  Moreover, the Nanox "founder" claimed in November 2019 that no such device exists, to the best of Nanox "knowledge."  

News in Nanox annual report

What's news and notable in Nanox annual report, relative to the Prospectus filed in February? 

Material weakness

We have identified a material weakness in our internal control over financial reporting in connection with the audit of our financial statements as of and for the years ended December 31, 2019 and 2020. (page 49)

Oops.  That's even before any revenues are recognized.

Dangling chips 

 As mentioned above, we currently manufacture the MEMs X-ray chips in the clean rooms located in Tokyo, Japan (page 15)

Nothing like it is mentioned above (in the annual report).  The rest of the statement, of course, is also false - the clean rooms located in Tokyo, Japan do not allow commercial use, and therefore Nanox cannot manufacture the proposed "digital" x-ray source that relies on those chips (and, in reality, there is nothing digital or MEMs about them).

 

No working Nanox.Arc

Although we have produced a working prototype of the Nanox.ARC and developed a prototype of the Nanox.CLOUD, we have not produced any of the approximately 15,000 Nanox.ARC units planned for the initial global deployment under the contract manufacturing agreement with FoxSemicon Integrated Technology, Inc., a subsidiary of Foxconn (“FITI”).  (page 7)

So, one working prototype of Nanox.CART, the one that got cleared?   But no working prototypes of Nanox.Arc?  Is this an admission, finally, that the RSNA 2020 demo of the Nanox.Arc was faked?  Why couldn't Nanox complete even one of the 10 prototypes that Nanox was supposedly assembling in November 2020 (according to the Q3 2020 results call)?  What happened to those mock-ups in all these production photos pushed by Nanox and its promoters this year?

A side note here:  Nanox never signed an agreement with FITI, according to the text of the contract manufacturing agreement.  The agreement was signed with a Japanese company that is not a Nanox subsidiary, according to public corporate records.

No ceramic tubes

We are evaluating, subject to completion of testing, a transition from glass-based X-ray tubes to ceramics-based tubes for cost efficiency purposes, which are the tubes to be used in the multi-source version of the Nanox.ARC, and we intend to enter into an agreement for such ceramics-based tubes with a new manufacturer in the future. (page 14)

That is, Nanox still cannot manufacture the ceramic tubes that the CEO claimed were used at the RSNA 2020 demo of both the Nanox.Cart and Nanox.Arc.  So, the RSNA 2020 demo was fake and the FDA 510(k) submission may have been fraudulent.

Fuji is out

We have not entered into any licensing agreements; however, we expect to enter into negotiations regarding a commercial arrangement with FUJIFILM Corporation for the licensing of our Nanox System. Any of the above factors may negatively affect the implementation of our Licensing Model, or cause our Licensing Model to fail. (page 12)

This is an admission that Fuji is not a Nanox Mamography OEM (that is, all Nanox investor presentations so far have been misleading ).  In the Prospectus, Nanox still falsely claimed:  

We are currently discussing the terms of a potential commercial agreement with FUJIFILM Corporation.

Chinese tubes 

We have, and expect to enter into, agreements with manufacturers and/or suppliers in China for the production of our X-ray tube, the Nanox.ARC and some of their respective components. (page 23)

Is this an admission that Nanox is using a regular low-cost, low-quality, hot-cathode Chinese x-ray tube and calling it "digital?"

 

A confused FDA: Cart or Arc

 

... we submitted a 510(k) premarket notification for the Nanox Cart X-Ray System... in January 2020... On January 30, 2021, we received additional information requests from the FDA which, among other things, require us to address certain deficiencies and questions, including requests that we provide additional support regarding the intended use of the Nanox.ARC and the comparability of the Nanox.ARC to the predicate device. We submitted our response to these requests on March 1, 2021. On April 1, 2021, we received clearance from the FDA to market our Nanox Cart X-Ray System. ...we may seek alternatives for commercialization of our Nanox Cart X-Ray System.  (page 32) 

Why was the FDA asking about Nanox.Arc in January 2021?  The device that got submitted and eventually got clearance is Nanox Cart X-Ray System, that is, the ugly Nanox.Cart, not the fake Nanox.Arc. The FDA should have asked about Nanox Cart X-Ray System, no?

Nanox also confirms that it still has no plans the market/commercialize the Nanox Cart X-Ray System even after its pre-market notification got cleared.

Update:  Muddy Waters tweets about Gilad Yron, the Chief Business Officer, no longer counting as an executive, which I missed (it is not clear what his current role is, if any). 

Update April 8, 2021:  Fixed some spelling.  Also, the Nanox.Cloud prototype developed by Nanox is just a collection of a few mock-up screens that use stolen images and contain non-sensical findings.  

Pumping while selling

 The CEO went on Bloomberg yesterday to pump the stock.  

He did not tell the audience that he put an order to sell 1,003,931 shares just hours earlier (at a low expected price of about $41).  The CFO sold only 40,533 shares.   Both selling according to a 10b5-1 selling plan supposedly adopted on March 4, 2021 (but that plan was not disclosed in the two prior 144 forms filed by the CEO)...  Nice.

There are some gems in the Bloomberg interview - more later.

Update April 7, 2021:  

Gem #1:  The tube the CEO is holding, while selling his shares, is fake, non-functional - it appears the vacuum sealing has failed (if there was ever one) - and cathode elements are falling off...

Gem #2:  5 tubes in Nanox.Arc, not 6.  The CEO insisted on 6 tubes in Nanox.Arc (and finalized design) at RSNA 2020. 

Gem #3:  The predicate device for Nanox.Cart is one of GE machines.  That indicates potentially fraudulent 510(k) submission, as all GE machines (that I am aware of) under the IZL product code can do Chest PA, the most common x-ray image done in the world, while Nanox.Cart, as demoed at RSNA 2020, can't.  The upcoming 510(k) summary should shed more clarity here.

Update December 12, 2021:  The interview is still available on Youtube.  The CART is not cleared for chest, only for hands, wrists, and fingers.

Nanox announces FDA clearance of something

According to the press release, Nanox

single-source Nanox.ARC digital x-ray technology has received 510(k) clearance from the US Food and Drug Administration (the “FDA”).

Quite interesting, since the FDA, by law, cannot clear a technology, only a device.  It is also interesting that the mythical single-source device is nowhere to be seen on/in Nanox website, SEC filings, investor presentation, or any other marketing materials or white papers. .

an ugly device demoed at RSNA 2020

 

Nanox also confirms that it does not intend to deploy the device for which it received clearance:.

The Company remains on track and expects to submit a 510(k) application to the FDA for its multi-source Nanox.ARC and the Nanox.CLOUD in 2021. If cleared, the multi-source Nanox.ARC will be the Company’s commercial imaging system that it expects to deploy broadly across the globe.

That is really interesting, as 510(k) clearance is also known as pre-market notification, so it makes little sense to clear a device that it is not intended to be marketed.

But what is truly astonishing is that Nanox does not state in its press release that the device uses Nanox proposed "cold-cathode" x-ray source.  So does the device that just got cleared use a regular hot-cathode dental tube?

As of now, there is no public confirmation of the clearance by the FDA.  On Monday morning, the FDA should update its clearance database, and if the device got indeed cleared as Nanox claims, we will learn the product code, the name of the Third Party, and the date the Third Party recommended clearance, if there was any Third Party to begin with.  But we will have to wait for 30 days to read the Summary, where the predicate, intended use (extremities only?), and some tech characteristics will have to be made public...  And then Nanox will have some explaining to do - how do you enable early detection of cancer (also known as Nanox vision, or the oxymoronic "screening of symptomatic patients"), when all you are cleared to do is image broken wrists or feet?

Update April 4, 2021:  There is an argument floating around that an FDA clearance proves that the company is not a fraud.  The argument is flawed for at least three reasons:

1. Nanox claims that its Nanox.Arc device is novel.  A clearance, however, means that the company demonstrated that the device to be marketed is substantially equivalent to a legally marketed device.  Oops.  How can it be novel, if it is substantially equivalent to something already on the market?
2. A clearance is also known as pre-market notification.  But Nanox says that it has no plans to market/sell/ship/commercialize/deliver/deploy its single-source device.
3. Theranos, the fraud, also got clearance (in July 2015) for a device it did not intend to sell.  By January 2016, the federal government was after it.

Update April 5, 2021:  According to the FDA database, the device that was cleared is a cart - "Nanox Cart X-Ray System" - notice it is not named a (single-source) Nanox.Arc.  The product code is IZL (a mobile x-ray system).  There is no product code for a detector (MQB), so the device has no built-in detector, and so it cannot take images by itself (but should be able to use any $25,000+ cleared detector).  The clearance was recommended by a Third Party, Accelerated Device Approval Services, on December 28.  The summary should be released around May 1st.

Marketing vs reality

Nanox greets us this morning with another tweet, as it is about to fail its milestone which called for "FDA approved" by the end of the day today.

Wow, that proposed "digital" source will make x-ray systems not only affordable, but cool and multifunctional, too?  

Guess which of the two devices below belongs to Nanox?

Device 1.

Device 2.

Nanox claims that the ugly Device 1 is the only one it has submitted for FDA clearance and it does not intend to market it.  Device 2 uses the 100-year-old technology, and so does Nanox device, I believe, even though Nanox denies it.  Device 2 has been on the market since last year.

Update:  Nanox failed to get "FDA approved" in Q1 2021, and missed its "milestone."

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device).

How does the device look like?

Nanox website, investor presentations, social media, press releases and promo pieces are all littered with designs and photos of various versions of the fancy but fake multi-source Nanox.ARCs.  But you will never find the single-source device that Nanox claims to have submitted for FDA clearance in January 2020.  Not once.

So, how do we know for sure what the device is supposed to look like?  Is it the ugly one that supposedly took the radiograph of the CEO's hand at RSNA 2020 or some fancy multi-source one with just one tube activated?   Has Nanox ever stated, in writing, how the device looks like?

Yes.  A presentation slide helps here - this one, Slide 22, is taken from the January 2021 JP Morgan presentation deck.

It states:

On the left the hand of Ran Poliakine, Nanox s CEO, as was taken during the 2020 RSNA live demo, using the Nanox single source device with the Nanox tube;

So the ugly device from the RSNA 2020 live demo is indeed the device Nanox claims to have submitted for FDA clearance. 

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device).

Does the FDA ever disagree with the Third Party recommendation?

Let us assume for a moment that Nanox were not a fraud and the Third Party did indeed recommend SE on December 28, 2020.  Is it possible that the FDA disagrees and issues an NSE decision anyway?

The FDA's "Third Party Review Organization Performance Report" that comes out each quarter can be very useful for answering such a question.  The latest one has this nice table.

Turns out, it is not very likely, but it is possible.  Of the 75-85 submissions each year, the FDA disagrees in 1 or 2 cases.  Between 5 and 10 submissions are withdrawn or deleted (basically, the submitter gives up).  Interestingly, no Third Party seems to make an NSE recommendation - I guess that's why they are paid the big bucks by the submitters.

Update April 5, 2021:  Nanox beat the odds and got clearance for a Nanox.Cart (the ugly device).

Another market-moving tweet

Nanox tweets that is going to change the world, and the stock jumps 15%.

The market is oblivious to the irony that it is investors who have been waiting for months for "FDA approval," whatever that is supposed to mean.  As of today, no Nanox x-ray system is legal anywhere in the world. 

Expect FDA approval in early 2020 (quoted November 2019 conversation with the CEO)

Note also that all my research so far indicates that it is not true that two-thirds of the world cannot reach medical imaging and that one-third of the world waits too long to get a scan.  The availability of low-cost x-ray systems (both stationary and portable/mobile) and ultrasound devices has solved this problem years ago.

 

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device).

Doubting the doubter

Doubter71050722 tweets this morning that the CEO sold 750,000 shares after the Q4 results call, and everyone on Twitter doubts him.  Stock even shoots up nearly 30% pre-market.

But he provides a link to the emailed forms on the SEC website.

He also notes that the CFO also sold 40,000 shares.

 

Now, why are they in such a rush to sell, if the "FDA approval" (as the CEO likes to mislead and misbrand the supposedly-pending FDA clearance) were to come within "two weeks" of March 2,  that is, on March 16, tomorrow?

Update (March 17, 2021):  Director Onn Fenig follows the CEO and CFO lead and sells all his 12,573 shares.  But the CEO insists at the Oppenheimer conference today that "FDA approval" will be coming any day - he is an artist!

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (an ugly device).

Importance of using the right terminology

Nanox and its promoters want you to believe that FDA clearance, also known as premarket notification or 510(k), and FDA approval are the same thing.  Here is what the Code of Federal Regulations, the US administrative law, states:

Submission of a premarket notification ... and a subsequent determination ... that the device intended for introduction into commercial distribution is substantially equivalent ... does not in any way denote official approval of the device. Any representation that creates an impression of official approval of a device because of complying with the premarket notification regulations is misleading and constitutes misbranding. ( 21 CFR Part 807.97 ) 

So, Nanox is misleading and misbranding on slide 3 of its investor presentation:

And on its investor calls.

And one more thing.  Notice the device is "intended for introduction into commercial distribution."  But Nanox claims it does not intend to introduce into commercial distribution the device it has submitted, the single-source Nanox.Arc, according to its latest prospectus.

Subject to receiving regulatory clearance, the first version of the Nanox.ARC that we expect to introduce to the market will be a 3D tomosynthesis imaging system [not the single-source device].  If cleared by the FDA, we expect to commercialize the multi-source Nanox.ARC and we may seek alternatives for commercialization of our single-source Nanox.ARC. (page 79)

If the device was not intended to be marketed in January 2020, then the premarket notification was redundant, and the Third Party should have immediately rejected it, if it knew that the device was not intended to be marketed.  Did the Third Party know what Nanox was writing in its draft registration statements filed with the SEC?  And that is one of the reasons why the submission was likely fraudulent, if Nanox submitted anything to anyone for clearance.

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device).  So, what were the Third Party and the FDA told?  More hints when the FDA published the summary document, around May 1st...    

Foolish misdirection

Nanox stock is up more than 15% today.  The catalyst may have been a nice promo that claims that Nanox, the healthcare disrupter, is about to receive FDA clearance within a month and start distributing its new X-ray device.

Quite interesting, given that Nanox claims that it has not submitted its magic device for FDA clearance yet.  Nanox claims instead that it has submitted another, a "single-source," device that it does not intend to market or ship or distribute or offer for subscription or service.    

Here are some of the factual inaccuracies and false implications in the promo:

• Nanox has a new kind of X-ray
• X-rays are kind of boring
• [X-ray devices] are very expensive
• MRI devices use or create X-rays
• A CT scanner costs about a million, 2 million, 3 million dollars
• Nanox has made a radical new discovery
• The traditional X-ray devices and CT scanners create X-rays by heating the machine up over 1,000 degrees Fahrenheit, might be 2,000 degrees Fahrenheit
• X-rays devices and CT scanners are incredibly hot machines and have to be cooled down
• The expense in X-rays devices and CT scanners is in cooling the devices down
• Nanox can create X-rays without having to manufacture all this heat and cool the machine down
• Nanox proposed machine is far cheaper (to manufacture), $10,000 instead of a $1,000,000
• Nanox will radically disrupt the market, and is also going to expand the market
• We are going to see a lot more X-rays
• The proposed Nanox machine (a rudimentary tomosynthesis device) can generate images that are comparable to MRI images or CT images, not just to traditional X-ray or tomosynthesis images.

Update (March 13/14, 2021):    thedudemd  @ Stocktwits disagrees that the factual inaccuracies are factual inaccuracies and argues that 

a)  "Traditional xray tubes used in cts do get incredibly hot; so much so that scanners automatically shut down if tube gets overheated,"  and   

b)  "ct scanners do cost millions of dollars."

Tubes or devices/machines?  The Fool contributor said that the traditional x-ray device or traditional CT scanner was being heated up over 1,000 degrees Fahrenheit, which is clearly not true.  These systems operate at room temperature.

But let's talk tubes.  Both the traditional and the proposed Nanox tubes use the exact same inefficient mechanism of generating x-rays, whereby nearly 99% of the heat is generated at the anode and nearly 99% of the energy used to generate x-rays gets wasted as heat.

Interestingly, the filament in the tiny incandescent Christmas tree lightbulb gets even hotter - 2,200 degrees Kelvin to 3,200 degrees Kelvin -  or 3,500 degrees Fahrenheit to 5,300 degrees Fahrenheit!  Each one filament operates at about 2.5 V consuming about 0.4 W, and there are hundreds of them on the tree.  Christmas trees must get incredibly hot and burn up instantly, no?

  

Photo by Jason  Krieger from FreeImages.com

Regarding costs - maybe the latest and greatest CT scanner could cost over $2 million, but you can buy a used one for $80,000, as described here and here.   Of course, the proposed fake five-source Nanox.Arc is in no way comparable to even the oldest, cheapest and abused CT, as it cannot generate axial slices, even in theory.  Moreover, it is not even submitted for clearance, according to Nanox.  The device that Nanox claims to have submitted for clearance is a single-source device that cannot be cleared.

Update June 3, 2021:  The Nanox single-source device that got cleared was the Nanox.Cart.

A reason

There are many reasons why I suspect that Nanox did not submit anything to anyone for FDA clearance, or if it did, it did so fraudulently. 

Here is one.

It is February 7, 2020. The month of January had been very exciting at Nanox because the team finally submitted the super-secret single-source device for FDA clearance, after getting it to work and completing extensive testing with it at Hadassah.  No more need for fake videos showing fake tests of fake devices.  Right? Everybody is excited and still celebrating - even the lawyers and the assistants know what Nanox has achieved - they are getting rich! So what does Nanox do? It files a draft registration statement with the SEC and states on page 1: 

As a first step, we plan to submit a 510(k) application for a single-source version of the Nanox.Arc to the U.S. Food and Drug Administration (the “FDA”) in January 2020.

Plan to submit?  But it is February 7 already!  It should read "we submitted!"   How come whoever wrote the filing forgot about the submission?  On page 1, not buried on page 146 or something...

And what else do we learn in that draft registration statement on page 9?

We have not produced a working prototype of the Nanox.Arc

Wait, what?  How can you do testing, if you don't even have a working prototype?   Where did all the numbers and images in the submission come from?  How did Nanox write these sections in the submission without a working device:  Specifications , Substantial Equivalence Comparison, and Performance? 

Note that regulations require that all

510(k) submitters must include a statement certifying that all information submitted in the 510(k) is truthful and accurate and that no material fact has been omitted. 

So, did Nanox file a false draft registration statement with the SEC, or did Nanox made false statements to the FDA, or maybe both?

Note:  The fake video of the fake device titled "Nanox ARC  -  Raw chest scan demonstration," that was later "updated," was initially encoded on February 25, 2020.  Here is a snapshot.

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device, not the one shown here).  So, the draft registration filing was erroneous or the clearance submission was fraudulent.  More hints will be revealed in the summary that will be published around May 1st.  

Why Nanox.Arc has no chance for clearance

Nanox has a nice video on its front webpage titled "Understanding Nanox technology & vision"  It is extremely misleading, and, thus, extremely useful to regulators.  It proves that Nanox.Arc has no chance for FDA clearance, not this year and not ever.

How so?  Well, about 40 seconds into the video, the mesmerizing voice proclaims:

Years of dedicated development by Japanese and Israeli scientists have achieved a novel X-ray source and device that bring hope by being more affordable by orders of magnitude than the conventional X-ray technology used today.

Oops.  See, the FDA clearance pathway is only for a device that is substantially equivalent to a legally marketed device.  A novel device will be immediately rejected, as it fails the RTA checklist, and must go through either a De Novo classification request or a PMA approval submission.  Either one takes years.

Incidentally, according to the same segment in the video, the device below represents the X-ray technology used today:

Unfortunately, that is a sketch of an MRI device, which has nothing to do with X-ray technology - note the "chimney," which is actually part of liquid-helium cooling system (the superconducting electromagnets require very low temperature to operate).

Thanks to ThreadEnhancer @ AuntMinnie for the novel tip.

The video was published sometime in February or March, 2020, that is, after the supposed January 2020 submission for clearance of the single-source device.

Update:  The MRI device in the sketch is a stylized Siemens MAGNETOM.

Update (March 13, 2021):  The video, of course, is not the only place where Nanox explicitly describes Nanox.Arc as novel.

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly device).  Nanox.Arc (a multi-source one) still has no chance of clearance, unless Nanox admits that the device is not novel. 

Nanox explanation of the FDA timeline makes no sense

According to the latest prospectus and Q4 results call, the recent timeline of Nanox 510(k) submission goes like this:

• December 28, 2020:  The Review Organization recommended [Nanox single-source device] to the FDA for clearance
• January 1, 2021:  [Nanox] received an information request from the FDA through the Review Organization
• January 4, 2021:   [Nanox] responded
• January 30, 2021:  [Nanox] received additional information request(s) from the FDA
• March 2, 2021:  [Nanox] submitted a [complete and] comprehensive response.

If all of the above were true, Nanox should have received clearance no later than yesterday, March 8, 2021.  The explanation as to why is in two FDA guidance documents - 510(k) Third Party Review Program and FDA and Industry Actions on Premarket Notification (510(k)) Submissions: Effect on FDA Review Clock and Goals.  

Essentially, Section 523(a)(2) of the FD&C Act requires the FDA to make a final decision whether to clear the device or not within 30 calendar days after receiving a recommendation from the Review Organization.  Note that the final decision is confusingly termed "initial classification."  Any requests for additional information stop the clock until a complete answer is received.  So assuming the FDA got the recommendation on January 1, and then the clock stopped for 4 days or so and then for another 32 days or so, while FDA awaited for the complete responses, then the 30-day calendar deadline expired on March 8, 2021.

But Nanox press release says:  

The Company is in direct communication with the FDA and continues to expect that it can obtain U.S. regulatory clearance of the single source Nanox.ARC this year  (?!?!?)

And during the call, on March 2, the CEO rambled about "quite soon," "30 days" from the day of the call, and even "a couple of weeks" from the day of the call.  If Nanox disclosures were correct,  then it should have been within "a week."

So, in summary, Nanox is lying to investors about the status of its submission for clearance of the single-source device.  In fact, there are reasons to believe that Nanox may not have submitted anything to anyone for any clearance, or if it did, it was fraudulently.

And, of course, Nanox CEO did not miss the opportunity to confuse investors again by talking about approval (aka PMA) on the call vs clearance  (aka 510 (k) or pre-market notification).

We continue to believe that we will receive FDA approval of both our single source and multi-source device still within this year

According to Nanox own disclosures, the company has not submitted for approval but for clearance.  Or maybe this was a Freudian slip?  Any device that fails to get clearance is automatically classified as Class III, and would require a submission for approval, in which case Nanox has to supply sufficient valid scientific evidence that provides reasonable assurance that the device is safe and effective for its intended use or uses.  That translates into years and millions of dollars in human trials.  Not happening this year.

Update April 5, 2021:  Nanox got clearance for a Nanox.Cart (the ugly single-source device), within 30 days of the call, just as the CEO said.  Outstanding FOIA requests may eventually shed light on the actual FDA timeline. 

Tricky terminology

Nanox has a problem with the terminology it is using - is it innocently incompetent or intentionally misleading?  

Nanox typically, but not always (see below), claims to have submitted for FDA clearance (aka 510(k)) rather than FDA approval (aka PMA).  In its draft registration statement filed July 30, 2020, the company states:

In response to the feedback we received from the reviewer, we are conducting standard functional and safety tests to support the 510(k) application, and expect to submit the results from these tests in the third quarter of 2020. (page 1)

Just two weeks later, that statement became:

As part of the review process, in March 2020, we received an additional information request, referred to as a major deficiency letter, from the Review Organization which, among other things, required us to provide 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. In response to the feedback we received from the Review Organization, we have conducted additional product testing and expect to submit the results from these tests, along with our response, to the Review Organization, in the third quarter of 2020. (page 1)

Ok, feedback sounds less ominous than a request for additional information, but why, oh, why did Nanox have to mention a major deficiency letter?  Why didn't it just put a "deficiency letter," without the "major?" See,

FDA refers to PMA ... deficiency letters as “major deficiency letters” and 510(k) ... deficiency letters as “additional information letters” or “requests for additional information.” (page 2)

And, yes, the reviewer - the Third Party - can send "requests for additional information," according to the overview published by the FDA. 

So, again, why not just write "a request for additional information?" Why confuse anyone reading the filing (and Prospectus) with the addition of the "major deficiency letter," which would imply seeking FDA approval rather than clearance?

Here is an excerpt from the busy Slide 3 titled "Nanox at a glance" in Nanox investor presentation dated January 14, 2021 stating that Nanox expects FDA approval, although this appears to refer to an upcoming submission of the fancy multi-source device (in which case, approval is impossible in Q1 2021, because it takes years of human trials, unlike simple clearance within 90 days).

Update April 5, 2021:  Nanox got clearance, in the beginning of Q2 2021, for a Nanox.Cart (an ugly device).

The weight of a human, CE Marking, and the rest

The fake battery-powered Nanox.Arc 1.0 body scanner can withstand a human, according to a photo shown in June 2020 Haaretz article.

 

Nanox CEO and founder Ran Poliakine, January 15, 2020.source: Haaretz/LUZ Corporate Photography

So, what did the CEO tell the Israeli publication:

"The Nanox.ARC was distantly inspired by the sickbay of the 1960s television series Star Trek, where “Bones” McCoy would swipe a device over a patient to get a complete instant medical picture."  OK, so Nanox.Arc is fiction?

"On a practical level, the research and development was born of a failed project at the Japanese company Sony to develop LED screens."  Not OK - it was a failed project, but nothing to do with LED (light-emitting diodes)

"compared to just $10,000 and 70 kilos for the Nanox"  Not OK.  Nanox is now saying tens of thousands of dollars, and weight is no longer discussed.

"The company has applied for permits to the U.S. Food and Drug Administration, Europe’s CE and Israeli regulators."  Really, really not OK!!! There are no such "permits."  Nanox is now saying it has not submitted for FDA 510(k) clearance of the magic device, and that it has not submitted for CE Marking, and that means that it cannot register with the Israeli Ministry of Health.  

"Nanox is readying to install a device at Jerusalem’s Hadassah Medical Center to be used for developing novel early-detection and screening protocols to promote global preventive healthcare practices. Research is scheduled to begin the first quarter of 2021."  Not OK.  It is not happening.

"A [Sony] team worked on the idea [for a novel LED screen] for seven years at a cost of more than $1 billion. The project never yielded the screen because Sony canned it after Panasonic got to the market with a similar, lower-cost device. But along the way the team designed tiny silicon chips capable of creating consistent and exacting screenshot images, Poliakine said."  Not OK at all.  The story is quite a bit different, there was no $1 billion, and there are no such chips "creating consistent and exacting screenshot images."

"X-ray technology was developed at the end of the 19th century and to this day uses the same basic technology, based on heating a metal filament to 2000 degrees Centigrade."  Not OK.  The metal filament thing was invented in 1913 by General Electric (the former employer of Nanox Advisory Board chair).  Until then, X-ray technology used Nanox, that is cold-cathode, technology.

"The filament emits electrons that collide with an anode to create x-rays. The process uses a lot of electricity to keep the device cool."  Not OK.  Nanox process needs just as much electricity to keep the device cool.

"Nanox uses a proprietary silicon chip embedded with 100 million microcones that generate x-rays There are no moving parts, no need for cooling and no need for lots of electric power."  Not OK.  Nanox proposed tube performs exactly the same and uses the same power as a cheap Chinese tube unsuitable for medical imaging.  And, nope, Nanox does not have a novel tube that can be used in a commercial device. 

"Nanox ... employs 60 people, 38 in its Israel R&D center ad the rest at production facilities in Japan, the U.S. and South Korea."  Not OK.  Nanox has no production facilities anywhere.

Update March 25, 2021:  The original $1 billion thing seems to come from the June 2019 press release by Nanox predecessor (the current Nanox was incorporated in December 2018 but did not start "operations" until September 2019, per prospectus)

Update September 28, 2021: The April 2020 Hadassah press release says:

Over $1 billion and 15 years of development have been invested in revolutionizing the X-Ray source...

So, 7 years at Sony and 8 years at Nanox and Nanox predecessor?  Nope.  First, all Sony did was to send 6 "engineers" to the offices of Candescent to "learn" about the tech after it signed an agreement with it in November 1998 - there is no evidence that any independent devlopment.  Second, NanoX Imaging (Nanox predecessor) was "a multinational start-up established in 2012," but it was developing x-ray detectors not sources!