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VNRX: VolitionRx Reports 3Q 2024 results. Over 110,000 Nu.Q Canine Cancer tests have been sold. Cost cutting continues in a plan to be cash flow neutral in 2025. Management focused on signing licensing deals for Capture-PCR & Nu.Q NETs.

12/04/2024

By Steven Ralston, CFA

NYSE:VNRX

READ THE FULL VNRX RESEARCH REPORT

SIGNIFICANT OPERATIONAL UPDATES

3Q 2024 FINANCIAL RESULTS

VolitionRx (NYSE:VNRX) reported financial results for the 3Q 2024. Total revenues increased 187% to $474,522 compared to $165,211 in the third quarter of 2023,

Product revenues increased grew 218% YOY and 45.2% sequentially as Volition sold around 50,000 Nu.Q Vet Cancer tests during the quarter, primarily due to the launching of the Nu.Q Vet Cancer tests in Japan (by Fujifilm Vet Systems), Poland (by VetLab Poland) and worldwide (by Heska, now a Mars Antech company).

Service revenues (mostly generated by the sales of H.3 kits via Nu.Q Discover) increased 81.6%YOY but decreased 41.1% sequentially as the recognition of Nu.Q Discover revenues tends to be lumpy.

Management is implementing a significant cost cutting program with the goal of ensuring that Volition is cash flow neutral in 2025. In the third quarter, operating expenses declined 28.1% YOY and 13.7% sequentially, cost reduction measures were implemented in all three areas of R&D, G&A and sales & marketing with the intent of achieving a $10 million reduction in annualized expenses. Some of the actions include that the Directors intend to take 50% of their fees in equity for a least six (6) months, that senior management intends to take a percentage of their salaries (between from 10% to 50%) in equity for a least six (6) months ranging from 10% to 50% and that the payments of any cash bonuses are postponed indefinitely. This follows a $2.0 million cost cutting program that was implemented during the fourth quarter of 2023.

R&D expenses declined 25.3% to approximately $3.47 million from $4.65 million in the third quarter last year. G&A expenses declined 30.2% to approximately $1.82 million from $2.60 million due to lower personnel and legal expenses; full-time employees (FTE) decreased from 22 to 20. Sales and marketing expenses decreased 32.8% to $1.05 million from $1.57 million due lower personnel expenses and stock-based compensation. FTE decreased from 21 to 17. Interest expense increased 65.7% due to an increased interest paid. 

For the third quarter, VolitionRx reported a net loss of $5.82 million (or $0.07 per diluted share for stockholders) versus a net loss of approximately $8.37 million (or $0.11 per diluted share) in the comparable quarter last year.

Year-to-date, shares outstanding increased by 12.8% to 92,392,570 shares from 81,898,321 shares on December 31, 2023. As of September 30, 2024, Volition had approximately $5.4 million cash-on-hand.

Recent Financing

In early August 2024, VolitionRx completed a Registered Direct Offering of 9,170,000 common shares along with Series A and Series B milestone-linked warrants, at an offering price of $0.55 per Unit. In addition, 3,557,273 pre-funded warrants, along with milestone-linked warrants, were offered at $0.549 per Unit. Net proceeds from the offerings were approximately $6.4 million. All the milestone-linked warrants that were issued have the potential to provide gross proceeds of an additional $14.5 million upon the exercise of these warrants. H.C. Wainwright & Co. acted as the exclusive placement agent for the offering.

The 2-year Series A warrants are exercisable for up to 12,727,273 common shares are exercisable at $0.57 per common share with the expiration also linked upon an announcement of a significant agreement to develop and commercialize a product, technology or process in the human space with milestone payments.

The 5-year Series B warrants are exercisable at $0.57 per share for 12,727,273 common shares with the expiration also linked upon an announcement of the receipt of an FDA approval of a Nu.Q product, technology or process in the human space.

Update on Grant Funding

Management expects to obtain further meaningful government non-dilutive funding. The company has either applied or is in the process of applying for $25 million in non-dilutive grants from funding bodies in the U.S. and $18 million within Europe. Subsequent to the third quarter-end, Volition received over $2.2 million in commitments of non-dilutive funding from agencies within the Walloon Region. Additional non-dilutive funding is expected in the first half of 2025.

In Pursuit of Licensing Agreements Nu.Q NETs and Capture-PCR

VolitionRx has created a Confidential Licensing Data Room, which holds clinical and scientific data from the completed and ongoing studies. Through the remainder of 2024 and onwards, a significant amount of scientific and clinical data relating to Nu.Q NETs (particularly for sepsis) and Capture-PCR (a potential breakthrough cancer detection method) will be delivered to this Data Room so that interested parties can review and analyze the commercial potential of Volition’s IP. This room creates an environment that should stimulate serious investigative discussions and promote a path toward licensing agreements.

Management will continue to focus on negotiating a licensing agreement in the human space. In early July, PharmaVentures Ltd was engaged to provide strategic advice and transactional support for licensing deals for Volition's oncology and Capture PCR efforts. Management expects that the Confidential Licensing Data Room will facilitate entering into its first human diagnostics licensing agreements for Nu.Q NETs and Capture-PCR.

37th Annual ESICM LIVES Conference

On October 7, 2024, VolitionRx sponsored its first Satellite Symposium at the 37th Annual ESICM (European Society of Intensive Care Medicine) Conference in Barcelona. Data from two retrospective studies and interim results from another large clinical study were presented.

  • SISPCT retrospective study in Germany (n = 971) found that patients with the most severe acute respiratory distress syndrome had the highest levels of H3.1
  • Amsterdam UMC retrospective study in the Netherlands (n = 1,713) showed that higher levels of H3.1 level indicated a greater their risk of multiple organ failure
  • interim analysis of RHU Records in France (n = 416 out of 1,500) indicates that level of H3.1 can be used to distinguish between patients with sepsis (median H3.1 level around 700ng/ml) and those with septic shock (median H3.1 level of just over 1,000ng/ml).

RECENTLY PUBLISHED PAPERS, POSTERS AND REPORTS

SEPSIS

On October 7, 2024, VolitionRx sponsored its first Satellite Symposium at the 37th Annual ESICM (European Society of Intensive Care Medicine) LIVES Conference in Barcelona. At the Symposium, the presentation was titled: “NETs: Casting a new light on sepsis management.” Several experts (Prof. Djillali Annane, Dr. Andrew Retter, Terry Kelly, PhD and Dr. Caroline Neumann) provided findings from large, independent studies that explained the potential clinical utility of Nu.Q NETs in the management of sepsis. A 44-minute video of the Satellite Symposium presentation is available on Volition’s website: direct link here and the accompanying slide deck is also available here.

Management also posted a 4-minute video synopsis of Volition’s contributions to 2024 ESICM LIVES Conference: direct link here.

In addition, a report entitled “Sepsis: A brighter hope for tomorrow,” was presented at ESICM. The report is available on Volition’s website: direct link here.

At ESICM, a poster titled: “Clinical utility of the Nucleosome levels in septic Acute Kidney Injury: improved classification and targeted intervention?” by Neumann et al (Jena University Hospital, Germany) was presented. The study found that high H3.1 nucleosome levels were associated with those developed acute kidney injury (AKI) and those high levels were also negatively associated with 28-day survival. The poster is available on Volition’s website: direct link here.

Also at ESICM, a poster titled: “Nanopore sequencing to elucidate the origins of circulating DNA during extracorporeal membrane oxygenation” by Berman et al (Volition America LLC) was presented. The study found that with the use of shallow whole-genome sequencing from Oxford Nanopore Technologies, there is an ability to profile both fragmentomic properties; also DNA methylation allow for the identification of changes associated with severe respiratory failure and extracorporeal membrane oxygenation (ECMO), which occurs during extreme cases of sepsis. The poster is available on Volition’s website: direct link here.

Nu.Q NETs

In mid-September, a poster titled: “Nu.Q® NETs immunoassay detects Neutrophil Extracellular Traps by quantifying circulating H3.1 nucleosomes” was presented at Neutrophil 2024 in München, Germany. The poster by Volition SRL presents a study that the level of circulating H3.1-nucleosomes is a promising biomarker for detecting NETs and that Volition has developed a chemiluminescent immunoassay for detecting these circulating H3.1-nucleosomes. The poster is available on Volition’s website: direct link here.

On October 25, 2024, a paper titled: “Understanding the complex chromatin dynamics in primary human neutrophils during PMA-induced NET formation” by Atteberry et al. was published in Frontiers in Immunology. The paper is available on Volition’s website: direct link here.

LUNG CANCER

In mid-September, a poster titled: “Prognostic value of circulating nucleosomes during treatment with or without immunotherapy in Non-Small Cell Lung Cancer: results from Nucleo-Lung study” was presented at ESMO 2024. The presented data indicates that the level of H3K27Me3 nucleosomes can be predictive of overall survival (OS); additionally, the level has the ability to give alerts concerning a progression-free survival (PFS).

The team at the National Taiwan University has submitted a paper for peer-review, which is not yet in the public domain. The paper is on a large prospective study of approximately 800 low-dose CT positive for high risk patients.

OTHER RECENT COMPANY VIDEOS & WEBINARS

In September 2024, Volition posted a 2-minute video description of Capture-PCR, which can be viewed here.

On October 21, 2024, Volition presented a webinaron NETs titled “NETs: Casting a new light on sepsis management.” The slide deck is available at NETs webinar  and the video is available to watch here.

Also in late October 2024, Volition presented a 15-minute webinar titled “How to use Nu.Q Vet Cancer Test.” The video can be viewed here.

UPDATE - Nu.Q VET CANCER TEST

2024 Nu.Q Vet Developments Through the Third Quarter

In March 2024, Volition announced the signing of a supply agreement with Fujifilm Vet Systems Co. Ltd. for the Nu.Q Vet Cancer Test to veterinarians in Japan. The agreement allows Fujifilm Vet Systems to sell and perform canine cancer screening services with the Nu.Q Vet Cancer Test throughout its diagnostic network of 10 central reference laboratories that serve over 90% of the 12,000 veterinary clinics and hospitals in Japan.

Between March 21-24, 2024, Fujifilm Vet Systems introduced the Nu.Q Vet Cancer Test at its booth at the World Veterinary Cancer Congress in Tokyo. At the Congress, Dr. Heather Wilson-Robles presented a poster about the Nu.Q Vet Cancer Test.

During 2Q 2024, Heska began offering the Nu.Q Vet Cancer Test on its Element i+ in-house diagnostic platform.

In 2Q 2024, product revenues from sales of the Nu.Q Vet cancer screening tests and H3.1 kits increased 68.3%, primarily driven by stocking up by Heska (Antech) for the U.S. and Europe, and also by Fujifilm Vet for Japan.

Fujifilm Vet Systems Co. Ltd launched for the Nu.Q Vet Cancer Test to veterinarians in Japan on July 1, 2024.

During 3Q 2024, Heska (Antech) began offering the Nu.Q Vet Cancer Test in Australia, India and Singapore. In addition, VetLab (Polskie Laboratoria Weterynarjvne) launched the Nu.Q Vet Cancer Test in Poland and in the Czech Republic.

VolitionRx is making progress on the pre-analytics for the Nu.Q Vet Feline Cancer Test.

Updated on Distribution Network of Nu.Q Vet

Volition Veterinary continues to expanded its distribution network through new supply agreements. The Nu.Q Vet Cancer Test is currently available in 17 countries.

  • the U.S. (initial product launch in November 2020 through direct sales being processed at the GI Lab at Texas A&M University followed by IDEXX in January 2023 and Heska, an Antech/Mars company in April 2024),
  • the U.K. & Ireland (launched in the U.K. and Ireland through the Veterinary Pathology Group, and in the U.K. through Nationwide Laboratories, both November 2023),
  • Portugal & Spain (DNAtech - product launch in November 2022),
  • Singapore (SAGE Healthcare - product launch in November 2023),
  • Taiwan (Vita Genomics - product launch in November 2023),
  • Italy, France, Spain, Germany and Malaysia (scil animal care company GmbH, an Antech company),
  • UK, India, Australia, Singapore, Hong Kong , New Zealand, Canada and UAE (Antech company),
  • Japan (Fujifilm Vet Systems - product launch in March 2024),
  • Poland and the Czech Republic (VetLab Polskie Laboratoria Weterynaryjna – July 2024)

Expected Nu.Q Vet Milestones in 4Q 2024 - 2025

Management continues to pursue additional supply agreement worldwide.

In connection with the supply agreement signed with Heska, management expects to receive a $5 million milestone payment (based on feline product development) within the next year and a half.

UPDATE - SEPSIS

2024 Nu.Q NETs for Sepsis Developments Through the Third Quarter

On the March 26, 2024, management confirmed that Volition completed the FDA Q-Submission process, a pre-submission mechanism to ask questions and to request feedback from the FDA prior to submitting a 510(k) Premarket Notification. The FDA confirmed that Volition can continue following a Section 510(k) regulatory pathway.

During 2Q 2024, Volition performed an interim analysis of over 450 patients, of approximately 1,500 patients in the consortium study being led by Key Opinion Leader, Professor Djillali Annane (Dean of the Faculty of Medicine at the University of Versailles Paris Saclay and Head of the Critical Care Department at Raymond Poincaré University Hospital in Garches, Paris). This interim analysis will be presented at the company’s second Key Opinion Leader Workshop in September 2024.

On June 3, 2024 an article entitled: “Understanding Complex Chromatin Dynamics of Primary Human Neutrophils during PMA Induced NETosis” by Atteberryet al. was posted on bioRxiv for peer review. The article finds that Volition’s Nu.Q NETs H3.1 assay enhances the understanding of NETosis, which potentially can help identify potential targets for modulating the process of inflammatory diseases, such as sepsis, systemic lupus erythematosus and rheumatoid arthritis.

On June 10, 2024, an article entitled: “Rapid high-throughput method for investigating physiological regulation of neutrophil extracellular trap formation” was published in the Journal of Thrombosis and Haemostasis (JTH) by Zukas et al. The article describes Volition’s novel synthetic sepsis model and emphasizes the importance of investigating neutrophil physiology in order to better understand NETosis-related diseases, particularly COVID-19 and sepsis.

During 2Q 2024, over 8,000 Nu.Q NET samples from over 2,500 patients with sepsiswere run and processed from the two large retrospective sepsis studies are being conducted in Europe (a Sepsis Group Study in Germany and another at the Amsterdam University Medical Center). Samples were collected throughout their length of stay (from admission to outcome) so that longitudinal data could be obtained and the trajectory of disease can be examined.

Clinical studies and other data on Nu.Q NETs for sepsis were gathered into a confidential Data Room during the summer of 2024 for the purpose of supporting discussions and negotiations with interested parties regarding a potential licensing arrangement. Management believes there is a realistic possibility that the company could enter into a licensing agreement related to Nu.Q NETs sepsis within the next two quarters

  • In September 2024, the company’s second Key Opinion Leader Workshop, which is focused on sharing and advancing therapeutic management of sepsis, convened in Paris. The event was chaired again by Professor Djillali Annane. Key data and findings from the most recent studies on sepsis were shared and discussed.
  • On October 7, 2024, VolitionRx sponsored its first Satellite Symposium at the 37th Annual ESICM (European Society of Intensive Care Medicine) Conference in Barcelona. Data from interim/final results from large clinical studies that used Nu.Q NETs to measure levels of circulating H3.1 nucleosomes were presented. The report presented at Satellite Symposium was entitled “Sepsis: A brighter hope for tomorrow.”
  • two large retrospective sepsis studies that were conducted in Europe.
  • SISPCT retrospective study in Germany (n = 971) found that patients with the most severe acute respiratory distress syndrome had the highest levels of H3.1
  • Amsterdam UMC retrospective study in the Netherlands (n = 1,713) showed that higher levels of H3.1 level indicated a greater their risk of multiple organ failure
  • interim analysis of RHU Records in France (n = 416 out of approximately 1,500 patients) indicates that level of H3.1 can be used to distinguish between patients with sepsis (median H3.1 level around 700ng/ml) and those with septic shock (median H3.1 level of just over 1,000ng/ml).

Expected Nu.Q NET Sepsis Events in 4Q 2024 - 2025

  • Andrew Retter collaborated with Professor Annane and Professor Mervyn Singer on an article entitled “Neutrophil extracellular traps: a potential key component of the dysregulated host immune response in sepsis,” which is not yet published, but is under peer review.
  • Additional papers are also expected from Volition’s Centers of Excellence in 2024 and 2025.
  • Interim analysis of a 500-patient study opened at Guy's andThomas’s Hospital during 1Q 2024 may be released during 1H 2025. The study is comparing 450 patients with sepsis to 50 healthy patients undergoing cardiac surgery. The study is expected to be completed in 2025.
  • After signing an agreement with Diagnostic Oncology CRO (DXOCRO) in August 2022 to support development and clinical validation studies in the U.S., DXOCRO conducted large-scale finding studies in order to determine clinical utility of using the Nu.Q NETs test, at first for monitoring sepsis and later for non-Hodgkin’s lymphoma. In February 2024, DXOCRO was further engaged to conduct another range finding study of Volition’s Nu.Q H3.1in vitro diagnostic (IVD) test for use in sepsis. During 2Q 2024, the recruitment process closed.

LICENSING DISCUSSIONS & NEGOTIATIONS

VolitionRx has a substantial IP portfolio with 86 granted patents with a further 128 patent applications pending as of July 2024. Management’s goal is to enter into licensing or supply agreements, particularly in the human space for Nu.Q NETs, Nu.Q Cancer and Capture-PCR, and to begin receiving milestone payments under those agreements.

A recent key activity to achieve this goal is the creation of Confidential Licensing Data Rooms, which will store clinical and scientific data from the completed and ongoing studies. Interested parties in the realms of liquid biopsy, IVD, sepsis and/or oncology will be able to review and analyze all the supporting data in one place and in an environment that should stimulate thoughtful fact-finding discussions and promote a path toward licensing agreements.

Nu.Q DISCOVER – GROWING REVENUE BASE

VolitionRx offers laboratory services and contract research for external parties under the Nu.Q Discover moniker. These external parties include pharmaceutical companies, biotechnology companies and academic researchers, among others. Under Nu.Q Discover, Volition offers products (such as recombinant nucleosomes, antibodies, reagents, supply kits etc.) and processing services in order provide epigenetic profiling in disease models, pre-clinical testing and clinical trials.

The first Nu.Q Discover agreement was signed in the fourth quarter of 2021. In early 2022, the aggregate annual worth of the company’s Nu.Q Discover contracts were roughly $200,000. Since then, the worth of contracts being pursued and signed has ramped up. During 2023, Nu.Q Discover generated $300,000 in revenues, and the pipeline of Nu.Q Discoveropportunities is valued at over $1 million.

Due to the project-based nature of Nu.Q Discover contracts, the revenue stream tends to be lumpy quarter-to-quarter.

INSTITUTIONAL OWNERSHIP

During 2024, institutional ownership has increased to over 19% of the outstanding shares, over doubling since the beginning of the year. Notably, since February 2024, Lagoda Investment Management, L.P. has increased its holdings of VolitionRx from 3,882,850 shares to 5,438,000 shares in August 2024. Other large shareholders include Armistice Capital, LLC, Geode Capital Management, LLC, Vanguard Group, BlackRock, Fidelity, Silverberg Bernstein Capital Management LLC and State Street Corp.

VALUATION

Utilizing a financial model based on DCF methodology, which forecasts out to 2031, and uses a 10% discount rate (based on CAPM), a 2% terminal growth rate and a terminal P/S multiple of 0.54, the indicated value of VNRX is $3.02 per share

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