Volitionrx Ltd Q2 FY2024 Earnings Call

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the VolitionRx Limited's Second Quarter 2024 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference call will be opened for questions. This conference is being recorded today, August 15, 2024. I would now like to turn the conference call over to Louise Batchelor, Group's Chief Marketing and Communications Officer. Please go ahead.

Thank you, and welcome everyone to today's earnings conference call for VolitionRx Limited. Before we begin, I'd like to remind everyone that some of the information discussed on this conference call will include forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our beliefs as well as assumptions we have used upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may vary significantly based on a number of factors that may cause the actual results or events to be materially different from future results, performance, or achievements expressed or implied by these statements. We have identified various risk factors associated with our operations in our most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We do not undertake an obligation to update any forward-looking statements made during the course of this call. Cameron Reynolds, President and Group Chief Executive Officer, will open the call providing key highlights of the second quarter and indeed the first half of 2024. Then Dr. Andrew Retter, Chief Medical Officer, will provide a commentary about our clinical trials program. Terig Hughes, our Group Chief Financial Officer, will then cover Volition's financial and operating results along with a discussion of recent finance activities before passing back to Cameron for a look ahead to upcoming milestones. We will then open the conference call to a question-and-answer session. I'll now hand over the call to Cameron.

Thanks, Lou, and thank you everyone for joining Volition's second quarter 2024 earnings call today. We appreciate your time given the busy earnings call season. Thank you for your continued support in helping us advance our mission to save the lives and improve outcomes of millions of people and animals worldwide through our novel epigenetics platform. This year we have successfully supported our veterinary licensing and distribution partners to launch the Nu.Q Vet cancer test and I'm delighted that we have sold more tests in the first half of this year than we did in the whole of 2023. Through the end of June 2024, we sold more than 60,000 Nu.Q Cancer tests versus about 58,000 tests for the full year of 2023. After very good initial feedback from vets, they are now marketing the test aggressively, so another exciting market to watch. We have invested significantly over the recent years to build out our product pillars and to help ensure we have robust scientific and clinical evidence to support our potential breakthrough technologies.

Our focus in the second half of 2024 will include negotiating our first licensing deal in the human space and to that end, PharmaVentures has recently been engaged to act as an advisor to Volition to help secure licensing deals. PharmaVentures is a respected international advisory company with a proven track record in licensing, partnering, and strategic alliances. PharmaVentures' specialist experience in deal making and extensive network means that it is ideally placed to support us as we seek to commercialize our potentially groundbreaking oncology and Capture PCR portfolio. I will return later in the call to discuss future milestones and to answer your questions, but I will now pass over to Dr. Retter for a summary of upcoming data for inclusion in the data rooms, not only for oncology but also for sepsis. We have already received expressions of interest from key industry players. Andy, over to you.

Our first two studies have over 2500 patients. We have high resolution data both on admission and longitudinal data throughout their length of stay. The cohorts are extremely well characterized and we believe this will be an extremely rich source of insight into the value of H3.1. These samples have all been run and processed. The data analysis is being finalized with the goal to be completed and ready to enter the data room by the end of the month and shared with our KOLs in September. Preliminary results across the cohorts are promising and consistent. As I reported last quarter, we extended the DXOCRO study in the United States to include sicker patients and for patients to be initiated into the study from the Emergency Department rather than simply including ITU patients. Recruitment for this study has now closed and data analysis is almost complete. Our project with our Key Opinion Leader, Professor Djillali Annane in France, is progressing well. This is a consortium project of an ongoing prospective study of which Volition is a member. Again, it's longitudinal in nature, large scale, with high resolution of approximately 1500 patients in the study. Working closely with Professor Annane and his team, we have performed an interim analysis of over 450 patients. This will be added to the confidential data room and shared at our upcoming Key Opinion Leader Workshop in Paris in September.

Finally, from a publication perspective, following on from the Care event last year, I have been working with Professor Annane and Professor Mervyn Singer on a review article exploring the role of investigating NETs in sepsis. We hope to see this on bioRxiv again soon. Looking forward, in September we are hosting our second Key Opinion Leader Workshop. Again, it will be chaired by Professor Djillali Annane and attended by some of the world's leading experts on sepsis. During this session we will be sharing the key findings from our recent extensive studies as well as some of our significant work from our innovation team in America. I would like to reiterate that last year's event, the whole sense and impression from the KOL Group was that Nu.Q NETs potentially represents one of the biggest breakthroughs in sepsis management in the last 30 years. We truly hope this statement is correct, and the data to be presented by Volition and our centers of excellence could provide the evidence to support this bold new view. In October, we anticipate a number of the clinical studies I mentioned earlier will be reported at our Satellite Symposium at the European Society of Intensive Care Medicine, one of the largest intensive care conferences in the world. We are very proud to sponsor our first Satellite Symposium. There will be many more details to follow, but it is going to be a very busy second half of the year for Nu.Q NETs and sepsis. We expect all of these activities to help us continue to build momentum and solidify the keen interest to date and further our licensing discussions and negotiations with partners for Nu.Q NETs.

We've mentioned before Capture-PCR, a novel liquid biopsy method involving the first reported physical isolation of a class of tumor-derived DNA fragments from blood. These cancer-derived DNA fragments are then extracted for removal of all background DNA from the same sequence for detection with a low-cost and simple PCR test. Volition tested this method in a small clinical experiment and detected a range of solid and liquid cancers, including detecting cancers at the very earliest stages of the disease or stage one disease. Dr. Jake Micallef and team have presented this method and associated data at a number of cancer-specific conferences and are developing the all-important key opinion leader and potential centers of excellence network. The team has continued to identify other potential biomarkers and the associated PCR tests and especially gained ground looking at solid cancers and will conduct initial studies in larger patient cohorts in short order. From a publication perspective, we are close to completing the manuscript and plan to submit this breakthrough method for peer review soon. We believe that this will be an incredibly important paper to add to our data room and support the ongoing commercial discussions with a wide range of potential licensing partners. I just want to conclude by saying that year-to-date we have added and continue to add supporting new materials to our data rooms for Nu.Q NETs, Capture-PCR, and Nu.Q Cancer. These clinical data and scientific papers have proven to be of great interest to potential licensing companies in highlighting the promise of our patented technologies. Thank you very much for listening. Lots and lots to come in this space. With that, I'd like to pass you over to Terig for the finance report. Thank you everyone. Terig?

Good morning everyone and thank you for joining the call today. I will now provide a summary of the key financial results for the quarter ended June 30, 2024. As announced in our first quarter results, we are continually working on a number of threads with the aim of ensuring Volition is cash flow positive in 2025. From a revenue perspective, during the second quarter of 2024, we recorded revenue of approximately $396,000, approximately 83% higher than the same period last year, and for the first half of 2024, revenue totaled $567,000, up 55% versus the first half of 2023. So we are seeing revenue growth starting to accelerate, primarily driven by Antech's launch of the Nu.Q Vet Cancer test on their in-house platform in the U.S. and Europe in April. Secondly, from an expenditure perspective, we have and will continue to undertake a thorough review of all projects with the aim of streamlining our activities to help ensure that we deliver on our focused action plans and monetize our exciting technologies and intellectual property. As of June 30, 2024, headcount was 9% lower than the end of the second quarter of 2023, and operating expenses for the second quarter of 2024 were 24% lower than the same quarter last year. From a funding perspective, throughout the company's history, we have been successful in securing non-dilutive funding on favorable terms and year-to-date we have targeted a range of government agencies, including in the U.S., to fund or co-fund some of our strategic projects. As a reminder, we have previously received over $20 million in non-dilutive funding support from various Belgian and European agencies. We will provide further updates on this in the coming months. We ended the quarter with cash and cash equivalents of approximately $6 million. Subsequent to quarter end, we completed a registered direct offering of common stock and warrants to purchase common stock of up to $21.5 million in aggregate gross proceeds with a single healthcare-focused investment fund. This deal comprises of a $7 million upfront investment at closing and up to an additional $14.5 million of potential aggregate gross proceeds upon the full exercise of milestone-linked warrants issued to the investor in the transaction. Our focus in the second half of 2024, with the support of PharmaVentures, will include negotiating our first licensing deal in the human space, following we hope, a similar approach as we achieved in the veterinary space.

Thanks, Terig and thanks, Andy for your comprehensive reports. As previously mentioned, our focus continues to be on getting each pillar to support itself, either through product revenues, milestone payments, out-licensing and/or other non-dilutive funding in the coming year, as well as on the company-wide cost reduction measures of $10 million. Our aim is to ensure Volition is cash flow positive in 2025. The team has made strong progress towards this goal in the second quarter. We've also made strong progress through the first half of 2024 in getting the data required to support our strategy to monetize RRP through licensing agreements. Our focus in the second half of 2024 will include negotiating our first licensing deal in the human space and we are delighted to be working with PharmaVentures to help secure such deals. We have accumulated a lot of experience from our various licensing and supply negotiations for Nu.Q Vet, which we believe will help us move towards commercializing some of our other technologies such as, but not limited to, Nu.Q NETs, Nu.Q Cancer, and Capture-PCR. We are making strong progress on a number of fronts. It's an exciting time as we push our technologies up the value curve in order to maximize the monetization of our IP through payments for exclusivity, milestone payments, and ongoing licensing revenues. If successful, as we expect, we believe this strategy would provide us ongoing royalties and very meaningful milestone payments in the next 12 months. In closing, I'd like to thank you all for joining the call today. We appreciate it given how much there is to digest over all of our pillars. We will now take questions. Operator?

Thank you. Our first question comes from the line of Bruce Jackson with The Benchmark Company. Please proceed with your questions.

Hi, good morning and thank you for taking my questions. I'd like to focus on the revenue uptake for the Vet product. We had a nice uptick this quarter and I know that to some extent this is out of your control because you're working with distribution partners, but you've got the test launching in Japan and Antech launched in April. So just for the next couple of quarters, if you've got line of sight, are we just going to see sequential increases in revenue and could we know what kind of uptick curve we could potentially be looking at?

Thanks, Bruce. Yes, it was a very good uptick this quarter. I'll pass you over to Terig.

Yes. It's difficult to know what that curve looks like, but you're right, we saw a very good uptick. I think the revenue from Vet in Q2 was about double that of Q1, but it's difficult to know whether that continues on a straight line like that. As you said, we don't have direct line of sight into what that's going to look like for the next couple of quarters, but we certainly expect it to increase over the next quarter or two because we've got both Antech and Fuji having just launched in the last quarter. So we're looking forward to seeing some increase there over the next couple of quarters. But it is difficult for us to give guidance at this point. Yes, and Antech obviously just recently launched on the point-of-care and we're extremely happy with that machine. I think it's the first time that I'm aware of in history that any point-of-care cancer test has been available for any living things. So it's quite a first and I think that could be a game changer. But obviously, the lab market is also very important and Fuji are really hitting the ground running. But it can be a little lumpy because they obviously stock and then they can go through the stock for a few months and reorder. But all the indications we have have been a very good response from the Vet. Sensitivity of 76 at 97%. Specificity is obviously an extremely good test. We're very hopeful that it's really picking up, but it could be a little bumpy over the next few quarters until it kicks into demand going from all areas, but at the moment we're very happy.

Okay, great. And then one more on the income statement for Terig. Good expense control in the quarter for operating expenses. Do you see that being the level that we're going to be running at going forward?

Expenses are decreasing each quarter, and as I mentioned earlier, we've reached a peak in our spending. Our current priority is commercialization, which is leading to a reduction in R&D costs that we expect to continue quarterly. We aim to lower overall expenses by at least $10 million annually. We began cutting costs last quarter, and you will observe the effects of these actions throughout the year. Our goal is to achieve this $10 million reduction in expenses by the end of the year and into the next year.

And I think, Bruce, it's probably important to emphasize we absolutely understand the climate's changed from a few years ago. Any raising money now is expensive. So we are incredibly careful with every dollar we spend. We've actually just spent the last few days going over all the accounts again to see what else we can take out. And now we're cutting everything we possibly can. But we're making sure that the things that lead to revenue and also to the licensing deals we continue to fund. Because I think the licensing deals are getting very close to the rooms being ready. We've had a lot of interest. I think they're truly potentially fantastic breakthrough technologies. You heard from Andy that the data is consistent and very promising. And so we're very hopeful we can get a great licensing deal in the next few quarters as well. So, but we absolutely get it. We are doing everything we can to take out every penny we can to make sure we reach these milestones. And there are quite a few big milestones in the next few months and quarters. So we're extending the runway as much as possible to make sure we get them.

Okay, great. Thank you very much. That's it from me.

Thanks, Bruce. Have a good day.

Thank you. Our next question comes from the line of Ilya Zubkov with Freedom Broker. Please proceed with your questions.

Hi, good morning and thank you for taking my question. I have a question on the recently raised funding. Earlier it was said that each project is aimed to be funded separately. And I was wondering if this strategy is still valid and how the funding raised last week relates to this strategy?

So we are absolutely trying to make sure every one of the key areas is self-funding. So Vet is at the moment concluding the milestone payments. The net data looks absolutely fantastic, as we said, and we are going to be publishing a lot of it soon. We are very hopeful that through milestone payments and deals, that can also happen in the human cancer sector; we have been around 14 years now. From my point of view, it's everything we wanted from the start in the human cancer side as well; Nu.Q in Capture PCR, also in lung cancer. We have data coming out in Nu.Q, in solid tumors, which is also very exciting, as you will see soon. So I think it's very plausible that that is potentially self-funding as well, as well as all the different grants we're expecting from the governments. We have a large amount of money coming in. We expect again from different government agencies, both in Europe and U.S. So we did a fundraise. Obviously, it's expensive money at the moment, but we wanted to make certain we could get these milestones out, get the data out, as Andy said, in the next couple of months, and in all the different areas, and do everything we can to get a licensing deal. So I think it's exactly the same strategy. Terig, do you want to speak on that?

Yes, I think you've covered most of it, Cameron. I think getting the revenue to ramp in the Vet business, getting the licensing done in the human space, and then focusing on bringing the cost down and getting some of the government funding in that should take us to a point next year where if we're successful, we'll be cash flow positive.

Thank you. Have a great day.

Thank you. Our next questions come from the line of Steven Ralston with Zacks Small-Cap Research. Please proceed with your questions.

Thank you. You've made us got some good traction here, ramping up the product line. Is there a way to break down? You mentioned that it was lumpy, but through your distribution channels in different countries, is there any way to get a breakdown to see where we're seeing the release, where the strength is?

We're not providing that at the moment. Yes, the numbers are still sort of relatively lumpy, as Cameron mentioned, and we're not seeing any meaningful trends from quarter-to-quarter at the moment because we've still got launches happening. Yes, it is difficult to provide any sort of meaningful guidance on trends at the moment. So that's something we'll be hoping to do when we've got a bit more traction. But I think it's fair to say, obviously, the early revenue was IDEXX and stocking up, which they've been working through. We've now had a range of other partners who bought this bump is the launches in Japan and with Mars. So it is picking up very much. And we're also making, in the Vet space, progress on the cat pre-analytics, potentially for another milestone payment there and launch of the cat product. We've also had feedback from a lot of different partners. The micro titer plates work as you can tell from all the trials and the processes. But when you get into a larger number of samples, micro titer plates are not ideal for workflow, in the lab they work well. But as you can imagine, a plastic plate for 40 tests is not the same as a machine. So we've spent a lot of time and effort and now we have the test working on the automates. Then obviously we expect to be able to do that in cats if we have a cat product. So we're doing a lot of work and I think the pickup now is from the point of care and from Japan, which is plates. But we're hopeful too that we can get some more pick up. And I think for the labs to really kick into high gear, they're going to need to automate is the way to go. So we've been doing a lot of work on that background as well. Now that won't kick into next year. Of course, we add monitoring to it and hopefully cats next year perhaps it will pick up. But we're very encouraged with the enthusiasm of our two new partners in Antech and Fuji and also the work obviously done traditionally by IDEXX. So it's all there, but it will be up and down, but the trend is obviously strongly upwards. We've done more in the first half of this year than all of last year. But I think it'll become much more regular in a few quarters once all of them have their launch phases and start ordering regularly.

Thank you. Concerning the cost-cutting program, I mean you made tremendous progress in R&D and sales and marketing where reductions were between 17% and 19% sequentially, but the general and administrative expenses are lagging a little behind that. I think it's like single digits. Do you expect that to pick up? I know it was like a two-tier cost reduction program where you actually implemented some cost cutting over 12 months ago. Could you clarify that? And whether you expect G&A to expenses to drop significantly, just like R&D in sales and marketing?

So I think obviously the R&D is coming. Some of that comes to a natural end just in terms of projects that are finishing up. So that happens a bit sooner. We are turning over every rock that we can look under to find what we can cut out. But the G&A obviously takes a little bit longer to tackle, and so we will see that coming down over the next few months, but perhaps not as quickly as the R&D as those, some of those projects just roll off naturally. But the goal is, as we said, to continue to see progress on that over the balance of this year and into next year.

Thank you. Concerning the recent financing, you have these milestone A&B warrants which are going to give a nice tale of funding when you meet these old milestones. The B warrants seem to be quite specific about progress with FDA approval. Could you please clarify what you expect to trigger the A warrants?

Yes. So, obviously, the warrants are commercially driven, as you've said. We've expressed that we are very happy, actually. I think I'd actually say that the scientific team is confident about the data in cancer and sepsis, and we have a lot of interest from partners. So we do expect to have a commercial deal in the next. I mean, it doesn't take a few weeks by any means, but certainly a quarter or two. We should be getting very strong traction in at least a few of them. And so the milestone, we spent a lot of effort on this raise, making sure that was at an achievable level. They are focused on getting some value in the process. They'll become public, I guess. But it's basically having a deal in the human space. And the longer one is for the FDA, but that's obviously a few years away. But we're very hopeful we can meet that A warrant in the short to medium term.

Thank you. One last question on the financing, are you implementing some sort of cash management program to get, well, in some areas, you can still get reasonable interest rates to bring in a few extra $100,000 off the cash balances as you just completed this $7 million financing?

Yes, we do have some interest-bearing accounts where we put any spare cash that we do have. So, yes, we are managing the cash as efficiently as we can.

All right, thank you. Just one last question, concerning ESMO in 2024 in what, mid-September? How many papers are you going to present there?

There's one paper being presented there which is predominantly focusing. Well, not predominantly, is focused on lung cancer, and we're very excited by the results there.

And the big one is the European Society of Intensive Care, which is in October, and in that, do you want to go through the presentation for that, Andy?

In that we've booked a satellite symposium where we'll be showing data from three upcoming scientific trials and from our three large clinical trials we've conducted so far. So lots of, lots of work there.

Thank you for taking my questions.

Thank you, Steven.

Thank you.

Thank you. I am showing no further questions at this time. I would now like to hand the call back over to Cameron Reynolds for any closing remarks.

Thank you, everyone, and thanks for your interest in Volition. I'd like to assure everyone we are working incredibly hard to reach the milestones on commercialization, on the cost-cutting front, but also on the licensing front with PharmaVentures in the human space. We're very, very happy with all the data we're seeing, and we've finally got a range of different products we can license in human cancer after 14 years, where it's exactly what we wanted when we started. Also, as Andy said, the sepsis data we're extremely happy with as well. So that's all coming out in the September, October timeframe, in publications, in conferences, and in data rooms for a large number of interested parties. It should be an extremely interesting end of the year. I'm looking forward to the next earnings call in November. Thank you for your time.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.