VolitionRx Limited (VNRX) on Q4 2022 Results - Earnings Call Transcript
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to VolitionRx Limited's Full Year 2022 Earnings Conference Call. [Operator Instructions] This conference call is being recorded today, March 16, 2023. I'd now like to turn the conference over to Scott Powell, Executive Vice President of Investor Relations. Please go ahead.
Scott Powell: Thank you. And welcome everyone to today’s earnings conference call for VolitionRx Limited. This call will cover Volition's financial and operating results for the full year of 2022, along with a discussion of our recent activities and key upcoming milestones. Following our prepared remarks, we will open the conference call to a question-and-answer session. Also on our call today are Mr. Cameron Reynolds, President and Group Chief Executive Officer; Mr. Terig Hughes, Group Chief Financial Officer; and Dr. Tom Butera, Chief Executive Officer of our Volition Veterinary subsidiary. Before we begin, I would 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 based 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 of these forward-looking statements made during the course of this call. I’d now like to turn the call over to our President and Chief Executive Officer, Mr. Cameron Reynolds. Cameron?
Cameron Reynolds: Thanks, Scott. And thank you everyone for joining Volition's full year 2022 earnings call today. We especially appreciate your time given the busy earnings call season. 2022 was a transformational year for Volition. After 12 years in operation, we have successfully transitioned from a company solely focused on research and development to an organization that has also commercial products. Volition is powered by Nu.Q, our cutting edge Nucleosomics platform, which has enabled the development of all of our product pillars and is the foundation of the company. I am so proud of the hard work, expertise and commitment of our team and what we've achieved together. Given this is our full fiscal year result, we will commence the call with our Group Chief Financial Officer, Terig Hughes, before moving on to Dr. Tom Butera, Chief Executive Officer of Volition Vet. For an update on the rollout of Nu.Q Vet via our global supply and licensing agreements. And finally, I will provide an update on the great progress the team have been making with regards to another one of our key pillars, Nu.Q NET, as well as a brief update on Nu.Q Cancer and Nu.Q Capture. Without further ado I'll hand you across to Terig for the financial report. Terig?
Terig Hughes: Thanks very much Cameron. And thank you everyone for joining our earnings call today. I will now provide a summary of the key financial results for the year ended December 31, 2022. Starting with cash, we closed out the year with cash and cash equivalents of approximately $10.9 million. From a revenue perspective, we recorded just over $300,000 in earned revenue in 2022, a 240% increase over the prior year, the majority of which was from sales of the Nu.Q Vet Cancer Test with the balance mainly attributable to the Nu.Q Discover program. The net loss during 2022 was $30.6 million versus a $27 million loss for the prior year. This result was predominantly driven by higher personnel costs and sales and marketing spending as we prepared for commercialization. During 2022, we strengthened our balance sheet by adding approximately $6.4 million in net cash before deducting offering expenses through an underwritten public offering of our common stock in August. Furthermore, in August, 2022, we were delighted to announce the award of approximately $1.5 million in non-diluted funding from the Namur Invest Capital Risk in Belgium to fund an early access program for our Nu.Q product portfolio at key sites across the EU, the UK, and the U.S. Additionally, we recorded grant income of $1.2 million in 2022 from the Walloon Region in Belgium. We continue to manage our expenditures and cash flow carefully. And whilst the overall level of expenditure increased in 2022 as compared to 2021, the impact on cash flow was more than offset by receipt of the Heska milestone payment of $10 million in March, 2022. As a result, net cash used in operating activities was $15.3 million for the full year or a monthly average of approximately $1.3 million. In the most recent quarter ended December 31, cash used in operating activities averaged approximately $1.7 million per month. While we expect expenditures to increase again in 2023, partly driven by our clinical trial activities, we also expect cash flow impact to be moderated by potential milestone payments of up to $13 million anticipated from the Heska Corporation. So to recap, we close the year with cash and cash equivalents of approximately $10.9 million. Subsequent to year-end, we received approximately $8 million in net cash before deducting offering expenses through an underwritten public offering of our common stock in February. And we expect upon achievement of near-term milestones to receive a further $13 million this year from Heska Corporation. We are now in revenue generating mode with a Nu.Q Vet Cancer Test available through the reference lab networks of IDEXX Laboratories, Heska, the Texas A&M and GI Lab and some local distributors such as DNAtech, Portugal. Heska has also started pre-selling the Nu.Q Vet Cancer at the point of care, which we expect to provide a significant future revenue stream at a solid margin. It is great to see we are now up and running on our commercial journey, and I look forward to sharing revenue update with our next earnings call for the first quarter in May. Given the range of products that we expect to develop from our proprietary Nucleosomics platform, we believe that our addressable markets are significant and we look forward to accessing these opportunities and reporting in June course. So, we have made strong progress on many fronts in 2022 and into the first quarter of 2023. And with that, I will hand over to Tom for further detailed updates on the rollout of our Nu.Q Vet Cancer Test and upcoming milestones. Tom?
Tom Butera: Thanks very much, Terig, and good morning everybody. 2022 was a breakthrough year, and I feel really proud of all the team’s achievements. It seems just a while ago now, but looking back to the first quarter of 2022, we signed our first large scale licensing and supply agreement with the Heska Corporation. The Heska agreement provides three new specific areas that you should all be aware of. First of all, exclusive rights to Heska to sell Volition’s Nu.Q Vet Cancer Test for companion in animals at the point of care. Number two, non-exclusive rights to Heska to sell the Nu.Q Vet Cancer Test for companion animals via Heska’s reference laboratories. And three, certain rights of negotiation to Heska to potentially commercialize a wider test menu for companion animals again at the point of care. The Heska agreement also came with some very significant financial milestones to give you the breakdown. First of all, Volition received a $10 million upfront payment on signing the agreement, and Volition will receive up to $18 million based upon the achievement of near and mid-term milestones. $13 million of which we anticipate receiving in the first half of 2023. In addition to these milestone payments, and most likely significantly greater than these payments is the ongoing revenue that Volition expects to receive in relation to payment for kits for the reference lab market, and for the supply of key components for the exclusive point of care product that Heska will bring to the market. You must all remember every time Heska sells a test, Volition will make money be that through the sale of a kit or from the sale of a key component. It’s a long-term deal, and we believe that it’s a fantastic market opportunity for us. And to bring folks right up to date in 2023, Heska is now taking pre-orders for the Heska Nu.Q Canine Cancer Screen and Monitor Test at the point of care, and we anticipate a full commercial launch in the second quarter of 2023. During 2022, we also executed a supply and distribution agreement with IDEXX Laboratories, a global leader in pet healthcare innovation. This agreement was signed in October and provides IDEXX with the rights to sell the Nu.Q Vet Cancer Test worldwide through its global reference laboratory network. Pursuant to the IDEXX agreement, Volition expect to receive ongoing revenue from the sales of its reference laboratory kits. IDEXX launched our test at the world’s largest veterinary conference, VMX, which was held in Orlando in the U.S. earlier this year, and plans to continue to roll out to other countries throughout 2023. I am delighted that the Nu.Q Vet Cancer Test is now available in the mainstream mass market in the U.S. and indeed happy to report to all of you it’s already been ordered by veterinarians in more than 40 states. Remember this important point; there are approximately 84 million pet dogs in the United States alone. Nearly 50% – 50% of U.S. households bring their dog to the veterinarian annually for a health exam. We believe that this provides a significant opportunity for us to introduce the Nu.Q Vet Cancer Test as an accessible and affordable screen for senior dogs and at-risk breeds to aid early detection and improve outcomes. Simply great news for the veterinarians, their pet families, their pets, and a great reason to come to work every day. I'm also happy to report that Professor Wilson-Robles and team continue to make great progress in both ongoing and completed studies. A particular note is the use of the Nu.Q Vet Cancer Test for monitoring disease progression and remission. And to that end, Professor Wilson-Robles recently submitted a paper for peer review about evaluating treatment efficacy in real-time accurately monitoring the progression of lymphoma and identifying relapse soon, all of which will provide veterinarians terrific information to help guide their treatment decisions. It's a terrific paper and demonstrates another potential significant utility of our test. In wrapping up and looking ahead, I'd say the next thing to look out for will be the full commercial launch of the Heska Nu.Q Canine Cancer Screen and Monitor Test at the point of care, which we anticipate in the coming weeks. We are also looking to expand our global distribution further and are pursuing commercial deals at a global, regional and local level, so keep an eye out for that. And lastly, from an R&D perspective we are working on our feline product and also looking to extend into emergency medicine, mirroring the human side of Volition with an emphasis on NETosis. So we have lots to keep us busy, and I look forward to providing further updates at our next update call and indeed at our Capital Markets Day in May. And with that, I'll pass back to Cameron Reynolds, our Group Chief Executive Officer. Cameron?
Cameron Reynolds: Thanks Tom, and thank you, Terig for those comprehensive updates. Great progress indeed. From a commercial perspective, I would have to say signing the licensing supply agreement with Heska and IDEXX were standout moments of 2022 for me. But in the background, we have not only continued to strengthen our broad IP portfolio, which is a real asset for the company but we've also dedicated considerable time and resources to scaling up and strengthening our infrastructure for delivering high quality services under our licensing and supply agreement. During 2022 in particular we sought to build out HR, IT, finance, legal and commercial functions to support the growing needs of the company. We now have over 100 staff worldwide based in Belgium, the UK, the U.S. and Singapore all of whom play a part in our future success. I will wrap-up the call today with updates on several of our other product pillars. Nu.Q Capture, Nu.Q Cancer and Nu.Q NETs. Human blood is a mixture of many different cell types floating in a complex soup of proteins and other molecules, including nucleosomes released by cells from all around the body. Detecting a handful of cancerous or other abnormal cells in a patient's blood sample has historically been like finding a proverbial needle in a haystack. Volition's Nu.Q Capture program has several strands of technology which one, essentially removes background noise, thereby amplifying the signal; or two, looks to identify the signal in a novel way including through mass spectrometry; or three, isolate various chromatin fragments, including nucleosomes and transcription factors; for analysis by mass spectrometry and next-generation DNA sequencing. I am very happy to report we have made real progress on a number of these trends throughout 2022 and into 2023. As a reminder, this sample enrichment tool removes healthy nucleosomes, leaving an enriched sample of abnormal nucleosomes behind for further analysis. One area of progress is linked to Nu.Q Capture mass spec whereby we enrich the sample and then use mass spec to help identify specific cancer related biomarkers. In 2022, we published a paper using this technology in colorectal cancer and we have recently submitted for peer review a second paper this time in relation to non-Hodgkin's lymphoma. These nucleosomes contain tumor-specific DNA, typos, epigenetic changes and other biomarkers that when analyzed could potentially be used to diagnose a specific type of cancer or other medical condition, guide treatment selection and monitor disease and treatment progress. Further, the use of Nu.Q Capture technology in the field of transcription factors has led to the successful isolation of tumor derived transcription factor-DNA complexes from blood samples obtained from cancer patients. As transcription factor binding to DNA is cancer and tissue specific, this technology may, in principle, provide the basis for blood tests for cancer in general as well as blood tests to identify the organ or tissue affected by cancer. Development is ongoing and I look forward to providing updates in future calls. In our Nu.Q Cancer pillar, we announced Volition’s participation in a government backed perspective study to evaluate the performance of blood biomarkers in the early detection of lung cancer with Hospices Civils de Lyon, France’s second largest university hospital. The Lyonnaise Initiative for the Initiation of Lung Cancer Screening ILYAD is a wide-ranging clinical study assessing the feasibility of a lung cancer screening program and the effectiveness of screening. The ILYAD study will evaluate the performance of Volition’s Nu.Q test as a blood biomarker for the early detection of lung cancer, when used alone and in conjunction with CT scan, with the ultimate goal of developing a national screening program in France. Our longer term project, but fantastic to be involved in such an initiative. Volition has also conducted a retrospective proof-of-concept study with HCL in lung cancer, the results of which will be presented at an upcoming conference. And lastly, we completed the National Taiwan University Lung study, analysis is underway with publication expected thereafter. And so to our final pillar covered today, Nu.Q NETs. In May, 2022, the Nu.Q NETs product with CE Mark for the detection and evaluation of diseases associated with NETosis on two platforms, the ELISA plates and the automated i-10, enabling clinical use in more than 27 countries across Europe. We firmly believe Nu.Q NETs will have wide applicability for diseases with a NETs component such as sepsis, COVID-19, influenza, thrombosis, et cetera, and potentially could enable the stratification of patients with a high level of NETs, allowing physicians to rapidly triage these patients, and monitor their disease progression and response to treatment. In 2022, together with our collaborators, we published a peer reviewed paper and two posters; the key finding reported is that levels of Nu.Q NETosis as measured by Volition’s Nu.Q NETs test are highly elevated in sepsis, and moreover that the results correlate very well with the severity disease SOFA score, Sequential Organ Failure Assessment. This result has garnered a lot of interest from KOL and has led to establishing some of our centers of excellence. In August of 2022, Volition appointed DXOCRO a contract research organization specializing in the commercialization of diagnostic biomarker technologies, to spearhead our clinical product development and FDA regulatory programs in the U.S. DXOCRO is undertaking large-scale finding studies across multiple sites using Volition’s Nu.Q platform to determine clinical utility in sepsis and cancer with the goal that one or more of such studies will support an application to the FDA’s Breakthrough Device Program. The first phase of the focused on sepsis has been completed, and the application of the FDA’s Breakthrough Device Program is expected to be submitted in the first half of this year. And joining earnings [indiscernible], I’d like to thank you for joining the call today. We really appreciate it. I, along with the rest of the board and indeed the whole company can very much look forward to sharing further news regarding our Nu.Q product pillars as well as the results of our key clinical studies, publications, and milestones at the coming months and quarters. And to that end, I’m delighted to say we’ll be hosting a Capital Market’s Day at the New York Stock Exchange on the afternoon of Thursday, May 11th. We would love to see you there. But for today, a wrap up saying, I very much feel we are in an extremely strong position to commercialize our Nu.Q platform in so many areas. Position is truly powered by Nu.Q. I could not be more positive about our work at the heart of epigenetics, and I’m very excited for the next phase of our journey. We’re happy to take your questions. Operator.
Operator: Thank you. [Operator Instructions] Thank you. And our first question comes from the line of Bruce Jackson with Benchmark. Please proceed with your question.
Operator: The next question is from the line of Constantine Davides with E.F. Hutton. Please proceed with your questions.
Operator: Thank you. Our next question is from the line of Steven Ralston with Zacks. Please proceed with your questions.
Operator: Our next question is from the line of David Westenberg with Piper Sandler. Please proceed with your questions.
Operator: Our next question is from the line of Jim Sidoti from Sidoti & Company. Please proceed with your question.
Operator: Our next question is from the line of Ian Cassel with IFCM. Please proceed with your questions.
Operator: Thank you. At this time we are at the end of our question-and-answer session, and I'll hand the floor back to Cameron Reynolds for closing remarks.
Cameron Reynolds: Thank you. Before I start the closing remarks, I'll just make one statement. We've been asked a few times whether we had any exposure to Silicon Valley Bank and other market issues with the bank. Short answer is no, we do not. And we are obviously monitoring the situation and like everyone, there's some fluctuations in markets and things going on, but we have no direct exposure to it whatsoever, just to be clear in case anyone asks that in the future. And so thank you very much for the call today. I think it's very clear we are now very much on the commercialization path. We are continuing on with our development and research, but we're really on the front foot now on the vet space and I think on the NETosis space. And we are really following up now on the human cancer space as well. So expect to see a lot of more information throughout the year as the revenue goes up and – as the revenue goes up and really start to show a steady ramp on what we are. And then as we really start to layer in NETosis and some more NETosis deals and revenue as well as the human cancer side we'll have a lot more coming in on as well. So thank you very much. And as a final reminder we have a Capital Market Day, which will be before the next Q, which is on May 11. Around the queue, May 11 in New York City. And yes, again we'd like to thank the New York Stock Exchange for alerting us, use their fantastic facilities, and we'll be making quite a few presentations and developments on all the things which are moving forward so well. So anyone who can make it, please contact us, and it should be yet another great occasion where we can showcase the progress we've made on so many fronts. Thank you very much. I'm really looking forward to updating in the coming months as we continue to develop. Thank you for your time.
Operator: This will conclude today's conference. You may disconnect your alliance at this time. Thank you for your participation.
