VNRX: VolitionRx Enters into Global License & Supply Agreement with Heska Corp. for Nu.Q Vet Cancer Screening Test. Financial Review of 2021 and Expectations in 2022.

By Steven Ralston, CFA

NYSE:VNRX

READ THE FULL VNRX RESEARCH REPORT

OPERATIONAL HIGHLIGHTS & 2021 FINANCIAL RESULTS

Commercialization of Nu.Q Vet

On March 29, 2022, VolitionRx VNRX announced the signing of an exclusive License and Supply Agreement with Heska Corporation HSKA for the distribution of the Nu.Q Vet Cancer Screening Test at the point-of-care for companion animals. Heska is a growing veterinary health laboratory diagnostic systems company specializing in point-of-care tests, analyzers and specialty products for canines and felines in North America (62.6% of revenues) and 9 international markets.

VolitionRx received a $10 million upfront payment on signing (in late-March) and will receive up to an additional $18 million based upon the achievement of certain milestones. Initially, the licensing agreement grants exclusive rights to commercialize Nu.Q Vet for canine cancer screening and monitoring at the point of care. Heska will offer the Nu.Q Vet test on its proprietary Element i+ Immunodiagnostic Analyzer point-of-care platform, which was launched in 2020. Element i+ is designed to deliver test results in minutes.

Also, Heska has been granted non-exclusive rights to sell the Nu.Q Vet test kits through its reference laboratory network. The payment for the kits and key components will be at pre-agreed prices, which should provide another revenue stream for VolitionRx.

VolitionRx estimates that the total addressable market (TAM) worldwide for cancer screening and monitoring in canines and felines to be about $11 billion. The managements of VolitionRx and Heska share the same vision of being able to provide affordable diagnostic tests that enable the early detection and treatment of health conditions in order to achieve better outcomes. Nu.Q Vet tests are expected to be offered at a price point of under $50 per kit (of which VolitionRx will receive around $10), which will position the test as a mass market product with the aim of supporting clinical decisions during annual check-ups, wellness exams and healthcare treatments. As a result, an ongoing revenue stream is expected to be generated by providing kits and key components to veterinarians around the world.

The commercialization process is anticipated to take at least six months as Nu.Q Vet test is adapted to Heska's Element i+ point-of-care platform, and potentially on Heska's multiplexed Heska panels. Revenues could be generated as early as late 2022.

In addition, in mid-December 2021, VolitionRx entered into non-exclusive License and Supply Agreement with SAGE Healthcare Private Limited for the Nu.Q Vet Cancer Screening Test in Asia. Preparations for the launch of the Nu.Q Vet test into centralized labs in Singapore are currently in progress.

Nu.Q Assays Presented at ASCO GI 2022

In February 2022, VolitionRx presented two posters of study data at 2022 ASCO Gastrointestinal Cancers Symposium:

• Circulating nucleosomes levels improve FIT performance for detecting high-risk colorectal neoplasms in a symptomatic population (n=476 patients enrolled)

• Circulating nucleosomes for detection of colorectal cancer and high-risk advanced adenomas (n=520 average-risk asymptomatic patients)

The 476-patient study is encouraging in that Volition's Nu.Q assays (H3K36Me3 and H3K9Me3) when used in conjunction with the FIT (Fecal Immunochemical Test) appears to detect CRC (colorectal cancer) and all high-risk advanced adenomas, both proximal and distal, in symptomatic patients. Potentially, unnecessary colonoscopy could be reduced by 28%. The next step is to facilitate an independent, prospective validation study.

The 520 -patient study of average-risk asymptomatic patients indicated that two different Volition's Nu.Q assays (H3K27Me3 and H3R8Cit) of the seven tested, when in conjunction with the FIT, could potentially reduce unnecessary colonoscopies by over 20%. Simultaneous tests of certain nucleosome levels appear to enhance the quality of diagnoses since the use of the FIT alone generates false-positives in the neighborhood of 60%.

The studies were undertaken by VolitionRx and the Department of Internal Medicine at the National Taiwan University Hospital.

Nu.Q NETs CE Mark Registration

Management intends to complete the CE Mark certification process in Europe for the company's Nu.Q NETs assay. Volition plans to register the Nu.Q H3.1 NETs assay with a broad claim for detecting and monitoring diseases with a NETs component (e.g. sepsis, COVID-19, influenza, autoimmune diseases and cancer) and across multiple platforms (ELISA plate, automated beads etc.). Management expects the CE Mark registration process to be completed by the summer of 2022.

The company is developing a U.S. clinical study for the purpose of obtaining FDA approval of Nu.Q NETs. A pilot study is expected to begin later in 2022.

Nu.Q Capture

The first two clinical papers concerning Nu.Q Capture (A Novel Proteomics Approach to Epigenetic Profiling of Circulating Nucleosomes and Serial profiling of cell-free DNA and nucleosome histone modifications in cell cultures) were published in the first half of 2021. The second half saw the continued recruitment of team members for Nu.Q Capture research at the innovation hub in San Diego. Multiple methods for enrichment have been identified, along with using Nu.Q Capture in combination with sequencing, other Nu.Q assays and mass spectrometry. Also, Nu.Q Capture technology was used in the poster (concerning canines with lymphoma) that was presented at the VCS Society Annual Conference.

VolitionRx is now working on developing a large 1,000+ patient study in the areas of lung cancer and colorectal cancer.

Silver One

During 221, a Service Lab was installed in Silver One. During the second quarter, Volition provided quotes to multiple pharmaceutical and biotechnology companies for processing samples under the Nu.Q Discover moniker. A handful of contracts were currently in the negotiation phase near the end of 2021.

On the year-end conference call (March 31, 2022), it was announced that the first Nu.Q Discover agreement was signed in 2021. An additional five contracts have been signed in early 2022; these contracts have an aggregate annual worth of slightly over $200,000.

Nu.Q Cancer – Updates on ongoing human studies in hematological, lung and colorectal cancers)

Updates on Large-Scale Blood, Lung and CRC Clinical Trials

On-going Large-scale Study of Colorectal Cancer (CRC) Clinical Trial in Asia

The clinical data of the 5,000-subject asymptomatic screening study and the 2,000-subject symptomatic study, along with the data logs, were analyzed during the third quarter of 2021. The initial findings were presented in two posters at the 2022 ASCO Gastrointestinal Cancers Symposium in mid-February 2022.

On-going Large-scale "Marquee" Study for Lung Cancer in Asia

Volition has completed preliminary analysis of the lung cancer study and abstracts have been submitted for presentations at two (2) lung cancer conferences to be held later in 2022.

On-going Clinical Trial for Diagnosis of Non-Hodgkin's Lymphoma (NHL) in the U.S.

Due to delays caused by the COVID-19 pandemic, the study protocol of the 1,500-subject NHL study was altered in order to upgrade to a high-throughput platform, which should assist in the FDA approval process. Recruitment for the altered study is now expected to begin in the second quarter of 2022.

On-going Large-scale "Marquee" Study for Colorectal Cancer (CRC) in the U.S.

In June 2021, collections resumed for EDRN (Early Detection Research Network) study; enrollments have been slow, but steady. The EDRN continues to anticipate that the study will be completed in the fourth quarter of 2022.

Milestones Expected During the Remainder of 2022

• Nu.Q Vet Cancer

◦ Achievement of Heska Agreement milestones in order to receive $18 million in milestone payments

◦ Additional announcements of licensing agreement(s) for the distribution of Nu.Q Vet Cancer Screening Test nationally and/or internationally. VolitionRx continues to be in negotiations with 2 other companies.

Silver One: Under the Nu.Q Discover program, six contracts for processing samples utilizing Nu.Q Discovery assays were signed in late-2021 and the first quarter of 2022. These contracts have an aggregate annual worth of slightly over $200,000, but are expected to ramp up slowly throughout 2022, but particularly in the second half.

• Nu.Q NET

◦ Management expects to receive CE Mark certification for Nu.Q NET in Europe during the summer.

◦ In an effort to obtain FDA approval of Nu.Q NETs, a pilot study is expected to begin later in 2022.

• Additional Papers, Posters and/or Abstracts

◦ Nu.Q Vet

▪ The results of a clinical study with over 100 canines is in progress with the results are expected to be submitted in a peer-reviewed publication in 2022. Preliminary data suggest that Nu.Q Vet may be able to detect that a dog is coming out of remission weeks prior to the current methodology of physical detection.

▪ The analysis of over 600 canines, 504 of which are cancer patients, has been accepted for publication by a veterinary journal and is currently under review.

Large-scale Study of Lung Cancer Conducted in Asia - The findings have been submitted for presentation at two conferences later in 2022.

Full Year 2021 Financial Results

On March 30, 2022, after the market close, VolitionRx reported financial results for the fourth quarter and full year ending December 31, 2021. Total revenues for 2021 were $90,035, which consisted of product revenue from direct sales of the Nu.Q Vet Cancer Screening Tests being processed by the GI (Gastrointestinal) laboratory at Texas A&M University.

Total operating expenses increased 33.7% from $21.3 million to $28.4 million. R&D expenses increased 6.9% to approximately $15.5 million, primarily due to higher personnel expenses and stock-based compensation. The number of Full Time Equivalent (FTE) personnel increased 21% from 47 to 57. G&A expenses increased 54.8% to $8.75 million, also driven by personnel expenses and stock-based compensation, along with increased liability insurance and legal fees. Sales and marketing expenses increased 285%, driven by higher personnel, stock-based compensation and direct marketing expenses. In this division, the number of FTE personnel increased by 333% from three to ten. In all three expense categories, management increased the stock-based compensation component to a more competitive level in order to attract and retain employees.

For 2021, VolitionRx reported a net loss of $26.81 million (or $0.51 per diluted share) versus a net loss of approximately $20.35 million (or $0.45 per diluted share) in 2020.

The company's cash burn rate is approximately $2.0 million per month. As of December 31, 2021, working capital was approximately $15.46 million, a slight improvement over the $14.10 million on December 31, 2020. The company has a strong balance sheet with slightly above $20.58 million in cash & cash equivalents. As part of the Heska global licensing & supply agreement, VolitionRx received $10.0 million near the end of the first quarter of 2022.

During 2021, Volition received net proceeds of $23.22 million through the issuance of shares and was awarded $1.52 million in grant income from Walloon Region. Shares outstanding increased by 9.5% to 53,223,761 shares from 48,607,017 shares on December 31, 2020.

During 2021, Volition received net proceeds of approximately $4.6 million through the company's aftermarket (or ATM) equity distribution program, and was awarded $1.52 million in grant income from Walloon Region.

In addition to capital financings, late in the first quarter of 2022, VolitionRx received a $10 million upfront fee from License and Supply Agreement with Heska Corp.

VolitionRx is engaged in multiple epigenetic projects based on company's proprietary Nu.QTM platform, which encompasses numerous blood-based clinical assays that have been developed internally within the company.

IP Portfolio

VolitionRx has a substantial IP portfolio with 84 granted patents, including 12 in the U.S., 14 in Europe and an additional 58 worldwide as of December 31, 2021. The company has 93 patent applications pending.

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