VOLITIONRX LTD quarterly report, Q3 FY2022

VolitionRx Limited — Q3 2022 Form 10-Q

Business context and period. The unaudited report covers the three and nine months ended September 30, 2022. VolitionRx is developing blood-based diagnostic and monitoring tests using its Nucleosomics platform and is transitioning from research and development toward commercialization. Its product areas include veterinary cancer testing, human cancer diagnostics, NETosis-related testing, and laboratory services.

Key financial results

MetricQ3 2022Q3 2021Nine months 2022Nine months 2021
Revenue$32,714$25,483$186,677$75,795
Operating expenses$8.03 million$7.59 million$23.96 million$19.62 million
Operating loss$7.99 million$7.56 million$23.77 million$19.55 million
Net loss$7.81 million$7.18 million$23.26 million$18.88 million
Net loss per share, basic and diluted$0.14$0.13$0.42$0.36

Revenue remained very small relative to operating costs; the filing does not provide a meaningful gross-margin figure. Q3 revenue included product sales, laboratory services, and royalty income. Nine-month revenue was principally product and services revenue.

  • Cash and liquidity: Cash and cash equivalents were $16.42 million at September 30, 2022, down from $20.58 million at December 31, 2021. Current assets were $17.67 million and current liabilities were $16.98 million; current liabilities included $10.0 million of deferred revenue.
  • Cash flow: Nine-month operating cash use was $10.09 million, investing cash use was $0.99 million, and financing cash provided was $6.63 million. Operating cash use was lower than the prior-year period, mainly because of the $10.0 million Heska upfront payment.
  • Debt and obligations: Balance-sheet long-term debt, including its current portion, was approximately $3.34 million. Contractual debt payments including interest were $3.71 million. The filing also reports finance leases, operating leases, repayable grants, and future research collaboration commitments.
  • Equity: Total stockholders’ equity was $2.84 million at September 30, versus $17.72 million at year-end 2021. The company had 57,496,003 shares outstanding at September 30 and 57,521,369 as of November 7, 2022.

Changes versus the prior comparable period

  • Nine-month revenue increased by $110,882, but remained below $0.2 million.
  • Nine-month operating expenses rose 22% to $23.96 million, with sales and marketing more than doubling to $4.90 million as personnel and marketing investment expanded. Research and development increased 9% to $10.61 million.
  • Nine-month net loss widened 23% to $23.26 million. For Q3, net loss widened to $7.81 million from $7.18 million.
  • The company raised approximately $6.4 million before offering expenses through an August public offering of 3.45 million shares and drew down a €1.0 million Namur Invest loan. The filing says no shares had been sold under its $25 million Jefferies at-the-market facility by September 30.

Outlook, management commentary, risks, and unusual items

  • Going concern: Management reports substantial doubt about the company’s ability to continue as a going concern for at least one year from issuance of the financial statements. The company has incurred $160.0 million in accumulated losses, has minimal revenue, and expects to require additional financing. Management cites grants, debt or equity financing, licensing, and product commercialization as potential funding sources; there is no assurance financing will be available on acceptable terms.
  • Heska agreement: Under a March 2022 agreement, Heska received exclusive worldwide point-of-care rights to sell the Nu.Q Vet Cancer Test for companion animals. Volition received a $10.0 million upfront payment and may receive up to a further $18.0 million tied to milestones. The upfront payment was recorded as deferred revenue at quarter-end; the filing does not indicate that the milestones have been achieved.
  • Commercial and development plans: Management described anticipated development or launch work involving canine cancer monitoring, NETosis-related tests, and human cancer tests. It provided no quantified revenue, profitability, or cash-runway guidance.
  • Subsequent event: On October 7, 2022, Volition entered a global supply agreement with a pet-healthcare distributor for the Nu.Q Vet Cancer Test through its reference laboratory network. Financial terms were not disclosed.
  • Commitments: The amended DXOCRO agreement supports U.S. development and clinical validation studies, with total costs of up to $4.2 million; up to approximately $3.82 million remained payable for future services as of September 30.
  • Risks and controls: The company cites clinical-trial delays, regulatory and commercialization uncertainty, reliance on external financing and third-party manufacturers/distributors, and possible dilution or debt restrictions. Disclosure controls remained ineffective due to material weaknesses in internal control over financial reporting, including segregation-of-duties issues; remediation was ongoing.
  • The company reported no material pending legal proceedings and no material change in its previously disclosed risk-factor assessment. COVID-19, inflation, rising interest rates, and recessionary pressures may affect operations, but their future effects were uncertain.

Important facts for investors to verify

  • Cash runway and expected financing needs, including whether additional equity, debt, or licensing proceeds will be available and on what terms.
  • Progress toward satisfying the Heska agreement’s performance obligations and achieving its additional milestone payments.
  • Commercial progress and financial terms, if any, under the October 2022 distributor agreement.
  • Clinical validation, regulatory, manufacturing, and commercialization milestones and their related costs, including DXOCRO commitments.
  • Whether internal-control material weaknesses are remediated, and the timing and effect of further share issuance or ATM sales.