VolitionRx Limited — Q2 2021 Form 10-Q
Business context and reporting period. VolitionRx develops blood-based diagnostic tests using its Nucleosomics and Nu.Q platforms, with applications in cancer and other diseases. This unaudited quarterly report covers the three and six months ended June 30, 2021; comparisons are with the corresponding 2020 periods. The company remains predominantly in the research and development stage.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $24,782 | $5,194 | $50,312 | $5,738 |
| Operating expenses | $5.93 million | $5.22 million | $12.04 million | $11.09 million |
| Operating loss | $5.90 million | $5.21 million | $11.99 million | $11.08 million |
| Net loss | $5.57 million | $5.04 million | $11.70 million | $10.90 million |
| Net loss per share, basic and diluted | $0.10 | $0.12 | $0.22 | $0.26 |
- Revenue was mainly from direct sales of the Nu.Q Vet Cancer Screening Test through Texas A&M University’s Gastrointestinal Laboratory. No royalty revenue was recorded in the 2021 periods.
- For the first half, research and development expense rose 2% to $7.52 million, general and administrative expense rose 13% to $3.63 million, and sales and marketing expense rose 81% to $0.89 million. Management cited higher personnel costs and increased marketing; lower research and collaboration costs partly offset R&D personnel increases.
- Grant income for the first half was $392,000, versus $99,000 a year earlier. Despite revenue growth, losses widened: first-half net loss increased 7% year over year.
- Net cash used in operations was $11.57 million for the first half, compared with $9.23 million in 2020. Investing used $0.70 million, mainly for property and laboratory equipment; financing provided $20.71 million.
- Cash and cash equivalents at June 30 were $27.91 million, including $20.2 million in an overnight money market account. Current assets were $29.39 million and current liabilities $5.40 million.
- Total liabilities were $8.61 million. Long-term debt was $3.04 million, including current maturities; finance lease liabilities were about $0.61 million and grant-repayment liabilities $0.31 million.
- Equity financing generated approximately $18.9 million net proceeds in a February public offering. The company also issued shares under at-the-market programs. Shares outstanding increased from 48.61 million at December 31, 2020 to 53.14 million at June 30, 2021.
Changes, outlook and risks
- Commercialization and outlook: The company launched its Nu.Q Vet Cancer Screening Test in Q4 2020 and is developing additional veterinary tests and platforms. Management expects to use cash mainly for R&D and anticipates continued reliance on equity or debt financing, grants, licensing, or future revenues. The filing provides no quantitative revenue, earnings, or cash-flow guidance.
- Going concern: Management states that substantial doubt exists about the company’s ability to continue as a going concern for at least one year from issuance, citing cumulative losses of $121.8 million, operating cash outflows, and minimal revenue. Continued operations depend on obtaining financing and/or generating revenue; failure to secure adequate capital could force cessation of operations.
- Clinical and market risks: COVID-19 may delay trial enrollment and sample collection and divert clinical resources. Other key risks include regulatory clearance, market acceptance, competition and technological change, and intellectual-property protection. Management reported no material change in the risk factors from its 2020 annual report.
- Commitments and contingencies: Contractual payments reported as due totaled approximately $5.81 million, including debt, leases, repayable grants, and collaboration commitments; $1.53 million was due in the remainder of 2021. A clinical and regulatory services agreement for lymphoma projects could require payments of up to $2.9 million over 22 months, subject to project deliverables and termination terms. The company reported no material pending legal proceedings.
- Unusual and subsequent items: On July 14, 2021, the board extended expiration dates on certain options; the amendments are expected to result in $452,433 of additional option expense. In August, the company granted options and RSUs with vesting tied to corporate milestones. The filing also reports that disclosure controls were ineffective at June 30 due to continuing material weaknesses involving segregation of duties, IT oversight, and review of complex transactions; remediation efforts were underway.
Important facts for investors to verify
- Cash runway assumptions and the company’s ability to raise additional capital without substantial dilution or restrictive debt terms.
- Progress toward clinical validation, regulatory submissions and clearances, and any COVID-related trial delays.
- Whether Nu.Q Vet sales expand beyond the limited reported revenue base and translate into recurring commercial revenue.
- Progress in addressing the disclosed internal-control material weaknesses and effectiveness of remediation.
- The cost and timing of contractual commitments, milestone-linked equity awards, and the post-quarter option-expiration amendments.