Business context and reporting period
VolitionRx Limited (NYSE American: VNRX) filed this Form 10-K for the fiscal year ended December 31, 2020; it is an annual report, not a standalone fourth-quarter report. The company is a clinical-stage diagnostics developer using its Nucleosomics/Nu.Q platform to develop blood tests for cancer and other diseases. It launched its Nu.Q Vet Cancer Screening Test in Q4 2020. Human diagnostic products remained in development.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $13,433 | $17,096 |
| Operating expenses | $21.26 million | $16.06 million |
| Operating loss | $21.25 million | $16.04 million |
| Net loss | $20.40 million | $16.10 million |
| Net loss per share, basic and diluted | $0.45 | $0.41 |
| Net cash used in operating activities | $16.46 million | $12.74 million |
| Cash and cash equivalents at year-end | $19.44 million | $16.97 million |
- Revenue was immaterial relative to expenses; the filing does not provide meaningful operating margins or gross profit figures for assessing a scaled commercial business.
- Research and development expense rose 40% to $14.53 million, primarily reflecting higher personnel, laboratory, antibody and sample costs, and costs associated with Volition Germany. General and administrative expense increased 20% to $5.65 million; sales and marketing increased 11% to $1.07 million.
- Cash used in investing activities was $1.65 million, mainly for laboratory and manufacturing-facility investment. Financing activities provided $20.62 million, principally from equity financing. The May 2020 public offering generated approximately $12.7 million net; 2020 net proceeds from the 2018 at-the-market program were approximately $8.5 million.
- At year-end, total current assets were $20.33 million and current liabilities were $6.24 million. Long-term debt carrying value was $3.45 million; scheduled debt payments totaled $3.92 million including interest. Total liabilities were $9.86 million.
- Accumulated deficit was $110.17 million. Common shares outstanding increased from 41.13 million at year-end 2019 to 48.61 million at year-end 2020.
Material changes and developments
- Net loss widened by $4.30 million, or 27%, year over year, as operating expenses grew faster than revenue. Other income improved to $848,521 from a $56,131 expense in 2019, including $635,513 in grant income and a $293,312 gain on sale of fixed assets.
- Property and equipment increased to $5.17 million from $2.98 million, including investment in a Belgian manufacturing facility and related improvements.
- The company acquired Octamer GmbH in January 2020, later renamed Volition Germany GmbH, treating the transaction as hiring management rather than a business combination.
- After year-end, the company reported approximately $18.9 million net proceeds from a February 2021 public offering, approximately $1.2 million net proceeds under its 2018 ATM program, and $343,957 net proceeds under its 2020 ATM program. It also announced approximately $4 million of additional Belgian funding: a $1.3 million grant and $2.7 million in loans.
Outlook, risks and unusual items
- Going concern: The auditor’s report and management state that substantial doubt exists about the company’s ability to continue as a going concern, given recurring losses, negative operating cash flows and minimal revenue. Management expects to rely on financing, grants, licensing and eventual product revenue; it has not concluded that its plans alleviate the doubt. Financial statements contain no adjustments for a possible failure to continue as a going concern.
- Funding and execution: Management says additional capital is required to fully fund its plans. If financing is delayed, it expects to prioritize R&D staff and facilities, mainly in Belgium, and patent rights; clinical validation and regulatory timelines could be delayed. Future equity financing may dilute shareholders.
- Development and regulation: Commercial prospects depend on clinical validation, regulatory clearances or approvals, market acceptance, reimbursement and successful commercialization. The company anticipates regulatory pathways including CE marking in Europe and FDA clearance or approval in the United States.
- COVID-19: Volition reported no significant impact on 2020 business or results, but warned that future effects on operations, trials, demand, liquidity and financing remain uncertain. It reported 2020 studies in which nucleosome levels correlated with COVID-19 severity and outcomes; further serial-testing studies were underway, with results not assured.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2020 due to material weaknesses involving finance segregation of duties, IT oversight and review of complex transactions. Remediation was underway; the auditor did not attest to internal-control effectiveness.
- The company disclosed no litigation expected to have a material adverse effect and no material off-balance-sheet arrangements. It reported no share repurchases in Q4 2020.
Most important facts for investors to verify
- Whether the post-year-end equity and grant/loan funding, together with available cash, is sufficient to fund operations and whether the going-concern uncertainty has changed.
- Progress and independently supported results from clinical validation, regulatory submissions and commercialization, including actual sales of the Nu.Q Vet test.
- Cash burn, financing needs, debt and other contractual commitments, and the potential dilution from further equity issuance.
- Remediation of the disclosed material weaknesses and whether subsequent filings report effective financial controls.
- Whether COVID-19 research findings are replicated in larger prospective studies and support clinically useful tests.