VolitionRx Limited (NYSE American: VNRX) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Unaudited consolidated financial statements. VolitionRx develops epigenetic blood tests for cancer and diseases associated with NETosis; it is transitioning from research and development toward commercialization.
Financial performance and liquidity
- Revenue: Q3 revenue was $165,211, up from $32,714 in Q3 2022. Nine-month revenue was $531,329, versus $186,677. Product sales drove most revenue, with services also contributing; nine-month royalty revenue was zero.
- Losses and expenses: Q3 operating expenses were $8.82 million and net loss was $8.45 million, compared with $8.03 million and $7.81 million, respectively, a year earlier. Nine-month operating expenses were $27.78 million and net loss was $26.88 million, compared with $23.96 million and $23.26 million. Nine-month R&D rose 34% to $15.01 million, primarily reflecting clinical-trial and personnel costs.
- Per-share loss: Basic and diluted loss per share was $0.11 for Q3 and $0.39 for the nine months, compared with $0.14 and $0.42, respectively, in 2022. Weighted-average shares increased materially.
- Cash flow: Nine-month operating cash use was $24.51 million, versus $9.47 million in 2022; investing cash use was $0.78 million. Financing provided $25.21 million, principally from equity offerings. Cash declined slightly from $10.87 million at year-end 2022 to $10.81 million at September 30, 2023.
- Balance sheet and debt: Current assets were $12.20 million and current liabilities $17.65 million. Total liabilities were $20.89 million, against total assets of $18.04 million, leaving stockholders’ deficit of $2.85 million. Debt was $3.34 million, including current maturities; the filing also reports finance- and operating-lease obligations and $482,835 of grants repayable.
- Margins: The filing does not provide a clear gross-margin figure. Given the very small revenue base relative to operating expenses, the company remained deeply loss-making.
Material changes versus the prior comparable period
- Nine-month revenue increased by $344,652, but remained modest relative to operating costs. Q3 revenue growth was led by Nu.Q Vet product sales and Nu.Q Discover services.
- Nine-month net loss widened by $3.62 million. Management attributed the increase mainly to higher clinical-trial and personnel costs; R&D expense rose $3.80 million.
- Cash used in operations increased by about $15.04 million. Management cited the $10.0 million Heska payment received in the comparable 2022 period and increased 2023 clinical-trial spending.
- Share count increased from 57.87 million at December 31, 2022 to 78.34 million at September 30, 2023. February and June 2023 public offerings generated approximately $8.0 million and $17.6 million, respectively, in net proceeds as described by management; the company also sold shares through its ATM program.
Outlook, risks, and notable items
- Going concern: Management states substantial doubt exists about the company’s ability to continue as a going concern for at least one year from issuance. It has incurred cumulative losses of $193.9 million and expects to need additional funding. Plans include grants, debt or equity financing, licensing payments, and accelerating product development and commercialization. Failure to secure capital could force cessation of operations.
- Funding and dilution: Management says current revenues are insufficient to cover annual expenses and contractual obligations. Future financing may dilute shareholders, impose senior security rights, or restrict operations; there is no assurance funding will be available on acceptable terms.
- Commercial and development updates: Heska began pre-orders for its canine cancer test in February 2023; IDEXX launched its Nu.Q Canine Cancer Screen in the U.S. in January 2023. After quarter-end, Volition reported a UK launch through two distributors and presented early data on a CTCF-based cancer-detection method. These are company-reported developments, not evidence in this filing of material recurring revenue or validated commercial scale.
- Heska agreement: The $10.0 million upfront payment remains recorded as deferred revenue. Volition may receive up to $18.0 million in additional milestone payments, subject to specified commercial milestones and agreement terms.
- Commitments and controls: Contractual payments, including debt, leases, repayable grants, and research commitments, total approximately $6.56 million, including interest where applicable. Disclosure controls were deemed ineffective as of September 30, 2023 because of material weaknesses in internal control over financial reporting; remediation was ongoing.
- The company reported no material pending legal proceedings and no material changes to the risk factors in its prior annual report.
Most important facts for investors to verify
- Cash runway and actual subsequent financing needs, considering $24.51 million of nine-month operating cash use and the going-concern warning.
- Whether Nu.Q Vet and other products generate sustained sales, and whether the announced launches translate into meaningful recurring revenue.
- Progress toward Heska milestones and the conditions and timing for any additional payments; the $10.0 million upfront remains deferred revenue.
- Further share issuance, ATM usage, and potential dilution; reconcile the quarter-end share count with the 78,685,873 shares reported outstanding on November 7, 2023.
- Remediation of the material weaknesses in internal controls and any subsequent changes in control effectiveness.