VNRX: Q3 Results. Beefed-Up Distribution.

Zacks Small Cap Research
November 5, 2013

By Brian Marckx, CFA

Q3 10-Q Filed
VolitionRx  (VNRX) filed their 10-Q for Q3 on October 31.  Financial and operating results remain inline with our expectations.  The company is also making further progress with expanding its presence to the RUO channel and in product development.

Q3 operating expenses were $926k, slightly below our $1.1 million estimate.  Net loss and EPS were $926k and ($0.08), also marginally better than our $1.1 million and ($0.09) estimates.

Cash used in operating activities was $828k in Q3, down from $991k in Q2 - the difference mostly related to lower R&D spend in the most recent period.  VNRX exited the quarter with $474k in cash and equivalents, down from $751k at the end of Q2.  Subsequent to Q3 quarter-end, VNRX received cash subscriptions of $750k relating to the issuance of 366k shares ($2.05/share) with 100% warrant coverage (5yrs, $2.40 strike).

We are maintaining our Outperform rating and $7.25/share price target.  See below for access to our full 28-page report on VNRX.

Beefed Up Distribution
VNRX announced a distribution agreement with Active Motif for their NuQ product line for the RUO markets.  Acitve Motif will have co-exclusive rights, along with VNRX, to market the products in the <_st13a_country-region _w3a_st="on">U.S., Europe and <_st13a_country-region _w3a_st="on">Japan. 

Active Motif, at the forefront of epigenetics research and a major supplier of reagent products to the research community, should provide significant and targeted distribution reach for VNRX's product line.  And while, as we have previously noted in our coverage of VNRX, we think the RUO market likely offers only a fraction of the revenue potential compared to the commercial clinical market, it does offer the opportunity to generate some early revenue as well as provides the ability to build awareness about the products and expands the validation experience of their technology.  Revenue generated from the RUO channel will help facilitate ongoing and future clinical trials in support of eventual regulatory filings, including for CE Mark and FDA approval.

Eurostars Grant
VNRX announced they, along with Alcyomics, were awarded a European grant which is aimed at promoting development of new products from small and medium sized companies.  The EUREKA Eurostars grant, worth about $1 million total and about $560k of which is expected to be received by VNRX, will help fund Volition's research for its technology in inflammatory disease.  While most of the research to-date of the NuQ technology has focused on cancer applications, the company had talked in the past about expanding research for other conditions that are related to elevated nucleosomes, including inflammatory-related diseases (as well as autoimmune diseases and sepsis).  We view this as a small, yet meaningful step towards expanding potential applications outside of cancer, which will remain the company's main focus and where we see the bulk of the near term opportunity for the technology.

A copy of the latest research report can be downloaded here >> 
 VolitionRx Report

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