VNRX: Triage Data Expected in Coming Weeks, Frontline By Year-End

By Brian Marckx, CFA

NYSE:VNRX

Q1 Results / Operational and Business Update:

VolitionRx (VNRX) reported Q1 financial results and provided a business update. Relative to the financials, operating expenses were about 10% higher than we had modeled, almost all of which appears to be related to non-cash stock compensation. EPS was ($0.17) vs. our ($0.16) estimate.

Cush burn continues to be relatively moderate and, per management, is expected to remain near the current levels through the remainder of 2018. Cash used in operating activities was $3.6M ($3.6M, ex-changes in working capital) which compares to $2.7M ($2.7M, ex-changes in w/c) in Q1 ’17 and $3.9M ($3.3M, ex-changes in w/c) in Q4 ‘17. CapEx consumed $61k in Q1 ’18 and averaged $356k per quarter throughout 2017.

Cash balance, bolstered by the $7.8M, net ($8.4M gross), common raise (3.5M shares @ $2.40) in March, was $14.3M at quarter-end which, at the current operating burn rate, represents approximately 12 months’ worth of funds. Another $600k will become available via a loan from Namur Invest.

Relative to the operational update, while it appears timelines may have slid slightly on some of their programs, VNRX continues to make across-the-board progress in their various product development efforts – which includes their CRC tests; frontline and Triage. Readout of studies for both should be upcoming, with Triage first – now anticipated before mid-August (i.e. before Q2 earnings release) and the frontline 4.3k-sample (i.e. pre-validation study) later in 2018.

If all goes to plan, VNRX believes CE Marking of Triage could happen in Q4 ’18 and of the frontline screen in Q1 ’19 – timeline of the latter which we think may be bordering on optimistic given that frontline will need to run through the 12k-sample set following the pre-validation study. Nonetheless, we will be eagerly awaiting data on both of these CRC tests as well as initial data from the 27-cancer study (Univ Bonn, Germany), which is also expected later this year.

Asia also remains a focus – for Triage and CRC frontline. We think Asia could represent an even more substantial opportunity than Europe given the relatively massive populations and characteristics which may lend particular appeal to the benefits of NuQ versus fecal-based (occult-blood and DNA) CRC testing. In March Dr. Lee-Jen Wei joined VNRX’s scientific advisory. A cancer expert and with experience in clinical trial-related statistical methods, Dr. Wei is expected to play a key role in guiding VNRX’s Asia strategy. Initial studies could start in Asia prior to current year-end and if all goes to plan, initial commercial introduction could happen sometime next year.

Relative to commercialization strategies – the frontline should evolve as data becomes available. The strategy for Triage appears to continue to evolve - the initial gameplan for which had revolved around national CRC screening programs in certain European countries. This may now be more of a stay-tuned for updates situation and something we could hear more about with the upcoming data release.

There is also an update to VNRX’s RUO-related strategy. As a reminder, last September VNRX announced the introduction and first sale of Nu.Q-based RUO kits to a (unnamed) “large multinational pharmaceutical company”. In May VNRX ’18 signed a licensing agreement with Activ Motif which (per their website) “is the industry leader in developing and delivering innovative tools to enable epigenetics and gene regulation research.” Activ brings a vast distribution network that includes large research institutions and commercial life sciences customers. Under this arrangement, VNRX licenses their technology to Activ and Activ does all of the work – from manufacturing to sales and to distribution. VNRX will receive a royalty on sales. The initial RUO kit is expected to be available in June and others will follow.

We cover VNRX with an $8.00/share price target. See below for free access to our updated report.

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