VolitionRx Limited (VNRX) Earnings Call Transcript & Summary

Hello, everyone, and thank you for -- all for joining us during the Lytham Partners Spring 2021 Investor Conference. My name is Adam Lowensteiner, Vice President of Lytham Partners. Our next presentation comes from VolitionRx, ticker symbol VNRX, that is Victor, Nancy, Robert, X-ray, on the NYSE American Exchange. Presenting from the company is Scott Powell, Executive President of Investor Relations and Chief Financial Officer for Volition America. A copy of the slide presentation is available on your webcast screen, and you can also access a downloadable version by clicking the materials button on the left-hand side of the screen. Today, I have asked Scott to briefly run through the slide presentation, and we'll then engage in a fireside-like chat Q&A session. As a reminder, the company will be available for one-on-one virtual meetings. If you've not already signed up, please send me an e-mail at [email protected], or visit www.lythampartners.com/virtual, and click the one-on-one meeting request button. With that said, let me now turn the presentation over to Scott Powell, Executive President of Investor Relations and Chief Financial Officer for Volition America. Scott, please proceed.

Great. Thank you, Adam, for the kind introduction, and appreciate everyone dialing in today for the VolitionRx Limited corporate presentation. As Adam mentioned, I will run through the Volition slide deck briefly, and then we'll engage in a fireside chat afterwards. So hopefully, all of you can see the slide deck or can pull it up on your screen. We're at Slide 1, the cover page, Volition corporate presentation, March 2021. I would like to move to Slide #2, which is the forward-looking statements and disclaimer slide. I just point you to this slide because I will be making some forward-looking statements during today's presentation, which may or may not materialize in the future. So to point you to the safe harbor statement here. I would like to move next to what is probably most interesting to those of you on the call today, which is our recently launched veterinary cancer screening test for canines. I would like to, however, before going into the Vet product, just talk a bit about Volition in general. Our stated mission -- and we're a diagnostics company, and our stated mission is to save lives. What we mean by that is we are working predominantly in blood. We are working to develop a number of blood tests primarily to screen for oncology diseases, mostly cancer, but looking at other areas as well. If we think about the platform -- if we think about the modality and platform using blood to screen for various cancers, if we think about how we currently screen for most cancer types, we don't use a blood-based diagnostics for the most part. There are only a handful of blood tests that we use to screen for cancers. The screens that we utilize currently for cancer screening, they tend to be X-rays, tomographies, CAT scans, MRIs, et cetera, colonoscopies for colorectal cancer, fecal test for colorectal cancer, biopsies for instance for lung cancer. So we don't -- we use a lot of imaging technologies, surgical procedures such as biopsies and some invasive procedures. So the limitations with a lot of these screens are that they can be expensive. They are often much better at later-stage detection than early-stage detection, which is, of course, the inverse of where you want to be when it comes to cancer detection. They can actually harm the patient in some cases and some of them can be complicated to run. So we think that our approach focusing on blood has a number of advantages. Taking a blood sample is fairly straightforward, fairly simple procedure and something that we're all very comfortable with that we've all, most of us, have likely done dozens of times over the course of our lives for our routine blood work when we go in for our annual physical, blood tests when we're sick, blood donations for blood drives and so forth. So there are a lot of advantages and also 1 of compliance, right? Most of us are very comfortable giving blood, whereas we're maybe not as comfortable, of course, going in for a colonoscopy or a lung biopsy, which is obviously a much more daunting task or procedure. So there are a lot of companies in our space moving into blood. There's a lot of competition, of course, but the reward is substantial, right? Can you imagine, hopefully, in a few years, being able to go in to your doctor's office or to a lab and have blood taken and be told if you have any number of cancers through a simple blood test. That's where science is moving. There are billions and billions of dollars being invested in this space, in the liquid biopsy space and screening using blood as a modality. So we're really excited to be a part of this. And I'll talk first about one of our important pillars, which is the -- which is also our first product, and it's a blood test that we launched at the end of November 2020 to screen for 2 common cancers in canine. So it's our first animal health application. If you look at Slide 15, it's titled, Introducing the Nu.Q Vet Cancer Screening Test. And if we go to Slide 16, which is titled, Significant Market Opportunity, you can see some of the data here in the veterinary space. 38% of U.S. households have canine. There are about 77 million canines in the U.S. There are 20 million canines aged 7 or older, and I'll talk about that in a minute why that's important. And you can see some more statistics here. 83% of canines visit a vet at least once per year. 3/4 of those visits are for routine care. So non-symptomatic visits or asymptomatic visits. And then if you look to your right, you can see the 2 circles, approximately 6 million cancer diagnoses in canines in the U.S. each year. That compares to about 1.66 million cancer diagnoses in humans in the U.S. each year. So significantly greater amount of canines being diagnosed with cancer annually, not because canines are more predisposed to cancer. It's simply a function of their shorter lifespan, right? Humans now, I think our life expectancy is over 80 years. For canines, it depends on the breed, but could range from 10 to 12 to 14 years life expectancy. So naturally because of a shorter life expectancy, there are going to be more canines diagnosed annually. So it's a large opportunity for us. You can see the statistics here. It is a very large opportunity for us. If we move to Slide 18, you can see the clinical data that was so robust and strong and so encouraging that prompted us, in conjunction with Texas A&M University, to launch this blood test at the end of 2020. You can see some of the clinical data here. So in October of 2019, we have -- earlier that year, we have formed a wholly-owned subsidiary called Volition called Volition Veterinary Diagnostics, Development, LLC. And in October of 2019, we granted Texas A&M University a 12.5% equity ownership stake in that wholly-owned subsidiary. So Texas A&M has an equity stake in our subsidiary. In return for that equity grant, Texas A&M over the course of 2019 and 2020 were in a series of clinical studies, looking at our technology's ability to detect a variety of cancers in canines. And at the end of last year, we published this data that you can see here on Slide 18, which is titled, Nu.Q Vet Cancer Screening Test Has High Specificity and Sensitivity, and I'll talk about the data here. If you look on your left, you can see lymphoma. We had an area under the curve, or AUC, of 87.3% in this clinical study with Texas A&M University with their Veterinary Medicine and Biomedical Sciences Department. You can see -- below the AUC of 87.3%, you can see 74% sensitivity. I apologize, it looks like the -- only the Y remains. But that's supposed to say 74% sensitivity at 100% specificity. So for those of you who don't know, sensitivity is your false negative rate. Specificity, your false positive rate. And it ranges from 0 to 100%. So what 74% sensitivity means is that our blood test accurately identified about 3/4 of canines in this clinical study with canine lymphoma. And 100% -- so it was about -- it was a 26% false negative rate, so we actually identified about 3/4. We missed about 1/4 of canines with lymphoma. 100% specificity, what that means is there were no false positives. So not 1 canine that was identified as having lymphoma did not have lymphoma. So every canine identified had lymphoma. So -- and what's important to note is you can move these figures around a little bit. You can move your cutoff point, and you can trade sensitivity for specificity or vice versa. So it really depends on the market, the product and also the country in which you're operating. What's more important false negative rate or false positive rate, right, most tests of false negatives, most test of false positives. Really, depending on what ecosystem you're operating in and what clinical results you're looking for often determines which one is more important to the clinician or to the patient. Looking at hemangiosarcoma, the results were even more stunning. We had an area under the curve of 97.6%. And breaking out from that, the sensitivity and specificity or the false negative rate and false positive rate, again, at 100% specificity, so no false positives. There was not one canine identified as having hemangiosarcoma that did not have it. And even more impressive, 89% sensitivity, which means we accurately identified 89% or almost 90% of canines that had hemangiosarcoma. So Texas A&M was so impressed with these results that they encouraged us to launch this blood test with them. And if we move back 1 slide to Slide 17, titled, Our Product Proposition, you can see some of the economics there at the bottom, the last bullet point. So it costs us around 40 -- it costs us around USD 5 to USD 8 to produce this blood test. We sell it to Texas A&M contractually for $45 per test, as you can see at the bottom. Texas A&M sells it to veterinarians for $122. And then the suggested retail price to canine owners is USD 160 to USD 200. So a very healthy profit margin, A&M has a healthy profit margin and selling for $200 or less. And these tend to be out-of-pocket costs for canine owners, right, because many Americans do not have pet insurance. But under $200 to find out if your canine has 1 of these 2 cancer types, I think, is a very palatable price point and hopefully, a price point that generates meaningful sales over the course of 2020 and beyond. So how would this test be utilized in the clinic, so in a veterinary setting? Initially, we would envision this test to be used for symptomatic screening. So for canines that are exhibiting symptoms that could be associated with these 2 cancer types, but could also be perhaps some inflammation or infection. So help to rule in or rule out cancer when their canine is symptomatic. Vets have told us that canines, depending on the breed, are very cancer specific. So in other words, if you have a golden retriever, for instance, 95% of the time if it is cancer, it's 1 specific type of cancer, almost all the time depending on the breed. So in other words, if , say, you have a German Shepherd, but say German Shepherd are very predisposed to hemangiosarcoma, and your canine is -- your German Shepherd is 10 years old and is exhibiting symptoms, perhaps it's not eating, vomiting, lost weight, lethargic, perhaps, it might be a candidate then for -- what would be a candidate for a Volition Nu.Q vet screening cancer test to see if that German Shepherd has hemangiosarcoma, for instance, that German Shepherds are previously exposed to that particular cancer type. Obviously, what we want to do further with Texas A&M is to see if we can expand to 3, 4, 5 canine cancer types. These 2 that we're identifying are very common canine cancers, thankfully. They account for about 1/3 of all canine cancers. So there's immediate utility here for our blood test. Obviously, we'd like to be able to screen for 50%, 60%, 70% of all canine cancers in the future. So we will continue our work with Texas A&M to see if we're able to expand and identify more cancer types. But it's a very large market as it is as you can see from here. In addition to symptomatic screening, if you go back, again, 1 slide to Slide 16 that we previously visited, you can see that on the third bullet point down, about 20 million canines are aged 7 and older. That's important because canines, upon turning age 7, just like when humans turn a certain age, we become more predisposed to certain cancer types. When canine turn age 7, they're much more likely to develop cancer than if they're under the age of 7. So in addition to symptomatic screening, our blood test could be used in an asymptomatic screening environment simply using age as a trigger. So your canine turns age 7 or 8, it's a breed that's predisposed to either lymphoma and/or hemangiosarcoma, and you're going in for a wellness check, if your canine will be a candidate then for an asymptomatic screen using our blood test for canines. So you can see the statistics here of 77 million canines overall, 20 million aged 7 and older, 6 million potential diagnoses each year. So at $45 per test revenue to Volition, you can do the math in terms of what kind of opportunity this is ahead of us. One interesting point to note is that lymphoma is a blood-borne cancer. And so while we were looking at lymphoma and other blood-borne cancers in canines, we decided to look at some human samples as well. And so if you look to Slide 20, titled, Blood Cancer in Humans, I'll talk a bit about our work in blood-borne cancers in humans. And if you move to Slide 21, which was titled, Setting the Scene, Blood Cancer, you can see some of the statistics here as well. 700,000 cases of non-Hodgkin's lymphoma, acute myeloid leukemia and ALL globally each year, 415,000 deaths each year. The challenge that doctors have with diagnosing blood-borne cancers is the symptoms are nonspecific oftentimes. So the symptoms could be associated with other non-life-threatening diseases or causal factors. And so the doctors really have a hard time detecting or identifying whether or not the symptoms are a non-life-threatening symptoms that are more of a nuisance versus life-threatening symptoms such as these blood-borne cancers. So the way we hope to position our test in the marketplace is if a patient presents with symptoms that could be associated with blood-borne cancers, the doctor could order a Volition blood test to rule in or rule out blood-borne cancers in that patient. And that's very important as an adjunct tool or a companion diagnostic because if it's ruled out, then you can obviously, the doctor and patient don't have to do a whole lot more in terms of diagnosis and treatment. But if it is flagged or positive -- comes back positive as a blood-borne cancer, it's obviously a much more serious situation for the patient. And having this information earlier is very important to improving outcomes, just like in most cancers, if you can identify the fact that you have a cancer type early on in its genesis, it's generally much more treatable. Your outcomes are generally much better. Costs, obviously, and pain and suffering are much further diminished by early detection. So we're really excited about the opportunity here in blood-borne cancers in humans. You can see by turning to Slide 22, which is titled, Blood Cancer, Summary of Studies to Date. You can see some of the results that we've gotten looking at a number of blood-borne cancers. In terms of next steps, You can look to Slide 23, which is titled, Blood Cancer, Planned Studies. We have selected a diagnostic oncology CRO. We're looking to launch some fairly large studies in the U.S. to look at a number of these blood-borne cancers. We'll have further announcements on this over the course of the year. Hopefully, we will get these studies enrolled and start to have some initial data in 2021 or 2022. Again, large opportunity here based upon the statistics a couple of slides back. And there's really a need for this because there really aren't a lot of good tools to aid in the diagnosis of these blood-borne cancers with a simple convenient blood test like ours is planned to be. If we turn to Slide 24, we can look at some of the other clinical work that we've done in human health in looking at a variety of other cancer types. And this slide is titled, Other Cancers, Proof-of-Concept Data of Product-Grade Nu.Q Assays on Plates. And you can see some of the results we've generated here in lung and colorectal cancer. We have some lung data that we announced last month from our study at National Taiwan University Taipei, some very good results looking at lung cancer. Like blood-borne cancers, lung cancer is a similar challenge in that there is a need for an additional diagnostic tool to aid in the diagnosis of lung cancer. Currently, lung cancer is often diagnosed initially through a low-dose computed tomography or a CAT scan of one or both of your lungs. And upon interpreting the image, the doctor then has to make a determination whether or not the patient should go on for a lung biopsy, which is the -- which is generally the confirmatory test to confirm whether a patient has or does not have malignant nodules that are cancerous. And the challenge that doctors have in interpreting the image is it's just that, a lot of times, they don't know whether or not what they're seeing on the image are benign or malignant nodules. And so in some cases, they may be conservative and not have the patient go on for a confirmatory lung biopsy. When, in fact, the patient does have lung cancer and the challenge there is they don't have the -- neither the doctor nor the patient has a confirmatory diagnosis and so the patient goes back home and maybe has another CAT scan in 6 months or a year. And the danger there, of course, is that the lung cancer could start to progress to a later stage and/or metastasize to other organs. And on the other side, sometimes the doctors send patients on for lung biopsies when they're not really certain of what they're seeing -- what they're seeing in the images is malignant tumors. And obviously, unnecessary lung biopsy is unnecessary cost to the system, pain and suffering to the patient, and about 15% of the time, causes a collapsed lung. So it's a somewhat dangerous procedure that if the patient doesn't really need it, they shouldn't obviously be having the procedure done. So a blood test that could sit sort of as a gatekeeper, if you think about it that way, between the CAT scan or the lung biopsy to better inform the doctor whether or not to progress the patient on to the lung biopsy or not would be a very, very useful tool. And lung cancer is the deadliest of all cancer types. Finally, and then I'll turn it over to Adam for the fireside chat. But finally, I'll just briefly talk about our program in colorectal cancer. This is an interesting cancer type. We do have a very accurate diagnostic tool. The colonoscopy is a very accurate procedure. The challenge here is one of compliance due to the prep ahead of the colonoscopy, the actual procedure, which is invasive. And the time out of work, the administration of local or general anesthesia to the patient, the cost of a colonoscopy and the discomfort or embarrassment of going through that procedure leads a lot of people never to go for a colonoscopy procedure or it's a delay, delay, delay way beyond the age of 45, which is when you're supposed to have your first colonoscopy in the U.S. So compliance is a challenge with screening for this cancer type. We think that by introducing a blood test that is accurate, people would be much more willing to do a blood test initially while they may say no to a colonoscopy. And the advantage there is that we would get people to do a blood test much sooner than they would do a colonoscopy. Or in some cases, people will never do a colonoscopy, but they would do a blood test. Therefore, we're getting these people screened who ordinarily, a, wouldn't be screened until there's symptomatic; or b, wouldn't get screened for years and years later. The advantage here is that by introducing a more palatable modality, we would get people screened at younger ages if they have cancer, colorectal cancer, have it identified when they're younger. And obviously, the cancer would generally be at an earlier stage, the outcomes are better for that person. So really excited to move that program forward as well. And then the final slide, I'm sure many of you are interested to know our key financials. If we look at Slide 31, which is titled, Key Financials, you can see our ticker symbol is VNRX on the NYSE American Stock Exchange. Market Cap has been hovering around $200 million or so. You can see the 52-week range, the monthly burn. We are in a very comfortable cash position. We finished at the end of Q3 with about $19.4 million in cash. And then in January, had proceeds from our ATM facility of just over $1 million. We took in, in January also, $4 million in loans and grants. And then we completed a secondary offering in February, a $20 million secondary offering with Cantor Fitzgerald that we completed in February. So a very comfortable cash position currently that will allow us to focus on clinical data and moving products to commercialization stage. We have 5 analysts covering the company currently. We have Zacks, the Benchmark Company, Maxim Group, Aegis Capital and most recently, Cantor Fitzgerald, initiated research coverage about 2 weeks ago. So thank you all very much for listening to the VolitionRx story today. You can see our contact information on Slide 37, the final slide, our website. Feel free to browse our website. There's lots of great information there. Feel free to reach out to me directly if you have any further questions, and thank you all very much for listening in today. I'd now like to turn it over to Adam for our fireside chat/Q&A session.

Great. Thanks, Scott, for the overview. Let's expand now on a few different topics. You recently launched your first commercial product for cancer in canines. How is that going? Can you give us an update?

Sure, sure. We're not giving revenue guidance or projections. This is really, really early. This is our first commercial product that we've launched. We are generating sales. We are hopeful that that uptick or that trend will continue over the course of '21. It's really a learning experience for us having launched our first product. But I think a number of advantages that there really is nothing out there in terms of a simple easy-to-use blood test to screen for cancer in canines. That's a major advantage for our product. Secondly, our price point at under $200 -- $200 or under is a very palatable price for canine owners when they're likely paying out of pocket. The performance is very strong. The data we got in our clinical studies at Texas A&M, very strong performance data. So these are all major advantages. And also, just because of the pandemic, ironically, many of us are spending so much more time at home. We're more focused on our pets because we're home more. And that's really led to a resurgence in animal health and canines owners really paying more attention to their dogs and caring for them more. So all of these factors, I think, really bode well for sales growth and acceptance of our blood test for canines.

Great. That feeds well into my next question. Can the platform technology that Volition has here be used with other animals like, for example, cats?

Great question, Adam. We believe the answer is yes. So this is a whole new area of research for us. We were so pleased that we were able to go from clinic to product really in just over a year, which was a function of it being a bit easier to launch products in animal health than human health. And also just the focus that the Texas A&M and the support that they gave us was really great. So in terms of moving -- expanding beyond hemangiosarcoma and canine lymphoma, We hope to expand the number of cancers that we can identify in canines initially. So we'll work to do that with A&M to run additional studies to see if we can add a third, a fourth, a fifth and so forth canine cancer. And then certainly, I think the next logical place to look would be at felines, which is the second most common pets that Americans have after canines. The answer is we don't know, but we would suspect that our blood tests would have some utility in detecting feline cancers. So those are 2 areas of expansion for our veterinary program going forward.

Volition is focused on screening for several cancers in humans, but can the technology have capabilities of screening for any type of cancer?

Well, we have looked at a number of cancers. And we -- historically, if you look at some of our older press releases, we've looked at prostate cancer in humans, we've looked at pancreatic cancer, lung, colorectal and blood-borne cancers. And we've gotten good results across these various cancer types. I guess as a small company, we have to utilize our resources judiciously and really focus in on cancers that were either, a, getting the best results in, in smaller studies and move those to much larger studies because the hope would be that the performance data will be replicated in larger studies. The other thing is looking at the market, the size of the market. Colorectal and lung are -- those are the 2 deadliest cancer types in most countries globally. So those represent large opportunities for us. So certainly, it appears we have a platform technology. We've gotten good results in a variety of different human cancer types. And also now we're getting good results in animal health. And the other important thing to remember is that we have very strong patent protection. I didn't talk about this in the presentation, but we have numerous patents granted in the U.S. and Europe and Asia, and these are key cornerstone patents that really protect our platform technology.

Great. Let's wrap up here. Can you name the top 3 reasons investors should get on board the Volition train today?

Absolutely. I think market opportunity, each of these markets represent $1 billion opportunities for us. Lung cancer is the deadliest cancer, there's really a need for an adjunct screening to aid in the diagnosis of lung cancer. Colorectal is a huge market. Animal health is a huge market. We're operating in verticals that have significant revenue potential and opportunity for us going forward. Number two, we're in a strong cash position. We just raised $20 million with Cantor Fitzgerald. We don't need to go out and do a large dilutive raise in the short term so I think investors can focus on us getting clinical data out, commercial milestones, clinical milestones and so forth. And I think third, as I just mentioned, our strong intellectual property position, it will make it hard for competitors to enter our space and to sort of copy or replicate our technology because we have really done a great job filing patents over the past 10, 11 years and now have numerous patents granted. So I think we're in a very good position. I think we're well positioned going forward for 2021 and beyond. So thank you, Adam, for the opportunity to present today. And hopefully, the listeners will take close attention to Volition now and going forward?

Agreed. Thanks, Scott. Thank you very much for your time today. We really appreciate it. To anyone out there that has not already signed up for a one-on-one. Again, please send me an e-mail [email protected], or again, visit www.lythampartners.com/virtual, and click the one-on-one meeting request button. Finally, we have another presentation coming up here shortly. Again, visit the website for details. Thanks again for listening. Enjoy the rest of your day.