VolitionRx Limited (VNRX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to VolitionRx Limited Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. This conference is being recorded today, November 15, 2023. I'd now like to turn the conference call over to Scott Powell, Executive Vice President of Investor Relations. Please go ahead.

Thank you and welcome, everyone, to today's earnings conference call for VolitionRx Limited. This call will cover Volition's financial and operating results for the third quarter of 2023, along with a discussion of our recent activities and key upcoming milestones. Following our prepared remarks, we will open the conference call to a question-and-answer session. Also on our call today are Mr. Cameron Reynolds, President and Group Chief Executive Officer; Mr. Terig Hughes, Group Chief Financial Officer; Dr. Tom Butera, Chief Executive Officer of our Volition Veterinary Subsidiary, and Dr. Andrew Retter, Medical Consultant to Volition. Before we begin, I'd like to remind everyone that some of the information discussed on this conference call will include forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our beliefs as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may vary significantly based on a number of factors that may cause the actual results or events to be materially different from future results, performance or achievements expressed or implied by these statements. We have identified various risk factors associated with our operations in our most recent annual report on Form 10-K, quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission. We do not undertake an obligation to update any forward-looking statements made during the course of this call. I would now like to turn the call over to our President and Group Chief Executive Officer, Mr. Cameron Reynolds. Cameron?

Thanks, Scott, and thank you, everyone, for joining Volition's Third Quarter 2023 Earnings Call today. We especially appreciate your time given this is the busy earnings call season. We will commence the call with the financial report from our Group Chief Financial Officer, Terig Hughes, before moving to Dr. Tom Butera, our Chief Executive Officer of Volition Veterinary for an update on the rollout of our Nu.Q Vet Cancer Test. And then I'm delighted that Dr. Andy Retter, who works as a hematologist and intensive care consultant at one of the U.K.'s leading hospitals has prerecorded his thoughts on our progress in our Nu.Q NETs pillar. And in particular, the result of our FDA meeting achieving a clear regulatory pathway and also of our recent breakthrough early cancer detection method recently presented at ESMO in October. I will wrap up with my thoughts and upcoming milestones and discuss our overall strategy going forward. Without further ado, I'll hand you across to Terig for the financial report. Terig?

Thanks very much, Cameron, and thank you, everyone, for joining our earnings call today. I'll now provide a summary of the key financial results for the quarter ended September 30, 2023. From a revenue perspective, we recorded revenue of $165,000 for the quarter, a fivefold increase over the same period last year. During the first 3 quarters of 2023, revenue grew 185% to $531,000. We believe that these results demonstrate steady growth but not yet the ramp in revenues that we anticipate. We expect revenues to accelerate as we close out 2023 and into the early part of 2024 as several additional distributors come online with our Nu.Q Vet Test and our Nu.Q Discover pillar continues its growth. Year-on-year revenue growth was primarily driven by sales as the Nu.Q Vet Cancer Test, which grew almost fivefold over the 9-month period ended September 30, 2023, as compared to the prior year period, reflecting sales of the reference kits mostly through our agreement with IDEXX, who we are working closely with on their marketing and expansion plans across the U.S. and into international markets. Revenue for Nu.Q Discover for the first 3 quarters of 2023 was $151,000, which reflects 38% growth over the comparative period in 2022. Looking ahead, as we have previously stated, it is difficult in these early stages of commercialization to provide meaningful revenue guidance. But as both Tom and Cameron will cover in their updates, we are pleased with the progress we are making across a number of our product pillars. We ended the quarter with cash and cash equivalents of approximately $10.8 million compared to $10.9 million at the end of 2022. Net cash used in operating activities during the quarter was approximately $8.4 million and included payments of almost $1 million related to our U.S. clinical trial activities in sepsis, which have since went down due to successful completion of the first phase. We are working hard to keep burn as low as possible while we commercialize a range of products and more on that shortly. Total operating expenses for the quarter were $8.8 million compared to $8 million for the third quarter of 2022. This increase was primarily the result of increased research and development expenditures, mainly reflecting the cost of our U.S. clinical trials, which added $0.7 million to the P&L costs in the quarter. Net loss for the quarter was $8.5 million compared to $7.8 million for the 3 months ended September 30, 2022. As ever, and in particular, given the current macroeconomic conditions, we remain committed to careful expenditure and tight budget control. And to that end, we have recently completed a rationalization project and identified annualized savings of approximately $2 million including a reduction in our overall headcount. It is a balance between investing in our product development and launches to ensure revenue growth and preserving precious capital. This balance, we are very carefully and thoughtfully trading. To date, various European funding bodies and in particular, Belgian agencies have provided the company with approximately $19 million in nondilutive funding in various forms, including cash grants or loans on favorable terms. This cash has helped fund either wholly or in part our purpose-built R&D facility and our manufacturing site, Silver One in Belgium, our innovation lab in California, the establishment of our Volition Veterinary Subsidiary, various R&D programs and most recently, our Centers of Excellence program for Nu.Q NETs in Europe. Subsequent to quarter end, a Walloon institutional fund and regional government bodies of the Walloon region of Belgium, approved providing additional funding to the company, aggregating approximately $6 million. We are also expecting further amounts from other Belgian agencies to be secured in the first quarter of 2024. We would like to publicly thank various government agencies in Belgium for their continued support. We have also greatly expanded our efforts with respect to seeking nondilutive funding in the U.S. Our aim is to fund some of our major programs through either nondilutive or project financing, which we anticipate could potentially be upwards of $25 million over the next 2 years. Cameron will outline this strategy to fund our pillars going forward later in his portion of the call. Looking ahead, we also expect to receive a further $13 million in milestone payments from the Heska Corporation. Clearly, these are challenging times at the macroeconomic level. However, I believe that we are well placed with our existing capital and expected near-term incoming funds to execute the plan the team have in place for this final quarter and into 2024. And with that, I will pass over to Dr. Tom Butera, CEO of our Volition Veterinary Subsidiary. Tom?

Thanks very much, Terig, and good morning, everybody. I am pleased to report that in the first 9 months of 2023 revenue for the Nu.Q Vet Cancer Test grew almost fivefold over the comparable prior year period, reflecting sales of the reference kits through our global, regional and local supply agreements. The revenue growth demonstrates solid progress to date, and we certainly expect more growth to come as additional companies fully launch our product, both in the U.S. and around the world. As you will have seen in a recent announcement, our Nu.Q Vet Cancer Test is now available in the U.K. Indeed, I am taking this call from London, England as the team is in town for the London Vet Show over the coming days. We were thrilled the launch of our Nu.Q Test was featured in an article of the Sunday Times, one of the flagship papers here in the U.K., really terrific exposure. The London Vet Show is Europe's largest veterinary exhibition with more than 20% of U.K. vets attending the event. So we are looking forward to a busy few days, not only in the exhibition hall, but we also have a series of sponsored and invited talks on Friday with Dr. Sue Ettinger and Dr. Rebecca Timmins. There are 11 million pet dogs in the U.K. with 29% of the households owning one or more dogs, so we believe that the U.K. market provides another tremendous opportunity to drive access to our early detection test. We are delighted to be supplying 2 of the leading veterinary diagnostic providers in the U.K; NationWide Laboratories and Veterinary Pathology Group, both of whom will also be promoting the Nu.Q Vet Cancer Test at the London Vet Show. We expect exciting times ahead on this side of the pond. We are also making progress in our efforts to provide greater access to our Nu.Q Vet Cancer Test in Asia, and we'll be launching with VIDA Genomics in early 2024 in Taiwan. And also anticipate announcing the launch in the early part of 2024 with a leading veterinary diagnostic provider in Japan. In terms of our global licensing and supply agreements, IDEXX continues to ramp up the availability of the Nu.Q Test across the extensive U.S. reference laboratory network. IDEXX is gearing up marketing efforts to drive awareness and trial of the product with U.S. conference season just around the quarter in January and February 2024. The Mars Heska Group continues to make very good products as well, and we hopefully anticipate the launch of their exclusive point of care test very soon, which would also trigger a milestone payment to us. From a research and development perspective, under the guidance of Dr. Heather Wilson-Robles, Dr. Justin [Heine] and Dr. Rebecca Timmins, we are continuing to develop our feline product and we'll be expanding our Nu.Q platform into emergency medicine, specifically looking at NETosis, and I certainly look forward to bring you more detailed updates on these 2 topics in the future. That's a quick update from me, given our packed agenda today. I will now with great pleasure hand over to Dr. Andrew Retter, a hematologist and intensive care consultant at one of the U.K.'s leading hospitals. Dr. Retter has provided invaluable insights and guidance to the Volition team and presented at our Capital Markets Day earlier this year and at a number of informative webinars, events the team has hosted. Dr. Retter will be providing his view on our progress with Nu.Q NETs as well as discussing Volition's breakthrough method in early cancer detection. Andy, over to you.

Thanks very much, Tom, for that introduction, and good morning, everybody. I'm delighted to join the call today and provide an update on some of the significant progress made with Volition's Nu.Q NETs in cancer pillars. So starting first with Nu.Q NETs in sepsis, which is how I first was introduced to Volition. Sepsis, as you've heard me say before, is one of the leading causes of death worldwide with almost 15 million cases annually, leading to, unfortunately, around 11 million deaths. There is ongoing discussion about the diagnosis and definition of sepsis. Volition has made significant progress this quarter, which is carried through into the fourth quarter. In September, we hosted a key opinion leader roundtable event in Athens, Greece. This workshop held over the course of 2 days, focused exclusively on sepsis and the potential role of Nu.Q NETs. It was attended by some of the world's leading experts, including 3 authors of the highly influential and critical Sepsis-3 clinical definition paper. The current chair of the International Sepsis Forum and the current chair of the European Sepsis Alliance and many other attendees are operating as a Center of Excellence within the Nu.Q NETs program. And they have firsthand experience [indiscernible]. We desperately need new diagnostics and new tools to measure the progression of sepsis, and this may lead to new therapeutics. A sense from the group was that Nu.Q NETs potentially represents one of the biggest breakthroughs in sepsis and the management of sepsis in the last 40 years. If you would like to find out more about the KOL meeting, the short report was issued and is available in the Download section of the Volition website. Moving forward with this group, I'm now working on a clinical review article with the attention to submit it for peer review and publication in the first quarter of 2024. Speaking of publications, shortly after the event and subsequent to quarter end, in October, the first clinical paper from a Center of Excellence was published. This was published by Professor [indiscernible]. The data published demonstrated a mortality signal. So the higher the score, unfortunately, more likely a patient is to die. It also confirmed the correlation with Nu.Q NETs and the sepsis score. The sepsis score is the current but a little cumbersome aggregate score is to diagnose [indiscernible] sepsis. It is mainly used in research trials as opposed to data they practice at the bedside. As a clinician, the reason for the high level of interest, and there I say excitement about the results of Nu.Q NETs are that if we could establish a baseline and continue to monitor a patient with a blood test, this would be much more straightforward and more efficient than current practices. It also potentially provides us with a new therapeutic target to improve the care of our patients in the future. It is fantastic to have this first paper out and we look forward to further data being pushed by Centers of Excellence in 2024 and beyond. Over in the U.S., I am pleased to report that Volition recently completed the Q-Sub process with the U.S. Food & Drug Administration. I am happy to announce that they have agreed the regulatory pathway of a traditional 510(k) path with an adjudicated clinical comparator. The Volition team is grateful for the opportunity to participate in the Q-Sub process and greatly appreciate the feedback from the FDA. These interactions were engaging in helpful and Volition feels that such discussions gave it a clear regulatory path to follow for what we hope is an exciting opportunity. Finally, from a Nu.Q NETs perspective, I'm happy to say that the study in my own hospital, Guys and St Thomas' NHS Foundation Trust in London is about to open. Guys and St Thomas' is sponsoring the study and it is funded by Volition. As a reminder, this is a large-scale 500-patient prospective study, which will run over the course of the next 12 to 18 months. It is fantastically up and running ahead of the winter months. I'd like to take just a few minutes to discuss Volition's potentially breakthrough cancer detection method presented at ESMO 2023, the Annual Congress of the European Society of Medical Oncology. For those with a particular interest in this topic, might I direct you again to the Volition website where you can view a recorded webinar about this exciting breakthrough. Cancer, as we all know, is a deadly disease. Causing around 10 million deaths a year. It is also set to grow as our population ages with estimates of 30 new million cases a year by 2040. Like many diseases, early diagnosis has a significant impact on outcome. Putting it simply, the earlier we can diagnose cancer, the greater chance of survival and a good quality of life for our patients. Early diagnosis is challenging. Cancer develops silently with few symptoms, and so frequently, people are diagnosed late when there are a few treatment options available or when treatment is available, it is more invasive and more aggressive. Indeed, in the U.K., where I work, about 45% of cancers are diagnosed at stage 3 or stage 4. In early stage cancer, it is difficult to detect cancer-derived circulating tumor DNA, so-called ctDNA. The ctDNA in the blood may compromise only 0.01% of the DNA present around a background of 99.99% cell-free DNA circulating. Moreover, most of the cancer DNA has exactly the same sequence as normal DNA, current ctDNA detection methods on the market and in development involve DNA extraction. Sequencing of all the DNA in the sample both cancer and normal, and analysis of the sequencing data using sophisticated computer [indiscernible] informatics to tell them the path. Volition has developed a novel method for liquid biopsy involving the first reported physical isolation of a class of tumor-derived ctDNA fragments from blood. These cancer-derived ctDNA fragments are then extracted after removal of all normal background DNA from the test. This allows detection with a simple, low-cost polarized chain reaction. Volition's proof of concept data was presented at ESMO 2023 and demonstrates the isolation of tumor-derived DNA fragments from plasma. Volition tested the new method in a first small clinical experiment and detected a range of liquid in other cancers, including early stage 1 disease. For example, 74% of leukemias were detected at 96% specificity and 77% of colorectal cancers were detected at 92% specificity using ctDNA and PCR assays. These early assays were developed using leukemia as a model to follow. Surprisingly, we also detected many other cancers, including colorectal cancer in a blood test with an accuracy approaching that of the current fecal immunochemical tests. Dr. Jake Micallef, Volition's Chief Scientific Officer, known to many of you on the call today, previously stated, the results to date are exciting and pave the way for a whole new class of undiscovered biomarkers with potentially hundreds of thousands of possible targets. Volition is now developing a range of cancer-specific assays, which we expect to be more accurate, both more sensitive and more specific than these preliminary results, and we really look forward to sharing progress in the beginning of the first quarter of 2024. And drawing to a close, I'd like to express my own personal excitement about the progress of the company, both through Nu.Q and with respect to its recent potentially breakthrough cancer detection kit. I believe that Volition's technologies will not only help with diagnostic enrichment but also with monitoring of patient's disease progression and response to treatment, most incredibly, accomplishing these goals with what should be a relatively low-cost routine blood test, allowing it to be used around the world in multiple health care settings. Thank you very much for listening today. I will now pass you over to Cameron Reynolds for his final remarks. Thank you, Cameron.

Thank you very much, Dr. Andy Retter for providing those insights, and thanks as always to Terig and Tom for their reports. It's a real sign of the varied expertise we now have at Volition. 2023 thus far has certainly been transformational for Volition. But before I reflect on that, I'd like to take a moment to elucidate our financial strategy. Given the current macroeconomic conditions, we are focusing on getting each pillar to support itself either through product revenues, milestone payments, out-licensing or other nondilutive funding by the end of 2024. We are currently targeting the following: we expect Nu.Q Vet to be overall cash flow positive from now on through milestone payments and the expected revenue ramp as more partners launch and our existing partners expand into new territories. We expect Nu.Q Discover to more than double revenue in 2024 and to become profitable starting in 2025. We're running out of time to cover Discover separately on this call, but overall, we are very happy with progress with 9 contracts signed already and a further 10 currently in negotiation. Thirdly, we have begun a strategy to fund, as Terig alluded to earlier, our Nu.Q NETs pillar through nondilutive and/or project funding of up to $25 million. We have targeted a range of government agencies in the U.S. and Europe and are also preparing the background work aimed at attracting a large player to either out-license or invest in the product directly. Four, lastly, as discussed by Gail Forterre, our Chief Commercial Officer, in our recent webinar, there has been a lot of external interest in our CTCF and Nu.Q cancer technologies. Our strategy is to license this out to one or more larger companies as the commercial undertaking of this size is likely beyond our current capabilities. If successful, we believe this strategy could provide us ongoing royalties and very meaningful milestone payments in 2024. Given the current macroeconomic conditions, we believe these methods of funding the four pillars should provide us a very good basis to move forward. To date, in 2023, the commercialization of our transformational Nu.Q Vet Cancer Test within the companion animals health care sector has signed up several large new players with more to come. Given the ongoing bedding in of our existing partners and the expected launch very soon of a range of others, we strongly suspect we will see very good revenue growth from Nu.Q Vet through 2024. I'm also delighted in the progress we made in our Nu.Q NETs pillar and in particular, in determining our regulatory pathway forward with the U.S. FDA, a key milestone for the company. Thirdly, I'm absolutely delighted with the breakthrough CTCF cancer detection method, which we published just last month at ESMO. This is based on 13 years of work on the chemistry of circulating chromatin fragments. We have developed, what we believe, is a transformational wet chemistry pathway that identifies and physically isolates chromatin fragments that we know are tumor derived from background DNA of the same sequence and then tested with a simple PCR panel to establish whether cancer is present. A true breakthrough moment, the first reported physical isolation of tumor drive circulating DNA fragments from blood. We believe that this method obviates expensive and time-consuming DNA sequencing and bioinformatics allowing for rapid cost-effective detection in a routine blood test. This has been a fantastic achievement by our research and development team and one which has kept the intellectual property team very busy. As you can imagine, we believe that this represents a tremendous opportunity, a paradigm shift as it were for cancer detection and indeed, from this preliminary data, early cancer detection. This method could become a must-have technology for everyone in the liquid biopsy space. Given its significance, we are very much open to licensing this technology. We have been very encouraged by the level of interest thus far from a range of different companies. And at this stage, nothing is off the table, exclusive, nonexclusive, global, regional cancer Pacific or pan-cancer use. Exciting times, and this is exactly what we hoped for when we founded Volition. And so to sum up, I know it has been a long road to getting to where we are today, and I'm very proud of the progress we are making as a team of Volition and that we have stuck with it and got to where we are today. It's an exciting time for us as a company, and we look forward to sharing further updates and milestones with you over the coming quarters as we continue to adapt to the changing times and conditions to deliver on what we believe to be revolutionary technologies. In drawing this earnings call to a close, I'd like to thank you all for joining the call today. We very much appreciate it, given how much there is to digest across all of our pillars. We're happy to answer your questions now. Operator?

[Operator Instructions] Our first question comes from Ross Osborn with Cantor Fitzgerald.

Congrats on the progress. So just wanted to focus on Nu.Q Vet today given it's most near-term revenue opportunity. So with regards to the U.K. market, how much coverage do you think the 2 reference laboratories have there?

Yes, great question, Ross. Thanks for asking it. I think we're going to have broad coverage for the U.K. Both of these labs NationWide and VPG have extensive coverage in the U.K. throughout and also VPG also has penetration into Ireland. So the answer to your question quite simply is broad coverage.

Okay. Great. And then maybe turning to IDEXX, could you remind us the go-to-market strategy there just in terms of marketing reach and current capacity?

Yes. IDEXX, obviously is both a domestic U.S. company and has tremendous international exposure as well. They're currently -- we've been working with them obviously over the course of their launch since January of VMX. And they are highly engaged with us at the current time. They are obviously an extremely large company. Lot of moving parts. We had some early hiccups in the reference labs initially, which we have now smoothed out, and they're working very well. And also, we are extremely engaged with them in terms of collateral support and collaborative support on their educational awareness, and they are planning expansion in both domestically as well as internationally in 2024. So we really, quite frankly, even though the ramp has been a little bit slower, one has to realize this is a new concept and a new discipline that's being brought to veterinarian's cancer detection, but they are highly engaged with us, and we anticipate a significant ramp-up over the course of 2024.

Okay. Great. And then last one, and I'll jump back in the queue. You mentioned your intention to commercialize in Japan and Taiwan in 2024. Could you just walk through the rationale for targeting those geographies specifically?

Yes. To give you an idea, first of all, Japan, we're talking about a companion animal market of over 22 million dogs and cats, a pretty significant number. I mean, we're talking in the U.S., 84 million. So that's a pretty large number compared to the U.S. In Japan, we're talking about 11,000 hospitals. In the U.S., we're talking about 26,000 hospitals just to kind of give you some reference points. And then we have Taiwan who's quite frankly grown 49% growth in their companion animals over the last 4 years, and they're up to somewhere over 2 million pets, dogs and cats in the current market right now with about 1,600 veterinary hospitals. So I think between those 2 giving you some numbers and comparing them to the U.S., you can see they are very nice opportunities for us and considerable potential expansion for us in both of those countries.

The next question comes from Bruce Jackson with The Benchmark Company.

So just a couple of cash flow questions. First on the payment from Walloon. Is that going to hit in the fourth quarter? And then how much of that goes on the cash flow statement and how much goes to the income statement?

That's a good question. It will all go to the cash flow statement. It's cash that we will get in, in the next month. We're also expecting more from a national level body in Belgium, probably early Q1 next year. But these are in the form of funding similar to what we saw before where we've had $19 million of funding from the Walloon region in Belgium and that's a combination of grants and soft loans, and that helped us to finance a lot of the operations, including our Silver One production facility in Belgium. And we're very grateful for the support that we've had from Belgium and the Walloon region.

Okay. And then same question for Heska. What's the timing and the amount of the milestone? And then how does that flow through the income statement?

So the milestone will occur when Heska launches the product. How that flows through the income statement. Its milestone payments are similar to the first one that we received. We received $10 million upfront, if you recall that. That goes on to the balance sheet as a deferred income and is then earned out as we make future sales.

But as before, we could use them all immediately on arrival, if you will, for the company. So they're all very much part of working capital.

It's all cash in the bank. So you'll see that cash on the balance sheet and it's available to us when it's -- when we collect it.

And Bruce, if you add it all up with the 2, the amounts we expect in -- from the regional funding and the Belgium funding as well as those milestone payments on the launches, you're looking well into the $20 million range or over $20 million. So obviously, a very big part of -- the money will lead to get the milestones reached next year.

Yes. Perhaps I can add to that. With that funding, with the milestones, with the money from Belgium with what we've got currently, we do have line of sight on funding from the end of Q3 through the next 12 months.

Okay. Super. Last question on the CTCF research. I think you mentioned during the last webcast that there would be some more data coming out during the first quarter. Is that still the case?

Yes, absolutely. So obviously, it was very good preliminary data, and we've had a lot of interest from partners, which we're very excited about, and it is bigger than that. So we're very excited. But of course, we're working all the time not only on more data, which is obviously very important in a range of cancers which we aim to be presenting at specific conferences for those cancers as well as we're working on the -- it has not been optimized at all. So we're going through all the things to optimize it to make it as simple and easy and as routine as possible. And also the optimizations should also help with the overall accuracy. So overall, I think, as you know, Bruce, I'm a very optimistic person, but I'm very happy and a little surprised how quickly it's actually gone even since ESMO with the level of interest and Jake for the conference next week, the Liquid Biopsy Conference also in Madrid. So we're talking to a lot of other potential partners there. So expect to see a lot of information through this year and into next year and data as we said in Q1.

Our next question comes from Tim Moore with EF Hutton.

For new investors joining this call, maybe can you provide some anecdotes on how that's fine, your testing kits are exciting and useful and conveying that excitement to canine dog owners. Can you give any kind of interaction anecdotes or color behind that? It's a rapid outcome test, but vets seem to be buying into the adoption of the early cancer detection and probably spreading the word. I mean, any sense of that awareness for this rapid testing of cancer, you think like 1/3 of vets know about it already?

Yes. Thank you for the question. As I mentioned earlier in the call, early cancer detection is a new test and a new area of involvement for my veterinary colleagues. So we are obviously going around the world in terms of conferences where we're speaking to both general practitioners as well as oncologists and also obviously spending a lot of time in the U.S. going to major meetings. So what we're actually doing, there is robust interest in the cancer screening test, and they are learning from us as well as our partners on how to use the test and how to communicate it to the clients and how to bring it into their normal workload and normal examining patterns when they interact with their clients and their pet owners. So consequently, the interest is significant. We're spending a lot more time on how to use the test now and how to communicate it and then what to do after you get something that comes back to normal. But -- so you know the overall message with a screening test is one of piece of mark, close to 92% of the dogs die. 92% of the dogs are going to come back in a normal range, and you have 6% to 8% potentially in the higher range. But unfortunately, in the United States, where 6 million dogs a year develop cancer, it's a large number. So overall, the education continues with IDEXX, with our partners, with Heska and also with my own team, the vet team here at Volition, and that is an ongoing thing that we will continue to do throughout 2024 and 2025. But the interest has been robust. The use is increasing dramatically, and we're very excited about how our veterinary colleagues have received it.

That's great color. I appreciate it. My next question is about Heska in the milestone payments possibly to be received over the next several months. Is it fair to just assume that with any companies that get taken over like the Mars takeover, that might have slowed down the milestone payment, but is it possible that Heska could maybe launch both screening and monitoring at the same time and you can get a double milestone payment?

Yes, I think that's a great question. To answer the first part of the question with reference to the acquisition of Heska VMRs, that really, quite frankly, hasn't slowed down the optimization process that we've been doing on the point of care. As I mentioned in my earlier comments, on the video that we have done today, we're talking about a tech transfer going from a reference lab test to a point-of-care test, which is something that my veterinary colleagues use in their veterinary hospitals. It is a major accomplishment to do something like that. And consequently, it has taken some time to do it and it's gone a little bit longer than we anticipated. But we're almost there and when you think about it from a 12-month period of time when this was started to where we are now, it's a tremendous accomplishment where we're getting very close to a launch. So that point is well taken and hopefully, understood. Yes. The good part of that screening and monitoring. Since I've been in the field of Veterinary Medicine for a number of years. What you really want to do is you want to make sure that you're getting your message across to the colleagues on not too many things at the same time. We want to be very clear on our Nu.Q Cancer Screening Test, which is our first test and make sure they're using it, using it effectively. And that is the direction we're going in right now. And obviously, it's out there and thousands of tests have been run at this point in time, and we'll continue to do that. We will be entering the market with our monitoring application. We already have a peer-reviewed paper that came out in May of 2022. We are talking about it with our colleagues extensively, but we don't want to mix -- confuse the message. We anticipate that the monitoring application will probably really be introduced probably more like in the first quarter of 2024. And yes, to your point, will we get kind of a double with that between the screening and monitoring, of course, because both of those tests will interact with each other, and it will obviously bring even more credibility to both screening as well as monitoring. But we're focused on the screening first, and now we're continuing our education of the doctors on the monitoring, and that will follow suit after that.

Great. That's helpful. And my last question is just what do you think might be the time frame of the feline test launch? Is that more of December next year? And can you remind me when that does occur, does that trigger a $5 million milestone?

Yes. The feline test right now is in its pre-analytics stage. We're going through pre-analytics right now. And then we're going to go through more clinical studies in 2024, early part of 2024. We'll be producing a paper on it by the first half of 2024. And then the anticipation is and the hope is that we will have a cancer screening test coming out of it that we can utilize in probably hopefully the second half of 2024. Once that is there, that should trigger a payment from Heska with reference to the feline program and particularly with reference to cancer in cats.

The next question comes from [indiscernible] with Zacks Investment.

Just a quick question on the R&D expenses. They were lower in the third quarter than the first and second quarters of '23. Do you think that was due to the winding down of the U.S. clinical activities or the expense rationalization program? Or was it some other factors?

So as I think we've mentioned, we've had about $1 million cash expenses in the quarter related to the DxO studies for the sepsis trial in the U.S. We don't -- we won't see that in the next quarter because those have now wound down. We have begun to see some savings from the rationalization program. But in our business, expenses are pretty lumpy. It's very difficult to see smooth trends from one period to another. But what I can say is in terms of the underlying cash burn, we do expect that it's going to come down a little bit from here on.

Great. Yes. And then just another quick one. At ESMO, I think you started to see some clinical results from the efforts from the National Taiwan University. Do you know when you might expect some results from the U.S. [indiscernible] study?

The process for the long side has been quite active on both fronts. So we've wrapped human oncology together with the transcription factors. And the actual data itself, I can get back to you.

So in terms of it's [indiscernible]. So in terms of the pace of the papers now being written up by the National Taiwan University Group led by Professor Chen. So they're working on a clinical paper that will then be submitted for peer review and publication. And then what we're looking to do from a lung cancer point of view now in terms of that specific application is a validation project, which is likely to be done in another market that we haven't yet finalize that study in order to announce that.

And of course, there are a lot of results coming out of France as well. And we expect the first clinical use of Nu.Q in human oncology to be in France early next year in lung cancer with Dr. [indiscernible] facilities. So it's made progress and I think something we should reiterate quite a lot as well. The transcription factor is incredibly exciting, but Nu.Q platform itself is still very much part of what we do, very active in the vet space, of course. But also it has still a strong place in the human space. So human oncology will be a strong mixture, I think, of Nu.Q platform and the transcription factor platform going forward.

The next question comes from [indiscernible] with Freedom Broker.

Congrats with progress in the quarter. Could you share any details on the expected regulatory path on Nu.Q NETs in U.S.? What steps are left to go through to get FDA clearance?

Absolutely. Good question. So of course, we have been very active with the FDA. And just starting off, it's very exciting to run and hit the road, if you will, to be in such active discussions with the Food and Drug Administration is a very exciting milestone for us. So obviously, we submitted a process and what we discussed last time is we're keen to either get a breakthrough designation status or a clear path through a 510(k), which is potentially a very clear path. And as we talked about, we're very happy to say, we do have a clear path now. The path itself is the 510(k) path and that takes depending on the process and what data you need, but usually about 2.5 years from start to finish to get FDA approval. And obviously, I discussed a lot. We understand the conditions we're in now in the macroeconomic environment. So we're looking to fund our projects so that we don't -- we [indiscernible] very minimum any dilution for the top company. So we're working on ways to finance the NETs process. Obviously, we've had a lot of Belgium assistance, and we've had some more coming through. We're also looking for similar funding in the U.S. and also looking to package up this to get a large diagnostic companies or one of the large diagnostic companies perhaps interested in sharing the development costs to get through the FDA. So we have a very clear path now which is exciting, and we will be pressing the button once we're comfortable with the funding routes to get us where we need to get to. And in Europe, it is actually [indiscernible] now, as you're probably aware, through our IVDD approval. So now we're doing market studies for -- marketing studies, if you will, to get adoption for clinical utility. So that will be coming out. And we're also looking for a group to help fund the IVDR, which is the longer-term European approval process, which is now taking over. So overall, we have a very clear path in Europe and in the U.S. And -- but we're just very mindful. We don't want to start spending a lot of money into -- we've located the finance for it in a nondilutive fashion as humanly possible, and that's all in the process now. So we should have a lot more information on that through the year. But the bottom line to your question is about 2.5 years from when we press that button to the FDA.

Thank you. At this time, I would like to turn the call back to management for closing remarks.

Thank you, everyone. There's a lot to be taking in at the moment. There's a tremendous amount going on in the company. And I think as you've probably taken from everything we've said, we're tremendously excited with all of the pillars now, which are really coming through. But of course, in this environment, that excitement is tempered with the knowledge that we have to be very careful with our capital, which we have been. We have a lot of incoming money, which we've talked about. We're also pushing for as many other ways of funding what we do with -- as well as possible non-dilutively. So we'll have a lot of information through the rest of the year. So we're looking forward to hopefully what's looking to be a strong [debt ramp] through next year as well as the other exciting breakthroughs that we have. So thank you very much for your time, and I'm looking forward to speaking to you all soon with updates in all of our pillars. Thanks for your time.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.