VolitionRX Limited

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to VolitionRx Limited's third quarter 2020 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference call will be open for questions. If you have a question, please press the star key followed by the number one on your touchtone phone. If you'd like to withdraw your question, please press the star key followed by the number two. If you're using speaker equipment, please lift the handset before making your selections. This conference call is being recorded today, November 13, 2020. I'd now like to turn the conference call over to Scott Powell, Executive 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 2020, 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 Chief Executive Officer, Mr. David Vanston, Chief Financial Officer, and Dr. Jason Terrell, Chief Medical Officer. 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'd now like to turn the call over to our President and Chief Executive Officer, Mr. Cameron Reynolds. Kevin?

Thank you, everyone, for joining Volition's conference call today. I especially appreciate it, as always, given the busy earnings call season and the ongoing pandemic and lockdowns. I would like yet again to recognise the amazing commitment and hard work shown by our team over the past quarter during these difficult times, allowing so much progress in so many areas. Thanks also for those that attended our recent Virtual Capital Markets event. After such a great reception, we will be sure to host another event in the new year. I will start today by covering our financials and then get straight down to discussing the upcoming launch of our first product. the new QVET cancer screening test that we're targeting for the 30th of November, exciting times. We have strengthened our cash position this year, providing a great runway to achieve our many milestones and give us flexibility during the continuing pandemic. We closed out the third quarter with approximately 21 million cash and cash equivalents compared with approximately 17 at the end of last year. We continue to manage our expenditures carefully As we approach commercialisation, our burn rate is approximately 1.6 to 1.7 million per month, which we expect to continue as we make additional investments towards our product launches and expansion of our platform. Regarding product launches, I am delighted to announce the target date of Monday, November 30th, for launch of the new QVET cancer screening test in the US. This is an extremely important milestone for the company, as this first launch, that we expect to be the first of many, shows that our platform has reached the level of reliability and refuseability to be launched in a completely independent lab. This test will be positioned for use in the animal health check of older dogs, those that are seven years and older and for cases where there is a high suspicion of cancer. It may also be a complementary test for younger dogs at high risk for developing cancer in their lifetimes such as Burmese Mountain Dogs, Golden Retrievers, Rottweilers, Beagles, Boxers, West Highland White Terriers and Shetland Sheepdogs. The test will initially be available from the GI Lab at Texas A&M University to potentially thousands of vets across Texas and the rest of the US. Further details will be released at launch, but in brief, vets will draw the blood as per the collection instructions and then ship it for processing to the GI Lab at Texas A&M. Results will be available within three to five business days of receipt. We expect the cost of the test from the GI lab to be around $122 of which Volition receives approximately $45 per test at a greater than 85% margin. We anticipate vets to charge between $160 and $200 for the test. Cancer in dogs is widespread. It is the leading cause of deaths for dogs over the age of 10 and there are over 6 million new dog cancer diagnoses each year. As cancer screening is not commonplace in animal health, as it is in human health, we believe blood tests like the new QVET cancer screening test could completely transform how vets manage cancer in companion animals. It really is a simple, low-cost, easy-to-utilise base screening blood test which we believe will help streamline the screening process for up to one-third of malignancies in dogs, including common malignancies such as lymphoma and angiosarcoma. As in humans, early diagnosis of cancer has the potential to improve the treatment and quality of life, as well as providing valuable additional information to inform the clinical decision-making process. If you have not had the opportunity to see it yet, I would recommend watching Professor Heather Wilson-Robles' presentation from the recent Capital Markets Day that is available on our website. Heather did a great job of bringing our first vet product and its clinical relevance to life. As part of our pre-launch marketing, you might have seen a release earlier this week of a report entitled, A Look to the Future of Cancer Diagnostics. which compiled contributions from some of the key opinion leaders in the VET oncology space. It's an interesting read and it's also available to download on our website. It was fantastic to connect with these thought leaders who continue to support us either through ongoing studies or upcoming launch activities, so watch this space. To leverage our global team, I'm also delighted to say that we've begun pre-launch work in Asia, led by Dr. Jasmine Quay and supported by our VET team, and I'm looking forward to updating you on progress in the coming months. Certainly, we will announce further details at the time of launch, but I wanted to spend a couple of minutes discussing the commercial opportunity that this initial VET product represents. The obvious big question is, what is the size of the potential addressable market? As I said earlier, there is high unmet need in the VET market with few simple non-invasive tests currently available. Cancer is the leading cause of death in dogs over the age of two, and up to 50% of all dogs over the age of 10 develop cancer in their lifetime. There are approximately 77 million dogs in the US, and according to the 2019 ABMA US Pet Study, which is completed every five years, 83% of all dogs visit the vet at least once per year, with 75% being classified as routine preventative visits. So, we believe the market is both large and accessible. Clearly building a market takes time, but just to give you an idea of the potential market, of the 77 million dogs in the US, approximately 20 million dogs are over the age of 7 and therefore at high risk of cancer. For every 1.2 million dogs of the 77 million dogs in the US tested using the current platform of plates, we would generate approximately 54 million in sales revenue and over 45 million in gross margin. Or looking at it a second way, if just 10% of the older dogs in the US got the test each year, that's 2 million dogs, we would generate approximately 90 million in revenue and approximately 76 million in gross margin. And that's only 10% of the potential older dog market, not to mention the additional dogs that will be tested due to a suspicion of cancer or out of an abundance of caution for higher risk breeds and a wide range of potential new tests in dogs and other animals such as cats. In short, whichever way we look at this, we believe that this is a huge commercial opportunity. Our current expectations are based only on our initial canine cancer diagnostic test and the US market. However, we plan to launch additional veterinary tests and generate revenue outside the US in the future as well, and in other species. We are hopeful, given the demonstrated strong accuracy of our test, the market for our initial product will end up numbering in the millions of tests per year. While recognising the desire to receive revenue guidance, we're unable to provide such guidance at this time as we don't know how quickly things will ramp up, nor the total demand for the test. What we do know at this stage is that we have received our first request for a quote from the GR lab for approximately $370,000, this being the capacity for the first technician in the first year of the lab. We aim to announce the launch in further labs in the US and across the world once we review this beta launch in the first quarter of next year. This is just the beginning, but a fantastic opportunity and we are truly excited to start commercial operations. As discussed at the Capital Markets Day, our plan is to initially drive awareness of the new QVET test with specialist oncologists at the top institutions and have an extreme focus in Texas, training all of the oncology hospital specialists and have an outreach program with general practice veterinarians. I am really proud of how hard the whole team has worked to prepare the launch of our first clinical product. It's an incredible milestone for the company and we have an exciting few months ahead for us for sure. Moving from the vet business to human cancers, where, in parallel, we continue to make great progress. As was discussed at the Capital Markets Day, during the pandemic, we have focused on simplicity, and in particular, on our C-Mark H3.1 assay in blood cancers. You might ask, why? This is a product we can launch with a simple assay during the pandemic given the very similar results we have obtained in both human and dogs in these cancers with exactly the same assay. I think this makes a lot of sense during the pandemic to launch the same assay for the same cancers in humans and dogs, again showing the amazing versatility of our platform. To that end, I'm delighted to announce today that we have engaged Diagnostic Oncology as a contract research organisation to conduct a US clinical trial for non-Hodgkin's lymphoma . The trial is designed to obtain multiple FDA-approved adjunct tests to aid in the diagnosis of the five most common and aggressive forms of NHL. DxO is the largest US CRO specialising in oncology of purpose in vitro diagnostic device clinical trials. We are delighted to have them on board. NHL accounts for approximately 4% of all cancers with approximately 77,000 cases diagnosed per year in the US and around 700,000 worldwide. As Dr. Doyle discussed at Capital Markets Day, rapid diagnosis is essential as death can result in weeks whereas early treatment is often curative. Diagostis is often delayed as symptoms for NHL mimic those of common everyday conditions, such as tiredness. Existing data suggests UQ will greatly aid physicians in distinguishing NHL from common conditions, fulfilling what we feel is a critical unmet clinical need which represents a major market opportunity. The trial will enroll up to 1,500 subjects across 10 major US healthcare institutions over a total of 22 months. This extensive program will cost approximately $2.9 million over the two years, assuming the completion of numerous projects and includes not only the clinical study but also data analysis and regulatory and reimbursement submission preparation. We anticipate that diffuse large B-cell lymphoma which accounts for approximately 35% of NHL cases, will accrue study subjects more rapidly than less prevalent subtypes. To that end, we expect a DLBCL FDA 510 case submission will be possible approximately 10 to 12 months into the trial. At that time, we would like to submit a DLBCL 510K while petitioning FDA to accept subsequent 510Ks as sufficient NHL subtypes numbers accrue. The FDA approval for new QDLBCL, the subsequent 510Ks, can be filed utilising post-market data of an FDA-approved test. This strategy will streamline both FDA regulatory approval and CMS reimbursement approval to minimise our time to market and hopefully time to revenue. We're delighted to be working with Diagnostic Oncology LLC, DxO, and to get started on this pivotal study in the US. Dr. Terrell joins us on the call today to answer any questions on this exciting trial and potential product launch in our usual Q&A session at the end of the management summary. In addition to all of this, we have also made great progress on the research program for the use of new Q technology in netosis, and in particular in monitoring disease progression of COVID-19. And we're looking forward to broaden this into influenza and potentially other diseases such as sepsis. Currently, we have several studies that have either been collected or are being negotiated in Europe, and we anticipate the next results will be reported before the end of this year. As announced on the last call, we are also negotiating a large FDA trial for the use of our assays in NETs for COVID-19 and influenza in the US and will announce the full details once they have been finalised. Early identification and triaging of patients tested positive for COVID-19 who are the most likely to deteriorate and need critical care would enable both improved outcomes for patients and a more efficient use of critical care resources for healthcare providers. We believe this is still very much an unmet need worldwide in fighting the impact of the pandemic and given the information on the vaccine, many other conditions driven by mitosis such as influenza and sepsis. If we continue to see positive results in the longitudinal studies, we aim to have a C-mark product available on multiple platforms in the first half of 2021 and look to launch a low-cost product that could be used in any laboratory worldwide as soon as possible after that. We are yet again proud of the versatility of the NewQ platform and the range of applications for which these products can be leveraged. So while mitosis is still a relatively new field for Volition, given such positive early results, we have formed a NewQ NETS team to provide focus and drive to the product development program. To that end, we hope to announce an additional study in overall NETS and mitosis before the end of this year and are looking to use the NewQ technology in many ways in NETS. through diagnostic, disease monitoring and as a companion diagnostic to monitor treatment response. This once again underlines the strong breadth of the NewQ platform technology supported by a broad intellectual property portfolio. We plan to host another capital markets event focused on our NewQ NETS program early next year. From the large cancer clinical trial perspective, our marquee trials, I think it is fair to say that in various ways these have now been affected by the continued pandemic, either by slower or paused collection, or by a host of other supply chain or travel and communication issues. We believe we have successfully managed those areas under our control, such as assay development and running samples, both on track with our milestones, but many issues are obviously beyond our control. On particular note is the EDRN study in the US where in summary the EDRN expects lower collections in 2020 than originally planned and we expect this trial may be further extended as it is currently paused. As always, I will update with further details once available. On a better note, the collection of both large-scale studies at the National Taiwan University continues with the aim of to complete collection by the middle of next year. With regards to those studies, we have now completed 12 discovery-grade nuclear assays and five more orthogonal biomarkers on subsets of both our two National Taiwan University studies, colorectal and lung, and are working with our collaborators on data analysis. As for our more rigorous process of presenting data where we can, in either peer-reviewed papers or at conferences, an abstract has been accepted by the IASLC meeting in January, where we look forward to presenting our lung cancer detection results. The APDW meeting originally planned for December 2020 has been delayed to later next year, so we'll provide updates regarding colorectal cancer data in due course. From an expansion point of view, we are in the final paperwork stages for Silver One, a production hub for our products and components close to our lab in Belgium. We will soon be producing several key components and plan to achieve full ISO certification next year. We anticipate that as with our previous real estate transactions, at least some of these costs will be supported through non-dilutive grants and or loans from the NMU region. Our plan is to produce At large scale, raw materials such as recombinant nucleosomes, which act as a calibrant to our NUQ assays, in addition to antibodies that are key elements to our branded product, and indeed will manufacture our full diagnostic kits once finalised. We expect to offer all elements for both commercial sale and for clinical trial purposes and CE mark products for sale in Europe and beyond. We also intend to install a service lab in the new facility, which would undertake sample processing for external parties. The opening of the new facility will not only bring manufacture of key components in-house, thereby securing our supply chain. It should also significantly reduce the cost of production of many of these elements, and in turn, should reduce the cost of assay development. It's an exciting time, and I could not be happier that we could find a suitable site so closely situated to our current lab. Plus, it's another great step forward on our road to a diverse revenue stream. To that end, I'm also delighted to announce the appointment of our first sales manager, Emmanuelle Demure-Compte, who starts with the business in December. Emmanuel brings over 25 years of sales experience in the diagnostic field, having worked for companies such as Roche, Sanofi and most recently Vela. We believe he will be an excellent addition to our team with his focus to help drive revenue from our Silver One facility. I'm equally delighted to also announce on the call today that we have opened a small shared laboratory at California State University in San Marcos, California. This lab, initially with a team of just two, will be led by Dr. Terry Kelly, our Chief Strategic Officer, Evolution America. They will focus on blue-cell innovation and discovery research, which we hope will help us leapfrog forward on some of our more cutting-edge research projects, such as UQ Capture, which our team has been very active on over the past few months as well. So watch this space. I'm sure that you will agree that we have an incredible amount of existing and new activities underway. And so to support the runway needed for the new NHL clinical study, NET studies, including COVID-19, opening of Silver 1 laboratory expansion, and of course, launch of our initial NucuVet product, we've filed a takedown of our existing shelf registration statement to conduct it at the market equity offering, ATM, of an up to an aggregate of $25 million in shares of common stock to be sold periodically in the future. Oppenheimer and Sanderson Sherald will act as our sales agents under the ATM. The object for this new ATM, in contrast to our existing ATM, is to include more institutional investors over the life of the offering. As you may be aware from our filings with the SEC, our existing ATM has been in existence since September 2018 and we plan to utilise the available balance under the offering prior to the new ATM and so to the future. I'd like to reiterate our vision and what makes us so excited with our progress and our space. Volition is an epigenetics company focused on advancing the science of epigenetics and exploiting these advances in human and animal health. This has been our mission since our founding and is coming to fruition with our new cube platform at the very heart of epigenetics. We believe strongly the last decade of work at Volition with our ever-expanding team in epigenetics puts us in an extremely strong position with our expansive IP portfolio to be a significant player in this very key field. Overall, on so many fronts, with our ever-growing team and IP, I'm delighted with the progress we are making and I'm excited by the momentum we have developed in the epigenetics field. Indeed, our whole team is incredibly excited by the company's future opportunities. We aim to report through the end of this year and beyond into next year several key milestones including, most excitingly, the launch of our new QVET screening test. We will focus on driving revenue in the coming quarters where possible during the pandemic in four key areas. Vet products, disease monitoring tests through notosis, for example COVID-19, using our new production facility to drive reagent sales and licensing of our technology for others to commercialise. I, along with the rest of the board and indeed the whole company, look forward to sharing the results of key studies over the coming month and year with our optimised platform. Despite the pandemic, 2020 has proven to be our most exciting year yet, thanks to our fantastic hard-working team. Thanks for joining the call today. I very much appreciate it, given the busy earnings course season and the pandemic. We're happy now to take questions. Operator?