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Operator
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to VolitionRx Limited's second quarter 2023 earnings conference call. During today's presentation, all parties will be in listen-only mode. Following the presentation, the conference call will be open for questions. If you have questions, please press the star key followed by the number one on your touchstone 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 is being recorded today, August 15th, 2023. I'd now like to turn the call over to Scott Powell, Executive Vice President of Investor Relations.
Scott Powell
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 second quarter of 2023 and 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. Tarek Hughes, Group Chief Financial Officer, and Dr. Tom Butera, Chief Executive Officer of our Volition Veterinary Subsidiary. 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 upon 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 conference call. I would now like to turn the call over to our president, and Group Chief Executive Officer, Mr. Cameron Reynolds.
Cameron Reynolds
Cameron? Thanks, Scott, and thank you, everyone, for joining Volition's second quarter 2023 earnings call today. I especially appreciate it, given this is the busy earnings call season. We will commence the call with a financial report from our Group Chief Financial Officer, Terry Hughes, before moving on to Dr. Tom Butera, Chief Executive of Volition Veterinary, for an update on the rollout of NewQVet via our global supply and licensing agreements. Finally, I will provide an update on the great progress the team have been making with regards to our product pillars, in particular, NewQNets. Without further ado, I'll hand you across to Tereg for the financial report.
Cameron
Tereg? 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 June 30th, 2023. We ended the quarter with cash and cash equivalents of approximately $19.7 million compared with $10.9 million at the end of 2022. In June, we received approximately $17.6 million in net proceeds from a public offering of our common stock before deducting offering expenses payable by the company. Looking ahead, we expect to receive a further $13 million in milestone payments from Hesker Corporation and additional funding including significant non-dilutive funding from several Belgian agencies in the coming months. Net cash used in operating activities during the quarter was approximately $7.3 million and included payments related to our U.S. clinical trial activities. Moving on to the P&L, Whilst we continue to manage our costs carefully, as expected, the overall level of expenditure has increased in comparison to the second quarter of 2022. Total operating expenses for the quarter were $9.8 million compared to $8.1 million for the second quarter of 2022. This increase was primarily the result of increased research and development expenditures, mainly reflecting the costs of our US clinical trials, which added $1.2 million to the costs in the quarter. Net loss for the quarter was $9.6 million compared to $7.7 million for the three months ended June 30, 2022. From a revenue perspective, we recorded revenue of $216,000 for the quarter, a five-fold increase over the same period last year. And I'm pleased to report that in the first half of 2023, we achieved $366,000 in revenue, which exceeds the $306,000 in revenue reported for the entire year of 2022. So, great progress. Year-on-year revenue growth was driven by sales of the new QVET cancer test, which grew fivefold over the prior year, reflecting sales of the reference kits through our agreements with both IDEX and HESCA. Revenue for NUQ Discover for the first half of 2023 was $73,000. Looking ahead, as we've 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 the product pillars. And with that, I will pass over to Dr. Tom Botera, CEO of our Volition Veterinary Subsidiary. Tom?
Cameron
Thanks very much, Tarek, and good morning, everybody. The second quarter of 2023 was another busy period, not only for the Volition veterinary team, but for our licensing and distribution colleagues as well. Following the launch of our new QVet cancer test through IDEX's reference lab network in the U.S. in January, the team has continued to bed the technology into the process and procedures of IDEX laying a strong foundation for the rollout to other labs across not only the U.S., but across their extensive laboratory network worldwide. Progress with the tech transfer of our tests onto the HESCA point-of-care system has unfortunately been a little bit slower than anticipated. And while we appreciate this is frustrating, I frequently remind the team that this will be the first time that our NUQ technology will be used outside of centralized laboratory testing. Very important. To use a sporting analogy, we are deep into the final quarter We are in regular contact with the HESCA team who are working diligently to ensure the transfer is completed to the highest standards, and we thank them for their tenacious efforts. HESCA remains highly committed to providing veterinarians with rapid, accurate, low-cost, and easy-to-use on-site testing in the veterinary clinic to support their clinical decision-making. I look forward to providing further updates in due course. Outside of the U.S., we are making strong progress with several other potential licensing and supply agreements and or distribution partners and hope to sign several and launch in at least one significant market, such as the U.K., Germany, and or a large Asian market later this year. In June, John McKenna joined the Volition Veterinary team as our Global Accounts Manager. John has over 20 years sales experience in the human and veterinary fields and has been tasked initially with driving revenue through what we term the corporate consolidators here in the U.S. Great to have John on board. From a publications and product development perspective, I am happy to report this quarter that Professor Wilson Robles' peer-reviewed paper on the use of new QVET cancer tests for monitoring the disease was published in the Journal Plus One. The publishing of this monitoring paper achieves another very important milestone for us, and we believe has the potential to open up a considerable new market for our existing NUQ vet cancer test. As discussed in the paper, findings from the study show that nucleosome concentrations can be a useful tool for treatment monitoring and disease progression in dogs with hemopoietic cancers such as lymphoma. While veterinarians can already use our new QVET cancer test as a reliable and affordable screening tool for dogs with increased risk of developing cancer, this new research demonstrates another potentially significant utility of the test. As an innovative monitoring tool for canine lymphoma management, providing actionable information and helping guide treatment decisions to potentially not only aid early detection, but also improve outcomes. It is a huge step forward and fantastic news for veterinarians, pet owners, and their pets. Subsequent to quarter end in July, we were delighted to welcome Dr. Rebecca Timmons to the Valeshian veterinary team as our research director. Dr. Timmons brings some broad ranging experience to the team. Rebecca started her career at Colorado State University Veterinary School and held several positions from undergraduate researcher in our microbiology lab to lab manager and technician in the clinical science department at CSU's veterinary teaching hospital. In veterinary school, she was actively involved as the vice president of her class and was a DVM ambassador guiding new students. Most recently in her research career, she worked for a nanotechnology company, but is also a practicing general practitioner relief veterinarian here in the United States. Dr. Timmons has great experience and is a great fit with our team. From a research and development perspective, we are continuing to develop our feline product and extend our NUQ platform into emergency medicine, specifically looking at mitosis, and I certainly look forward to bringing you more detailed updates on these exciting topics in the future. In the second half of the year, we will continue to drive awareness of NUQ Vet amongst veterinarians through conferences, sponsored webinars, digital marketing, and press engagements. Pet Cancer Awareness Month is November, and so we expect to provide more details on these and other activities on our next earnings call. And with that, I'll pass back to Cameron Reynolds, our group CEO. Cameron?
Cameron Reynolds
Thanks, Tom, and thank you, Tarek, for those updates. The first half of 2023 has certainly been transformational for Volition. Through IDEX, a global leader in pet healthcare innovation, our new QVET cancer test is now available throughout the U.S. with coverage expanding around the world in sight. This was an incredible step forward for us as we commercialized our transformational NUQ technology within the companion animal healthcare sector. More recently, I'm delighted to report that as planned, we submitted our breakthrough device designation request, or BDDR, with the US FDA in June. This was a real milestone moment in our company's history. For the first time, we are in very active discussions with the FDA. Exciting times indeed. As a reminder, the BDDR submission is seeking feedback from the FDA on two basic questions. Does the FDA agree that we meet the definition of a breakthrough device? And does the FDA agree with the proposed path of a 510 ? We believe our case is strong and are delighted to be in active discussions with the FDA now and look forward to agreeing upon a clear regulatory pathway to approval for what we hope to be significant product. We're also making considerable progress with our Centers of Excellence in Europe for NUQ-NET, with the first clinical paper resulting from one center already submitted for peer review and abstracts from several centers accepted for the European Society of Intensive Care Medicine Congress in October. Remba Rabouf and Dr. Andy Retter, both of whom presented at our Capital Markets Day in May, together with Dr. Jake McAuliffe, our Chief Scientific Officer, who is well-known to many of you, have excelled in developing a strong network of some of the world's leading experts in sepsis. I'm excited to announce today we're hosting our first sepsis-focused Key Opinion Leader Workshop in September. This event provides an opportunity for these experts and centers of excellence to share their challenges in diagnosing and managing sepsis, their findings from working with NUQ-NETS, and their hopes for the future. Professor Djidili Annan will be chairing the session and plans to publish a position paper following the event. September is also Sepsis Awareness Month, so we hope to raise awareness about this devastating condition. There are between 47 to 50 million sepsis cases reported each year, resulting in 11 million deaths. This is a shocking one in five deaths worldwide associated with sepsis. It is the number one cause of death in hospitals, the number one cause for hospital readmissions, and the number one condition in terms of overall healthcare cost to treat, costing a staggering $62 billion annually in the US alone. Lots of numbers I know, but this is just to exemplify how significant and important this potential market opportunity is for volition. We believe that the NUQ-NETS test is a groundbreaking diagnostic aid that clinicians will be able to use to detect the disease associated with mitosis. So please watch out in September. We hope to be able to provide further insights into sepsis and NUQ-NETS then. Turning briefly to our other product pillars, First up, muq cancer. In the interest of time, I'm going to focus on lung cancer, the second most common and deadly cancer in the world. Early in the second quarter, Professor Lea Payan, a collaborator from Lyon University Hospital in France, France's second largest hospital, presented two posters at the American Association of Cancer Research Congress. These two posters demonstrated that muq assays in combination with circulating DNA molecular profiling at both diagnosis and during treatment progression improved the level of detection. Fantastic results which may help reduce unnecessary biopsies. The team are already working on introducing the technology into Leon University Hospital. These results have of course been written up and I'm delighted to say the clinical paper was recently accepted for publication and should be out soon. Also in lung, looking ahead, I'm delighted to say Professor Chen of the National Taiwan University has been selected for an oral presentation of his results at the upcoming European Society for Medical Oncology, or ESMO, in the fourth quarter of this year. This is one of our largest clinical studies using UQ in conjunction with low-dose CT, and we look forward to issuing the results in October. We are also excited that two of our abstracts involving UQ have been accepted for publication at ESMO. One of these abstracts is due to the fact that we're making strong progress in NewQ Capture, and we hope to update you more on this in the coming months and quarters. Continuing on publications for a moment, but jumping over to our other product pillars, another clinical paper detailing the use of our NewQ Capture mass spec technology has been submitted for peer review and publication during the second quarter, and both NewQ Capture and NewQ Discover featured in conference posters. As a quick reminder in giving a commercial update for NUQ Discover, the NUQ Discover pillar aids academic institutions, pharmaceutical firms and others in drug development and biomarker discovery. It is an innovative, mainly service-orientated platform, although kits are also available, which leverage our R&D and proprietary technology. On the whole, projects usually start as a modest revenue pilot study but the hope is they evolve into more substantial revenue streams as drugs move through the drug development pathway from preclinical to clinical. We are thrilled to announce that one of our oncology pharmaceutical contracts has progressed to phase 1b with their drug development program and our assays are very much an integral part of said clinical program, an exciting step forward. We also signed a contract focusing on drug development within the field of neuroblastoma. And whilst this rare disease is not necessarily a large commercial opportunity, providing proof of concept in a rare disease may help improve their future treatments. All in all, a very positive first half of 2023. The level of interest in our technology is truly fantastic, and we're excited to continue expanding its reach and potential. And so to sum up, I'm very proud of the progress we are making as a team at Volition. After many years of developing and optimizing NewQ, which we believe is a groundbreaking new consumer quantification technology, we are now commercially outlaying the platform and generating revenue. It is a hugely exciting time for us as a company, and powered by NewQ, we look forward to sharing further updates and milestones with you over the coming quarters. In drawing this earnings call to a close, I'd like to thank you all for joining the call today. As before, we very much appreciate it during this busy earning call season. I'm very happy to take your questions now. Operator?
Operator
Thank you. At this time, we'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, It may be necessary to pick up your handset before pressing the star keys.
Tom
One moment, please. Thank you.
Operator
Thank you. And our first question is from the line of Bruce Jackson with Benchmark Company. Please proceed with your question.
Bruce Jackson
Hi. Good morning. Morning.
Operator
Hi, Bruce.
Bruce Jackson
So... A follow-up question on the study in Lyon. If I recall correctly, it was originally put together to help develop a protocol for lung cancer screening in France. So was the data presented part of that study? And if it's not part of that study, can you maybe give us an update on how that study is going?
Cameron Reynolds
Yes. Thanks, Bruce. There's a lot going on in lung cancer and a couple of things just in France alone. and of course in Taiwan. And I can give you more details, I guess, after the call, but it's a lot to go through. So the poster presented at AACR in the paper actually is what we talked about on the call. It's not the screening, but a reduction as we talked about. There is a lot of work going on in the screening program. It's in process. We didn't update this quarter. Hopefully we'll have more updates next quarter. And the work in Taiwan has also gone very, very well with an oral presentation due at ESMO. So a lot of progress, and we hope to update on the screening program later on this year. But overall, lung has become a real standout in the new Q cancer pillar.
Bruce Jackson
Okay. Okay, great. And then with the new contract for the Phase 1B study, is this something where it's going to start generating a revenue stream?
Cameron Reynolds
Yeah, so you can discover – we've talked about this a few times. We've signed about 10 agreements, eight of which are generating revenue. And at this point in time, obviously, it's a reasonable, meaningful amount for what we do. But they tend to start small in the small tens of thousands of dollars for the initial pilot or process. And then if it does get through to the final stage, it can be something well into the millions. And not only does it provide early revenue, and you can see from the accounts, it's actually a considerable part of what we do now. The number of leads has gone up a lot. We've got some team members out there working with a lot of different pharma companies, some of which are very big and well-known, but obviously we can't use their names on the call. But we could not be happier with the level of interest and moving through the phases. But as I said, it's something that the millions of revenue, if that comes from each contract, would be something in the second or third phase of what happened. But it's also a matter of getting our technology out there. We see how valuable what we do is, and we can show now that there's eight groups now paying for the rights to use our technology, and I expect that to grow through the years.
Bruce Jackson
Okay, great. And then last question on the Feline program for VET. You were originally thinking that you might get the milestone payment in the first quarter of 2024. What's your current thinking on the timeline for that program?
Cameron
Terry, go tell them. Yeah, thanks, Bruce. We should be completing the pre-analytics for Feline by the end of this year. Anticipation probably be more leaking into this first half of 2024 rather than the first quarter.
Bruce Jackson
Okay. All right. Thank you very much.
Cameron Reynolds
You're welcome. Thank you. And I think it's probably emphasized there, we're really emphasizing research in the vet space as well, both on feline, other animals in the ptosis. So we're making good progress on that front, as Tom has outlined.
Tom
Thanks, Bruce.
Operator
Thank you. Our next question is from the line of Stephen Ralston with SACS. Let's see with your questions.
Stephen Ralston
Good morning.
Operator
Good morning.
Stephen Ralston
A few detailed questions. I see the licensing and supply agreement with IDEXX Labs. I'm wondering about the scope of the agreement. Sometimes you mention it that it's for the processing within the reference labs of IDEXX. In other words, they're in-house reference labs. And other times it's open-ended where you mentioned that just in any reference lab. Could you clarify that, please? Tom, do you have a slide? Sure.
Cameron
Yeah, sure, Stephen. Thank you for the question. When we speak of IDEX, we only speak of IDEX reference labs that are owned and specifically affiliated with IDEX. So their network, both domestically and internationally, um is in those one of two categories they are all idex supervised and they are either predominantly in the us they're all idex reference labs and then internationally they have affiliates that are associated with idex employees in those labs but they are all reference labs associated with idex that answers your question yes it does uh and continuing with new q vet um
Stephen Ralston
Could you detail the process of launching the monitoring claim? The paper has been published. What are the next steps, and when will you make that, be able to use that monitoring claim?
Cameron
Yeah, another good question. Thanks, Stephen. Yeah, we currently are working through, the paper came out in May of this year, the publication. Now what we're doing is really bringing that awareness level up to the oncologists, and to the veterinarians in terms of awareness about how to potentially use monitoring as a paper. I mean, use monitoring and using NUQ as a biomarker device for that application. The other piece of it, too, is we still also, too, want to make sure that they're using our NUQ screening test as an initial test for screening, and then that will lead into monitoring. So as we go through the awareness and education campaign with the people I just associated with, you will find that the monitoring itself in terms of speaking more heavily about it will probably be uh more related to when the poc launch eventually comes out and then around that point in time there will also be more concentration of it being used in the reference labs as well so latter part of 2023 going into 2024 we're preparing the way right now and getting people in the veterinary community to understand how to use that application thank you um jumping over digging a little deeper in new q discover
Stephen Ralston
The service line went from $5,000 to $50,000, quite a jump. And you mentioned you have eight contracts that are generating revenue. But you also mentioned this one trial that's in Phase 1B. Is that one particular contract the majority of that increase, or is it more evenly spread?
Cameron Reynolds
It's more evenly spread. There's a lot coming in bits and pieces from different groups. To go to many hundreds of thousands a quarter, we'd obviously have to go to a later stage in one of them. But it's quite well spread over the quarter. And we can go through the details. Also, obviously, some of the contracts are confidential. We can't talk too much detail. But there is a broad range through different contracts. And they are at the beginning phases for all of them, obviously. But we're very hopeful that as they grow, we'll get more and more of these smaller ones that lead to bigger ones.
Cameron
Terry, do you want to say anything? Yeah, that's about right. We've got, like Cameron said, we've got about eight agreements that are actually delivering revenue this quarter. And it's a very good spread across those agreements. And so we're quite hopeful that some of those will progress onto the next stage.
Cameron Reynolds
And we're also seeing quite a few more coming into the pipeline. So, you know, in three or four years' time, given the potential very large market of vets, nets, and human cancer and capture, this probably will not be a significant percentage of what we do in a few years' time. But it's just very good to get the revenue now and get the name out. And some of them could be very meaningful, but it's going to take a few years on the Discover side.
spk01
The other thing I'd say, Stephen, this is Lou, just for clarity, is that the project that has now flipped into phase 1B from a clinical study perspective, that is not yet recognized within these numbers. So whilst the pilot phase might have been one of the projects that are included in the numbers in terms of the phase 1B type of project, that's not yet within the numbers.
Stephen Ralston
Thank you very much for that clarification. Last question, your R&D expense line is increasing, and I'm trying to figure out the dynamics of that. And of course, you filed here in the FDA, or at least submitted an application. But I also read in your, in the verbiage, that you have this new program targeting circulating tumor DNA. First of all, is that being conducted in the United States in your California lab? And secondly, how much of that is part of the increase in your R&D expenses?
Cameron Reynolds
So just on the NICU capture side, we mentioned a couple of things. There's a few publications. On mass spec, we've also made very good progress on one of the other pillars. We're not talking about it too much because obviously we're in the process now. It potentially is a very big outcome. So we're in the process of confirming and patenting. So hopefully in the next sort of six months, we can confirm all of that and make some good news. And specifically on that, Terry, a question, do you have any?
Cameron
Yeah, so the biggest thing driving the increase in R&D year on year is the DxO studies, the clinical studies. So that adds about a million dollars in the quarter to – or just over a million dollars, actually, in the quarter to those costs. So that's the biggest driver. Thank you for taking my question.
Tom
Thank you, Stephen. Thanks, Stephen. Thank you.
Operator
As a reminder, thanks for asking the question.
Tom
You may press star 1 from your telephone keypad. Thank you. At this time, I see no additional questions.
Operator
I can hand the call back to Mr. Cameron Reynolds for closing remarks.
Cameron Reynolds
So thank you, everyone. Thank you for taking attention to our earnings call. Really looking forward to the next few months as we continue to drive the launches of MuQVet and get to the situation now the battle is joined with the FDA with regard to dentosis in the U.S., and we're expecting a lot of data coming through on the Natosa side, and hopefully some more news on the CAPTCHA side as well. So it's all coming through well, and I think we should have a very good end of the year. So I'm looking forward to updating you. And again, thank you for your time. Bye.
Operator
Thank you. This will conclude today's conference. We disconnect your lines at this time. Thank you for your participation.
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