Emerging cancer test specialist VolitionRx Ltd (NYSE:VNRX) has been making good progress in recent weeks and Friday's news of first revenues from its Nu.Q platform represented a milestone.
The firm received an order for its clinical research use only (RUO) kits from a large, multinational pharmaceutical company, it told investors on the same day it received a cash infusion of US$1.5mln, via a loan and a grant to advance its research.
Shares have lifted over 8% since Friday in New York to where they stand now at US$2.97 each. Broker HC Wainright rated shares a 'buy' after the news.
"We note that these RUO kits allow researchers to explore patterns of epigenetic modifications in circulating nucleosomes across a variety of clinical applications beyond cancers," said analyst Raghuram Selvaraju.
Recurring revenue stream potential..
"Importantly, if the assays become an indispensable companion diagnostic to another company’s therapeutic candidate, potential future licensing opportunities could generate recurring revenue streams in addition to the company’s planned commercialization of Nu.Q assays for colorectal cancer (CRC), in our view."
Two weeks ago, VolitionRx outlined its strategy for its colorectal cancer screening test, which it reckons is its largest near term commercial opportunity.
Aiming to launch test in Europe in 2018..
It is eyeing a launch of the diagnostic test in Europe in 2018, with a panel chosen for its Nu.Q colorectal cancer screening test for Europe in the fourth quarter of this year.
In the third quarter of 2018, CE Marking is expected to be completed, so the product could then be marketed in 28 European countries. The CE mark will also offer a regulatory platform to expedite approval in many Asian markets, VolitionRx said.
Selvaraju said this should provide a solution to the overwhelming compliance issue of patients foregoing available colorectal diagnostic and screening tools, and may potentially become the preferred option in colorectal cancer detection.
"We continue to expect the Nu.Q CRC triage test to be launched in the EU near term and start generating revenue for the company in 1Q18," he added.
What does the company do?
The firm is focused on developing blood tests - called Nu. Q tests - to discover if someone has cancer, a disease for which a simple blood test is not normally an option.
The tests are based on the science of Nucleosomics, which identifies and measures nucleosomes in the bloodstream or other bodily fluid - an indication that disease is present.
Early diagnosis is key in cancer and can not only prolong the life of patients, but also to improve their quality of life
US development also on track..
Volition America, a wholly-owned subsidiary of VolitionRx, is set to take part in a large multi-center CRC screening study funded by the U.S. National Cancer Institute's (NCI) Early Detection Research Network (EDRN).
A total of 13,500 samples would be tested in the study and all the data could take up to three years to be pooled together.
As reported previously, VolitionRx will contribute around just $3mln towards the arrangement, as opposed to a $30-$40mln usual cost for a trial of this size.
"In our view, Nu.Q assays’ ability to detect precancerous polyps at a high rate of sensitivity may be crucial in improving patient outcomes, thus differentiating it from competing tests," noted HC Wainright.
What's it worth?
The broker says its price target of US$10 a share (over three times' where it is now) is derived from a market value of the firm at US$254mln, including discounted cash flow-based enterprise value for Nu.Q assays, with a 15% discount rate and 2% terminal growth rate.