Company description: Blood-based cancer screening
VolitionRx is developing the Nu.Q cell-free nucleosome test for the blood-based detection of a series of different cancers. The test detects the fragments of chromosomes that are released on cancer cell death and uses the modifications present on these structures to rule out other diseases. This provides a non-invasive method of detecting cancer and because the technology is based on the routine ELISA test, it can be easily integrated into existing lab protocols at low cost. VolitionRx was established in 2011 as a virtual-style diagnostics start up and has grown into a NYSE-listed company with 20,000 sq ft laboratory facilities in Belgium with more than 30 employees. The lead programmes include cancer screening in several indications in humans, more recent ventures into animal health in partnership with the Texas A&M University and nucleosome-enrichment technology, which could boost the biomarker discovery for the Nu.Q platform and open another unique commercial opportunity for ctDNA enrichment, potentially useful for DNA-sequencing players in the liquid biopsy field.
Valuation: $215m or $5.46/share
Our VolitionRx valuation is $215m or $5.46/share compared to a previous $233m or $6.60/share. This is mainly due to revised launch dates, which were partially offset by a slightly higher net cash position and rolling our model forward. In addition, the warrant exercise had some dilution effect on our value per share. The upcoming multiple data announcements from the proof-of-concept studies should provide interesting catalysts for the share price. While these will be still be small feasibility studies, all of those studies will involve the product-grade assays. The insights from these will likely influence further R&D program and focus areas for VolitionRx, which is when we will revise our valuation accordingly. For the time being we do not include Nu.Q Vet or Nu.Q Capture commercial potential in our valuation due to their early stage.
Financials: Cash reach well into 2020
As expected, VolitionRx reported no income and an operating loss of $4.0m in Q119, compared to $4.6m a year ago; this is largely in line with our expectations. VolitionRx’s cash burn is around $4m per quarter. The company had cash of $16.2m at end Q119 after it had raised $6.7m gross in March from warrant exercise. More warrants were exercised after the close of Q119, bringing in an additional $5m for the company. VolitionRx reiterated its guidance that cash burn is likely to be $4m per quarter in the near future, which suggests the cash runway extends well into 2020. According to our estimates the funding gap in 2020 is $7.5m (shown as long-term debt in Exhibit 8). The only significant change to our estimates is that we have postponed the commercial launch of products for clinical use to 2021 or 2022 (more details below).
Sensitivities: Typical diagnostics R&D hurdles
VolitionRx’s risks include demonstrating the efficacy of its Nu.Q tests in detecting cancer and communicating this to regulatory and policy-making bodies in the US, Europe and Asia. The company has been upgrading its assays, which means all prospective studies are still to be performed. However, since its establishment the company has accumulated a large blood sample bank, which means that once the assays are ready, the studies could be performed relatively quickly. Presuming successful R&D and regulatory approval, VolitionRx also faces commercial risks. Adoption in Europe depends on convincing centralised screening programmes of the importance of adopting the test and the Nu.Q tests must compete with low-cost alternatives such as the faecal immunochemical test (FIT). The mitigating factor of this is that Nu.Q technology is based on classic ELISA, which is also a low-cost and readily available procedure.
Using nucleosomes to detect cancer
VolitionRx is a clinical-stage diagnostics company focused on the development of blood-based tests for detecting cancer. The company’s Nu.Q technology centres on the detection and characterisation of circulating nucleosomes. Nucleosomes are complexes of DNA and protein normally found in chromosomes, but in diseased cells these complexes can be released into the bloodstream. In healthy cells, nucleosomes are modified to control the expression of different genes, but in cancer they become hyper-modified as the cell loses the ability to regulate normal gene expression. VolitionRx has developed a series of different ELISA-based assays to characterise and quantify these nucleosome-based biomarkers in the hope of identifying signatures indicative of different cancers. Nu.Q assays have several potential advantages, including:
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Because they are based on ELISA technology, the tests are easily integrated into existing testing infrastructure, so there is no need for additional capital outlays;
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Nu.Q-based tests can potentially be sold at a low cost (compared to other branded tests that cost multiple hundreds of dollars. Currently we have $55-100 per test for colorectal cancer (CRC), $20-40 per test for lung and pancreatic cancers in Europe and the US, respectively, in our model.
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Nu.Q-based tests can be performed quickly and non-invasively (a simple blood draw is sufficient); and
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One unique feature of the Nu.Q platform compared to liquid biopsy tests based on next-generation sequencing technologies is that the latter technology seeks specific mutations, whereas the malignant process caused by these mutations causes epigenetic modifications across the epigenome. This means that a simple, low-cost ELISA-based Nu.Q test can be used to detect those modifications, whereas the detection of specific mutations requires complex DNA sequencing methods.
VolitionRx’s ongoing activities in (human) cancer diagnostics and near-term news flow include:
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Exhibit 2 summarises this year’s expected newsflow on generating proof-of-concept data with the updated assays. Although these are mainly small feasibility studies, as explained above, they all are conducted with product-grade assays and will deliver the first performance data, hence are potential catalysts for the share price.
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When it comes to larger programmes, VolitionRx indicated the lung cancer tests were impressive enough to expand the collaboration with the National Taiwan University by opening a prospective study in lung cancer patients, which will collect 1,200 blood samples (the latest announcement was released on 7 May 2019). The aim is to develop either a frontline screening test in lung cancer or a triage test after low-dose computed tomography (LDCT) (gold standard currently) to address the low specificity associated with LDCT. A total cost for VolitionRx is estimated at $320k over the next two years (until 2021). Preliminary data relating to the first 600 patient samples are expected to be released in Q120.
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Once VolitionRx evaluates the data from the ongoing proof-of-concept studies, we believe that it will make a decision how to best proceed and prioritize the analysis of the blood samples in its large biobank (Exhibit 1).
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Fosun Long March is one of the more recently announced partners in Asia. On 28 March 2019, VolitionRx announced a memorandum of understanding with the Asian conglomerate. The goal is to facilitate entrance into China. The final agreement is still to be reached, but the preliminary plan is to conduct three clinical studies in China in CRC, lung cancer and ovarian cancer. Fosun Long March, owned by the Shanghai Fosun Pharmaceutical conglomerate, is an in-vitro diagnostics company active in R&D, manufacturing and marketing of diagnostic and laboratory instruments and reagents. Financial details have not been disclosed yet.
Nu.Q Capture: An R&D project gaining pace
Early in 2018, VolitionRx described its progress with one of its internal R&D projects, which explores Nu.Q technology’s potential in enriching nucleosomes of tumour origin for use in ctDNA detection. During its CMD event, for the first time VolitionRx released new details and invited KOL and VolitionRx’s scientific advisory board member Professor Axel Imhof to present the progress.
The idea for Nu.Q Capture came from the collaboration of Professor Imhof and VolitionRx seeking to identify how mass spectrometry could be helpful to advance Nu.Q ELISA platform. Dr Imhof is a professor for protein analytics at the Biomedical Center of the Ludwig-Maximilians University of Munich (LMU) and the director of the Proteomics Core Facility of LMU’s Biomedical Center. His area of expertise is mass spectrometry for protein analytics, especially characterising histone modifications.
Mass spectrometry is a technique where a test object sample is bombarded with a beam of electrons so the atoms and molecules in it are ionized or become charged. Subsequently, detectors record a spectrum of these ionised particles. This information can then be used to identify the composition of the test sample. Specifically for VolitionRx, this technique could significantly speed up the discovery process of new epigenetic modifications in nucleosomes. The ELISA method allows the targeting of one specific modification at a time. Although this is sufficient for a clinical test, in the discovery of biomarkers (nucleosome epigenetic modifications in this case) mass spectrometry allows the analysis of multiple nucleosome modifications (known and undiscovered) at the same time. The reason such use of mass spectrometry has become available for VolitionRx is the rapid technological advance of the technology. As Professor Imhof explained, only 10 years ago mass spectrometers were still rather cumbersome to work with.
The first challenge was that mass spectrometry would require larger blood sample volumes per run. The solution was to move away from traditional ELISA solid-surface plates and instead use magnetic beads to precipitate nucleosomes from plasma. The first proof-of-concept tests were done using recombinant nucleosomes. These and subsequent tests with blood plasma and serum showed that nucleosome immunoprecipitation can be achieved at required levels for mass spectrometry.
VolitionRx did indicate this is still an early R&D project, but the achieved results potentially have several interesting directions.
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As discussed, the enriched nucleosomes can be analysed with mass spectrometry for epigenetic modification discovery. The specific antibodies could be developed and used in Nu.Q assays.
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Another potential application is DNA sequencing. As discussed above, the arrival of cheap next-generation sequencing technologies prompted a surge in the R&D of so-called liquid biopsy tests. The main hurdle in ctDNA research is the very small amount of tumour DNA. Another layer of complexity is that there can be other types of DNA in the bloodstream, as seen in post-myocardial infarction patients or pregnant women, whose blood contains DNA from the baby (collectively ctDNA and other types are called cell-free DNA). For these reasons the ctDNA-enriching technology could be interesting to other companies in the field.
Nu.Q Vet: Push into animal health taking shape
Another notable highlight in 2018 was VolitionRx’s push into animal health, which is a new application area for Nu.Q assays. Early in 2018, the company undertook a pilot veterinary study in collaboration with experts at the Texas A&M College of Veterinary Medicine and Biomedical Sciences. The results showed that using the same assays as in humans, the researchers were able to detect nucleosomes in samples from dogs diagnosed with cancer. Animal health could potentially be a commercially lucrative area due to the combination of a large market, high unmet need and substantially lower regulatory hurdle than in humans. As a result, VolitionRx signed a memorandum of understanding with the Texas A&M University to develop a commercially feasible product. Texas A&M University was chosen for its world-leading reputation in veterinary medicine and the interest from the organisation seems strong as the university could potentially negotiate a shareholding in VolitionRx’s US subsidiary, which is being established to run the animal health programme.
The second KOL invited to the recent VolitionRx CMD was Dr Heather Wilson-Robles, who is an Associate Professor at the Texas A&M University. Dr Wilson-Robles presented an overview of the programme, commercial opportunity and the work that has been done so far (a video presentation is available on VolitionRx’s website). The key points are:
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Feasibility studies showed that nucleosomes, specifically in dogs, are similar to humans and detectable with the Nu.Q platform. This applied to many other animals that VolitionRx and the Texas A&M university team looked at. Dogs were chosen as the first target population.
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Cancer is relatively more prevalent among dogs due to a combination of negative external factors (many are the same as for humans), but importantly many dog breeds have a much higher than normal risk of developing cancer during their lifetime as a side effect of the breeding process.
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The pet dog market is very large and cancer diagnostics represent a high unmet need. In the US there are c 55 million dogs and approximately 4.2 million cancer diagnoses each year. The increasing size is a combination of increased pet ownership and increased spend per pet.
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There are no reliable non-invasive tests to diagnose cancer in dogs, therefore most animals are diagnosed with an advanced disease. Diagnostics include expensive imaging or invasive operations, which must be done under anaesthesia. This limits the use of these options due to financial costs. A cheap (preliminary price is estimated at $100–200 per test) and simple test could be used for screening dog breeds that have a high risk of cancer.
The Texas A&M University researchers have conducted a study involving blood samples from 112 dogs in three different geographical areas and the Nu.Q platform worked reliably. Another 100 samples have already been collected and will be used to finalise the Nu.Q assay panel. Dr Wilson-Robles described that the first panel can be used to develop a research-use only product. The validation set is expected to be c 200 samples (50:50 diseased and control subjects). If the data are positive, this should be sufficient for the United States Department of Agriculture (USDA) regulatory approval, which is typically less onerous than from the FDA. Detailed timelines or specific cancer indications are not known yet.
Highlights of prioritised cancer indications: CRC
Historically, CRC was the VolitionRx’s main focus, partly due to well-defined screening programmes in many countries. CRC is one of the most common cancers, with approximately 1.36 million cases per year worldwide.1 Prognosis is highly dependent on the stage at which the cancer is detected, highlighting the need for improved CRC screening programme participation. According to the American Cancer Society the five-year survival rate for patients who have their cancer detected in the localised stage is 90%, compared to just 14% when there are distant metastases.2
Therefore, there have been significant efforts to establish screening protocols to identify the disease early. The US Preventative Services Task Force (USPSTF) provides guidance on a series of testing strategies for adults between the ages of 50 and 75:
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an annual faecal occult blood test (FOBT) or FIT;
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a FIT-DNA test (ie the Cologuard test from Exact Sciences) every three years or less;
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flexible sigmoidoscopy every five years, or every 10 years when combined with yearly FIT;
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CT colonography every five years; and
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colonoscopy every 10 years.
The guidance is now under review with the main revision focus on when the screening should be initiated. The American Cancer Society has lowered the recommended age to start screening for CRC from 50 to 45 years old in its updated screening guidelines released in May 2018. In Europe there are multiple national initiatives to screen the at-risk population using similar methods as in the US, but this varies by country.
None of these tests are ideal. The compliance for faecal testing is low (13–60% depending on the study) and colonoscopy, while highly accurate, is invasive and requires sedation. Combined, the CRC screening market is approximately 235 million people in the US and Europe (US population likely to increase if new USPSTF guidelines also lower the screening age).
Common CRC screening technologies
There are a number of different technologies being used or in development for detection of CRC and they fall into three categories: invasive, faecal and blood.
Exhibit 4: CRC screening test data comparison
|
Company |
Type |
Cost |
CRC sensitivity |
AP sensitivity |
Specificity |
Colonoscopy |
Various |
Invasive |
$1,200 |
95% |
95% |
95% |
Sigmoidoscopy |
Various |
Invasive |
$600 |
50% |
50% |
92% |
FIT |
Various |
Faecal |
$23 |
74% |
24% |
96% |
FOBT |
Various |
Faecal |
$5 |
40–70% |
12–24% |
93–98% |
Cologuard |
Exact Sciences |
Faecal |
$428 |
92% |
42% |
87% |
Epi proColon |
Epigenomics |
Blood |
$339 |
68–72% |
22% |
81% |
Colox |
Novigenix |
Blood |
$300 |
78% |
52% |
92% |
Source: FDA, Exact Sciences, World Gastroenterology Organization, Agency for Healthcare Research and Quality, Imperiale et al., Multitarget Stool DNA Testing for Colorectal-Cancer Screening, N. Eng. J. Med. 370, 1287-1297, CMS. Notes: AP=adenomatous polyps.
The FOBT is a relatively cheap (~$5) test in which stool samples are collected and analysed for blood. A limitation of the test is that it typically involves collection of up to three different faecal samples on three different days, negatively affecting compliance. There are a variety of different versions of the test but sensitivity is 40–70% and specificity is 93–98% according to the Agency for Healthcare Research and Quality. Sensitivity for precancerous lesions was rather low, generally between 12% and 24% depending on the specific test.
The FIT was developed specifically to target human haemoglobin and not be affected by dietary sources. It is more expensive than FOBT, but at ~$23 it is still relatively inexpensive. FIT is considered more sensitive than FOBT, with a sensitivity 73.8% and specificity of 96.4%. However, it has limited ability to detect advanced precancerous lesions with a sensitivity of just 23.8%.3 Like the FOBT, the FIT involves the collection of up to three different faecal samples on three different days.
Cologuard is a test marketed by Exact Sciences that combines a molecular assay, consisting of two DNA methylation markers (NDRG4 and BMP3), seven DNA mutation markers (all related to KRAS) and a DNA normalisation marker (beta-actin), with a FIT test. Unlike the other faecal tests, it only requires one stool sample. In addition, due to the molecular assay component the test is an order of magnitude more expensive than the standard FIT test. It is also significantly more sensitive than a FIT test with 92.3% sensitivity, but is less specific with 86.6% specificity, leading to a greater number of false positives than FIT. Cologuard also has a greater ability to detect advanced precancerous lesions with a sensitivity of 42.4%.
The gold standard for CRC diagnosis is colonoscopy, as it is highly accurate with few false positives or negatives. It is an invasive procedure that requires extensive bowel preparation and anaesthesia. The adverse event rate is relatively high with a hospitalisation rate for serious complications of one in 200, usually bleeding, colonic perforation or a negative reaction to anaesthesia.4 The colonoscopy is also the most expensive screening method for CRC at a cost of $1,200 per procedure according to Centers for Medicare and Medicaid Services (CMS).
Epi proColon is the only blood test based on detecting aberrantly methylated DNA of the Septin9 gene. As the test is based on just one marker it is not very accurate, with a significant number of false positives and false negatives. In analysing its pivotal trial data, the FDA commented the test yields 37.7 false positives per every true positive compared to 5.4 false positives per every true positive for FIT.
The Nu.Q opportunity in CRC screening
VolitionRx has various clinical programmes to support the marketing and commercialisation of the frontline Nu.Q CRC test in the US, Europe and Asia. The programmes (Exhibit 1) have finished collecting blood samples, which are now part of VolitionRx’s biobank. Once VolitionRx has identified the right Nu.Q assay panel following the upgrade, it will be able to run the studies relatively quickly, as prospective collection is the time-consuming part. More precise development details are not known yet.
Besides developing a test for frontline CRC screening, VolitionRx has also explored the potential for so-called triage for colonoscopy approach using a separate Nu.Q panel. This simplified test is not designed to diagnose cancer in the frontline setting; rather, it is a follow-up diagnostic for patients who have a positive FIT test. The goal in this case would be to further discriminate if the patient should receive a colonoscopy. In theory, this protocol has the capacity to significantly decrease the number of unnecessary colonoscopies, which the company believes would be attractive to certain state-sponsored CRC screening programmes. The total addressable market for the triage test is smaller compared to the frontline test, but is still substantial if low current compliance could be increased. There are approximately 136 million patients in Europe eligible for routine CRC screening. However, a recent study of faecal testing in France found compliance rates between 47% and 54%5 over four consecutive two-year periods. A study in Spain identified an FIT positivity rate of 7.2%,6 similar to rates observed in the US (7.0%).7 This corresponds to a total market of 2.5 million individuals per year across Europe if all nations adopted FIT screening programmes, or a little over 1% of the predicted US and European frontline CRC screening market.
