Louise Day - CMO and CCO Cameron Reynolds - President and CEO David Vanston - CFO

Jason McCarthy - Maxim Group Bruce Jackson - Lake Street Capital Markets Raymond Myers - The Benchmark Company Brian Marckx - Zacks Investment Research

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the VolitionRX Limited First Quarter 2018 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference call will be opened for questions. [Operator Instructions] This conference is being recorded today, Friday, May 11, 2018. I’d now like to turn the conference over to Louise Day, Chief Marketing and Communications Officer. Please go ahead.

Thank you, and welcome, everyone, to today’s conference call for VolitionRx Limited. Following our prepared remarks, we will open the conference call to a question-and-answer session. Also on our call today is Mr. Cameron Reynolds, President and Chief Executive 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 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 and other filings with the Securities and Exchange Commission. We do not undertake an obligation to update any forward-looking statements made during this call. I’d now like to turn over to our President and Chief Executive Officer, Mr. Cameron Reynolds. Cameron?

Thank you, Louise and thank you everyone for joining Volition’s first quarter 2018 earnings conference call. I would like to thank you all again for taking an interest in Volition at this exciting time for us. David Vanston, our Chief Financial Officer and Scott Powell, Executive VP, Investor Relations also join me on the call today. I'm absolutely delighted with the progress we're making on many fronts, which has been made possible by our growing expert team and our lab staff at our considerably larger 19,000 square foot purpose-built facility disability that opened last year. Our focus during the first quarter of 2018 was on advancing the development of our assays from the level of our past smaller trails to the analytical validity needed for large clinical grade trials and for products that can be run in laboratories and clinics worldwide. This development work will be the key to our future success. Furthermore, we have made significant achievements in many areas and we continue to be well within our target expenditures. We are extremely careful to minimize our cash burn rate and to keep it stable, taking into consideration our stage of development and the numerous activities that we are conducting. I was delighted in the first quarter to announce varying, encouraging interim results from the early stage performance of our Nu.Q test in the frontline asymptomatic colorectal cancer screening population study. To be absolutely clear, we have not yet selected the final panel for the product, but we have already chosen assays that are very statistically significant to move on to the much larger training steps from which we aim to choose a final panel for the launch of a frontline screening test. As part of this trial, we have run a range of other orthogonal markers, such as CEA. Several of these low cost non-proprietary markers are proven in late-stage cancer detection, however, they are known to have poor early stage and pre-cancer detection. Given that our markers have demonstrated excellent early stage detection, we believe that a mix of five to six Nu.Q Volition proprietary assays and these non-Nu.Q markers such as CEA will create the ideal panel to get the very best results across the range of cancer stages and pre-cancers. As mentioned earlier, throughout this year, the team has completed an incredible amount of work ahead of our large scale clinical study to ensure that our assays are analytically validated and have clinical grade, so that they can be very reproducible anywhere in any lab. This is a critical, albeit, time consuming step in the product development process and is not particularly newsworthy in terms of press releases. However, I would very much like to thank the team for their dedicated efforts. This mountain of critical work from our dedicated team is now usable in a wide range of areas, some of which I’ll outline below. From a Human Resources point of view, this quarter, in addition to the expansion of our lab team in Belgium, I'm delighted to welcome Professor. Lee-Jen Wei to our Scientific Advisory Board. Dr. Wei is a professor of Biostatistics at Harvard University and his main area of research is developing statistical methods for the design and analysis of clinical trials. I'm confident that his background and skillset will provide valuable expertise to Volition. Dr. Wei along with our internal statistical team should be instrumental in shaping Volition’s statistical analysis of its extensive clinical trial programs, geared for future regulatory approvals, especially with the US FDA. From a financial perspective, Volition raised 8.4 million in gross proceeds this quarter through a registered public offering of common shares. We intend to use the net proceeds for continued product development, clinical studies, product commercialization, working capital and other general corporate purposes. For the first quarter ended March 31 of this year, we closed out with a strong position of 14.3 million in cash and equivalents. We have kept very close controls of costs, despite the high level of research and development and marketing activity with an underlying average quarterly cash burn rate of around $3 million. Yet again, we have completed many milestones on a relatively tight budget to ensure we use our cash carefully and wisely. I’m delighted to announce on the call today that we have also secured an additional $600,000 of availability in non-dilutive funding from the Namur Invest in the form of a loan to be drawn down at our election at very favorable rates. We would like once more to publicly thank Namur Invest for its ongoing support in extending our runway. As a direct result of a huge amount of background work we have done to generate assays of clinical grade, with addition of aspects such as recombinant nucleosomes, something that only became technically possible last year, this week, we announced the signing of an exclusive global license, manufacturing sales and distribution agreement with Active Motif for a range of our new research use kits or RUO. The development work we have done on the research kits is also critical in our clinical trial work. As working closely with Active Motif to perfect the research kits has greatly assisted us in getting to clinical grade kits for our trials. The research kits use the same platform and assays as our Volition cancer screening panels, but may be used for many other purposes. The research kit range will allow researchers to explore patents of epigenetic modifications in circulating nucleosomes across a broad range of clinical applications, including cancers, inflammatory and infectious diseases. Active Motif is a key player in the field of epigenetics and we are very happy to be working with them. This is an excellent opportunity for Volition and we hope that this will provide an additional revenue stream beyond the commercialization of our blood based test for cancer. Active Motif has established relationships with our target customers across the world and is expected to start selling the kit next month. We believe the sale of these research kits will also broaden potential applications and generate further validation of our patent protected Nucleosomics platform. Indeed, we believe that Volition’s intellectual property portfolio will become increasingly valuable asset moving forward, covering products in additional areas of biology and medicine. Our belief is based on the fact that epigenetics govern many biological processes in health and disease in many areas, not just cancer. With the research kits we can send them around the world, we aim to rapidly expand the platform as other researchers and companies will utilize our platform and our IP for their field and will allow us to collaborate with a wide range of organizations through shipping them our kits. One such use of the research kits that I'd like to mention is based around the proof of concept work for the Nu.Q test platforms in animals for potential veterinary uses. I can announce today that we've already undertaken a pilot study, including assays already developed by us for use in our large ongoing human trials in samples collected over several years by well-known veterinary colleges in the UK and Belgium. This study has confirmed nucleosome detection in blood collected from dogs diagnosed with cancer with the same assays as in humans. This data would suggest that the Nu.Q platform may be applied to animal diagnostics in veterinary medicine and further validates the Nucleosomics as a platform technology. Let me be clear. This is not work we intend to do internally at this time, but our research kits can be shipped to other specialists in numerous other fields such as this example in veterinary uses. We believe that these related applications will be covered by our strong intellectual property portfolio and we aim to be strategic with all of these exciting new potential uses of our technology. Yet another advance this last quarter, held by analytical validation work is a project I mentioned on the last call, investigating the use of Nucleosomics to purify or enrich nucleosomes of tumor origin. By way of background, one of the biggest challenges facing cell-free DNA companies is that most of the circulating cell-free DNA in cancer patients does not come from the tumor, but from dead white blood cells. Only a small fraction of the circulating DNA is from tumor origin. Since all or most of this circulating DNA circulate as nucleosomes, a very exciting fact that has only recently been proven, and the nucleosomes of tumor origin are known to be different in structure, the ability to provide purified cell-free DNA has the potential to add considerable value to the company. This work is ongoing, proceeding well and we hope to have further updates later this year. In addition to this background scientific discovery work, we’re happy to confirm that we'll be working in parallel on a multi-cancer study. This 4,500 patients cohort already collected by the University of Bonn in Germany and includes patients with 27 of the most prevalent cancers. We aim to run around all of these clinical grade assays through this trial as they become available this year. This trial is incredibly important and we hope that we’ll show the breadth of our Nu.Q technology and helps direct our further development of Nu.Q tests for other important cancers, most notably, lung, pancreatic, prostate, gastric and ovarian to name just a few. We expect to report preliminary data later this year. It will be extremely interesting to see how our assays work in similar and different ways through all of these cancers. We aim for this to become a platform for licensing our essays to a range of other organizations that are expert in individual cancers. And so to the upcoming all important milestones for 2018 and into early 2019. We aim to release data on our updated Nu.Q Triage product before the next earnings call and expect to complete the validation study and CE Marked process before this year is finished. We aim to report data from our frontline screening test in the second half of this year with the aim of completing the validation study and CE marking process in the first quarter of 2019. We also expect to generate revenues, starting in June 2018 from our sales of our research kits through Active Motif and as we add in products for sales to ramp up next year. To be clear, we think having a large number of researching companies using our kits will greatly add to the validation of our Nucleosomics platform. However, we would expect much more significant revenue to come from our sales of clinical products we are developing. I’ve said on many calls before, but like to say it again. It's our people that make the difference and I would like to sincerely thank our visionary same for the significant progress we've made this quarter on so many fronts. We are extremely excited and optimistic about the coming months. We have been very active in adding team members that have helped us transform the company from one of research to one of products. We've done a huge amount of work in the background, which is not news in the sense of press releases, but is extremely important in the huge amount of background work that has been completed and is needed to ultimately launch products. We're extremely proud of the accomplishments we have achieved thus far and look forward to what the future holds for Volition. I, along with the rest of the board, and indeed the whole company, look forward to sharing the results of the key studies over the coming year. We work hard every day to create a brighter future, one where hope and cancer can come together in the same sentence.

[Operator Instructions] Our first question comes from the line of Jason McCarthy with Maxim Group.

So it seems that Nu.Q has the potential to address a couple of huge markets, patients who are non-compliant with the current screening standards and patients who are compliant, but may not need a colonoscopy or may not want to go for one if that's an option. So how do you see adoption growing among these two groups, and which is going to be your initial focus? And then additionally, what are the major differences between the US, Asian and EU markets, which may impact your commercial strategy?

Yes. Very good question, Jason. I'll do with the first one first. I think as being a small company and one which obviously launching products is a long process and a complicated one. The best way to do it, as you said, is to start with the lowest hanging fruit and I think we’re the only company out there really developing routine low cost blood tests. So I think that’s the only way of really getting the compliant market to compliant. I think there's huge compliance issues with colonoscopies and with every single clinical test out there, all of the tests that measure blood in your stool. Nowhere in the world does it get, about two-thirds of the people end up doing either tests when they’re combined. So I think the only answer is a blood test and within blood test, ones that which are routine, which I mean basically do people actually take them in normal course of -- normal blood work. So that’s certainly -- I don’t think it’s going to be the case with the vast majority of the other tests on the development, they cannot be routine. If they need a large amount of blood and a whole separate lab and are very complicated and expensive, they'll never become a routine. So I think the only way of dealing with the compliance is what we're doing. So I'm very confident of that market. When you try to get into the rest of the market, it gets more complicated, because the colonoscopy is a very accurate test as is the exact test. So people who are currently doing those tests, until we get to the levels of accuracy that they have, the wise thing for everyone is – for them to continue to do those tests. So I think the non-compliant market is absolutely low-hanging fruit, but it’s a very large market. In the US, it’s thought to be 25 million or 30 million people of screening page and it’s hundreds of millions of people in Europe and Asia. And the different markets is a very good question between the US, the EU, and Asia. I think they’re all going to be very important to us. The US is obviously a very key market. Healthcare budgets are massive, so we have the large trials underway there. Sensitivity, the accuracy detecting cancers is the most important aspect of the test in the United States, which is logical. Also, logically in Europe, they're actually very worried about the specificity because they have to get free follow-up tests to people who have both negatives, both positives, sorry. So they don't like a lot of positives, because it adds a lot of cost to the healthcare system. And Asia is a fantastic, growing market where I’d spend a lot of time. I actually just got back from Asia. Dr. Wei has done a very good job for us in Asia, getting fantastic trials lined up. So they’ve been really launched there as well. And I think it's an overlooked market for a lot of diagnostics because they typically don't spend a lot of money on the same test as the American market and it's not the same government systems as in Europe. But in the last 20 years, I think everyone knows it’s become very much more wealthy in a lot of Asian countries and for example, in colorectal cancer, it's becoming much more prevalent, because they’re generating [indiscernible]. But also in Asia, we’ve also looked at other cancers that are much more prevalent in Asia, their lifestyle and genetic differences, things like [indiscernible] are much more common in most parts of Asia. So we're looking to do some trials that I -- and products which are probably much more Asian focused, which is again quite unique to the last panel in 20 years. So I think every region is extremely important to us. The US, we take extremely seriously and we hope to grow through those FDA approval process as we have outlined. The EU is very important because it's hundreds of millions of people who have a healthcare markets and Asia is billions of people who are now, many of which are becoming able to begin to use our products. So we’re very, very confident we've managed to start addressing each of those three regions. We’re also a small company, but we are multinational in a very small sense. We do have a small team in the US. We do have a small team in Asia and a predominant lab tech group in Belgium, but I think it's important to do it. I think it's very tough to run an Asian process from Europe or America or from Europe. So I'm very happy with the team members we have in those places and they’re doing a great job in really laying the groundwork for our success in the US and in Asia. So I think all of them have to be taken seriously and we absolutely are.

And then just one more quick question. I think it will be helpful if you could talk a bit about the advantages that differentiate Nu.Q from some of the other commercial tests in the market?

Yes. Absolutely. Thanks, Jason. There is a lot of – obviously, there is a diagnostic currently for everything, but if you take colorectal for example and that's the very closest to the products in the frontline, you can obviously have a colonoscopy, which is a fantastic test, it’s just very expensive and invasive, which means a lot of people don’t do it. And outside the United States, very few people have it as a screening test, because of those reasons. The only other viable option is to check the blood in your stool, some of the tests are reasonably accurate, such as exact, so it’s quite accurate. Again, the big problem with the test is compliance. A huge number of people will absolutely not do that test for a whole – range of reasons. So what we believe makes us very different is being a blood test. Everyone is very familiar with blood tests. The only blood test currently used in a wide sense for cancer detection is in prostate, the PSA, which is similar to our test in platform. It’s also a low cost analyzer and therefore routine. And it’s used millions and millions of times every year around the world. So we have very few differences with other blood tests as well. We're really looking to circulating cell-free DNA or rare events in the blood, you test in inherently going to be much more complicated, expensive and need a lot more blood, which means unlikely to be routine and routine again means it just be part of your normal blood work goes to any lab to be what, to be a routine test, you have to be low cost, you have to be lighter and that’s exactly what we are and we’re certainly not familiar of anyone else that’s really developed another platform for routine blood tests beyond the things we’re doing. So I think it’s very unique and I think it’s absolutely needed and if we continue to launch products and they’re successful, I think we can really change the way cancer is diagnosed, because it needs to be done better. It’s a tragedy, if you are found early and have the cancer removed, you normally have a very good outcome and people tend not to have that outcome currently, because they don’t get tested or there is not a good diagnostic for that cancer. So once we really solve both those problems, which makes us very unique.

Thank you. Our next question comes from the line of Bruce Jackson with Lake Street Capital Markets.

So just if we can get a quick update on the clinical trials. So with the first one last quarter, you had done 17 out of the 30 Nu.Q markers. So the first question is, where is that trial right now? And then second, I'm assuming that the training set is running concurrently with that trial. So curious to know where that one is. And then if you can remind people what happens after that trial is finished. I assume you’re going to be selecting the markers. I know, this is a lot of questions, but if you can just try to --? And then when does the 10,000 patient validation trial kick in and how confident are you in these timelines?

Very good questions. So background, the trial has been running well. We're doing them concurrently, absolutely. We’re finishing off this and running the training steps. The key difference on timing has been, we've been very resolute that to be run in the training set, the FAs have to be of the final validated -- everything exactly as it will be used around the world, as in the research kits. So as I mentioned on the call, we've done a huge amount of background work, trying to make our assays as analytically valid that they can be, reproduced anywhere in the world and for all the different uses we’re looking for them, including research kits, including all the other collaborations we're working on. One of the biggest things we've actually discovered, which is very much to the benefit of the – precisely to the assay is the calibrant [ph] recombinant nucleosomes. I think we’ve discussed it briefly before. It’s actually very cool that worked out the way, actually Active Motif and another group have worked out of way of getting a very good calibrant, which was never possible before even up to a year ago. So it’s not the actual assay itself, but the calibrant. What they’ve done is put together a bunch of histones with DNA, the histones are made in Ireland and shipped to China where they’re assembled and then all that is added is the one nucleosome structure that we are after from the assay. So typically obviously, we’ve discussed before, there are hundreds or thousands of structures on the nucleosome. So being extremely precise to exactly what you’re measuring was not possible until this breakthrough was made. So being what we are, we’ve now instituted these as the calibrant for all of our assays throughout the, everything we do in the research kits in all of our trials going forward is exceptionally good way of doing it and it makes it much better calibrant for the whole assay, but of course, it takes time to recalibrate the assays for the new calibrant. So that’s been going very, very well. Some of those have taken longer than others. So that’s why we hadn’t finished the trials as in the timescales we thought last time. The actual running of the trial doesn’t take very long at all. We have four and once you have the final version of the assay ready, all the calibrants, everything perfect and tested, running them doesn’t actually take very long, it’s just making sure. If you think about in that sense, you have to make sure the ingredient is very good before you use it. But they are same ingredients for the research kits, for the 27 cancers, for all the colorectal cancers and the study is in different animals, which as you said, was, we’re very excited that the same tests that takes a nucleosome in human blood, also detected in dogs, which, it actually makes scientific sense, but it was very good to see that. So all these things in the process in ruling out, so we have done a lot more work on the assays for all those trials. We will be the first one to come through because in these less assays, we expect to be the Triage test, you meant before, that was just couple of Du.Qs in there. We said the frontline test will be much more like 5 or 6. So because we’re in the process of recalibrating all the assays with the new calibrant and a lot of other steps to make sure they are as good as they can be, it obviously, the frontline test will obviously be the slowest, because it has the most assays in it. So we expect to, before the next earnings call, to have finished all that for the Triage test and by the end of the year. Now, is that September, October, November, I guess it all depends on the supply chain from a lot of the things we depend on, but it’s certainly hard at it, the same time, remarkable job. We’ve taken on quite a few Ph.Ds in Belgium who have become the project managers for each of these levels that have done a sterling job of getting it done. So it sounds counterintuitive, but the actual trial still doesn’t take long. So just got to make sure we’re using the exact ingredients we want, but these will be decided that we’ll need for the FDA we believe as well as all the European and Asian regulators. So it’s something we really have to do, we take incredibly seriously, obviously this is not a simple, this is in a sense of, if we [indiscernible] and the process is not done exactly the way it should be. So we’ve done everything in the process as well as we can. Sometimes, it takes a few months longer to get all that finished, but it’s absolutely the right thing to do and it’s all bearing fruit. It seems making amazing progress in all those areas. So it will be all coming through in the second half of the year. And so timing wise, once we have the training sets, we then go through the validations and then you get them CE marked at parallel to the validation study. So what you picked the panel in the training set for the product and then you lockdown the panel and the variables and then run it through a blinded large population, which is exactly what we’re doing with the 12,000 as you said. We were thinking of that end of this year, but it looks more likely middle of the first quarter, by the time, given the processing in using all the new things we discovered to make the nucleosome assays better. I think now that’s a very realistic schedule, considering the amount of progress we’ve made in all the fronts.

And then if you could just tell us a little bit about Active Motif, so they’re privately held. We don’t have a lot of information about them, but if you can give us a sense of, what kind of labs they sell to and how much reach they have in that market that will be helpful.

Very good question and thank you. That’s something that I should cover. So we’ve worked, with Active Motif in a range of different areas for a while now, obviously that supply things which we consume, such as the recombinant nucleosomes. So we’ve come into very much, a lot of people supply antibodies and other factors, some are very good, some are not. We found them to be very good. So we’ve been working more and more closely with them. So it’s a bit of a two way relationship, we use some of their products and because that being so good with what we’ve used as with some others. We thought that would be the perfect people to distribute worldwide. And so this distribution, we don’t want to be distracted from our frontline process in the frontline trials. They will also be manufacturing the kits, they will also be distributing them and all the follow-up. So we don’t actually lift a finger beyond what we’re currently doing. And so we’re getting a royalty from them. So all of that goes straight to the bottomline. There is no extra cost that’s involved. And their business apart from some of the other antibodies and recombinants is selling these types of kits worldwide. As I said, we found them extremely good in what we’ve been buying from them. So we’re very happy to work with them. On the revenue side, a lot of people wonder when you’re selling for $7000, if you sell a few thousand, it gets very interesting. But our revenue stream, because we don’t want to do the work ourselves, we will be mostly 100 to 200 per kit, because it’s just a royalty stream coming to us. But that goes straight to the bottomline. But what it really allows you to do is really validate the platform. It doesn’t 10s, 100s, 1000s of kits, what they’re going to do is sell in the coming years. Every one of those in someone else’s lab. They’re validating our technology, they’re writing papers. And if they develop a product using our technology, this is all the intellectual property, then it’s a very different discussion. We may sort of come back to you for a product license. So we could try and do all those things ourselves, but we’re not an expert in veterinary field, we’re not an expert in cancer monitoring therapy, drug trials and all those things. So you try to keep the cost in the kits at good value, so people buy it. And then you hope that publish a lot and when it becomes a part of their product and then more and more our platform gets validated by these institutions and research organizations and any money that does come to us goes straight to the bottomline. So it’s very, very encouraging for us. But I think key to getting all that finished, we thought about doing this early on. We weren’t as confident about our intellectual property until as now, we’ve got a huge amount actually granted that we’re very comfortable and I have to say, given all the new breakthroughs in the nucleosomes, there is just better assays and much more precise, good calibration. Researchers have to know exactly what you may quantify, which recombinants are very key to doing. So they’re very happy now, as you said, as I said, I said in the press release, the founder of Active Motif things they should be very good sellers. And he thinks Nucleosomics is a breakthrough technology and he things that the genetics are becoming a very big story. So hopefully, we’re just going to follow this with our research kits that we can really use to get validation of our property and our platform and lots of groups around the world and of course we’re doing the right thing, trying to do everything ourselves is not going to happen. We can do a lot of good, a lot of hope to a lot of people around the world in their trials, in their work and make the money for shareholders in the way through. So it’s definitely a win-win. And our earing calls, maybe the next time, because it’s only for June 30 and that’s only next month, but should become more interesting, the number of kits we actually sold through the year and the process that makes us a company with products that actually bought by a range of groups and all those things I think will make us a much stronger company. And we’re launching the first product, which is a total nucleosome about next month, so it’s right away and then we aim to add one or two every month after that, the new product for different structures, because now we’ve perfected the one process to get to this standard, the others, the team will always criticize in saying this, but it’s a much more quick process to get them out one by one after that. So expect one or two per month. So we’ll have a good handful of them on the market about at the end of the year and probably a dozen more at least next year. So it’s very exciting.

Indeed, does this mean that you’re going to start giving revenue guidance anytime soon?

Good question. David is here and I think we -- we think that demand for the kits is in the 1000s. We’re not sure when that’s going to be. So for the short term, we will not be giving guidance because and don’t expect massive revenue from research kits. It’s something which is nice, but it’s not going to become cash flow neutral for the company or anything like that. It’s nothing like the revenue from the frontline kits, but it’s – we expect this to add to guidance when it becomes clearer to us. I think it will be until we see the traction on and get a very good. Once we take the final panel and finish the training set for the frontline test and the Triage test, we should have a better idea, but certainly that would be the early side of this year or next year. David?

Yes. So I would see next year. I think, think of the research kits to validate and grow our platform more than a significant revenue stream.

But we’ll see how that pans out throughout the year and then we strongly expect to get revenue, they will have the sales next month and we strongly expect sales in Q3.

Our next question comes from [indiscernible].

Just a couple of questions. As you’re tailoring the colorectal screening product for different markets in Europe and Asia and the US, which all may have different sensitivity and specificity requirements, I’m just wondering if you feel the matter of tweaking the software, the algorithm for analyzing the readout of the diagnostic or do you see sort of a different set of markers required for each territory?

That’s a very good question. I think first of all, what we’re going to be doing is CE marking the product in the Europe and then trying that product on the agent trials and on some US samples, just to see if there is a difference, there may be, there may not be. There is some speculation that probably we’re hoping not, but you never know until you try. So if we were to get to the moment we discussed this obviously at length in the team, probably more likely to be slightly different algorithm than necessary different assays, but we’re certainly leaving to open to that, because obviously there are quite a few choices we can use amongst the interval. So I think in these situations, what you typically do is run the European panel through an Asian population, for example, if it works very well, that gives you a huge head start, because a CE marked product is much quicker to get approval for in Asia for example. If it’s not, you then turn the trial into a training set and then see, if it’s different combination of assays or the algorithm would actually give you a better outcome and then into a separation validation set for an Asian population or a US population. I would be surprised if there was a much of a difference between the US and Europe, but we can be surprised if we find out. There could be more of a difference with Asia, but the only way of really telling that is to run these trials. So as you know, we have a very large trial being selected with EDR in the US. We’re looking to get a smaller US population along the same lines to test our panels before we do that population. We hope to have some news on that in the coming months on quarters and we have these large trials in Asia being collected. So all that information will be given. So obviously the easier thing for us is to have the same panel everywhere, but it’s not that much more work to change that same trial into a training set and run more assays and different algorithms to see how it goes. It would probably delay you about six months in that process. So being flexible, one of the great strengths is our flexibility, because you’re panel of a different markers, you can change things around, hopefully we don’t have to, but I think there is also, don’t forget, there are probably different, in Asia, there are tests that we probably would launch in Asia first, seems like [indiscernible] in Asia, not that common at all in Europe or US. So I think we actually hope it’s not just from Europe or US or Asia or the other way around that we can be a truly worldwide company and being a lot of different regions and perhaps to cross-pollinate different tests in different ways of doing things. But it’s a process we thought through it, and we have a certain plan to get all those things done, and they’re all in the same budget that we’re talking.

And can you just remind us what the regulatory strategy is for the diagnostic and symptomatic patients and maybe different from the early reliance screening tests?

Yes. Symptomatic is different, just for the listeners who aren’t familiar. Frontline test is a test given to everyone, just because of the age, once you are 50, you are just much more likely to have cancer, colorectal for example. The Triage is used in conjunction with the test particularly in Europe and Asia. Symptomatic is obviously, if you have symptoms, you go to the doctor with bleeding in the rectal area or something cramps, those kind of things. Therefore, typically more late stage patients, if you are bleeding or if you probably not likely to be stage 1 as likely. So the question then, actually and there is two questions, it's an open question we’re still seeking advice on. It’s whether we want to rule in or rule out cancer. So it's been a -- like everything we do, everyone has a different opinion on what -- the clinicians particularly, what would be best, the rule in would tell you, we think you have cancer, go get a colonoscopy and they get it particularly value, looks at the other end of the curve to say, it's very unlikely you have colorectal cancer, you probably got a stomach problem or an ulcer or something else. So we’re still working on that and it's probably still the same pathways to decide between those two. But probably a different panel from the frontline and the frontline test particularly on your second or third screen, the stage one and the pre-cancers are by far the most important, where once you’re symptomatic, you’re much more likely to have the latest stage cancer. So as we discuss different assays better at different stages of the cancer and it depends on whether we settled on a rule in or rule out of these, both of which have merit and we can also give enough flexibility. We probably have a product that does both and in some of the commissioning. And I think in Europe, I just want to say colonoscopy capacity, but they probably want to rule out cancer. With the US, you could do both. So that is still one of the open questions. We try to think through things very carefully and do a lot of consultation and that product is the third one in line behind the two I mentioned. So, I'm sure we’ll take advantage of that in the next couple of quarters before we really finish that work to really, analysis of those samples with our assays, answer the question in which we can, or indeed both and then we can patch that to different test, different questions.

Our next question comes from the line of Raymond Myers with The Benchmark Company.

My first question is a clarification about the Active Motif research kits. You talked about the price being in the $100 to $200 per kit range. That's intriguing, because it's higher than I believe than the price we’re expecting. Why don’t you clarify then?

Sorry. I’ll just break it down. So what they sell us far is up to them. We obviously, it’s their product, we’re licensing to them. We’ll be somewhere below $1000 for a kit, which is not high. When we set $100 or less in the US, that’s the one test, which is just a few different depending on the assays from the 96. So that’s for the entire kit. So that would be a few dollars for however, how much they sell it for. But to be clear, it’s a very good question. We didn’t want to be involved in customer service and they have a lot of contact worldwide and they go to all conferences with these kind of kits and they have a lot of customers like us for different things. So we didn’t want to reinvent that we are very happy with their service and their products they have been giving us. So we decided to license to them, they will manufacture our kits for the research kit and chip them around the world and we get a royalty from that, which we would expect depending on the use and as a contract, but we will be somewhere $150 to $200 range depending on what the process is and other factors, but that is all pure profits. We don’t have to look to finger, they ship them around the world, they follow up, all those things, which ends up and understand all those things to do it.

And so will you not be manufacturing the kits either, this is like a royalty revenue at a 100% margin, is that correct?

Correct.

The outlook for expenses, I know you’ve always been very good about controlling your expenses, can you give us a sense of where expenses are likely to go this year as we approach commercialization.

Thank you. It’s a very good question. I think it will be the same in the same average burn rate on cash of around $3 million per quarter. If you look at the history over the last year as well, we’ve managed to keep in that range. We do not expect to see it significantly move away from that.

A very important point. I think a lot of people quite rightly have decided that and this has been something that I’ve heard for three or four years, how to do all these things with such a small burn rate. We do it, because we have the facility in Belgium, we have very strong support in the region there and we like to thank them again. Our team is very conscious of the fact that until we’re profitable, we have to keep things very low cost. Our collaborators have given us amazing access to samples as well as -- and we have a lot of support from a lot of groups around the world, because everyone is really desperate for blood test for cancer. So we're very, very mindful that it's shareholders’ money that we've been given and we have to use it extremely carefully. So we’ve never had a blowout in the amount of money we spending recently. In the near to medium future either, because obviously it’s all about the runway to get all the things we need done. So we're very, very careful.

And the last clarification, the $600,000 loan that you mentioned, is that something that you received in Q2 and is it included in the financial statements that were published for Q1?

No. That's -- we received a letter of intent and it will be given, we will take it down in Q3. So if you noted, it's not included in the quarter’s statements that you’re looking at.

Okay. So for Q3? Q2 or Q3?

It will either be Q2 or Q3, but it’s already, it’s gone through the stages and we know that we’ll get it. Timing will be one month.

And we strongly expect to be getting a range of these as we move from a product company, exactly what they want us to do and it obviously helps the strengthen the run rate. So we’ve been very -- it's really allowed us to build up the same in Belgium. All the mountain of work we’ve discussed has been done within the budget with a fantastic, and the team has pretty much doubled I think over the last couple of years in Belgium on the bench which has given us the flexibility to really do huge amount of work on the background of the assays themselves.

Our next question comes from the line of Brian Marckx with Zacks Investment Research.

On Triage, the results that you expect to announce in Q3, will that include updated specificity and sensitivity and if so, will it be parsed by cancer stage.

Yes and yes. We would expect both of those.

And then it terms of initial commercialization of Triage, can you kind of just give us sort of a sense of what your thoughts are today.

Yes. Obviously, we’re a small company and distributing is a difficult issue. So what we've done with the research kits is we found a group of fantastic who have worldwide reach, who can do it. Obviously, some countries, we might have a small home advantage, some of the European countries, some in Asia like Singapore, but I think generally, our model would be for distributors, but we've actually been speaking to quite a few European wide and Asian wide distributors or for specific regions. Given the complexities involved in getting different European governments approved and some of the other areas, I think that's probably the best way to go. And we’ve also -- from the 27 cancer study, as we said, it’s going to be fascinating to see how our clinical assays work through all the cancers. Our model going forward I think is also going to be the license to some other groups, for example, we couldn’t license to launch products in that cancer, where we would be the same sense of run a trial with them, then they can help us launch the product because obviously that’s whole different skillset and it’s one which we don’t necessarily want to rephrase to the world. So I think wherever possible and almost everywhere it’s possible, we would like to use distributors except for a few areas where we have strong relationships, but I think overall, it’s a model which works very well. And then that’s for the ones where we produce it and that means, beyond that, for the other characters, maybe the better uses, other divisions we would look at, I think licensing is absolutely the way to go and that’s kind of revenue stream. We’d also eventually like to license our assays to the leading platform makers, to their platforms so that the royalty streams are a primary source of income. And we think that’s very achievable, given it’s a very simple platform. We have very total intellectual property and I can’t say it enough times, I think we are a little ahead of the time I guess and it’s taking time to catch up, but it really is going to become very important. The switching on and off and nucleosomes themselves, I think now more than ever, it’s become a huge part of a lot of research programs and eventually could become almost increasingly important the DNA. So and we are really front and center at all of those projects because in circulation, any disease that has itself there and it’s ranging, our assays and our tests and our whole technology and approach, we’re the only ones who do it, we think given our IP, with anyone who can do it and we’ve got very good team. But it means we also have a strong intellectual property position because we’ve worked a lot of things there, which we’re obvious when we started. So for all those, I think it’s distributor and licensing model.

And then in terms of the EU screen. I think it anticipated that you – last quarter, you expected to announce results of the 4300 sample study in Q2, is that still doable.

No. That’s next month. So we’re making very strong progress as we discussed and we're very happy with how the progress is going, but we will do the Triage announcement first, because it takes less as we discussed. So we aim to have them both done in the second half with the Triage first and then the frontline test. But given all the background work we've done on the research kits and for the rest, we decided we wouldn‘t mind any assay in the final trial for the training or validation set for any product nor any files really now at all without these much, much more precise calibrants and the other things we've done. So this has taken some time, but it’s absolutely the right thing to have done, because it's given us a much more precise assays and we can actually quantify what we’re measuring in ways which weren’t scientifically possibly a year or two ago. But expect to see both of those in the second half and the products in Q4 and Q1 from those.

Do you expect to announce the results of the 4300 study when it's completed? Will that be an announcement?

Yes. Absolutely. There is quite a few -- looking for news flows. Well, the research kits, the Triage, the frontline test and yes, all those will be announced when it’s finished. And as I mentioned before, it’s actually not running the trial, we just want to make sure all the ingredients are as good as you can make them. So and some of those seem to be, because there’s been good things, good from the cutting edge of sides, but really cool things being developed, which makes our kits more precise and more reproducible and we’ve added all those into the test, but we need to calibrate the range of assays and it takes time to do properly, which is why we expanded the team and got the process going, but we’re comfortable with them now and the process we’ve gone through.

[Operator Instructions] Our next question comes from the line of [indiscernible]

Many of my questions have been answered, but I thought I would ask a little bit more, could you expand a little bit about the size of the opportunity and the timing as you pursue a license agreement for the veterinarian market.

Dr. Terrell, US CMO and CEO has done a lot of work on this. The veterinary market is a multi-billion dollar market. We didn’t spend a lot keeping, obviously very good reasons and I think it’s very safe to say that diagnostic market and animal market in animals is even more than humans. So I think a lot of is given to animals because we don’t have adequate diagnosis, but it is a easier process to get to revenue. It’s regulated by the USDA, not the FDA obviously. So obviously we’ve got to be careful to make products, because animals are important as well, but it is a different process and one which is a lot quicker to get to revenue. But it’s not one which we’re expert at and we don’t want to. So we’ve been in discussions with a few different groups, we’ll have just news on that later this year as well where also it’s not worthy to note I guess, but it looks like the animals have very similar nucleosomes, a lot of animals, the bigger ones particularly seem like those have very similar nucleosome patents to humans. So it’s not that much extra development work. The assays which again the research quality ones, we have now, we aim to have an agreement with some veterinary groups or people who are experts in different animals to test our assays in animals. Now, we don’t know, but as we can detect nucleosomes in the circulation of those animals, we’ve done, the dogs. So, the next step is to set up a clinical trial to see the sensitivity and specificity in those animals and we’re very hopeful. I think it’s something we could really hope with a lot of animals and it’s a multi billion dollar business where I think products could be launched quite quickly and worldwide, because of same suffering of humans, obviously in animals. So we’re hopeful that something which should really add to the package of what we do and given we now have these research and assays we can ship, the use for them, we talked about the two uses, one is selling the kits to different research groups. The other one is where you can supply them for free in a JV or collaboration where you can – we provide the assays and the knowhow, they provide the samples from suffering animals who have cancer or don’t have cancer and we can see if we can detect it well and therefore we can try to help the treatment of those animals if it works. So it's very exciting. So we feel something we're going to give some in the – we don’t spend a lot of money. It’s the same assays. The beauty of our platform is the same essays and for all these different uses. So we’re developing a platform which should we hope have a lot of these different uses which could help a lot of other uses in a lot of other things, so that’s hopefully, we will have some more news on that in the coming quarters.

Ladies and gentlemen, we have come to the end of our time allowed for questions. I will turn the floor back to Mr. Reynolds for any closing comments.

Thanks again everyone for taking the time in this call. Yet another exciting and building quarter. I think next quarter is going to be exciting and the second half of the year as we announced these big trails. First, revenues come through from our Nucleosomics platform and as we develop all the other uses, which we've been discussing in these calls. Thank you all for your involvement and I really look forward to keeping you up to date in the coming months. Thanks for your time.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.