Epigenetic Diagnostics And NETs Platform Will Reshape Long Term Prospects In Cancer And Autoimmune Care

Catalysts

About VolitionRx

VolitionRx develops and commercializes Nu.Q nucleosome-based blood tests for cancer, NETosis-related diseases and veterinary diagnostics.

What are the underlying business or industry changes driving this perspective?

• Scaling adoption of Nu.Q Vet through automation on the IDS i10 and integration into large reference labs positions the test for inclusion in routine wellness panels. This could multiply test volumes and materially increase recurring product revenue.
• Growing demand for noninvasive cancer and sepsis diagnostics in human health aligns with VolitionRx's Nu.Q Cancer and Nu.Q NETs platforms. The first real world clinical use in European hospitals and lung programs should support higher licensing revenue and improve gross margins.
• Industry wide focus on precision medicine and epigenetic biomarkers is driving pharma and biotech interest in tools like Nu.Q Discover. The Hologic co marketing agreement and initial sales can expand the customer base and create a higher margin, services driven earnings stream.
• Breakthrough Capture Seq technology that concentrates tumor derived DNA while removing background noise directly addresses key performance limits of liquid biopsy. This supports potential high value licensing deals that could accelerate topline growth and enhance operating leverage.
• Rising recognition of NETs as central to a wide range of autoimmune and thrombotic conditions, combined with VolitionRx's status as the only company with an approved NETs assay and the Werfen collaboration in APS, supports the prospect of broad test menus and expanding royalty flows that lift revenue and net margins over time.

Assumptions

This narrative explores a more optimistic perspective on VolitionRx compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming VolitionRx's revenue will grow by 429.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1554.3% today to 87.6% in 3 years time.
• The bullish analysts expect earnings to reach $191.8 million (and earnings per share of $0.88) by about December 2028, up from $-22.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-37.9 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 3.0x on those 2028 earnings, up from -1.4x today. This future PE is lower than the current PE for the US Medical Equipment industry at 30.0x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.45%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company remains dependent on a handful of early stage licensing and co marketing deals with large partners such as Werfen and Hologic. Any delay or failure in converting current technical validations and exploratory projects into broad commercial launches could leave revenues small and lumpy for years, limiting the expected step change in revenue and slowing earnings growth.
• Many Nu.Q applications, including APS, NETosis related indications and lung cancer screening, target relatively niche or still emerging use cases where clinical utility, reimbursement and guideline inclusion have not yet been established at scale. If long term adoption stalls below management expectations, recurring test volumes may fail to materialize, constraining revenue growth and keeping net margins deeply negative.
• The business model relies on capital light licensing and royalty streams rather than building its own global commercial infrastructure. If large diagnostics and liquid biopsy companies choose competing technologies or develop in house alternatives to NETs and Capture Seq, VolitionRx could remain a small technology vendor with limited bargaining power, capping long term licensing revenue and compressing earnings potential.
• Despite highlighting substantial total addressable markets in oncology, sepsis and autoimmune disease, current quarterly revenue of approximately $0.6 million and the decision not to provide revenue guidance underscore the early commercialization stage. If operating leverage does not emerge quickly enough relative to ongoing R&D and partnering costs, net losses may persist and net margins may not improve toward the very high levels implied in the bullish narrative.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for VolitionRx is $3.0, which represents up to two standard deviations above the consensus price target of $2.2. This valuation is based on what can be assumed as the expectations of VolitionRx's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3.0, and the most bearish reporting a price target of just $1.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $218.9 million, earnings will come to $191.8 million, and it would be trading on a PE ratio of 3.0x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $0.27, the analyst price target of $3.0 is 91.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.