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Vermillion Posts Q3 Revenue Decline, Acquires Assets of Correlogic

NEW YORK (GenomeWeb News) – Vermillion today announced that total revenues in the third quarter were down 23 percent year over year despite an 81 percent uptick in product revenues.

The company also said that it has purchased "substantially all" of the assets of Correlogic Systems, a company currently in Chapter 11 bankruptcy protection.

The company's revenues for the three months ended Sept. 30 came in at $320,000, compared to $413,000 a year ago. While product revenues grew to $206,000 from $114,000 a year ago — all from sales of its OVA1 ovarian cancer test — licensing revenues slid to $114,000 from $299,000, the result of Vermillion's past achievement of certain milestones under an agreement with Quest Diagnostics, its partner on the OVA1 test, the company said.

Analysts had expected revenues of $420,000 for Q3 2011.

During the quarter, about 4,108 OVA1 tests were performed, up 5 percent sequentially from the second quarter. By the end of the quarter, more than 3,200 doctors had ordered the test, a 23 percent increase from the second quarter, Vermillion CEO Gail Page said on a conference call after the release of the earnings results. She added that the figure represents about 9 percent of all obstetricians and gynecologists in the US.

For the fourth quarter, the company expects between 4,000 and 4,300 OVA1 tests to be performed.

Vermillion's net loss for the quarter increased to $4.7 million, or $.31 per share, from $2.7 million, or $.26 per share, a year ago, and beat Wall Street estimates of a loss per share of $.36.

The firm's R&D costs increased 27 percent to $1.4 million from $1.1 million a year ago, while SG&A costs rose 21 percent to $3.5 million from $2.9 million. The total increase in operating expenses, Vermillion said, was due to higher clinical trial and collaboration costs related to its ovarian cancer program and its Vasclir test for peripheral artery disease.

During the call Page said that the company plans to schedule a meeting with the US Food and Drug Administration to discuss the appropriate regulatory pathway for the test, though she did not provide a time table. The company also expects to present results from an intended-use study for the test at a "major cardiovascular meeting" during the first half of 2012, she added.

Operating expenses also rose as a result of an increase in legal fees associated with litigation with Molecular Analytical Systems, which had once been Vermillion's parent company. In 2007, the Los Altos, Calif.-based firm sued Vermillion, then called Ciphergen, for breach of a licensing agreement, stemming from Vermillion's sale of its SELDI technology to Bio-Rad Laboratories in 2006.

As GenomeWeb Daily News' sister publication ProteoMonitor reported then, Molecular Analytical Systems is alleging that it had to sign off on the terms of the Bio Rad deal, relating to how Bio-Rad would use the SELDI technology, which Molecular Analytical Systems had licensed to Vermillion.

Vermillion also announced today it has acquired essentially all the assets of Correlogic Systems, a protein-based diagnostic test firm that had been developing an ovarian cancer test called OvaCheck. The company filed for Chapter 11 bankruptcy protection in July 2010.

The $435,000 all-cash deal, which needs bankruptcy court approval, includes certain diagnostic samples, software, and intellectual property.

"We felt that they had a fairly attractive sample base," Page said about the deal, adding that Vermillion expects it to be additive to Vermillion's development of its OVA2 test.

"We also feel like there's a lot of what I call white noise out there by a lot of companies claiming to be in this space, and by taking this IP and software, we can harvest it and we can also … keep other people out of this space," she said.

Vermillion does not intend to commercialize the OvaCheck test, she added.

Vermillion ended the third quarter with $27.2 million in cash and cash equivalents.

In early morning trading, shares of Vermillion on the Nasdaq were down 15 percent at $1.67.

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