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Vermillion Q4 Revenues Spike 45 Percent

NEW YORK (GenomeWeb News) – Vermillion reported after the close of the market on Thursday that its fourth quarter revenues grew 45 percent year over year on an increase in revenues generated by its OVA1 ovarian cancer test.

For the three months ended Dec. 31, 2013, the Austin, Texas-based company recorded $1.6 million in total revenues, up from $1.1 million in the year-ago period. Product revenues, comprised of OVA1 sales, rose to $1.5 million from $1.0 million, while licensing revenues were flat at $113,000.

OVA1 revenues during both Q4 2013 and Q4 2012, Vermillion said, included an additional royalty component of revenue based on 33 percent of the Quest Diagnostics gross margin on the test. "Vermillion recognizes this portion of revenue when it is reported by Quest Diagnostics in a 'true-up' after the end of the calendar year," it said.

A "true up" is an accounting method to adjust a figure to its true value.

During the recently completed quarter, product revenue was made up of $211,000 from 4,218 OVA1 tests performed at a fixed price of $50 per test, and $1.3 million from the 33 percent royalty on 16,745 OVA1 tests reported by Quest "as resolved in 2013."

The resolved tests include reimbursed and unreimbursed tests for which Quest considers the payment status as final, Vermillion said.

The firm posted a net loss of $1.8 million, or $.07 per share, for the fourth quarter, compared to a loss of $1.4 million, or $.09 per share, a year ago. The company used 25.2 million shares to calculate is per-share loss in the recently completed quarter, compared to 15.1 million shares in the year-ago period.

In December, certain investors exercised warrants to purchase 12.1 million shares of Vermillion's common stock.

Vermillion upped its R&D spending in Q4 2013 to $1.0 million from $333,000 a year ago, and increased its SG&A spending 10 percent to $2.3 million 2.1 million.

For full-year 2013, the company posted revenues of $2.6, up 24 percent from $2.1 million in 2012. Product revenues rose to $2.1 million from $1.6 million, while licensing revenues were unchanged at $454,000.

Product revenue from OVA1 in 2013 included $851,000 from 17,004 OVA1 tests performed at a fixed $50 per test and $1.3 million from the 33 percent royalty reported by Quest.

In 2012, product revenue from OVA1 included $824,000 from 16,460 OVA1 tests performed at a fixed $50 per test, and $816,000 from the 33 percent royalty reported by Quest.

Last summer, Vermillion sent to Quest a notice of termination of a licensing agreement between the companies dating back to 2005. Vermillion had said that terminating the agreement would allow it to play a larger role in expanding the commercial reach of OVA1.

On the company's conference call following the release of its financial results on Thursday, Vermillion Chief Accounting Officer Eric Schoen noted that the company's field representatives drove up OVA1 sales more than 15 percent, based on volume, in those territories they cover. However, the increase was offset by a sales decline in territories where Vermillion has no field representatives, he added.

He also said that financial results for tests performed in 2013 do not include OVA1 tests that Quest has deemed unresolved — those for which Quest does not consider the payment status as final. Those results will be included in a future "true-up" report.

Vermillion President and CEO Thomas McLain also made note on the call of the final Clinical Lab Fee Schedule determination issued by the Centers for Medicare and Medicaid Services in late 2013. The schedule authorizes Medicare contractors to price OVA1 using a gap-fill method that considers the market value for the test, compared to a crosswalk method, which does not.

"This was a significant change from external expectations and it sets a precedent for CMS recognizing the value of biomarker-developed tests and linking how they are priced to the value they bring to clinical decision making and healthcare efficiencies," McLain said. "We will pursue a gap-fill price for OVA1 in 2014."

For full-year 2013 Vermillion had a net loss of $8.8 million, or $.42 per share, compared to a net loss of $7.1 million, or $.48 per share, a year ago.

The company's R&D costs in 2013 increased 18 percent year over year to $2.6 million from $2.2 million, while its SG&A costs were reduced 5 percent to $8.7 million from $9.2 million.

The company finished 2013 with $29.5 million in cash and cash equivalents.

"Our revenue growth in 2013 demonstrates the value of Vermillion's increased efforts in directly promoting the use of OVA1 in the US market," McLain said in a statement. "With the knowledge and experience gained during the year, we plan to significantly expand our sales efforts in 2014. While we will continue to partner with Quest Diagnostics to make OVA1 available in the US, we expect that our direct efforts will lead to a higher volume of tests and increased revenue per test."