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With a $290M Deficit, Vermillion May Need to Explore Tests Beyond OVA1, Evaluating Funding Options

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This article has been updated to include comments from Vermillion that the company is evaluating options for additional sources of funding.

Originally published May 25.

Vermillion just launched its OVA1 ovarian tumor triage test in March, but it may need to launch additional tests if it is to climb out of the red.

According to quarterly results filed with the US Securities and Exchange Commission on May 24, Vermillion said it had accumulated a deficit of $291 million from its inception in 1993 through March 31, 2010.

The company, which emerged from bankruptcy in January, reported that its net loss for the quarter quadrupled to $11.6 million from $2.8 million in the comparable period of 2009.

"To become profitable, the company may need to complete development of additional key diagnostic tests, obtain the US Food and Drug Administration approval and successfully commercialize those products in addition to the OVA1 Test," Vermillion stated in its filing.

Although the 10-Q notes that the company may need to raise additional funding, Vermillion officials maintained that the company is currently only evaluating options to garner additional funds and did not elaborate on the company's product-development plans.

In January, the company received about $43.1 million as part of a private placement, and it held cash and cash equivalents of $37 million as of March 31.

In September, the FDA cleared OVA1, a test that helps physicians determine ahead of surgery whether a woman's ovarian mass is likely to be malignant. The test is being marketed through Quest Diagnostics.

OVA1, which analyzes five protein markers, including transthyretin, apolipoprotein A-1, beta2-microglobulin, transferring, and cancer antigen 125, is currently the company's main source of revenue. On March 12, the company announced that the Centers for Medicare & Medicaid services would cover OVA1 under Medicare.

For the three-month period ended March 31, the company reported total revenues of $73,000, up from no reported revenues in the year-ago period.

In addition to OVA1, the company has developed and licensed to the Ohio State University Research Foundation a mass spectrometry test to help doctors predict the risk of recurrence of a blood disorder called thrombotic thrombocytopenic purpura.

The company is also developing with Stanford University researchers a blood test to gauge patients' risk of developing peripheral artery disease.

This test, evaluated in four studies involving 1,000 patients, evaluates multiple biomarkers linked to PAD and gives an index score. Patients with high index scores have been shown to be seven times more likely to have PAD than those with low index scores.

Five years ago, under a strategic alliance agreement between the two firms, Quest provided Vermillion with a $10 million secured line of credit.

Under the terms of the agreement, "portions of the borrowed principal amounts may be forgiven upon the company’s achievement of certain milestones relating to the development, regulatory approval and commercialization of certain diagnostic tests," Vermillion said in its SEC filing.

In order for Quest to forgive the loan amount, Vermillion must commercialize a licensed lab test with a maximum of three applications (which would forgive between $1 million and $3 million); gain early FDA clearance or commercialization of the OVA1 test kit (which would forgive $3 million); and gain FDA clearance for up to two subsequent test kits to coincide with commercialization (which would forgive between $2 million and $4 million each).

Upon receiving FDA clearance for OVA1 in September, Vermillion's loan from Quest had already been reduced by $3 million and the company is in discussions with Quest for an additional $1 million reduction associated with FDA approval of OVA1.

As reported by Pharmacogenomics Reporter's sister publication ProteoMonitor, the launch of the OVA1 test is expected to help lift the company out of its financial woes and transform it from a proteomics technology firm to a diagnostics company (PM 3/12/10).

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