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Vermillion's Q1 Revenues Drop 28 Percent; CEO Page to Leave Firm

NEW YORK (GenomeWeb News) – Vermillion reported after the close of the market on Tuesday that a drop in its product revenues led to a 28-percent decrease year over year in total revenues for the first quarter.

The company also announced that President and CEO Gail Page will be leaving the company by September and Vermillion has begun the process to find her successor.

For the quarter ended March 31, revenues totaled $312,000, down from $431,000 a year ago. While licensing revenues were flat at $114,000, product revenues, comprised of sales of Vermillion's OVA1 ovarian cancer diagnostic test, fell 38 percent to $198,000 from $317,000 a year ago.

The year-ago product revenue figure includes a recognition of $158,000 in deferred revenues from Quest Diagnostics for OVA1 sales from the Quest Diagnostics "true-up report," Vermillion said.

The Q1 2012 revenues included only the $50 fixed fee portion of revenue per test from the OVA1 tests performed, and Vermillion said it plans to recognize revenue above and beyond the $50 fixed fee portion in the fourth quarter of 2012, after Quest completes its annual "true up" of OVA1 sales for the year.

In the first quarter, a total of 3,952 OVA1 tests were performed, a 28 percent increase year over year, but short of a range of between 4,000 and 4,300 tests that had been expected, Page said on a conference call following the release of Vermillion's earnings results.

"We are not satisfied and have implemented several initiatives that will lead to regaining our growth trajectory," she said, which included the elimination of four of the firm's 14 territory development managers in Q1.

"Our challenge during the quarter was to maintain the testing volume and increase our sales force productivity to position the company to regain its growth trajectory. We are happy to report that our sales force productivity … has regained its momentum, preserving the fairly flat sequential quarter," Page said.

Since OVA1 was launched in March 2010, about 12 percent of all gynecologists in the US have used the test, she noted. For the second quarter, Vermillion anticipates between 4,100 and 4,400 OVA1 tests to be performed.

The Austin, Texas-based molecular diagnostics firm lowered its R&D costs in the first quarter to $452,000 from $1.2 million in Q1 2011, while SG&A costs dropped 44 percent to $2.0 million from $3.6 million. Total operating costs fell by half to $2.4 million from $4.8 million, primarily due to lower clinical trial and collaboration costs, one-time reversals of accrued expenses resulting from litigation, and a restructuring program announced in January.

Vermillion had a net loss of $1.8 million, or $.12 per share, during the quarter, compared to a net loss of $4.3 million, or $.34 per share, a year ago.

The company exited the first quarter with $19.9 million in cash and cash equivalents.

Highlights for the first quarter included approval from an American Medical Association panel giving the OVA1 test a Category 1 CPT code. The new code becomes effective Jan. 1.

Vermillion also recently resolved litigation involving Bio-Rad Laboratories and Molecular Analytical Systems stemming from the sale of the SELDI technology to Bio-Rad in 2006. Vermillion paid Bio-Rad $700,000 from an escrow account, as part of a settlement agreement. In return Bio-Rad is returning about $1 million to Vermillion from the escrow account.

Its settlement with MAS includes a nominal one-time payment of $35,000.

Vermillion expanded payor coverage with the additions of two Blue Cross Blue Shield plans and two Wellmark plans during the first quarter, and in January, the US Department of Defense added OVA1 to its contract.

Page said on the conference call that that the company is in discussions with six new regional payors and has "stepped up our dialogue" with national payors.

"As we advance through 2012, we will remain focused on improving coverage and reimbursement, as they are key drivers for adoption," Page added in a statement. "We continue to seek opportunistic partnerships for our product pipeline, with the goal of accelerating development and bringing additional resources to the commercial effort."

Vermillion on Tuesday also announced it has begun a search to find a successor to Page as President and CEO. Page said she expects to leave the firm by September 3.

"Vermillion now enters a new commercial phase, one in which we can expand the market for OVA1, continue OVA2 and PAD development and seek additional opportunities for Vermillion to build a molecular diagnostics franchise both on its own and in partnership with other companies," Vermillion Chairman James Burns said in a statement. "A leadership change at this point is consistent with our plans to advance the company to its next phase of growth."

Page has resigned from Vermillion's board of directors as part of the leadership succession plan, the company said.

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