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Vermillion's OVA1 Sales Increase 8 Percent in Q1

NEW YORK (GenomeWeb News) – Vermillion reported after the close of market Wednesday that its first-quarter revenues rose 5 percent to $328,000 from $312,000 in Q1 2012, beating the consensus Wall Street estimate of $300,000.

Vermillion posted product sales of $214,000, up 8 percent from $198,000 year over year. Those sales are based on 4,274 OVA1 ovarian cancer tests performed in Q1 versus 3,952 tests performed in the year-ago period.

These revenue figures, the company noted, do not include the additional royalty component of revenue based on 33 percent of Quest Diagnostics' gross margin, which Vermillion receives once a year under the two parties' licensing agreement for OVA1.

License revenue in Q1 was flat at $114,000.

Vermillion's net loss for the first quarter was $2.6 million, or $0.17 per share, above Wall Street projections of $0.15 per share, compared to a net loss of $1.8 million, or $0.12 per share, in Q1 2012.

The company's R&D expenses for Q1 were $484,000, up 7 percent from $452,000 in Q1 2012. Its SG&A expenses were $2.4 million, up 20 percent from $2.0 million in the same period last year.

This increase in expenses was due primarily to "one-time items, including costs related to the delayed 2012 annual shareholder meeting held in March 2013, a proxy contest, and CEO transition," Vermillion said.

During a conference call following the release of the results, Vermillion CEO Thomas McLain laid out a shift in the company's OVA1 sales approach, announcing that Vermillion would be taking over from Quest Diagnostics as leader of OVA1 commercialization efforts.

"As a high-value diagnostic, retaining current users and expanding into new accounts requires a specialty sales skill set. Coverage is also a significant factor in driving increased use of the test," McLain said, adding that these considerations are "not core to a high-volume reference laboratory business model."

As part of this shift in strategy, Vermillion plans to migrate the OVA1 test to a widely available, automated clinical testing platform, McLain said, noting that such a move could improve access to the test.

"Currently, the test is run on two older platforms with limited availability," he said. "This project will expand access to the test to more facilities and hospitals across the US market. It is designed to also provide a scalable and reliable way to deliver OVA1 to non-US markets together with suitable commercialization partners."

Migration of the test to a new platform will require new validation studies and US Food and Drug Administration 510(k) clearance, he noted, adding that Vermillion hopes to complete this process by the end of 2014.

Vermillion Chief Accounting Officer Eric Schoen also noted on the call that the company was raising its guidance for 2013 operating expenses to between $12 million and $13 million. It had previously projected operating expenses for the year of between $9.5 million and $10 million.

The increased spending will use funds from a private placement Vermillion completed this week, Schoen said. Investors including Oracle Investment Management, Jack W. Schuler, and Matthew W. Strobeck purchased 8 million shares of Vermillion common stock for $13.2 million, with the company's net proceeds totaling $11.8 million after expenses. Vermillion also issued these investors 12.5 million warrants with a strike price of $1.46, from which the company could realize an additional $18.3 million.

As of March 31, 2013, the company had cash and cash equivalents totaling $5.8 million. Following the completion of its recent private placement, it had approximately $16.6 million in cash and equivalents.

In Thursday morning trade on the Nasdaq, shares of Vermillion declined 9 percent to $2.39.