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Vermillion Performs 3,920 OVA1 Tests in Q2, But Revenues Fall 9 Percent on Drop in Licensing Income

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By Adam Bonislawski

Vermillion reported this week that it sold an estimated 3,920 OVA1 ovarian cancer tests in the second quarter, a 27 percent spike over the 3,080 tests performed in the first quarter of this year and a 214 percent improvement over the 1,247 tests performed in Q2 2010, the first quarter the company recorded revenues from the diagnostic.

The 3,920 tests represented $191,000 in OVA1 sales, a 300-plus percent increase over the $45,000 in product revenues Vermillion recorded in the year-ago quarter. Overall Q2 revenues, however, dropped 9 percent year over year to $304,000 from $344,000 as the firm's license revenues fell to $113,000 from $299,000 a year ago.

License revenues are tied to Vermillion's achievements of certain milestones under its strategic alliance agreement with its marketing partner on the OVA1 test, Quest Diagnostics.

The quarter's OVA1 sales numbers exceeded Vermillion's guidance of between 3,200 and 3,500 tests and the company predicted that sales would continue to accelerate, offering a guidance of between 4,000 and 4,300 tests sold in Q3.

With the increase in sales came increased expenses, as the firm's SG&A costs jumped 35 percent to $4.2 million from $3.1 million. On a call discussing the company's results, chief financial officer Sandra Gardiner noted that this rise was due primarily to additions to the firm's sales force and increased enrollment of subjects in an intended-use study for its Vasclir protein biomarker diagnostic for peripheral artery disease.

She added that Vermillion expects "cash usage from operations during the third quarter will be approximately $4 million to $5 million." As Gardiner noted during the company's Q1 2011 conference call, at that spend rate it would have to sell between 65,000 to 80,000 tests per year to break even.

Vermillion also began selling OVA1 in India during the quarter, although these sales "were fairly immaterial to [the firm's] overall financials," said Ashish Kohli, vice president of corporate strategy. He noted that they accounted for less than five percent of tests performed during the quarter.

International expansion remains a key 2011 objective for Vermillion, said CEO Gail Page during the call, adding that the company's India strategy will initially focus on private payers in Delhi, which represents roughly 70 percent of that city's market.

The company this week also announced an agreement with Pronto Diagnostics to distribute OVA1 in Israel and the Palestinian territories. At around only six million women, this is a relatively small market, but, Page said, it "has favorable pricing relative to many countries."

Vermillion is also continuing to evaluate countries in Europe, Asia, and South America as possible targets for expansion, she added.

In the US, gaining support of the country's roughly 800 gynecological oncologists continues to be key to Vermillion's OVA1 sales effort. During the quarter the firm hired its first territory development specialist, who, Page said, will be tasked with gaining the support of this group of physicians. Internal numbers "reflect support" for OVA1 from approximately 30 percent of the country's gynecological oncologists at the end of the second quarter — an increase, she said, of five percent compared to Q1.

During the quarter, Vermillion also published two peer-reviewed papers on OVA1 in the journal Obstetrics & Gynecology (PM 05/13/2011). As Laura Havrilesky, a gynecological oncologist at Duke University, told ProteoMonitor prior to the publication of the papers, positive results in a peer-reviewed journal will be crucial to wider acceptance of the test by the gynecological community.

During the call the company also acknowledged the existence of potential competitors, in particular the Risk of Ovarian Malignancy Algorithm, which measures levels of the protein CA-125 – currently the standard biomarker for ovarian cancer detection – and human epididymal protein 4, or HE4 – to determine if patients with pelvic masses should be sent on to a gynecological oncologist.

OVA1 measures CA-125 as well as four other proteins —beta-2 microglobulin, transferrin, apolipoprotein A1, and transthyretin — but does not measure HE4.

In a paper published this month in Obstetrics & Gynecology, a Brown University-led research team found that the ROMA test had a sensitivity of 93.8 percent and a specificity of 74.9 percent in a study of 472 women. By comparison, OVA1 demonstrated sensitivity of 94 percent and specificity of 35 percent in the Obstetrics & Gynecology papers published on the test in May.

While these results suggests the two tests are roughly equal in terms of sensitivity, OVA1's lower specificity could be cause for concern as low specificity, Havrilesky suggested in May, could be one of the things making physicians reluctant to embrace the product.

"If you're a gynecologist and you're sending every single patient who comes in the door with a problem out to a specialist, that's perhaps not financially good and also perhaps not really in the best interest of all your patients," she said. "Looking at those [specificity] numbers, if you were sitting in your general OB-GYN practice, they might be a little concerning – 'A lot of my benign cases are going to go out the door because I'm doing this test on everybody.'"

In June 2010 Abbot received FDA approval for its blood-based Architect HE4 assay, which it co-developed with Fujirebio Diagnostics to measure levels of the protein. Quest also offers an FDA-cleared HE4 biomarker assay.

Vermillion is currently working on second-generation ovarian cancer test called OVA2 that it hopes will improve on OVA1's specificity, however the company didn't discuss this diagnostic during the call.

Beyond ovarian cancer, Vermillion is also continuing efforts to bring its Vasclir PAD diagnostic to market, and is currently engaged in an intended-use study being done in collaboration with researchers at the Colorado Prevention Center. According to Page, the study is in the final stages of completing its target enrollment and is "on track to yield top-line data during the third quarter."

This week the company said it had received notice of allowance for a patent covering the use of beta-2 microglobulin as a PAD biomarker. The patent is the company's fourth for PAD biomarkers.

Page also noted the company's patents on biomarkers covering indications in breast cancer and Alzheimer's disease, saying that Vermillion is "evaluating strategic options to decide on the best course of actions with these assets."

During Q2, the company's R&D spending increased 71 percent to $1.6 million from $938,000 a year ago.

The firm's net loss for the second quarter swelled to $5.7 million, or $.39 per share, from $698,000, or $.07 per share, a year ago.

Vermillion had $36.3 million in cash and cash equivalents at the end of the second quarter.


Have topics you'd like to see covered in ProteoMonitor? Contact the editor at abonislawski [at] genomeweb [.] com.

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