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Vermillion to Plead its Case Before Nasdaq Panel to Fend Off Delisting

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It was one step forward, two steps back for Vermillion.
 
This past week, while announcing it had overcome one financial hurdle that could have delisted its stock from the Nasdaq exchange, the company said that it faced delisting action on another cause, and its auditors had expressed once again continuing concern about its ability to survive.
 
The good news for Vermillion was that it had been told by Nasdaq on March 18 that it had managed to raise its share price above $1 for at least 10 consecutive days, meeting that requirement for continued listing.
 
However, seven days later the exchange informed the company that because its market capitalization was below the minimum $35 million required, Vermillion could face delisting on that ground. As of April 3, Vermillion’s market cap stood at $23.8 million. In addition, in its annual report, independent auditors PriceWaterhouseCoopers gave the company a “going concern” qualification.
 
Vermillion said it plans to request a hearing with the Nasdaq Listing Qualifications Panel, during which it will answer questions about its business and explain why its stock should not be delisted. If unmoved by Vermillion’s arguments, the panel can delist the company. Vermillion said it anticipates a hearing to be scheduled within 45 days. In the meantime, its stock will continue trading on the Nasdaq.
 
Vermillion had received a letter from the exchange in February warning that it was not in compliance with exchange rules requiring a listed company to have at least $2.5 million in stock equity; a market cap of at least $35 million; or at least $500,000 in net income from continuing operations for the most recently complete fiscal year, or two of the three most recently completed fiscal years.
 
The company was given until March 24 to regain compliance by getting its market cap up to $35 million for 10 consecutive business days. If it didn’t, Nasdaq could begin delisting procedures [see PM 02/28/08].
 

Vermillion “has suffered recurring losses and negative cash flows from operations and has a net capital deficiency that raises substantial doubts about its ability to continue as a going concern.”

Also, in Vermillion’s annual report filed with the US Securities and Exchange Commission this week, PriceWaterhouseCoopers once again expressed concern about its client’s financial viability, saying it “has suffered recurring losses and negative cash flows from operations and has a net capital deficiency that raises substantial doubts about its ability to continue as a going concern.”
 
Vermillion in the Red
 
Vermillion’s troubles are far from new. For its entire history, the company, formerly called Ciphergen Biosystems, has never posted a profit and as of Dec. 31, 2007, losses totaled more than $239 million, according to its annual report. Since selling off its Surface Enhanced Laser Desorption/Ionization platform to Bio-Rad Laboratories in late 2006, leaving Vermillion with no product revenue stream, its finances have been especially fragile, and in documents filed with the SEC, the company has issued sharp warnings about its future.
 
Last May, the company said that in order to stay afloat it would need to raise additional funds as “our current cash balances may not be sufficient to fund planned expenditures.” [See PM 05/17/07]
 
While Vermillion was able to raise $20.6 million late last summer through a private placement of common stock, it is still treading water financially. During the quarter ended Dec. 31, 2007, the most recent quarter for which information is available, the company posted a loss of $3.3 million on revenues of $23,000.
 
In March, the company laid off nine employees in a cost-cutting move, bringing the number of staffers to 19 as of March 31. A year ago, the company had about 40 employees.
 
Vermillion’s future now rests on its diagnostic-development pipeline. In November, it licensed its assay for thrombotic thrombocytopenic purpura to Ohio State University, which developed it into a test that is now being sold for clinical use. It also collaborating with Stanford University to develop and commercialize a diagnostic test for peripheral artery disease.
 
Vermillion also has said it expects to file with the US Food and Drug Administration for approval of its ovarian cancer triage test during the next few months.   
 
Last week, the company also said that the Nasdaq has told it that it had regained compliance with an exchange listing rule that a company’s shares must be at least $1 in order to remain being listed.
 
In September, Vermillion had received a letter from Nasdaq saying its bid price had fallen below the $1 mark for 30 consecutive business days. Nasdaq gave Vermillion until March 4 to raise its bid price to at least $1 for a minimum of 10 consecutive business days, or else Nasdaq could begin delisting action.
 
To raise its share price, Vermillion initiated and successfully completed a 1-for-10 reverse stock split last month [see PM 01/10/08 and 03/06/08].
 

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