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Vermillion Proposes Reverse Stock-Split To Lift Stock, Avoid Nasdaq Delisting

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Vermillion is seeking a reverse stock-split in a bid to increase its share price and fend off the threat of being delisted from the Nasdaq exchange.
 
Late last week, the company formerly known as Ciphergen filed documents with the US Securities and Exchange Commission announcing a special meeting of shareholders to be held on Feb. 14 to vote on the move.
 
Under the conditions of the company’s proposal, if the split is approved by shareholders, they would receive one share of stock for every six to 10 shares they currently hold. The final ratio of the split would be determined by the company without further approval of shareholders. A possible split would take place on or before the company’s next annual shareholder’s meeting.
 
Shareholders of record as of Jan. 3 are eligible to vote. As of that date, the company had 63,801,971 outstanding shares of stock, or $49.8 million in market capitalization, and 36,143,197 issuable shares, the company said in its filing.
 
Reverse stock splits are typically done to buoy the price of a stock. Shareholders would hold fewer shares of a company’s stock though each share would carry a higher price. The total value of the shares held by a shareholder would be unchanged.
 
“The principal purpose of the reverse split is to increase the market price of the outstanding common stock above the minimum bid price requirement of $1 per share required by the Nasdaq” to continue being listed on the exchange, Vermillion said in its filing.
 
In September 2007, Nasdaq told Vermillion it was in danger of being delisted because its per-share price had fallen below $1 for at least 30 consecutive business days. Nasdaq gave the company until March 4 to regain compliance [See PM 09/13/07].
 
While a company can regain compliance if its bid price closes at or above the minimum $1 for 10 consecutive business days, that decision is at the discretion of Nasdaq. From Sept. 17, 2007 to Oct. 29, 2007, a period of 31 trading days, Vermillion’s stock closed daily at between $1 and $1.04. Since then, however, for a period stretching toward 50 trading days, its shares have fallen below the $1 mark.
 
Vermillion stock was trading at $0.70 per share early Thursday afternoon.
 
If the company’s stock is delisted it would likely trade over-the-counter. In its filing, Vermillion said that being bounced to the OTC could provide further financial hardship by making it more difficult to sell its stock and raise capital.
 
A possible split of Vermillion’s stock would apply to outstanding shares of its common stock; shares of common stock issuable upon the exercise of outstanding stock options; shares of common stock issuable upon the exercise of warrants to purchase common stock; shares of common stock issuable upon the conversion of the company’s 4.5 percent and 7 percent debt notes; and the maximum number of shares for each enrolled employee’s share purchase right under the employee’s share purchase plan.
 
During the past 20 months, the company has repeatedly had to deal with possible delisting actions. In May 2006, it received notice from Nasdaq that it had fallen below minimum market capitalization requirements and was in danger of being delisted [See PM 06/29/06].
 

“The principal purpose of the reverse split is to increase the market price of the outstanding common stock above the minimum bid price requirement of $1 per share required by the Nasdaq.”

In August 2007 the Nasdaq told Vermillion it could be tossed off the exchange for failing to meet a requirement that it have at least a $2.5 million in stockholders’ equity, $35 million market cap, or $500,000 of net income from continuing operations for the most recently completed fiscal year, or two of the three most recently completed fiscal years.
 
The following month Vermillion received notice from Nasdaq that it had met compliance with that requirement [See PM 09/20/07].
 
Delisting is just one of the problems the company has had to face recently. With the sale of its surface enhanced laser desorption ionization platform to Bio-Rad Laboratories in late 2006, Vermillion, aiming to become a specialty diagnostics firm, has had no product revenues. In filings with the SEC the company has warned that it faced dire and imminent financial troubles [See PM 05/17/07 and 04/12/07].].
 
Meanwhile, during the summer, the company agreed to pay $600,000 to settle a patent dispute and was later hit with a lawsuit alleging it is in breach of a licensing agreement with its former parent company [See PM 07/19/07].
 
During the fall, however, Vermillion said that the first of its diagnostic tests under development, for thrombotic thrombocytopenic purpura, was ready to launch [See PM 11/08/07].
 
The company is also conducting clinical trials for its ovarian cancer triage test and hopes to submit results to the US Food and Drug Administration for possible approval early this year. A third test in the pipeline, for peripheral arterial disease, is being co-developed with Quest Diagnostics. In November the company said the assay could be launched early this year as a laboratory-developed test targeted at primary-care physicians.
 
A message left to the company seeking comment was not returned.
 
In a statement, Vermillion said that its TTP test, co-developed with Ohio State University has been launched and “is being received favorably in the market.”
 
Its clinical trials of the ovarian cancer test continue and Vermillion expects to report top-line data from the trial later this quarter. The company remains on track to submit data to the FDA during the first half of 2008 for possible approval of the test.
 
Vermillion also said its partner on the PAD test, Quest Diagnostics, is readying to launch a laboratory-based test for the ailment sometime this quarter.

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