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Vermillion's 2011 Financials Highlight OVA1 Sales Growth, Reimbursement Struggles


(This story originally ran on March 27.)

By Adam Bonislawski

Vermillion this week reported fourth-quarter 2011 revenues of $868,000, up 152 percent from $345,000 a year ago.

The rise was driven primarily by increased sales of the company's OVA1 ovarian cancer test. Product revenues, comprising sales of the test, increased to $755,000 from $149,000 a year ago.

Fourth-quarter 2011 product revenues included $549,000 in variable royalty payments from the full year of OVA1 sales due to Vermillion through its licensing deal with Quest Diagnostics. Under this agreement, Vermillion receives an upfront fee of $50 for every OVA1 test performed plus a royalty payment of 33 percent of Quest's gross profit. This latter portion Quest pays to Vermillion once per year.

Testing volume in Q4 increased 40 percent year over year to 4,118 tests performed. License revenues slowed to $113,000 during the quarter, a 42 percent drop from $196,000 a year ago.

For full-year 2011, Vermillion saw total revenues rise 58 percent to $1.9 million from $1.2 million in 2010. Product revenues from OVA1 sales increased to $1.5 million from $308,000 a year ago with test volume rising in 2011 by 147 percent to 15,225 tests performed. Licensing revenues dropped 48 percent to $454,000 from $867,000 in 2010.

The numbers, which follow on preliminary Q4 and full-year 2011 results the company released last month (PM 2/24/2012), shed some light onto OVA1 reimbursement levels, which recently have been a source of concern for some Vermillion investors (PM 12/23/2011).

According to the figures released this week, Vermillion's $549,000 in royalty revenue came from 11,708 OVA1 tests reported by Quest as "resolved" – meaning that they include both reimbursed and unreimbursed tests for which the payment status is considered final.

Vermillion has not released Quest's gross profit per OVA1 test. However, in the past the company has said that OVA1 is reimbursed at around $600 per test, and former Vermillion CFO Sandra Gardiner has stated that given a spend rate of roughly $16 million per year, the company would need to sell around 65,000 tests annually to break even – putting Vermillion's revenue per test at around $250 (PM 1/6/2012). As per its agreement from Quest, $50 of that would come from the upfront fee with the remaining $200 coming from the 33 percent royalty payment.

At $200 per test, the 11,708 tests Quest reported as resolved would generate around $2.34 million in royalty revenues for Vermillion. The $549,000 in royalty revenues that the company in fact reported from these tests amounts to roughly 23 percent of this figure, and around $47 per test.

Vermillion CEO Gail Page acknowledged the company's reimbursement challenges in a statement accompanying the release of the Q4 and full-year 2011 results, noting that "improving payer coverage and reimbursement for OVA1 remains our key strategic initiative" in 2012.

"We are continuing to work closely with our partner, Quest Diagnostics, and our territory development managers to both engage with physician offices during the claims process and as well as better educate payers," she said. "We believe this two-pronged approach ultimately drives more favorable coverage decisions. We also recently launched a program to encourage local key opinion leaders to work with regional insurance providers and support coverage of OVA1."

Vermillion's R&D spending for the quarter increased 9 percent to $1.2 million from $1.1 million a year ago, while SG&A was cut by 23 percent to $2.7 million from $3.5 million.

Its net loss for the quarter was $3.1 million, or $.21 per share, compared to a net loss of $4.0 million, or $.38 per share, in Q4 2010.

For full-year 2011, its R&D costs spiked 42 percent to $5.4 million from $3.8 million, and SG&A spending increased 19 percent to $14.0 million from $11.8 million.

It posted a net loss of $17.8 million, or $1.25 per share, for 2011, compared to a net loss of $19.0 million, or $1.83 per share, in 2010.

The firm ended 2011 with $22.5 million in cash and cash equivalents.

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

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