This story originally ran on May 16.
Vermillion this week reported first-quarter 2012 revenues of $312,000, down 28 percent from $431,000 a year ago.
It also announced that president and CEO Gail Page will be leaving the company by September and that its board has begun searching for her replacement.
The Q1 decline was due to a drop in revenues from the company's OVA1 ovarian cancer diagnostic, which came in at $198,000, down from $317,000 a year ago. Licensing revenues were flat year over year at $114,000.
The drop in OVA1 revenue was not reflective of sales volume, but rather the timing of deferred "true-up" payments from Quest Diagnostics for sales of the test. Vermillion posted 3,952 OVA1 sales for the quarter, a 28 percent increase year over year.
Under its licensing agreement with Quest, 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. For 2010, this revenue was reflected in Q1 2011. For 2011, it was included as part of the company's Q4 2011 revenues.
The firm posted R&D costs in the first quarter of $452,000, down from $1.2 million in Q1 2011. SG&A costs dropped 44 percent to $2 million from $3.6 million. Total operating costs fell by half to $2.4 million from $4.8 million, primarily due to lower clinical trial and collaboration costs, one-time reversals of accrued expenses resulting from litigation, and a restructuring program announced in January (PM 1/6/2012).
Vermillion had a net loss of $1.8 million, or $.12 per share, during the quarter, compared to a net loss of $4.3 million, or $.34 per share, a year ago.
It ended the quarter with $19.9 million in cash and cash equivalents.
Despite the 28 percent increase in test volume, Vermillion fell short of its guidance of 4,000 to 4,300 tests for the quarter. On a conference call following the release of the Q1 results, Page noted that the company has "implemented several initiatives that will lead to regaining our growth trajectory." These included elimination of four of the firm's 14 territory development managers in Q1.
Also part of Vermillion's efforts to expand use of OVA1 is a second multi-center validation study of the test the company has launched in collaboration with University of California, Irvine, gynecologic oncologist Robert Bristow.
"Enrollment and sample testing [for the study] have now been completed for the cohort of about 500 patients, and pathology reports are undergoing final review," Page said, adding that "the database will soon be locked and data analysis can begin."
The company also noted progress in development efforts for its peripheral artery disease diagnostic Vasclir and its second-generation ovarian cancer test OVA2.
The company will be presenting a poster on Vasclir at the 2012 Society for Vascular Medicine annual meeting in June and has submitted a manuscript on the test for publication in a peer-reviewed journal, Page said.
Regarding OVA2, she said that "testing of the biomarkers [for the test] progresses with our partners at Johns Hopkins, assessing design options to address incremental product opportunities within our ovarian cancer franchise."
With the expiration of Vermillion's licensing deal with Quest coming in October, the task of developing and commercializing tests beyond OVA1 looms as a key issue for the company.
Under its deal with Quest, Vermillion has received a $10 million line of credit, forgivable upon the achievement of various milestones related to the development, regulatory approval, and commercialization of diagnostic tests. The company has received forgiveness of $3 million from OVA1, leaving its current outstanding balance at $7 million, which is due upon expiration of the licensing agreement on Oct. 7.
The agreement, which was originally signed in 2005, has been extended in the past, most recently in October 2009. Page said, however, that it is currently unclear whether Quest will extend the agreement again.
"We'll be working with Quest on the progress the alliance has made and looking at what kind of opportunities there may be, but we just don't have any kind of visibility on [the potential of an extension] at the moment," she said. "It is what it is, and we will be working with Quest to see if there are things that we can do or not do."
In its quarterly report filed this week with the US Securities & Exchange Commission, Vermillion noted that it is "currently in discussions with Quest Diagnostics regarding the achievement of an additional $1,000,000 forgiveness milestone related to OVA1 under the terms of the Strategic Alliance Agreement."
However, "Quest Diagnostics has not acknowledged that such a milestone has been achieved," it added.
The company also noted in the filing that it "will likely be responsible for the repayment of the outstanding principal amount and any unpaid interest on the secured line of credit" on Oct. 7.
Assuming Vermillion's CEO succession process goes as planned, Page will have stepped down by that date. According to James Burns, chairman of the company's board, the firm aims to recruit "a growth-oriented CEO" and focus "primarily on commercialization and increasing adoption [of OVA1] and pushing the top line."
During her tenure Page led Vermillion through Chapter 11 bankruptcy and the commercial release of OVA1, but she and the company's board have come under criticism from some investors due to sluggish sales of the test since its launch.
Last April, James Besser, a managing member of Manchester Management – a Boston-based hedge fund that at the time held a nearly 10 percent stake in the company – called in a series of letters for alterations to Vermillion's bylaws that would make it easier for shareholders to make changes to the company's board (PM 4/29/2011).
In February, three Vermillion shareholders – George Bessenyei, Robert Goggin, and Gregory Novak – filed notice with the SEC that they were seeking to replace as board members Page and John Hamilton, a former executive at Depomed (PM 3/2/2012). According to their filing, the trio planned to nominate Novak and Goggin to the board at Vermillion's upcoming annual shareholder meeting.
Reacting to news of Page's impending resignation, Bessenyei told ProteoMonitor this week that he considered "it as a major success in our proxy contest. It's a step to the right direction."
He didn't comment on how Page's departure might affect his and his partners' nomination plans, noting only that they were "looking forward to having a constructive dialog with the remaining board."
Page this week resigned from Vermillion's board, effective immediately, and the company amended its bylaws to eliminate the vacancy left by her resignation, reducing its number of directors to six from the previous seven. This leaves one instead of two seats up for election at its upcoming annual shareholder meeting. The company has nominated Paul Sohmer for election to this seat, replacing Hamilton, who was not nominated for re-election.