Vermillion Reports Second Quarter 2013 Results

                Vermillion Reports Second Quarter 2013 Results

PR Newswire

AUSTIN, Texas, Aug. 14, 2013

AUSTIN, Texas, Aug. 14, 2013 /PRNewswire/ --Vermillion, Inc. (NASDAQ: VRML),
a multivariate diagnostics company focused on gynecologic cancers and women's
health, reported on its financial results for the second quarter ended June
30, 2013.

"In Q2, we continued to focus on building the solid foundation needed to
expand OVA1® commercialization and improve the care for women with
gynecological cancers," said Thomas McLain, Vermillion's President and CEO.
"Test volumes of OVA1 were about the same compared to the second quarter of
last year as we made changes to strengthen our field sales force during the
quarter.

"We also made progress in addressing the inherent challenges in establishing a
novel, high-value diagnostic test as a new standard of care. The positive
statement issued in May by the Society of Gynecologic Oncology (SGO)
represents a major step forward for OVA1. We also advanced our efforts to
provide peer reviewed clinical and economic data to support the increased use
of our test."

Q2 2013 Financial Results
Total revenue in the second quarter of 2013 was $323,000 compared to $321,000
in the same year-ago quarter. Second quarter 2013 revenue was comprised of
$210,000 in OVA1 product sales and $113,000 in license revenue.

Second quarter of 2013 product revenue was derived from 4,184 OVA1 tests
performed at the fixed $50 per test as reported by the company's OVA1
marketing partner, Quest Diagnostics. This was consistent with the 4,150 OVA1
tests performed in the year-ago quarter.

The OVA1 product revenue in both periods does not include the additional
royalty component of revenue based on 33% of Quest Diagnostics gross margin.
Vermillion recognizes this portion of revenue when it is reported by Quest
Diagnostics in an annual 'true-up' after the end of the calendar year. The
true-up is based on reimbursed and unreimbursed tests for which Quest
Diagnostics considers the payment status as final. For the full year of 2012,
the true-up provided $816,000 in revenue to Vermillion or an additional $60
per test.

Total operating expenses in the second quarter of 2013 were $2.4 million as
compared to $4.0 million in the same year-ago quarter. The decrease is
primarily due to one-time items in 2012, including FDA post-marketing study
start-up costs, proxy contest and related litigation legal expenses, and CEO
severance, not being repeated in 2013. For the six months ended June 30, 2013,
total operating expenses were $5.3 million as compared to $6.4 million in the
same year-ago period.

Net loss for the second quarter was $2.1 million or $(0.11) per share, as
compared to a net loss of $2.0 million or $(0.13) per share in the same
year-ago quarter. The prior year included a one-time gain of $1.8 million on
the sale of an instruments business. For the six months ended June 30, 2013,
net loss was $4.7 million or $(0.27) per share as compared to a net loss of
$3.8 million or $(0.25) per share in the same year-ago period. As of June 30,
2013, the company had 23.5 million common shares outstanding.

As of June 30, 2013, cash and equivalents totaled $16.4 million. The company
utilized $1.7 million in cash for operations in the second quarter of 2013,
and expects $1.8 million to $2.3 million in cash used for operations during
the third quarter of 2013.

Q2 2013 Key Developments

  oAdvanced efforts to improve the standard of care for women with ovarian
    cancer. The Society of Gynecologic Oncology (SGO) issued a second position
    statement focused on OVA1, the only marketed five biomarker panel for
    women with ovarian cancer. The statement references Vermillion's two peer
    reviewed studies that provide clinical validation in the context of the
    American Congress of Obstetricians and Gynecologist's opinion titled: "The
    Role of the Obstetrician-Gynecologist in the Early Detection of Epithelial
    Ovarian Cancer." The SGO statement is available here.
  oTook steps to expand the market for OVA1. Vermillion submitted a notice of
    default to Quest Diagnostics, the company's exclusive commercialization
    partner for OVA1, on May 23, 2013. The notice cited a number of material
    violations, breaches and failures to perform by Quest Diagnostics. The
    Strategic Alliance Agreement states that if a party fails to cure material
    defaults within 90 days of the notice, the other party has the right to
    terminate the agreement.
  oImplemented a multi-front approach to address BlueCross BlueShield (BCBS)
    Technical Evaluation Center's (TEC) April 2013 published statement
    classifying OVA1 as experimental/investigational. Their opinion was based
    on data published through 2012 and did not consider several important 2013
    developments including publication of results from a second large
    confirmatory clinical trial of OVA1 and the SGO statement. Although the
    action by TEC has resulted in 10 BCBS plans reversing their positive
    coverage decisions for OVA1, reducing total covered lives to approximately
    80.7 million, it did not affect test sales in covered territories for the
    quarter.
  oInitiated development of outcome and economic clinical study data to
    support the use and coverage of OVA1. The company signed a cooperative
    research and development agreement (CRADA) with the U.S. Army Medical
    Research and Materiel Command (USAMRMC) to assess health and economic
    benefits of OVA1. Vermillion has compiled significant data supporting the
    clinical utility of OVA1 and is focused on studies supporting the outcome
    and economic benefits from the appropriate use of the test in 2013 and
    2014. This new agreement follows a January 2012 decision by the U.S.
    Department of Defense to add OVA1 to its testing portfolio.
  oReleased new clinical data focused on the benefits of OVA1 versus other
    ovarian cancer diagnostic tests. Two new follow-on studies on the
    potential use of OVA1 were presented at Western Association of Gynecologic
    Oncologist's Annual Meeting. The studies of clinical results for more than
    1,000 patientspredicts that referral patterns and medical practice
    economics will not be adversely impacted by incorporating OVA1 into the
    care for patients with an adnexal mass requiring surgery. The second study
    predicts significant improvement in referring patients with early-stage
    ovarian cancers to specialists for their initial surgery and treatment.
  oAdvanced the development of a next generation diagnostic for identifying
    ovarian cancer. Proof-of-concept data was presented by Vermillion's
    collaborators from the Johns Hopkins University Center for Biomarker
    Discovery and Translation at the American Society of Clinical Oncology
    (ASCO) 2013 Annual Meeting. The presentation demonstrated the potential of
    a new panel of patented biomarkers to significantly improve specificity
    over the existing OVA1 algorithm while maintaining high sensitivity in
    pre-surgical assessment of adnexal masses for risk of malignancy. An
    abstract of the research titled "A Panel of Biomarkers to Improve
    Specificity in Presurgical Assessment of Adnexal Masses for Risk of
    Ovarian Malignancy," is available on ASCO's website here (abstract number:
    5573).
  oAssured access to funding to execute Vermillion's strategic and commercial
    plan in 2013 and 2014. The company completed an $11.8 million (net)
    private placement in which shares of the company's common stock were
    purchased by a number of strategic investors. Proceeds from the
    transaction will support the generation of additional clinical and
    economic data aligned with the company's efforts to secure treatment
    guideline support, expand the commercial opportunity into new markets, and
    advance one or more next-generation ovarian cancer diagnostic tests.

"Vermillion, like all multiplex diagnostic test providers, faces significant
challenges from the changing regulatory and reimbursement environments in the
U.S.," said McLain. "OVA1 has already been differentiated by its FDA clearance
and the clinical evidence being presented and published in peer reviewed
journals in 2013. This data substantiates the clinical utility of our test and
will support our efforts to change clinical practice standards and improve
outcomes for women with ovarian cancer.

"The impact of the 2013 TEC decision on covered lives and the lack of a
standard policy and approach for CMS pricing for novel diagnostic tests has
created market uncertainty. Our CRADA with USAMRMC is the first in a series of
outcome and economic studies that will demonstrate the value of OVA1 and
establish its benefit in improving health system efficiency. While the path
ahead will be difficult, these collaborations will allow us to provide quality
data from peer reviewed studies that detail OVA1's value for patients,
providers and payers."

Conference Call and Webcast
Vermillion will hold a conference call to discuss its second quarter results
later today, Wednesday, August 14, 2013 at 4:30 p.m. Eastern time.
Vermillion's President and CEO Thomas McLain will host the call, followed by a
question and answer period.

Date: Wednesday, August 14, 2013
Time: 4:30 p.m. Eastern time (3:30 p.m. Central time)
Dial-in number: 1-800-732-5617
International: 1-212-231-2906
Conference ID: 21668439
Webcast: http://www.media-server.com/m/p/v7m7pi5y

The conference call will be webcast live and available for replay via the
investor section of the company's website at www.vermillion.com.

Please call the conference telephone number 5-10 minutes prior to the start
time. An operator will register your name and organization. If you have any
difficulty connecting with the conference call, please contact Liolios Group
at 1-949-574-3860.

A replay of the call will be available approximately two hours after the call
through August 28, 2013.

Toll-free replay number: 1-800-633-8284
International replay number: 1-402-977-9140
Replay ID: 21668439

About Vermillion
Vermillion, Inc. (NASDAQ: VRML) is dedicated to the discovery, development and
commercialization of novel high-value diagnostic tests that help physicians
diagnose, treat and improve outcomes for patients. Vermillion, along with its
prestigious scientific collaborators, has diagnostic programs in oncology and
women's health.

The company's lead diagnostic, OVA1®, is a blood test for pre-surgical
assessment of tumors for malignancy, using a unique multi-biomarker approach.
In a published clinical trial, OVA1 achieved 99% sensitivity in detecting
epithelial ovarian cancers (EOC). This included 96% sensitivity for stage I
EOC, the earliest and curable EOC stage, compared with 57% for the
conventional biomarker CA125. In addition, OVA1 found 82% of malignancies
missed by non-specialist pre-surgical assessment, and it increased detection
of malignancy over ACOG guidelines from 77% to 94%. As the first
protein-based, In Vitro Diagnostic Multivariate Index Assay (IVDMIA) cleared
by the FDA, OVA1 also represents a new class of software-based diagnostics.
Additional information about these published clinical trials is available on
Vermillion's website at www.vermillion.com.

Forward-Looking Statement
Certain matters discussed in this press release contain forward-looking
statements that involve significant risks and uncertainties, including
statements regarding Vermillion's plans, objectives, expectations and
intentions. These forward-looking statements are based on Vermillion's current
expectations. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. In order to comply with the
terms of the safe harbor, Vermillion notes that a variety of factors could
cause actual results and experience to differ materially from the anticipated
results or other expectations expressed in such forward-looking statements.
Factors that could cause actual results to materially differ include but are
not limited to: (1) uncertainty as to Vermillion's ability to protect and
promote its proprietary technology; (2) Vermillion's lack of a lengthy track
record successfully developing and commercializing diagnostic products; (3)
uncertainty as to whether Vermillion will be able to obtain any required
regulatory approval of its future diagnostic products; (4) uncertainty of the
size of market for its existing diagnostic tests or future diagnostic
products, including the risk that its products will not be competitive with
products offered by other companies, or that users will not be entitled to
receive adequate reimbursement for its products from third party payers such
as private insurance companies and government insurance plans; (5) uncertainty
that Vermillion has sufficient cash resources to fully commercialize its tests
and continue as a going concern; (6) uncertainty whether the trading in
Vermillion's stock will become significantly less liquid; and (7) other
factors that might be described from time to time in Vermillion's filings with
the Securities and Exchange Commission. All information in this press release
is as of the date of this report, and Vermillion expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
such statements to reflect any change in Vermillion's expectations or any
change in events, conditions or circumstances on which any such statement is
based, unless required by law.

This release should be read in conjunction with the consolidated financial
statements and notes thereto included in our most recent reports on Form 10-K
and Form 10-Q. Copies are available through the SEC's Electronic Data
Gathering Analysis and Retrieval system (EDGAR) at www.sec.gov.

Investor Relations Contact:
Liolios Group, Inc.
Ron Both
Tel 1-949-574-3860
vrml@liolios.com



Vermillion, Inc.

Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Par Value Amounts)

(Unaudited)
                                                     June 30,     December 31,
                                                     2013         2012
Assets
Current assets:
Cash and cash equivalents                           $ 16,392     $  8,007
Accounts receivable                                   156           137
Prepaid expenses and other current assets             240           348
Total current assets                                  16,788        8,492
Property and equipment, net                           103           142
Total assets                                         $ 16,891     $  8,634
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                    $ 656        $  525
Accrued liabilities                                   1,129         1,074
Short-term debt                                        1,106         1,106
Deferred revenue                                       958           492
Total current liabilities                             3,849         3,197
Deferred revenue                                       543           770
Total liabilities                                     4,392         3,967
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, none issued and outstanding at June 30,    —             —
2013 and December31, 2012, respectively
Common stock, $0.001 par value, 150,000,000 shares
authorized at June 30, 2013 and December31, 2012;
23,486,261 and 15,200,079 shares issued and            23            15
outstanding at June 30, 2013 and December 31, 2012,
respectively
Additional paid-in capital                            340,609       328,097
Accumulated deficit                                   (328,133)     (323,445)
Total stockholders' equity                             12,499        4,667
Total liabilities and stockholders' equity           $ 16,891     $  8,634



Vermillion, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Amounts in Thousands, Except Share and Per Share Amounts)

(Unaudited)
                      Three Months Ended June 30,  Six Months Ended June 30,
                      2013            2012          2013          2012
Revenue:
Product               $  210          $ 208         $ 424         $ 406
License                  113            113           227           227
Total revenue            323            321           651           633
Cost of revenue:
Product                 34             28            71            66
Total cost of revenue    34             28            71            66
Gross profit             289            293           580           567
Operating expenses:
Research and             554            1,002         1,038         1,454
development^(1)
Sales and                920            1,122         1,992         2,640
marketing^(2)
General and              934            1,840         2,271         2,308
administrative^(3)
Total operating          2,408          3,964         5,301         6,402
expenses
Loss from operations    (2,119)        (3,671)       (4,721)       (5,835)
Interest income         6              8             8             16
Interest expense        —              (66)          —             (131)
Gain on sale of          —              1,780         —             1,780
instrument business
Gain on litigation       —              —             —             379
settlement, net
Reorganization items     —              —             —             88
Other income             (4)            (25)          25            (47)
(expense), net
Loss before income       (2,117)        (1,974)       (4,688)       (3,750)
taxes
Income tax benefit       —              —             —             —
(expense)
Net loss             $  (2,117)      $ (1,974)     $ (4,688)     $ (3,750)
Net loss per share -  $  (0.11)       $ (0.13)      $ (0.27)      $ (0.25)
basic and diluted
Weighted average
common shares used to
compute                  19,637,161     14,957,224    17,431,641    14,930,339
basic and diluted net
loss per common
share
Net loss                (2,117)        (1,974)       (4,688)       (3,750)
Foreign currency
translation              —              1             —             (1)
adjustment
Comprehensive Loss    $  (2,117)      $ (1,973)     $ (4,688)     $ (3,751)
Non-cash stock-based
compensation expense
included
in operating
expenses:
(1) Research and     $  12           $ 40          $ 32          $ 74
development
(2) Sales and           32             57            86            93
marketing
(3) General and         14             314           121           384
administrative

SOURCE Vermillion, Inc.

Website: http://www.vermillion.com
 
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