Vermillion, Inc. (NASDAQ: VRML), a leading molecular diagnostics company, reported financial and operational results for the first quarter ended March 31, 2012.
Q1 2012 Operational Highlights
- In Q1, the volume of OVA1®, the company's flagship diagnostic test designed to help differentiate benign from malignant ovarian masses, was generally in line with the forecast set by management for the quarter and demonstrated an increase of 28% to 3,952 from the same year-ago quarter.
- Received a Category 1 Current Procedural Terminology (CPT®) code approval from the American Medical Association (AMA) CPT Panel for OVA1. The company expects this major endorsement to help streamline claims processing and accelerate further coverage and adoption by private payers.
- Expanded payer coverage for OVA1 with the addition of Excellus BCBS (3.3 million lives), BCBS LA (1.1 million lives), and Wellmark South Dakota and Wellmark Iowa (2.1 million lives). Currently, there are 26 independent Blue Cross Blue Shield plans representing in excess of 42 million lives. Including Medicare and other regional plans, total coverage for OVA1 is estimated to be approximately 89 million lives.
- In January, the Department of Defense added OVA1 to their contract, giving more than 45 military medical centers in the U.S. and numerous military medical clinics and facilities around the world access to OVA1 for the first time. This provides coverage to approximately 1.4 million uniformed service members.
- Strengthened the company's patent portfolio with two notices of allowance for patents, including platelet biomarkers for cancer and methods for diagnosing ovarian cancer.
- Settled Bio-Rad litigation and returned $1.1 million in escrow funds to Vermillion in April 2012.
- Settled Molecular Analytical Systems (MAS) litigation for a nominal one-time payment of $35,000 versus the $5 million claim.
Q1 2012 Financial HighlightsTotal revenue in the first quarter of 2012 was $312,000, comprised of $198,000 in OVA1 sales and $114,000 in license fees from Quest Diagnostics. Product revenue from OVA1 sales in the first quarter of 2012 represented an increase of 25% compared to $159,000 in the same year-ago quarter. The prior year quarter also included recognition of a $158,000 of deferred revenue from Quest Diagnostics for 2010 OVA1 sales from the Quest Diagnostics 'true-up' report.
OVA1 revenue in the first quarter of 2012 included only the $50 fixed fee portion of revenue per test from the OVA1 tests performed. Consistent with 2011, the company plans to recognize the revenue above and beyond the $50 fixed fee portion in the fourth quarter of 2012 after Quest Diagnostics completes its annual 'true up' of OVA1 sales for 2012.
Total operating expenses decreased in the first quarter of 2012 to $2.4 million from $4.8 million in the same period a year ago. The first quarter of 2012 included $0.1 million in non-cash stock-based compensation, as compared to $1.3 million in the same year-ago quarter. The remainder of the decrease was due primarily to the company's restructuring program announced in January 2012 as well as one-time reversals of accrued expenses upon settlement of the MAS and Bio-Rad litigation.
Net loss for the first quarter was $1.8 million or $(0.12) per share, as compared to $4.3 million or $(0.34) per share in the same year-ago quarter. The first quarter 2012 net loss included a $0.4 million gain for a payment received on litigation settlement.
As of March 31, 2012, the company's cash and cash equivalents totaled $19.9 million. The company used $2.6 million in cash from operations during the first quarter, and expects $1.5-$2.5 million cash utilization during the second quarter of 2012 including the receipt of the Bio-Rad escrow account funds.
Management Commentary"During the quarter, we put a key cornerstone in place for the commercialization of OVA1 with the new CPT code approval," said Gail S. Page, Vermillion's president and chief executive officer. "We look forward to benefiting from our new code when it becomes effective the first of next year. This significant milestone will help streamline claims processing and accelerate further coverage and adoption by private payers. Since our CPT approval was supported by several peer-reviewed publications and positive coverage decisions, including Medicare, it also represents a valuable endorsement of OVA1 as an important triage test for ovarian cancer.
"This important CPT milestone coincided with the expanded payer coverage we achieved during the quarter, including the U.S. Department of Defense, which is helping our sales effort.
"We have been able to strengthen our financial position with the successful resolution of the MAS and Bio-Rad litigation. These are in addition to the earlier resolution of the gain contingency discussed on our Q4 call, which was settled for $1 million and will add approximately $700,000 to the bottom line. Regarding Bio-Rad, in addition to removing more than $1 million of accrued liabilities from our books, we were able to add approximately $1.1 million in non-dilutive cash to our balance sheet with the release of the Bio-Rad escrow account in April. We recognized $0.4 million from the Bio-Rad resolution in the first quarter and the remainder will be recognized in our second quarter. The positive outcome of the MAS litigation also relieved the company of a potential $5 million claim.
"Our goals for the quarter were to resolve these outstanding claims in order to remove the potential obligations and uncertainty. We are very pleased with the closure that each brings and the resulting non-dilutive cash added to our balance sheet. It was vital that the company resolve these corporate issues satisfactorily as we continue to pursue our operational goals around the commercialization of OVA1 and the development of our pipeline.
"As we advance through 2012, we will remain focused on improving coverage and reimbursement, as they are key drivers for adoption. We continue to seek opportunistic partnerships for our product pipeline, with the goal of accelerating development and bringing additional resources to the commercial effort. We expect all of our efforts to result in an increase in the number of OVA1 tests performed, and for this to range between 4,100 and 4,400 in the second quarter of 2012."