Vermillion, Inc. has reported on its financial results for the first quarter ended March 31, 2013.
Q1 2013 Financial Results
Total revenue in the first quarter of 2013 was $328,000, compared to $312,000 in the same year-ago quarter. First quarter 2013 revenue was comprised of $214,000 in OVA1 product sales and $114,000 in license revenue, as compared to $198,000 of OVA1 product sales and $114,000 in license revenue in the year-ago quarter.
First quarter of 2013 product revenue was derived from 4,274 OVA1 tests performed at the fixed $50 per test as reported by the company's OVA1 marketing partner, Quest Diagnostics. This was an 8% increase from 3,952 OVA1 tests performed at the fixed $50 per test 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 first quarter of 2013 were $2.9 million as compared to $2.4 million in the same year-ago quarter. The increase is primarily due to one-time items, including costs related to the delayed 2012 annual shareholder meeting held in March 2013, a proxy contest and CEO transition, partially offset by lower sales and marketing costs. Net loss for the first quarter was $2.6 million or $(0.17) per share, as compared to $1.8 million or $(0.12) per share in the same year-ago quarter.
As of March 31, 2013, cash and equivalents totaled $5.8 million. Following the private placement completed on May 13, 2013, Vermillion had approximately $16.6 million in cash and equivalents.
The company plans to use the cash on hand and the expected proceeds from exercise of the warrants to accelerate its research, clinical and commercialization programs.
As a result, guidance for 2013 cash-based operating expenditures is being increased to a range of $12 million to $13 million versus the previous guidance of $9.5 million to $10 million.
The recently completed investment transaction was structured to provide funding for the company's 2013-2015 strategic plan. "This investment in Vermillion positions us to improve the quality of care for women with ovarian cancer," said Thomas McLain, Vermillion's president and CEO. "It provides both strategic and financial resources to build on our early success with OVA1 as the first FDA-cleared multi-biomarker blood test to aid in the diagnosis and treatment of ovarian cancer."
"Our experience in growing the OVA1 market with Quest Diagnostics has defined the key factors for building market awareness and expanding its use," continued McLain. "In 2013 and 2014 we will focus on positioning the patient outcome and cost advantages of the on-label usage of OVA1 versus off-label usage of CA-125 for the pre-surgical triage of suspicious ovarian masses."
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 and expanded insurance coverage.
These studies will also be essential to building understanding of the benefits of integrating OVA1 with current clinical practice and showing how OVA1 can greatly reduce the percentage of women who receive substandard care.
The funding will also support two important strategic initiatives:
• The company will migrate OVA1 to a clinical testing platform commonly available around the world. This will expand the market for the test to more laboratories and hospitals and enable licensing OVA1 in non-U.S. markets. It will require the successful execution of validation and clinical studies to support submission of a 510-K and FDA clearance. The company targets launch on this new platform by the end of 2014.
• The company will also use the funding to accelerate the development of a next generation ovarian cancer diagnostic. This test will utilize a combination of current and novel biomarkers in a new algorithm to increase specificity and positive predictive value, while significantly reducing false positives. The company expects to announce proof of concept results during the second quarter and targets the launch of a next generation test in 2015.