Restructuring Play in Diagnostics at a VC Valuation

Vermilion(VRML) technology utilizes a panel of biomarkers integrated with multivariate analysis software to develop disease specific assays. The R&D effort leverages collaborations with institutions such as Stanford, John Hopkins and MD Anderson for discovery and validation of biomarkers.

Vermillion’s OVA 1 Test for ovarian cancer was cleared by FDA in March 2010 for the evaluation of ovarian adnexal mass prior to planned surgery. Sensitivity for detection of ovarian cancer was reported at 92.5%. In the most recent quarter ended Sep 30 the Company reported revenues of $413K and $830k YTD with a Net Loss of $2.736M.1230 OVA1 Tests were sold through its Strategic Agreement with Quest Diagnostics (DGX). 2010 guidance has been upped to sell about 5000 OVA-1 tests. Analysts’ revenue estimates for 2011 are in the $3M range.

Additional products in the pipeline are: 1.) VASCLIR, a test to stratify risk of developing peripheral artery disease (PAD) estimated to affect 12 M Americans. Clinical development is ongoing with a focus on selecting additional biomarkers; and 2.) TTP (Thrombotic Thrombocytopenic Purpura) an enzyme based test for a blood disorder that causes abnormal clotting and carries the risk of neurological,renal and cardiac dysfunction. The TTP test is currently being performed in a collaboration with Ohio State University Research Foundation for use as a LDT(lab developed test). The Company recently received a notice of allowance from USPTO for B2-microglobulin as a biomarker for peripheral artery disease (PAD).

The Company has over $25M of cash and $7M in long term debt related to the restructuring of the predecessor company Ciphergen. The Company emerged from bankruptcy in January 2010.10.5M shares are outstanding with a Market Cap of $51.3M based upon a stock price of $4.93.

Vermillion has a unique strategy for diagnostic products, the OVA 1  test is on the market with partner Quest with another test for PAD at a later stage of clinical development. The Company has a strong management team with 17% ownership from institutional investors.VRML offers good potential but needs to be tracked for revenue momentum and further validation of its product pipeline.

Chart forVermillion, Inc. (VRML)

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