Restructuring Play in Diagnostics at a VC Valuation
Vermilion (NASDAQ: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 OVA1 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 Sept. 30, the company reported revenues of $413K and $830k YTD with a net loss of $2.736M. The 1230 OVA1 Tests were sold through its strategic agreement with Quest Diagnostics (NYSE:DGX). The 2010 guidance has been upped to sell about 5000 OVA1 tests. Analysts' revenue estimates for 2011 are in the $3M range.
Additional products in the pipeline are:
- VASCLIR, a test to stratify risk of developing peripheral artery disease (PAD) estimated to affect 12M Americans. Clinical development is ongoing with a focus on selecting additional biomarkers; and
- 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 the U.S. Patent and Trademark Office for B2-microglobulin as a biomarker for 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. It has 10.5M outstanding shares 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.