Stock Alert for Vermillion Inc. (VRML)

Vermillion Inc. (VRML) and its subsidiaries engage in the discovery, development, and commercialization of diagnostics tests that help physicians to diagnose and treat patients. The Company develops novel diagnostic tests in the fields of oncology, hematology, cardiology, and women’s health with the initial focus on ovarian cancer. Its lead product includes the OVA1 ovarian tumor triage test (the OVA1 Test), which addresses pre-surgical identification of women who are at high risk of having a malignant ovarian tumor. The Company has collaborations with various academic and research institutions, including The Johns Hopkins University School of Medicine; The University of Texas M.D. Anderson Cancer Center; University College London; The University of Texas Medical Branch; The Katholieke Universiteit Leuven; Clinic of Gynecology and Clinic of Oncology, Rigshospitalet; Copenhagen University Hospital; The Ohio State University Research Foundation; Stanford University; and the University of Kentucky. It also has strategic alliance agreement with Quest Diagnostics Inc. to develop and commercialize up to three diagnostic tests. VRML serves clinical reference laboratories, hospital laboratories and physician offices.

Share Statistics (27-Mar-12)   FY

2009

FY

2010

%

Chg

Q2

2011

Q3

2011

%

Chg

Symbol VRML Revenue, $Mn 0.00 1.18 0.30 0.32 6.67%
Current price $1.77 Gross marg. 0.00% 92.37% 90.00% 90.63% 0.70%
52wk Range: $0.97-$7.60 Oper. margin -1987.40% -1427.81%
Avg Vol (3m): 485019 Net margin -1612.71% -1909.33% -1453.13% -23.89%
Market Cap. 26.30M              
Shares Outstanding 14.86M EPS, $ -3.03 -0.99 -67.33% -0.39 -0.31 -20.52%

Source: Reuters.com, SEC Filings.

Investment Highlights

VRML shares headed higher on Tuesday after the Company announced its fourth quarter and full year 2011 results, which showed strong increases in total revenues and lower net losses.

Shares in the Austin, TX-based company added 12.03% to close at $1.77, with over 2.52 million shares traded.  The stock has so far reached a 52-week high of $7.60, its 52-week low being $0.97.

Shares have risen 11.3% in the last five trading days and 37.2% in the last month.  Year-to-date, the stock is down 62.1%.

Total revenues in the December quarter rose 152% to $868K from $345K in the comparable quarter of the previous year.  The latest quarterly result included included $755K from product sales of OVA1, the Company’s flagship diagnostic designed to help differentiate benign from malignant ovarian masses, and $113K of license revenue related to the VRML’s achievement of certain milestones under its amended strategic alliance agreement with Quest Diagnostics.

For the full year, total revenues were $1.9 million, an increase of 64% from fiscal 2010. Full-year 2011 revenues included $1.5 million from product sales of OVA1 and $454K of license revenue. Product sales of OVA1 in 2011 include $761K from 15,225 OVA1 tests performed at the fixed $50 per test, $549K for the 33% royalty reported by Quest Diagnostics for 2011, and $159K for the 33% royalties reported by Quest Diagnostics for 2010. The 2010 royalty was reported to the company and recorded in the first quarter of 2011.

VRML realized a net loss $3.1 million, or $(0.21) per share, for the last three months of 2011, as compared to $4.0 million, or $(0.38) per share, in the same year-ago quarter. Net loss for 2010 included $8.6 million in reorganization items and $4.4 million in gains resulting from the exercise and fair value revaluation of common stock warrants. Net loss for 2011 came in at $17.8 million, or $(1.25) per share, as compared to $19.0 million, or $(1.83) per share in 2010.

As of December 31, 2011, VRML’s cash and cash equivalents totaled $22.5 million. The Company used $5.0 million in cash from operations during the fourth quarter, including $435,000 for the Correlogic asset acquisition.

Gail S. Page, president and CEO of VRML, made the following statements: “2011 showed substantial expansion in OVA1 tests usage leading to another year of revenue growth for Vermillion.  In fact, more than 3,700 or 11% of the nation’s gynecologists — the professionals who help define the standard of care for women with ovarian cancer — ordered OVA1 in 2011. The specialist sub-group of gynecologic oncologists supporting OVA1 also grew by 24 in the fourth quarter, bringing the total to more than 275. Given the relatively short period of time this test has been on the market, this represents strong traction and increasing brand awareness within the gynecologist community. This strong progress was matched by increased OVA1 payer coverage in 2011 and the addition of the Department of Defense payer coverage in January 2012.”

VRML earlier this month announced the American Medical Association (AMA) Current Procedural Terminology (CPT) Panel has voted to approve an application for a Category 1 CPT code for its OVA1 test.  According to CEO Page, this approval was supported by several peer-reviewed publications and positive coverage decisions, including Medicare.

“The new CPT code is a critical step in advancing the commercialization of OVA1, as we believe it will help streamline claims processing and accelerate further coverage and adoption by private payers.”

Source:

http://phx.corporate-ir.net/preview/phoenix.zhtml?c=121814&p=irol-news&nyo=0

Financial Strength (27-Mar-2012)

Company

Industry

Sector

Quick Ratio (MRQ) 1.63 1.42
Current Ratio (MRQ) 4.35 2.14 1.76
LT Debt to Equity (MRQ) 53.13 23.53 27.21
Total Debt to Equity (MRQ) 53.13 58.03 36.23
Interest Coverage (TTM) 1.95 2.39

Source: Reuters.com, SEC Filings.

Technical Analysis

Source: http://stockcharts.com

VRML is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent levels.

VRML’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9minute moving average or signal line. This suggests that positive momentum has begun to slow.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
Mar-27-2012 symbol Share, $ $ Mn 2012 2013 2012 2013
OraSure Technologies Inc. OSUR 11.43 550.64M n/a 127 5.50 4.48
Abbott Laboratories ABT 61.33 96.43B 12.24 11.46 2.42 2.34
Diagnostic Substances  Median       30.38 n/a 4.95 n/a
Vermillion Inc VRML 1.77 26.30M n/a n/a 15.03 10.56

Source: Thomson Financial

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