·

The new PAMA price for OVA1 of $897 per sample went into effect on January 1, 2018. The average rate per sample paid in the first quarter of 2018 was $721 compared to $127 in the first quarter of 2017. The percentage paid was 81% in the first quarter of 2018 compared to 60% the first quarter of 2017.

·

Managed Care Updates:

o

Contract agreement lives increased by 26% at March 31, 2018 compared to March 31, 2017 including a very key Northeast Benefits Fund awarded during the first quarter of 2018.

o

Positive Medical Policy lives increased by 47% as of March 31, 2018 compared to March 31, 2017.

o

Total covered lives under contract is 86% to date.

·

Sales Adoption Update

o

Regional Channel Partner launched in May 2018

o

Introduction of new sales representatives and payer coverage are yielding positive results as follows:

§

Philadelphia territory increased from 39 to 58 samples from Q4 2017 to Q1 2018 – a 49% increase

§

Dallas Fort Worth territory increased from 12 to 37 samples from Q4 2017 to Q1 2018 – a 208% increase off a small base.

§

New York Metro, prior to coverage, the territory was at a run rate of 143 specimens per quarter. For the first quarter of 2018, we are up to 165 per quarter and in the second quarter to date 2018, the territory is running at a 200 per quarter run rate.

·

A renown National Continuing Medical Education (CME) program, highlighted OVA1 as a key risk assessment strategy in an activity entitled: “Adnexal Mass Management: Risk Stratification & Management Practice for Best Patient Outcomes.” The program reached 7,614 healthcare providers with 714 completing the program for CME credit to date. This rate of penetration is very high according to CME company metrics.  

·

In the UpToDate article entitled: “Serum biomarkers for evaluation of an adnexal mass for epithelial carcinoma of the ovary, fallopian tube, or peritoneum,” published in the March 2018 issue, authors Frederick Rand Ueland, MD and Andrew John Li, MD found that physicians using the OVA1 test in conjunction with the American College of Obstetricians and Gynecologists (ACOG) criteria identified more ovarian cancers than physicians using the ACOG criteria alone. UpToDate is an evidence-based physician-authored clinical decision support resource used by physicians to make point-of-care decisions and is read by over 1.3 million clinicians in more over 180 countries. 

·

We completed concurrent underwritten public offerings of Vermillion, Inc. common and preferred stock on April 17, 2018 with net proceeds after offering expenses of $13.3 million. The proceeds should enable Vermillion to drive its commercialization strategy for OVA1 in the US.

·

Total revenue in the first quarter of 2018 was $649 thousand compared to $728 thousand in the same year-ago quarter.

o

Product revenue in the first quarter of 2018 totaled $613 thousand compared to $678 thousand in the prior year quarter, representing a 9.6% year-over-year decrease. The decrease was driven by the major volume loss of one low priced legacy customer as we previously disclosed in Q3 2017 (the “Legacy Customer”).

o

In addition, revenue on a per test performed basis increased to $337 per test in the first quarter of 2018 compared to $296 in the first quarter of 2017, representing a 14% increase. 

·

There were 1,818 OVA1 tests performed during the first quarter of 2018 compared to the 2,293 OVA1 tests performed in the prior year quarter, or a 21% decrease. The majority of the decrease was associated with the Legacy Customer as noted on prior earnings calls. We expect the test volume to improve over the course of the year, primarily in the second half of the year as we see the results of increased sales and marketing investments made in the first half of the year.

·

Cost of product revenue was $533,000 for the first quarter of 2018 compared to $422,000 for the first quarter of 2017, representing an increase of 26% due primarily to some equipment maintenance costs, increased postage and Quest Diagnostics Incorporated project management fees incurred in the first quarter of 2018

·

ASPIRA IVD Service revenue in the first quarter of 2018 totaled $36 thousand, a decrease of $12 thousand compared with the first quarter of 2017. At March 31, 2018, we had a backlog of $490 thousand which is scheduled for completion in 2018.  Normally, ASPiRA IVD revenue varies from quarter to quarter based on the stage of ongoing customer projects. Cost of ASPiRA IVD service revenue was $270 thousand for the first quarter of 2018 an 11% decrease compared with the same period in 2017 reflecting reduction in variable costs.

·

Total operating expenses in the first quarter of 2018 were approximately $2.7 million compared to $2.7 million in the same year-ago quarter, or essentially flat. Research and development expenses for the first quarter of 2018 decreased by $83 thousand, or 37%, compared to the same period in 2017. Sales and marketing expenses for the first quarter of 2018 increased $202,000, or 20%, compared to the same period in 2017. This increase was primarily due to increased headcount and personnel-related expenses in the first quarter of 2018 compared to 2017. General and administrative expenses for the first quarter of 2018 decreased by $93 thousand, or 7%, compared to the same period in 2017.

·

Net loss for the first quarter of 2018 was $2.85 million as compared to a net loss of $2.67 million for the first quarter of 2017. Our net loss per common share was flat year over year for the first quarter at (.05).

·

Cash and cash equivalents were $3.1 million at March 31, 2018. We utilized $2.4 million in cash in the first quarter of 2018. As previously noted, we completed a capital raise in the second quarter and we have adequate liquidity for the foreseeable future.  





March 31,

December 31,



2018

2017

Assets

Current assets:

Cash and cash equivalents

$

$

Accounts receivable

Prepaid expenses and other current assets

Inventories

Total current assets

Property and equipment, net

Other assets

 -

Total assets

$

$



Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

$

Accrued liabilities

Short-term debt

Other current liabilities

Total current liabilities

Non-current liabilities:

Long-term debt

Other non-current liabilities

 -

 -

Total liabilities

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.001 per share, 150,000,000 shares authorized at

March 31, 2018 and December 31, 2017; 60,039,338 and 60,036,017 shares

issued and outstanding at March 31, 2018 and December 31, 2017,

respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$





Three Months Ended



March 31,



2018

2017

Revenue:

Product

$

$

Service

Total revenue

Cost of revenue(1):

Product

Service

Total cost of revenue

Gross profit (loss)

Operating expenses:

Research and development(2)

Sales and marketing(3)

General and administrative(4)

Total operating expenses

Loss from operations

Interest income (expense), net

Other income (expense), net

Net loss

$

$

Net loss per share - basic and diluted

$

$

Weighted average common shares used to compute basic and diluted net loss per common share

Non-cash stock-based compensation expense included in cost of revenue and operating expenses:

(1)  Cost of revenue

$

$

(2)  Research and development

(3)  Sales and marketing

(4)  General and administrative