UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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ISS Presentation
February 21, 2013
Forward-Looking Statements
The following information contains certain forward-looking statements relating to the company’s business, which can be identified by the use of forward-looking terminology such as “estimates,” “believes,” “expects,” “may,” “are expected to,” “will,” “will continue,” “should,” “would be,” “seeks,” “pending,” “anticipates,” the negative version of these words and other similar expressions, or by discussions of strategy, plans or intentions. Such statements include descriptions of the company’s investment and research and development programs and anticipated expenditures in connection therewith, descriptions of new products expected to be introduced by the company and anticipated customer demand for such products and products in the company’s existing portfolio. Such statements reflect the current views of the company with respect to future events and are subject to certain risks, uncertainties and assumptions, including those described in the company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Many factors could cause the actual results, performance or achievements of the company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected.
This presentation is copyright 2012-2013 by Vermillion, Inc. All Rights Reserved.
All logos, trademarks and brand names used in this presentation are the property of Vermillion or belong to their respective owners.
EXECUTIVE SUMMARY
Corporate Vision
To become a recognized leader in the advancement of women’s health by providing innovative methods to detect, monitor and manage the treatment of gynecologic cancers and other related diseases
3
Who we are…
As an industry leader in Proteomics2, we discover and commercialize novel, high-value tests that better diagnose, monitor and treat disease
In collaboration with prestigious research institutions, we have development programs in oncology, cardiology, and hematology
Our flagship product, OVA1®, is the first FDA-cleared, multi-biomarker blood test for pre-surgical diagnosis of ovarian cancer
OVA1 represents a new class of software-based diagnostics
Our expanding patent portfolio helps sustain a “first-mover” advantage
2. Proteomics is the large-scale study of proteins, particularly their structures and functions. After genomics, proteomics is considered the next step in the study of biological systems.
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Unique Translational R&D Advantages
Proven Strengths Offer an Ideal Platform for Growth
Industry-Leading Discovery & Design
>10-yr alliance with Johns Hopkins Ctr for Biomarker Research
“Gordian knot” approach to IP and proprietary SW algorithms
Innovation includes biomarkers, algorithm & patient care path
Renowned Clinical Partnerships
OVA1® “firsts” open doors to best KOL’s in the country
Ability to leverage externally-funded clinical studies
Result: IP, papers, FDA support & payer/guidelines assistance
Outsourced/Flexible Infrastructure
Core collaborations include IVDMIA discovery and design
Clinical, QA, RA, biostats expertise via CRO, avoiding fixed cost
Enables rapid response to pipeline/funding changes
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Renowned Clinical Partnerships Set the Stage for Pipeline Success(1)
Dr. Fred Ueland (U Kentucky) – OVA1® validation & launch Dr. John Cooke (Stanford) & Dr. Will Hiatt (U. Colorado) – PAD feasibility Dr. Robert Bristow (UC Irvine) – 2nd OVA1® Clinical study
Potential collaborator for OvaDx – aid in diagnosis
Dr. John Martignetti (Mt. Sinai, NYC) – ICS collaborator
Post-surgical monitoring, prognosis
Dr. Rob Coleman (M.D. Anderson) – ICS collaborator
Presurgical diagnosis & triage of endometrial cancer
(1) Estimated. Expected milestones are not placed in any specific order within years.
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Diagnostic Patent Portfolio
# of Patent Patents Issued / Allowed
Disease Area
Families U.S. Non-U.S.
Ovarian cancer 17 4 4
PAD 4 5 1
Alzheimer’s disease 3 3 2
Breast cancer 4 1 -
Other 3 2 -
TOTAL 31 15 7
10 new patents granted or allowed since January 2011 7 new biomarker patent families acquired from Correlogic
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OVARIAN CANCER FRANCHISE / OVA1®
OVA1 Addresses Unmet Clinical Need for Better Diagnosis of Ovarian Cancer
Lifetime risk of developing ovarian cancer: 1 in 71
Ovarian cancer is called the “Silent Killer” since it can easily go unnoticed, making early detection key to survival3
- More than 1 million adnexal masses (aka tumors or cysts) detected annually in the U.S.
- 22,000 determined cancerous
- Only 19% are diagnosed as malignant before the cancer spreads (metastases)
- This relates to >15,000 deaths annually
Only 1 in 3 women with ovarian cancer are initially treated by a gynecologic oncologist, in part due to inadequate diagnostic tests and procedures
5-year survival rates for ovarian cancer have lagged far behind the overall cancer survival rate, calling for a more effective means of diagnosis
3. Surveillance, Epidemiology, and End Results, Stage Distribution and 5-year Relative Survival by Stage at Diagnosis for 2001-2007,
Adnexal
Mass
Key to Survival: Early Detection
% of 5-year Survival
Stage
Cases Rate
I 24% 95%
II 6% 65%
III 55% 15-30%
IV 15% 0-20%
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What’s the Problem with the Traditional Approach to Diagnosis?
CA125 Blood Test
Before OVA1, CA125 was the only existing blood test for Ovarian Cancer
Unreliable: 50% false negatives for early stage ovarian cancers
Misleading: Elevated levels can be caused by other conditions (i.e., benign ovarian tumors, endometriosis)
Transvaginal Ultrasound/Imaging
Unreliable: evaluation not standardized, too subjective
Variable: Results dependent on the varying skill & experience of the Ultrasound operator
Physical exam not conclusive
Limited # of Gynecologic Oncologists (GOs)
100,000 Family Practitioners in U.S.
50,000 General Surgeons 50,000 Internists
35,000 OB/GYNS
~1,000 GOs
Just 1,000 Gynecologic Oncologists in the U.S.
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The Solution: OVA1®
OVA1 is an FDA-cleared blood test to help physicians assess the probability that ovarian masses are malignant or benign prior to surgery With 96% sensitivity, OVA1 may help refer cancers to oncology specialists, while 95% negative predictive value (NPV) helps ensure benign cases are treated in a local setting.4 OVA1 is the first FDA-cleared, protein-based, In Vitro Diagnostic Multi-Variate Index Assay (aka “multi-biomarker test”) and represents a new class of software-based diagnostics
“As physicians who are expert in the care of women with gynecologic cancers, members of the SGO are supportive of scientific advances such as OVA1 that may help healthcare providers better detect when referral to a gynecologic oncologist is indicated.”
Society of Gynecologic Oncology, Sept 2009 5
4. Ueland FR, DeSimone CP, Seamon LG, et al. Obstet Gynecol. 2011;117(6):1289-1297.
5. http://www.sgo.org/newsroom/position-statements-2/ova1/
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How OVA1 is Typically Used: The OVA1® Diagnostic Pathway
“Using OVA1 to better triage women with a pelvic mass may lead to improved outcomes and more streamlined care, with possible cost savings if that referral is not necessary.”
- Dr. Beth Y. Karlan, 2005 President,
Society of Gynecologic Oncology
Lower Probability of Malignancy
Treated by OB/GYN
Higher Probability of Malignancy
Specialist Involved
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Validated Through 44 Clinical Sites4,6,7
>1,000 adnexal surgeries >250 various malignancies 3 separate publications
Study 1 sites: 17
Study 2 sites : 17
Study 1 & 2 sites: 10
Total: 44
4. Ueland FR, DeSimone CP, Seamon LG, et al. Obstet Gynecol. 2011;117(6):1289-1297.
6. Miller R, Smith A, DeSimone C, et al. Obstet Gynecol. 2011;117(6):1298-1306.
7. R.E. Bristow et al. / Gynecologic Oncology 128 (2013) 252–259
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OVA1®: OVA500 Multi-Center Study7
OVA500 KEY TAKEAWAYS
Outstanding performance reported in early-stage ovarian cancer and across a broad range of malignancy subtypes
>1,000 patients in combined OVA1® clinical studies with a total of 259 malignancies
Overall both studies identified 93% (78/84) early-stage ovarian malignancies
Confirms the unrivaled sensitivity of OVA1® for early-stage adnexal malignancies in the critical population of premenopausal women
Gynecologic Oncology published OVA500 clinical study in November 2012
Principal Investigator for the second OVA1® study, Dr. Bristow has authored four books and published numerous research articles on ovarian cancer
“Thanks to diagnostic advances like OVA1, there is real hope that the majority of women with ovarian cancer will undergo surgery by a qualified gynecologic oncologist, which is one of the most powerful determinants of survival.”
Dr. Robert E. Bristow Director of Gynecologic Oncology Services UC Irvine Healthcare
7. R.E. Bristow et al. / Gynecologic Oncology 128 (2013) 252–259
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OVA1®: OVA500 Multi-Center Study7
New OVA500 multi-site study confirmed & extended the original pivotal study results:
OVA500 Multi-Center Study Results
Combined w/ Risk Stratification OVA1
Sensitivity NPV
Physician Assessment Performance Sensitivity
Overall 96% 98% Overall 92%
Premenopausal Early Stage Disease 91%
94%
Population Premenopausal Patients 94%
Early Stage Ovarian Premenopausal in early
91% 91%
Cancer (Stage I & II) stage w/ specificity of 61%
7. R.E. Bristow et al. / Gynecologic Oncology 128 (2013) 252–259
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Stand Alone Performance
Stand Alone Sensitivity of OVA14 & ROMA8
OVA1 (n=) 39/40 52/52 57/68 149/161
ROMA (n=) 9/12 34/34 26/38 71/86
OVA1 maintains a high level of sensitivity across a broad range of malignancy subtypes OVA1 provides a minimal rate of cancers missed of 7% compared to 17%
4. Ueland FR, DeSimone CP, Seamon LG, et al. Obstet Gynecol. 2011;117(6):1289-1297
8. ROMA® (HE4 EIA + Architect CA125 II™) Instructions For Use, 2011-09, Fujirebio Diagnostics, Inc.
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OVA1 Expanding Coverage & Favorable Pricing
Total Lives Currently Covered with OVA1
27 Blue Cross Blue Shield
47 million
(BCBS)
Medicare / Medicare
45 million
Advantage
Department of Defense 1.4 million
Other payors contracted
1.5 million
with Quest Diagnostics
Total 94.9 million
Highmark of Medicare coverage established in March 2010: $516.25 per test Department of Defense coverage initiated Q1 2012 at list price: $650 per test
BCBS Coverage Expanding
(Millions of Lives)
47M47M
41M
36M 36M 36M
30M
21M
10M
5M
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 2011 2012
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New AMA CPT Code – a Watershed Industry Milestone
AMA assigned a unique Category 1 CPT Code to OVA1 effective January 1, 2013 Replaces physicians use of problematic generic code when billing insurance companies Code streamlines claim processing and accelerates expanding coverage and adoption by private payers Approval supported by several peer-reviewed publications and positive insurance coverage decisions, including Medicare
CMS (Centers for Medicare & Medicaid Services)
will use “gap-fill” process to determine CPT code pricing for first year
CPT® (Current Procedural Terminology) codes are published by the American Medical Association (AMA)
They provides uniform language that accurately describes medical, surgical, and diagnostic services.
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OVA1 Clinical & Commercial Success Demonstrates Strong Growth Opportunity
Nearly 38K tests ordered through 2012 >5,371 ordering physicians to date More than 30 Key Opinion Leaders in the speaker bureau Two peer review publications in June 2011 Increasingly supported by positive coverage decisions, i.e., Medicare and Blue Cross Blue Shield Positive statements by ACOG & SGO OVA500 study published by Gynecologic Oncology in November 2012 Granted unique CPT code, effective Jan. 2013
Growth in OVA1 Tests
Performed Since FDA Clearance
9. Guidance issued and effective only on 11-12-2012
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Ovarian Cancer Roadmap
Expand OVA1 use to include risk assessment of patients with adnexal masses Development of next generation ovarian cancer diagnostic test in collaboration with Johns Hopkins University Targeted OVA1 line extension for presurgical monitoring
Ovarian Market Opportunity
U.S. Target
Indication Test Population10
Triage 300k
Adnexal Masses X 1 Million
High Risk
TBD
Monitoring
Drug Selection
TBD
& Prediction
10. Approximate estimates, based on Vermillion market research
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VASCULAR MEDICINE PROGRAM / PERIPHERAL ARTERY DISEASE
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PAD Market Opportunity
Prevalence of PAD is high in the diabetic and elderly populations, both of which are expected to grow in coming years
Obese people aged 50+ are another at-risk group who could also benefit from a blood-based PAD diagnostic test
Early diagnosis and treatment of PAD could prevent disability and save lives(1)
Currently no blood test for PAD
“In the next five years, 1 in 4 patients with PAD will suffer a heart attack, stroke, amputation or death.” (2)
(1) Steg et al, JAMA, 2007 Mar 21; 297 (11): 1197-206 (2) PAD Coalition 1Q 2008 (3) American Heart Association Recommended Testing
U.S.
At Risk Group(3) Population
(Millions)
Diabetics aged 50+ 13.2
Smokers aged 50+ 19.6
Elderly aged 65+ 38.0
(Less Overlap) (11.5)
TOTAL 59.3
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Positive Initial Study Results for PAD
PAD intended use study:
1,025 subjects were studied by researchers at Stanford Univ. School of Medicine and the Univ. of Colorado
Identified PAD in 17 of 20 (85%) of patients that were missed by conventional clinical assessment alone
Results recently presented at an annual meeting of the nation’s leading vascular medicine specialist and submitted for publication in a prestigious peer-reviewed vascular medicine journal
Publication would further build foundation for discussion with the FDA regarding regulatory clearance
Study results were presented at the
Society for Vascular Medicine 2012 Annual Meeting in June 2012
“…Results indicate this biomarker model is a useful adjunctive tool that adds independent value to a clinical risk score in the target population of low to moderate Framingham risk.”
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Seeking Development Partner for Peripheral Artery Disease (PAD)
A significant market opportunity exists Extensive intended use study completed Requires cardiology market segment expertise
Additional product development and clinical trial work is required This is the best avenue to realize value for our PAD assets
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MANAGEMENT TEAM
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Management Team
Deep management team with proven expertise in diagnostic test development and commercialization
Title Experience
Hybritech, Gen-Probe, Nanogen, Osmetech
Bruce A. Huebner Interim CEO, Director
Molecular Diagnostics
Beckman Coulter, Invitrogen Corporation, Corning
Senior Vice President
Donald G. (Microarray Technologies), R.W. Johnson
Business Development
Munroe, Ph.D. Pharmaceutical Research Institute, Allelix
Chief Scientific Officer
Biopharmaceuticals
Capitol Vial, Apogent Technologies, Chiron
William B. Creech VP, Sales & Marketing Diagnostics,
Abbott Diagnostics
Chief Accounting Borland Software, Trilogy Enterprises, Momentum SI,
Eric Schoen
Officer Alticast, PricewaterhouseCoopers
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BOARD OF DIRECTORS
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Board of Directors
Established Board of Directors with proven expertise in diagnostic test
development and commercialization
Title Experience
James S. Burns Chairman of the Board AssureRX, Entremed, MedPointe, Osiris Therapeutics
Hybritech, Gen-Probe, Nanogen, Osmetech Molecular
Bruce A. Huebner Interim CEO, Director
Diagnostics
Philadelphia National Bank, Crocker National Bank,
John F. Hamilton Director Chiron Corporation, Glyko, Association of Bioscience
Financial Officers
Pain Therapeutics, COR Therapeutics, MCM
Peter S. Roddy Director
Laboratories, Hewlett-Packard, Price Waterhouse
Carl
Director Tecan Americas, American Monitor Corporation
Severinghaus
William C. IDEXX Laboratories, Bayer Healthcare, Becton
Director
Wallen, Ph.D. Dickenson, Wampole Laboratories
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Board Committees
J. Burns W. Wallen, PhD. C. Severinghaus P. Roddy B. Huebner
Chairman 9
Audit Committee 99 9*
Governance Cmte 9* 9
Compensation Cmte 9 9*
Business Dev Cmte 99 9
Interim CEO 9
*Committee Chairman
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Board Qualifications / Experience
Age Healthcare Board Finance Marketing Int’l R&D General Comp
Industry & Sales Mgmt
J. Burns 66 9 9 9 9 9
B. Huebner 62 99 9 9 9
W. Wallen, PhD. 69 99 9
P. Roddy 53 99 9
C. Severinghaus 60 9 9 9 9 9
Robin Vedova 59 99 9 9 9
Robert Goggin 48
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New Board Nominee
Robert S. Goggin
Mr. Goggin’s lack of Qualifications:
No experience in managing or operating a Healthcare/Diagnostic Company
No medical reimbursement experience
No experience with FDA submissions or compliance
No Board Governance experience
No Board Compensation committee experience
No Board Audit Committee experience
No Board experience of any kind
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Mr. Goggin’s History
History of interaction with Mr. Goggin and his group
In 2011, Mr. Goggin filed suit against the Company to delay the Company’s 2011 Annual Meeting. Mr. Goggin admitted during deposition that he had been drinking prior to sending a inappropriate email to Ms. Page. The Court of the Chancery denied Mr. Goggin’s request for relief.
We offered a Board Seat to Mr. Goggin’s Group in early 2012 if they would nominate a qualified candidate. They declined.
We offered to accept Mr. Novak (a member of the Group) as a candidate based upon his legal intellectual property credentials. They declined.
In June 2012, The Group filed a lawsuit regarding the 2012 Shareholder Meeting. Meeting was stayed while case was pending. The court found that Mr. Goggin knowingly caused his assistant to improperly notarize court filings. Case was dismissed with prejudice in November.
We offered to accept Mr. Bessenyei (a member of the Group) as a Board candidate in December 2012. The Group demanded unilateral veto rights for any new CEO and fees and expenses be reimbursed in the amount of $500,000. Unacceptable to the Vermillion Board on behalf of the Shareholders.
Mr. Goggin and his Group have not put the interest of the Shareholders first.
This Proxy contest is a wasteful display of the lack of concern about the Company and its Shareholders.
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New Board Nominee
Elect Roberta L. (Robin) Della Vedova to fill the open Board of Directors position
Robin has the following industry credentials to be a productive contributing member of the Vermillion Board: Extensive industry experience in small and large companies In-depth knowledge of compensation issues related to our industry Knowledge of “how to” manage a start up laboratory cancer testing company with its financial pressures Substantial knowledge of the women’s health industry and cancer testing marketplace Pertinent international market experience Adding a woman to the Board of a gynecologic cancer and women’s health testing company is very relevant.
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Stock Incentive Plan
Approve the increase of 1,300,000 authorized shares
Used to attract the best possible new management and employees – in particular our CEO position Annual awards to compensate Directors versus cash Special incentive awards to award and retain key employees versus cash Without additional shares it will be difficult to impossible to compete for talent over competitive companies in our space We would have to provide ongoing cash awards which would not be the best use of cash for a company of our size
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Compensation
Approve Annual Compensation
Vermillion routinely retains outside professional compensation experts to evaluate employee compensation versus industry standards Vermillion establishes compensation targets that are within industry standards CEO annual compensation for 2013 at $252,000 plus a $50,000 bonus package and 100,000 stock options is well below industry standards Our management team and employees are paid within industry guidelines
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Key Takeaways
Vermillion is an emerging industry leader in Multi Marker IVD with expanding opportunities in Gynecologic Cancer and Women’s Health
Experienced Board and Management Team
Success with first commercial product:
- Nearly 38K tests ordered through 2012
- 5,371 ordering physicians to date
- Strengthening trends in OVA1 payer coverage and adoption
- New CPT code, effective January 1, 2013
- New OVA500 study confirms the original pivotal study, supporting OVA1 as a new standard of care for Ovarian Tumor risk assessment
Broad patent portfolio supports corporate strategy
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Contact Information
Corporate Headquarters Bruce A. Huebner
Vermillion, Inc. Interim CEO 12117 Bee Caves Rd. Vermillion, Inc. Building 3, Suite 100 512-519-0422
Austin, TX 78738 bhuebner@vermillion.com Tel: (512) 519.0400 Fax: (512) 439.6980 www.vermillion.com
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