Aspira Women's Health Inc (AWH) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Vermillion Q1 2011 financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we'll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, May 10, 2011.

I would now like to turn the conference over to Ashish Kohli. Please go ahead, sir.

Thank you, Operator, and welcome to our conference call. Today we issued a financial results press release for the first quarter of 2011, which is also on our website and we encourage everyone to refer to it for more details. Some of our commentary and answers to today's questions may contain forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. Vermillion is providing this information as of the date of this webcast and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise. Forward-looking statements reflect Management's current estimates, projections, expectations or beliefs and involve risks and uncertainties that could cause actual results and outcomes to be materially different . Risks and uncertainties that may affect the future results of the Company include, but are not limited to, the competitive environment, the speed of market adoption, changes in government regulations, payer reimbursement, relationships with our strategic partners and other factors as described in the Vermillion 2010 Form 10-K, quarterly results on Form 10-Q and current reports on Form 8-K.

A telephone replay of this call will be available beginning approximately 1 hour after this call through May 25, 2011. A copy of our financial results release for the period ended March 31, 2011 is available on our website at www.vermillion.com. At the request of the Company, this call is being recorded. The entire contents of the call, including the question-and-answer session that will follow, are the copyrighted property of Vermillion with all rights reserved. And the redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Vermillion Incorporated is strictly prohibited.

The agenda for today's call will be as follows. Gail Page, our Chairman and Chief Executive Officer, will lead off by providing an update on some of our key corporate initiatives . She will be followed by Sandy Gardiner, our Chief Financial Officer, who will provide a financial overview. Gail will then close by providing an update on the sales ramp and strategy for OVA1. With that, I would like to turn the call over

Thank you, Ashish. Today we will begin with a discussion of the business fundamentals where I'm happy to report ongoing progress in several key areas. Let me begin with an update on our efforts with coverage in reimbursement for OVA1. And the United States, revenue for diagnostic testing comes from several sources, including private third-party payers and public government healthcare programs such as Medicare and Medicaid. As many of you might know, on March 12, 2010, Highmark Medicare services, the Medicare administrative contractor that has jurisdiction for clients submitted by Quest Diagnostics for the OVA1 assay announced coverage of reimbursement for OVA1 in the amount of $516.25.

Using this as an initial validation of the value proposition of OVA1, Vermillion and Quest have aggressively worked to expand coverage and reimbursement from private payers across the country, and we are pleased today to report that during the first quarter 2011, payer coverage for OVA1 expanded with the addition of independent Blue Cross, Highmark Blue Cross Blue Shield and Capital Blue Cross, 3 key health plans in the state of Pennsylvania. In addition, Blue Cross Blue Shield of Delaware, Horizon Blue Cross Blue Shield of New Jersey and Mountain State Blue Cross Blue Shield of West Virginia are also providing coverage for OVA1. Furthermore, Blue Cross Blue Shield of Tennessee recently issued a favorable coverage policy for OVA1 which will become effective this month.

Only 14 months post launch of OVA1, in addition to Medicare, we now have 17 independent Blue Cross Blue Shield plans around the country who have evaluated the clinical utility of benefits of OVA1 resulting in positive coverage policies. Remember, not all health plans publish coverage policies, positive or negative, and we are aware of additional health plans reimbursing Quest Diagnostics for OVA1. Working in concert with Quest Diagnostics and their health plan team, we believe our joint [effort] have and will continue to result in more payers recognizing the benefits and clinical utility of OVA1, resulting in additional coverage and reimbursement. As a comparison, Genomic Health launched Oncotype DX in January of 2004, Medicare coverage began 2 years later in January of 2006. The majority of private payers began coverage of Oncotype in the following 2 to 3 years post launch.

In terms of patient access, we believe that nearly 80 million insured lives have health insurance with positive coverage decisions for OVA1. This is up from the roughly 67 million to 68 million lives at the start of the year. Second, on the sales front, our Q1 guidance was 3000 to 3500 tests and Quest Diagnostics performed approximately 3080 OVA1 tests during the quarter. This represents 5% growth quarter over quarter. Although this remains within our guidance, we did experience the following factors during the quarter. Continued inconsistent coverage decision amongst payers, annual resetting of deductibles and additionally we believe weather negatively impacted our Q1 volume growth due to the number of emergency snow days experienced during the months of January and February. Recall that much of our growth is in the Northeast region which was particularly affected by weather. However, as the quarter progressed, we saw an improvement in March, which was our largest volume month since launch with 1190 tests, an increase of 15% over November, our largest month previously.

Our next key accomplishment involves the presentation of several positive publications at the International Gynecologic Cancer Society and the Society of Gynecologic Oncology. The presentation of data is part of our efforts to increase awareness and highlight the clinical benefits of OVA1. This is an ongoing process and a fundamental building block of the introduction of a new diagnostic test.

Most importantly on the call today, we are delighted to announce that 2 peer review manuscripts describing OVA1 have been accepted for publication in the June edition of Obstetrics and Gynecology, also known as the Green Journal. The first one is titled effectiveness of a multivariate index assay in the preoperative assessment of ovarian tumors with [Dr. Fred Ulin] as the first author. The second one is titled performance of the American College of Obstetricians and Gynecologic ovarian tumor referral guidelines with a multivariate index assay with Dr. Rachel Miller as the first author. Both articles will be made available online to subscribers of the Green Journal on May 23 and in print on June 1. We believe these peer review articles will be important assets for Quest Diagnostics and Vermillion as we continue to pursue additional positive coverage policy.

Fourth, we are delighted to begin the launch of OVA1 in India with Quest Diagnostics. As we have mentioned previously, launching OVA1 internationally in a select group of countries is a key objective for 2011. Just last week, Quest Diagnostics begin selling OVA1 in India which represents an incremental market opportunity for Vermillion. This is a new market, and will take time to educate and drive awareness of OVA1. Our initial strategy will be the private payers in targeted markets such as Delhi and Mumbai. In the meantime, we will start the process of securing government reimbursement. 2011 will be a year of planting the seeds internationally and with that in mind we continue to evaluate territories in Europe, Asia and South America with Quest as well as other potential business partners.

Fifth, we continue to move forward our pipeline which includes our OVA2 program and VASCLIR program. With respect to OVA2, our collaborators at Johns Hopkins presented initial data regarding findings that describe markers that could improve on the clinical specificity of CA 125. As you know improving on clinical specificity will be a key feature in future tests for the diagnosis of ovarian malignancy. Our PAD intended use study is progressing nicely, we have enrolled approximately 50% of our target simple size. We remain on track to have top line data in the third quarter.

Lastly we've strengthened our balance sheet by selling 4 million shares in a follow-on public offering resulting in approximately $20.2 million net proceeds to the Company. I want to reiterate the 4 broad buckets targeted for this cash. OVA1 remains a key near-term growth driver, and our primary efforts are directed at accelerating market adoption in the United States. Quest Diagnostics and Vermillion are currently initiating post marketing studies designed to help aid this goal. In addition, the financing allows us to expand our sales/market development organization, which we will do in a strategic manner based on sales ramp, geography and payer coverage. It is important for our shareholders to remember that the Vermillion team is more than a sales force, they are a group of individuals who are responsible for market development and the coordination of interactions with the Quest Diagnostics sales team who take the orders and are responsible for the billing as well as customer service related to OVA1.

We expect to be nimble and make the appropriate changes to support the continued growth and challenges in the future. As we have mentioned previously, we are launching OVA1 in a select group of international countries. Having a strong cash position allows us to fund the appropriate marketing and clinical studies that may be necessary to secure regulatory and reimbursement approval, a precursor to long-term success in these countries. Accelerating our R&D pipeline is another area of potential spending as we look to advance our next generation ovarian assay and more near term, our PAD diagnostic program.

Based on the results of our VASCLIR intended use study, we will discuss with the FDA an appropriate regulatory strategy. We will look aggressively at external avenues to help broaden our growth opportunity, whether they are through in licenses, small acquisitions or distribution agreements. This should allow us to leverage our unique business model of being a software centric diagnostic Company with R&D collaborations with important academic institutions and an established distribution partner in Quest Diagnostics. The financial strength provided by the following offers positions us to evaluate potential opportunities as they arise. With that as a summary, I will now turn it over to Sandy to discuss our financial performance.

Thank you, Gail. Total revenue for the 3 months ended March 31, 2011 was $431,000, $317,000 from product sales of OVA1 and $114,000 from license revenue. Under our amended agreement with Quest Diagnostics, we received $50 for each OVA1 performed as well is 33% of Quest Diagnostics gross profit. In addition to recognizing the $50 per OVA1 royalty on the approximate 3080 tests performed during the first quarter, we also recognized approximately $160,000 in product revenue related to the 33% royalties previously deferred to our balance sheet as of December 31, 2010. These royalties represent approximately 2800 OVA1 tests resolved by Quest Diagnostics as of December 31, 2010. Resolved amounts include both reimbursed and unreimbursed tests. Of the OVA1 tests reimbursed, the average revenue representing both the fixed and variable components was approximately $175 per test.

Operating expenses for the 3 months ended March 31, 2011 were $4.8 million. Operating expenses included approximately $1.3 million of noncash stock-based compensation expense. Total net loss for the first quarter was approximately $4.3 million, or $0.34 per share. Weighted average shares outstanding were 12.5 million for the 3 months ended March 31, 2011. Our current shares outstanding are 14.7 million. Cash and cash equivalents at March 31, 2011 were $40.2 million. We utilized $3.4 million in cash during the first quarter and anticipate that cash usage during the second quarter of 2011 will be approximately $4 million to $5 million. We expect our cash utilization to begin to increase from previous quarters as we expand our territory management team, both in the US and internationally, initiate post-market and patient registry studies and continue to invest in our R&D pipeline.

As we mature and gain clarity, there will come a time where our increasing revenues will begin to help offset our cash operating expenses. At this point, we are still in our early stages of development and cannot predict the timing of this inflection point. Now I'll turn it back to Gail for a discussion on the sales ramp.

Before I describe our tactical and operational initiatives to commercializing OVA1, I'd like to take a moment to reiterate each of the roles that Quest Diagnostics and Vermillion played in this process. With a large distributed sales force, excuse me, and relationships with a wide base of physicians, Quest Diagnostics has the infrastructure to call on far more physicians than does Vermillion. In contrast, Vermillion will focus on market development and provide a team that serves as subject matter experts to ensure that the relevant expertise will work synergistically with our colleges at Quest Diagnostics. We have chosen (inaudible) individuals that demonstrate the ability to act as subject matter experts with the capability of completely understanding OVA1 and the associated messaging. Since this was a new lunch and we therefore had no historical data, our initial strategy in deploying these territory managers was to align them with Quest Diagnostics' business unit.

As we develop state level volume data and expand insurance coverage, we are better able to align our territory managers to the highest potential business opportunities and volume growth. To that end, in January, we eliminated 1 territory and added 2, one on each coast. Additionally, we now have 2 Director of Sales, each covering half of the US. This provides us with the ability to continue to increase our market development efforts with our sales force and have an appropriate Management team in place. In April, we proceeded to add 2 additional territories in the South and East and those will be in place and fully trained by the end of Q2.

I would now like to discuss the sales and marketing efforts in a little bit greater detail. Currently, we are in our (inaudible) next phase of growth in OVA1's life cycle in which continued expansion of coverage will be critical to driving long-term success. Measures we are taking to accelerate the growth of OVA1 sales include the ongoing hiring of additional territory managers, broader insurance coverage, increasing physician awareness, strong presence in professional journals as well as post marketing studies.

I would now like to discuss some key details regarding our field team. Currently, we have a total of 16 people in the sales and marketing department, 14 of whom our [field based]. We're targeting 18 in total by the end of Q2. These additional assignments will be added in the South and East areas where insurance coverage is in place, growth is occurring and the significant population base provides new growth opportunities. We are developing a team of seasoned veterans with significant women's health experience (inaudible) Vermillion. 4 of our field people have approximately 1 year with Vermillion, 6 have approximately 9 months and the remaining 4 have come aboard since January of 2011.

We continue to evaluate growth areas and the need for additional coverage. Our target for new territory managers is to work synergistically with the Quest Diagnostics organization in each of their designated territories to generate approximately 100 tests per month within 12 months. This requires a combination of skills and matrix management as we are the manufacturer rep for OVA1 1 and Quest Diagnostics is our distribution partner. We will continue to add territory managers as popular states gain coverage.

A new program we are implementing is the addition of territory development specialists who will provide inside sales support. 2 of these specialist will be added by the end of Q2. These individuals will provide sales support to our territory managers by qualifying trade show leads, uncovering new opportunities and utilizing our CRM for lead development. As you would expect, we monitor a number of metrics besides test volume to measures success and adjust our activities as needed. We will begin to provide a few of them to help monitor our progress.

The first metric will be the total number of doctors ordering OVA1. As a point of reference, there are roughly 35,000 gynecologists in the US today. At the end of Q1, there were approximately 2000 doctors who have ordered OVA1. This represents more than 5% of the reported gynecologists in the US and it's an increase from the 1400 at the end of Q4. Also, our focus on gaining the endorsement and support of the specialists, the gynecologic oncologists continues to be very successful. Of the approximate 800 practicing gynecologic oncologists in the US, our internal tracking mechanism reflects support from 17% at the beginning of the year to approximately 25% currently. This is crucial to our continued growth, because the gynecologist will rely in the consultation of these specialists in determining when to best use OVA1.

Let me next provide you with an update on our marketing effort. As a further expansion of our medical education program that we have conducted since September, we are very pleased today to announce that QIAGEN N.V. of the Netherlands and Vermillion have created a pilot medical education program to be launched in June that will combine the efforts of both organizations to offer gynecology the latest in gynecological cancer diagnosis. The title of the program is advancements in women's health ensuring optimal oncology outcomes with the OVA1 and HC2 HPV. The pilot program will be launched via presentations in 6 selected markets across the US utilizing renowned physicians who are experts in the diagnosis and treatment of cervical and ovarian cancers. These medical education programs will be provided to general gynecologist providing the latest in testing and guidance and the proper management of these diseases in women. Both Companies expect to continue this program in Q3 and Q4 on a wider scale as the program kicks into full implementation.

We attended 10 professional meetings in April, attended 8 calls week in Washington with very good response and interest, and we will attend 12 other meetings in May and June.

Turning to forward guidance, we expect 3200 to 3500 OVA1 tests to be performed in Q2. This takes into consideration numerous factors including the number of days in the quarter, continued limited coverage by the large payers, the ability to expand the diagnosis (inaudible) currently approved by Medicare and the time required for our new territory managers to become fully productive. Our goal is to support growth throughout Q2 with the organizational changes described earlier, strong presence in scientific journals, successful attendance at key industry conferences and additional health plan coverage decisions.

I want to finish by taking a few minutes to address progress on the corporate front and describe the steps Management and the Board of Directors are engaged in to transition Vermillion into a leading diagnostic Company. First we want to reiterate to all of our shareholders that we work for you, and therefore open to any and all suggestions you may have. As such, we are pleased to announce the following. During our emergence from Chapter 11 bankruptcy, the quarter proved our restated bylaws which included a 12-month advanced notice requirement for shareholders to matters before the annual meeting. The Board of Directors and our legal counsel have done an extensive evaluation of our bylaws including a comparison to similar companies.

Based on the results of our survey, the Board has amended the bylaws to shorten the advance notice period to 90 days beginning with the 2012 annual shareholder meeting. This will allow shareholders a reasonable timeframe to put matters to a vote in an annual meeting. Please feel free to refer to our recent proxy statement for more detailed explanation. The Board appreciates your feedback and believes this change is in the best interest of all shareholders. As always if any of our shareholders would like to reach out to us after this call, or within the coming weeks, we would welcome this opportunity. Vermillion remains focused on enhancing shareholder value by expanding OVA1 revenue opportunities as well as looking at ways to accelerate and expand our product portfolio. Thank you, Operator, we are now ready for questions.

(Operator Instructions) Matt Dolan. Please go ahead with your question.

Hello, good morning.

Good morning.

Gail, first question on the volume you saw and the guidance, just looking on a monthly basis you had a record March but it doesn't look like you're expecting to match that volume on a monthly basis in Q2. Can you give us a little bit more data on what you're seeing kind of on a month-to-month basis, are you getting the reorders from new accounts or are you getting any more granularity from Quest?

Hello, Matt, this is Bill Creech, how are you?

Good, how are you?

Good. The increase in March was significant, we feel that we'll continue the growth through the second quarter. And the factors that Gail mentioned had a negative impact or an impact on our growth, but I must say that in some of our territories we had significant growth above the 5%, and the March coming in very strong with the other activities that Gail has mentioned, we feel very comfortable about the guidance for the second quarter.

Okay. But do you have any other reorder rate, or I guess why would the volume slow down from using March as the baseline?

Well we have reorder volumes but we're not at liberty to disclose that. The information that Gail shared on the number of doctors ordering I think is very encouraging, and we expect that trend to continue.

Okay, great. And then on the collections side and reimbursement, Sandy, I think you mentioned a number in terms of pricing. It looks on the variable side, we're getting just around $50 per test in terms of what you booked on those 2800 test, is that correct? Maybe you could give us a broader update on how collections are coming in and how we should expect that variable piece to trend from here?

Well on the variable piece that you're talking about, so the OVA1 test that we're reimbursed, our average revenue, both the fixed and variable, was $175. So $125 is the variable component of that.

That's to Vermillion?

That is to Vermillion, exactly. So $175 is the total we had previously booked the $50 last year and the remaining $125 is what incorporated the $160,000 that was taken from our deferred revenue to our income statement. And that is of the OVA1 test reimbursed. There were approximately 2800 tests that were resolved-- of these 6100 that were performed last year, there were approximately 2800 test that were resolved as of December 31. And let me just remind you, that just a fixed date and time under the agreement. So the test had to be resolved as of the end of the year December 31 of for them to be included in that adjustment.

Okay, so-- I get you, so you're not getting-- out of the 2800, it's not a simple math exercise to get the end pricing. Can you tell us then on collections, what proportion of tests are actually being collected on and therefore paid to you at this stage and how you expect that to change this year ?

We actually do not have that level of detail. We get that level of detail on the annual adjustment, which allowed us to recognize that variable component. On the ongoing monthly basis, we continue to record the $50 per test as the revenue and defers the remaining to our balance sheet. And just to remind you of how the agreement works and why it is very favorable to us, the monthly payments are actually paid to us based on the number of tests performed, not billed, not reimbursed, we don't have that clarity on a month-to-month basis. That's why it's important to not look at our monthly and/or quarterly information as a stand-alone basis. We want to encourage you that this takes time, we're going to experience fluctuations and therefore it is something that is going to take us time to resolve and that's why we continue to record our revenue this way.

Okay. And then on the spend side of things, you've got a couple more ads on the sales and marketing side and some R&D programs going on, were does spend track from Q1 levels?

Well Q1 we utilized $3.4 million in cash and spend we anticipate to be $4 million to $5 million for the next quarter as we start to increase cash utilization for the post-market and patient registry studies, the territory Management team that you heard tell talk about and investing in our R&D pipeline.

Okay. And the Gail, finally on the QIAGEN deal, any detail you can provide us there? Is there-- what's the commitment from either party?

Matt, this is Bill again. It's a co-marketing program that we have put together and both organizations are extremely excited about presenting these programs across the country. And once we finished the pilot program of 6 presentations, we'll analyze what else we need to do and how many programs we'll have. We'll share that in the future.

All right, I'll let somebody else in. Thanks.

[Trey Cobbs]. Please go ahead with your question.

Good morning and thanks for taking my questions.

No problem.

I guess if we could start off maybe by getting an update in terms of what you're seeing and hearing in the market regarding traction for OVA1. Bill I don't know maybe if you could give us some of your takeaways from ACOG and/or the feedback that you're getting from physicians in terms of plans for adoption?

Trey, thanks for the question. We had very good response from the physicians. There was 1 presentation, the physician mentioned OVA1 and saying if you have any confusion about what to do order OVA1. We had a number of physicians come immediately to the booth after that. Other physicians that we talked to were very excited about looking forward to the peer review publication coming up in the Green Journal. And as one survey indicated, a number of doctors are anticipating using OVA1 in the practice moving forward.

Okay, and then just as a follow on to that, I think on the last call you mentioned from these physician education events, you typically see orders in the 60 to 90 days following a physician attending the event. Is that still good way to think about adoption, and how are these events progressing year to date?

I would say that was a-- that is a good way to analyze it. I can't give you any more details than that. But they're moving forward, we had -- I don't have the numbers right in front me, but average of 8 to 10 per month in the first quarter. And with the addition of the QIAGEN programs, we're going to continue at that rate through the second quarter. Third quarter is going to be a little bit slower because of summer vacations.

Okay. And then maybe for Gail, with the planned publication in the Green Journal, could you talk about what that does for you in terms of getting in front of private payers and potentially leveraging that additional validation data to garner a coverage decision?

Sure, there's many plans that as you know each plan has its own process and it's tech review process that it goes through, and we've been very fortunate to have this many positive coverage decision in this short of time period. But as we progress to the larger payers, peer review is a very important component of their analysis. So this will give us the documentation that we need to go to the next meeting to the next step with these payers. So we're very encouraged, we're very pleased that we have 2 that are happening about the same time, so this'll just be in our arsenal of documents and things to go along with that.

Okay, and then on PAD, could you talk about the milestones that you're looking for there in the next 12 months? I think you had mentioned something in your prepared commentary, but I missed it.

Sure, I'm going to turn it over to Dr. Fung.

So, Trey, as we indicated we're a little halfway through enrollment in our intended use study. Just to recap for the audience, the intended use study is really a program to transition from really an academic setting into a real life clinical setting in which we develop our algorithm in the intended use population, which to remind you is smokers over 50, diabetic over 50 and the elderly over 70. And so our intention is to have this algorithm developed as part of this intended use study with top line data available as we indicated in the third quarter. From there, we'll springboard to a pre-IDE meeting with the FDA. We did have some initial conversations with the FDA couple years ago, so they are primed to understand this product but obviously we need to have greater discussions to go into the granularity of the size and scope of the clinical trial that would be required for a regulatory clearance or approval. And I think until we have those conversations, we won't really be able to give much clarity beyond that.

Okay, great, thanks for taking my questions.

No problem, thank you .

Zarak Khurshid. Please go ahead with your question.

Good morning, guys, thanks for taking the questions. Was just curious how to quantify some of the various sales drivers, so maybe you addressed it in the comments, but what fraction of your sales growth is Quest driven versus Vermillion? And as a follow up, what is going on at the Quest level these days, and are you happy with generally how things have played out at Quest over the last year?

Zarak, this is Bill again. As Gail mentioned, our territory Managers are more business development and subject matter experts, so the sales activities really are driven by Quest. I feel that we're very effective in doing what we do as driving and developing the business by territories and Quest is moving forward. And just as anecdotal for the Tennessee coverage that Gail mentioned, we're creating activity in Tennessee to promote that awareness of the new medical coverage. So we're very pleased with how we're interacting with Quest.

Okay, great. And then on the reimbursements side just roughly how many covered lives do you have currently, and how do you sort of qualitatively expect that to evolve over the next year or two? Thanks.

Well if you think about it, Zarak, we were at about 60 -- north of $65 million at the end of the year, and now with the new additional plans we're up to over $80 million. So the metric we are trying to provide is to show that each quarter as we gain coverage how those total number of lives increase. And that seems to be the industry standard. We've looked at other companies and how they provide that metric, so we're falling in that same vein. So but I would also say that if you look at a lot of other companies that one would say would be comparable from the standpoint they're in women's health care, what we've accomplished in the coverage area in 14 months, I do believe has said some industry records relative to the amount of coverage how soon we're getting it. Now there's other issues along with that, as you know the current reimbursement system is really designed for the traditional test and not these proteomics-based assays. So it's a new education process, and it's one that takes a lot of time and attention, and I think that Quest helps plan people as well as our expert, Jeff Salzman, all of those try to attend whatever meetings and to keep pushing harder and garner that coverage.

Thank you.

[Keenan Ferguson]. Please go ahead with your question.

Good morning, thank you very much. So you talked about the goals for international expansion and I want to talk about Canada for a moment. It's a much smaller market than India or the US but the recession didn't hit it nearly as hard as the US. It's population is affluent and from an employment disposable income and health coverage standpoint, they're in better shape than the US right now. So what steps have you had and/or Quest taken to marketing Canada and/or develop the Canadian territory, what have the sales been?

What we can tell you is that we're having various conversations at various levels, some with Quest, some with other entities that may be a better partner in certain countries. But we're not at the point where we can discuss anything in finality, we're just prohibited from doing that in our contractual conversations. But we would say and reiterate that we are looking at all sorts of areas from Brazil, to China, to Canada, all those things are being considered.

All right. So a follow-up question, Canada was at some point part of your strategy for expansion, but we note that your trademark applications in Canada have been allowed to expire or be abandoned or something to that effect, is Canada part of your expansion plan?

Well again, what I can reiterate is that we are in conversations with folks that cover those territories as well as many international territories. We are a small Company, so we have to be very strategic in how we approach these companies and countries to make sure that the process by which we would need to go through, that the pay back is there in short term, that you have to prioritize. Our first obligation is to really develop OVA1 in the US. We are looking at international opportunities, but they're sort of on the second priority, if you will.

Thank you. That concludes my questions.

Okay, thank you.

(Operator Instructions) [Neil Klein]. Please go ahead with your question.

You find that he comes back for second usage and continues to use the test?

Neil, this is Gail. Unfortunately we only heard like about the last 4 words of that.

Okay, so I'm sorry. Once a doctor initially uses your test, what are your findings in him coming back, him or her, coming back for a second utilization? And if they don't, how do you follow up on that?

Neil, this is Bill Creech. With the market size, we estimate that a physician may see 1 to 3 women with an adnexal mass per month. We are pleased with the reorder rate. We get those by category or volume of reorders from Quest, that's confidential information, but we are very pleased with the reordering rate and especially the pickup with the new physicians that Gail mentioned with 2000 currently order-- have ordered OVA1.

And they generally may come across something like 1 to 3 cases a month, depending on their practice?

Neil, that's correct. It's 1 to3 depending upon the size of their practice.

All right. Just doing some quick math here, when do think you might get to a point where you're at breakeven? It appears to me that $3000 a quarter of tests and $4 million as an expenditure, we've got to do, if my math is right close to 25,000 cases.

This is Sandy. At this point in time, it's actually way too early for us to answer that and to tell because much of the components were breakeven as you can expect have to do with market adoption and reimbursement rates. And until-- we're in early stage and we're going to experience a lot of fluctuations in the level and the amount of reimbursement, and until we experienced a more gradual level, we cannot answer that question.

But at $175 per test, which you said is your approximate cash flow from it, or billing, and $4 million a quarter mathematically you'd have to do about 25,000 tests, wouldn't you?

Yes, mathematically I mean you-- we would be needing to do 65,000 to 85,000 tests a year. Now we would expect as we get better coverage, our reimbursement rates would increase and at some point we will see an inflection point. And so based on that, that is why it's too early to tell for us at this point in time.

Thank you for your help. Good luck in the future.

Thank you Neil. Neil, I would suggest that if you have an opportunity, if you want to give me a call back later in the week, I'd be glad to walk you through very successful companies like Digene and Cytec that went through the same process that we're going through in developing market. And once you get more of the larger payers on board and your reimbursement starts to stabilize, what you really are striving for is to get your test to become the standard of care. And when it's becomes that standard of care, then you do see that inflection point. It happens at different times for different companies, obviously our goal is to get it to happen sooner than later.

Right, I will give you a call. Thank you.

Okay, you are welcome.

Ms. Gail Page, there no further questions at this time. I'll turn the call back over to you, please continue with your presentation or closing remarks.

We really appreciate the support that everybody has given. I hope that you agree that we have made great progress this quarter, we look forward to reporting continued progress. The Management team would like to thank you for joining us today. We appreciate your interest in Vermillion and look forward to updating you on our progress on our next call. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.