Aspira Women's Health Inc (AWH) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Vermillion Incorporated third quarter 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, Wednesday, November 9, 2011. I would now like to turn the conference over to Ashish Kohli, Vice President, Corporate Strategy. Please go ahead, sir.

Thank you, operator, and welcome to our conference call. Today we issued a financial results press release for the third 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 November 23, 2011. A copy of our financial results release for the period ended September 30, 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. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Vermillion Incorporated is strictly prohibited.

The agenda for today's call will be as follows. Gail Page, our President and Chief Executive Officer will lead off of by providing a brief corporate update. She will be followed by Eric Schoen, our Chief Accounting Officer, who will provide a recent financial overview. Gail will then close by providing a more detailed update on the sales ramp and strategy for OVA1. With that, I would like to turn the call over to Gail.

Thank you, Ashish.

Let's begin with an update on the sales front. Our Q3 guidance was 4,000 to 4,300 tests and Quest Diagnostics performed an estimated 4,108 OVA1 tests during the quarter. This marks the sixth consecutive quarter that we have met or exceeded guidance.

More importantly, the business has grown 107% year-over-year for Q3. This illustrates the acceptance OVA1 is experiencing in this previously undeveloped market that Vermillion is pioneering. During Q3, we completed our peripheral artery disease clinical intended use study with promising results that we will discuss later. Additionally, we received a Notice of Allowance for our fifth PAD patent covering a combination of biomarkers that could be used for the diagnosis of PAD. This further strengthens our patent portfolio around this important program.

We are also very excited to have added Dr. Munroe to our team. Dr. Munroe has extensive experience in the diagnostic industry and has been a key member of senior management in a number of prominent diagnostic and life science companies. Most recently he served as Vice President Immunoassay Research and Development at Beckman Coulter.

I look forward to discussing these milestones in greater detail in a few minutes. For now, I will turn it over to Eric to discuss our financial performance.

Thanks, Gail.

Total revenue for the 3 months ended September 30, 2011 was $320,000, $206,000 from product sales of OVA1 and $114,000 from license revenue. Total revenue for the 9 months ended September 30, 2011 was $1.055 million, $714,000 from product sales of OVA1 and $341,000 from license revenue. Operating expenses for the 3 and 9 months ended September 30, 2011 were $4.8 million and $15.5 million, respectively.

Operating expenses included approximately $0.4 million of non-cash stock-based compensation expense in the third quarter of 2011 and $3 million in the first 9 months of the year. This compares with operating expenses of $4 million and $11.2 million for the same 3 and 9 month periods of 2010. The increases year-over-year were primarily due to the addition of personnel subsequent to the Company's emergence from Chapter 11 bankruptcy protection, investments in sales and marketing to establish the adoption of, and reimbursement for, OVA1 as well as an increase in clinical trials and collaboration costs for the ongoing development of the Company's ovarian cancer program and PAD blood test VASCLIR.

Total net loss for the third quarter was approximately $4.7 million or $0.31 per share based on weighted average shares outstanding of 14.8 million. Total net loss for the 9 months ended September 30, 2011 was approximately $14.7 million or $1.04 per share based on weighted average shares of 14 million. Our current shares outstanding are 14.9 million.

Cash and cash equivalents at September 30, 2011 were $27.2 million. We utilized $4.3 million in cash from operations during the third quarter, and paid off the $5 million principal amount of convertible notes which came due in September. We anticipate that cash usage during the fourth quarter of 2011 will be approximately $4 million to $5 million.

Now I will turn it back to Gail for a discussion of various corporate initiatives.

I am very pleased to report ongoing progress in several key areas. In terms of OVA1, Quest Diagnostics performed an estimated 4,108 OVA1 tests during the quarter, which represents 6 continuous quarters of growth. Several factors influenced the pacing of our growth during the quarter. Helping us were the ongoing market development programs and medical education events, as well as improvement in sales force productivity. Not surprisingly, the summer holidays negatively impacted our quarter-over-quarter growth.

We continue to track the total number of doctors ordering OVA1. As you know, there are roughly 35,000 gynecologists in the US today. At the end of Q3, there were over 3,200 doctors who have ordered OVA1, a 23% increase over Q2. This represents approximately 9% of the total GYNs in the US. We anticipate these trends will continue as more gynecologists become educated on OVA1.

Additionally, a key metric for the territory develop managers is to gain the endorsement and support of the gynecologic oncologists. Of the approximate 800 practicing gynecologic oncologists in the US, our internal tracking reflects support from approximately 34% at the end of Q3; an increase of approximately 4% from last quarter. A GYN-ONC is considered to support OVA1 by speaking on OVA1, providing a referral list of physicians, changing their institution protocol to include OVA1, writing a letter of support, or other quantitative efforts that we can measure. This is crucial to our continued growth because the gynecologists will rely in the consultation of these specialists in determining when best to use OVA1. We expect this trend to continue as our newer team members become more seasoned.

During the third quarter, we conducted almost 20 medical education events delivering the OVA1 message and data to over 400 doctors in a formal venue conducive to education, dialogue, and discussion with our KOLs. We were delighted with the data presented by Dr. Fred Ulan at the European Society of Gynecologic Oncology meeting in Milan. The key finding was that OVA1, when combined with imaging, achieved a 98.1% sensitivity for all types of ovarian cancers and obtained a negative predicted value of 96.3%.

Historical studies show that women have more favorable outcomes when surgery for ovarian cancer is performed by a gynecologic-oncologist. The current research demonstrates that OVA1 in conjunction with imaging will not only help identify more women with ovarian cancer for referral, but can give them greater confidence that their ovarian tumor is benign. Additionally, because of the high overall mortality from ovarian cancer, clinical sensitivity for malignancy is a key metric, especially in the early stages when survival beyond 5 years is at its greatest. These data further confirm and support the clinical utility of OVA1 as an adjusted tool to aid the physician in the assessment of women with an adnexal mound.

In terms of our marketing efforts, during the third quarter we exhibited at 13 state level and regional physician events. These meetings continue to give us the opportunity to interact with key thought leaders, discuss the utility of OVA1, and gain overall support. In September, we celebrated Ovarian Cancer Awareness Month by participating in 14 events nationwide. Ovarian cancer survivors and their families are champions for OVA1 and continue to help us create awareness among women and physicians.

Our special media efforts in the third quarter resulted in 66% growth in our reach with women and physicians alike. Additionally these platforms helped to build brand strength and loyalty for OVA1. All of these efforts are critical to create awareness and stimulate demand. These are part of the strategic campaign for our business to build a market which did not exist before, and develop a long-term opportunity for OVA1.

We also advanced our pipeline this quarter with positive top line results in our PAD intended use clinical study. These data were subsequently used to identify a biomarker combination that identifies 80% of PAD patients missed by the conventional Framingham risk score. The availability of a simple blood test to reclassify patients missed by a conventional risk assessment could greatly aid in the detection and management of this disease, which affects millions of Americans each year. We will be scheduling a meeting with the FDA to discuss the results of the intended use study and the most appropriate pass forward for regulatory clearance of this important product. We are also planning to submit these results for presentation at a major cardiovascular meeting in the first half of 2012.

We recently signed a definitive agreement that we believe could help accelerate our ovarian program. We entered into an asset purchase agreement with Correlogic Systems, whereby Vermillion has agreed to pay $435,000 in cash for substantially all of Correlogic's assets in connection with its ovarian cancer diagnostics business, which includes certain diagnostic samples, software, and IP. Correlogic is in Chapter 11 proceedings in the United States Bankruptcy Court for the District of Maryland and the transaction is subject to court approval. Strategically, this transaction gives us access to perspectively collected samples, intellectual property, and software, all of which could accelerate our ovarian program. Additionally, we have sample collection times and potentially gain further IP protection.

Let me now turn to market requirements and initiatives for creating the demand and protecting the value of innovative and breakthrough diagnostics and technologies. We realize coverage and reimbursement are significant business development activities. As such they require front end work to achieve the desired long-term outcomes. To lead this effort [Carl Swanns], industry veteran with extensive reimbursement successes in multiple start-ups has joined the Vermillion team.

We continue to be pleased with our progress in obtaining coverage after just 18 months post-launch of OVA1. Currently, approximately 25% of the insured lives in the US have OVA1 coverage, which is a compelling start. We continue to focus ongoing efforts towards obtaining national coverage decisions; however, these typically have a much longer lead time due to industry established processes and time frames. In most cases, these entail clinical and technical reviews that are performed on an annual basis.

Vermillion is currently identifying key physicians to interact with health plan medical directors, defining post marketing studies to satisfy payer coverage concerns and conducting a patient referral study. For health plans that have published positive coverage policies, the next step is to negotiate an acceptable reimbursement rate, typically using the established Medicare allowable as a benchmark. We're fortunate to have Quest Diagnostics as our partner, providing Vermillion with a depth and breadth of experience in relationships to help ensure our success with obtaining appropriate and acceptable reimbursement.

Incorporation into clinical practice guidelines is another key factor in driving adoption for OVA1. It is worth noting that OVA1 is now mentioned by both the National Comprehensive Cancer Network Guidelines and the ACOG Practice Committee for managing adnexal masses. We understand the impact and the importance of guidelines and are actively pursuing a strategy for inclusion into ACOG guidelines. Turning to forward guidance, we expect 4,000 to 4,300 OVA1 tests to be performed in Q4.

As we described, we face certain challenges in developing a market for an innovative product like OVA1. While we are confident in those actions that we are currently undertaking, it is important that we continue to set appropriate expectations for our investors. This guidance takes into consideration the impact of holidays and limited coverage by the larger payers combined with the impact of direct patient bills. Our goal is to support growth throughout Q4 by continuing our marketing efforts, educating the target audience at key industry conferences, and securing additional health plan coverage decisions. We are aggressively working with physician practices to minimize patient bills by creating medical necessity and winning appeals. Additionally, we are evaluating the potential for a unique code for OVA1.

On behalf of the management, we appreciate the support of our shareholders during the market development phase of this landmark product. We remain focused on the execution of our plan. Thank you. Operator, we are now ready for questions.

Thank you. (Operator Instructions) Trey Cobb with Stephens. Please go ahead with your question.

Thank you for taking my question. Just to start, I believe you said you ended 3Q with 3,200 physicians ordering OVA1, so you added an incremental 600 physicians during the quarter; is that correct?

Yes Trey, that is correct.

Okay, and then maybe you could talk a little bit about how orders trended throughout that -- were September order trends better than July, or just any incremental data you could provide there would be helpful.

Trey, we don't give monthly numbers, but we continue to trend upwards and we saw continual increase in our average test per day or per month on an ongoing basis through the third quarter.

Okay, that was helpful. And then on the guidance 4,000 to 4,300, are there any headwinds that we should be looking for 4Q? Because I would assume with the solid incremental adds that would continue, 600 this quarter, 600 in 2Q, I thought the order trends may look to be a little conservative. Is there anything that we are missing there?

Well, Trey, we hope that investors realize that we are not a book and ship type business, it's esoteric and we don't have visibility to future orders; therefore, we always take a conservative approach to guidance. We continue to add new accounts and we continue to have higher reorders for physicians, but we also see market conditions such as patient bills affecting some of the doctors ordering patterns. We know who they are and we are putting appropriate actions into place.

Okay, thanks. And then Gail, maybe if you could just talk a little bit more about the strategic rationale for the Correlogic acquisition.

Sure. We have done a considerable due diligence on the Company and its assets; and in looking, we felt that they had a fairly attractive sample base. There's two reasons when we look at things like that, are they additive to the program that you have?

And as you know we're make in great progress with our OVA2 program, so we felt like that it could be additive to that. And instead of us having to go and collect those samples, we felt like those samples would give us a jump start. We also feel like -- there's always a lot of what I call white noise out there by a lot of companies claiming to be in this space; and by taking this IP and software, we can harvest it and we can also sort of keep other people out of that space, if you will.

Okay. So it just gives you a good jump start I guess on your OVA2.

I think it's very additive to where we are.

Perfect. Okay, thanks for taking my question. I'll hop back in the queue.

No problem. Thank you.

Matt Dolan with Roth Capital Partners. Please proceed with your question.

Hello everybody, good morning.

Good morning.

I wanted to follow on the OVA1 ordering patterns question. It looks like reorder rates are pretty slow relative to the number of accounts you're adding. Maybe help us understand kind of what's going on out in the field as it relates to reorders. Is it a reimbursement issue that is keeping that number depressed at this point? Are you seeing anything competitive? What is driving that number?

Matt, we continue to see reorders. We track them in several different categories and we continue to see each category increasing, as well as initial orders as Trey pointed out. We continue to build the business and see new accounts; but on the other hand, we also see market conditions affecting some of the doctors reordering once they see patient bills. So they may suspend them temporarily; and again, we are working with those doctors and putting appropriate actions in place.

So generally though, reimbursement is probably the rate limiting step there. Are you seeing anything competitively that is affecting reorders?

Yes to the first question; no to the second. Yes, reimbursement and patient bills is a slight impediment there, but no impact from competition.

Okay. And in terms of the variable component of reimbursement that you will book on an annual basis, what do you know about that part of the equation? Clearly that potentially is bigger than your fixed payment from Quest. So if bills are coming in and getting paid, what price are you receiving on those OVA1 tests?

Well, the billing and collection is done by Quest so we really have very little visibility except once per year we get that annual true-up. Quest gives us, every month, they pay us in cash an estimate of that variable piece which is reduced by the 50% credit that we have talked about on previous calls. So until we get the next true-up, which isn't due until the end of February 2012, we just really have no visibility into what that revenue recognition will be.

Okay. I will follow-up on that. And then going into the next quarter, it looks -- the guidance calls for flat OVA1 volumes. Gail, maybe you can just help us with the operating structure, kind of where we are on the OVA1 ramp and maybe you can recalibrate us on how you see that playing out over the next 12 to 18 months relative to the size of the Company's operating structure right now in terms of $4 million to $5 million in spend for the quarter. Thanks.

Sure. So obviously, the fourth quarter is a tough quarter because you have so many holidays. So it's not that we are not out there thinking that we are going to grow the business because of course we are. We are very focused on that. We also know that we have the impact of the holidays, and what Bill has talked about is that we are in that phase where we are sort of growing the top end, but we do have -- we're at that point where we do have some physician practices that are seeing denial's, and that's why we have Carl in there to work on that with the Quest people to handle those denials and we referred to that in the script today.

So we feel like that that is everything we can tell that's fairly normal. A lot of people run into these processes. That's why we are looking at, should we go ahead and pursue a code. So as we meet these challenges, we try to make sure that we are addressing them in a timely manner.

As far as expenses, yes, we are always looking at expense reduction. We will be taking a real strong look at that in fourth quarter. We are looking for revenue generation, and we're always looking at our strategic options. So we are very aware of the balance sheet and the burn, and will be adjusting appropriately.

Okay, great. Thanks for your time.

Zarak Kurshid with Wedbush Securities.

Good morning. Thanks for taking the questions, guys. Kind of dovetailing on the last question, it looks like you have about 10% of GYN-ONCs on board. If you just take kind of the current run rate or maybe a little bit higher and extend that out, it looks like you are still substantially less than some of those bigger numbers for the overall market opportunity of 800,000 tests or so per year. So can you maybe just speak to your current thinking on realistically the size of the addressable opportunity, and how much of that comes with the larger pairs, which could be -- meaning, what is sort of achievable or what can you actually capture over the next couple of years without those large pairs?

Well, we think the market opportunity is solid. We have no reason to believe that the market opportunity today is any different than where we started. But you're absolutely right in that you go through stages. When you launch a product, generally, you get your early adopters, you get the early adopters on the payer, sort of the small payers and you really focus on the middle majority payers.

And what we have to keep recalibrating all of the people that are logged in Vermillion is we're only about 18 months post-launch of this test; and as we all know molecular diagnostic tests do take time. In fact, this week, just a couple of other products are just now getting Medicare and they've been on the market for quite a time. But I would agree with you and I'll ask Carl to speak to it that our next challenge is to really get -- roll over some of the bigger players.

So I will let Carl speak to that. He has been on board now for about 60 days I guess, and has been out there in the field and I will let him speak to that because that is going to be instrumental in us hitting that inflection point. I think it's not only that, Zarak, but it's also continue to work on the guidelines. Getting in the guidelines, getting the major players, these are all very specific things that we need to accomplish and we need to do them in a very timely manner, which we're all very aware of. So I will turn it over to Carl to speak to the reimbursement.

Thank you. As a Gail acknowledge, we have had very successful early adoption by a number payers, which puts us well ahead of comparable companies with a similar time frame. But also as we described, the larger payers have different requirements for data and publications, and we are addressing those as aggressively as possible. That said, we also want to continue to push those payers through the utilization of KOL physicians and having those physicians interact with medical directors, share their case experiences so that we can be both respectful to payer requirements but also aggressively address the market demand that we want to meet. So, --

Okay. Thank you. And just a quick follow-up. How many employees currently, and then Gail if you can talk about the recent 8K regarding Dr. Fung. How has his role changed within the Company, if at all? Thank you.

Okay. I think currently we have about 28 employees. We are fairly stable at this point in time. And as far as Dr. Fung, I believe he is on the call and he will be happy to address that. As we have evaluated the future of the Company, we have the three major programs now with PAD, OVA2, OVA1. And Dr. Fung has contributed greatly over the years and really wanted to pursue more of his medical expertise.

And as we grow the Company, we felt like we needed to broaden from a depth and breadth standpoint our R&D program such that that's why we got sought someone with Donald's experience. Donald has a lot of development experience, platform experience. So whether we are growing internally or whether we are looking from a strategic partnership, etc. we felt like we needed the expertise of someone like Dr. Munroe. We also know that from a reimbursement standpoint, one of the key things that Carl said was look, we've got to have our medical director on the road and meeting with the Humana's, the United's and people of that; so Eric has been out on the road fulfilling that capacity.

So, we really feel like this is part of our growth curve, rounding out our organization and bringing in and supplementing all the talent. So, Eric, did you want to comment any further?

No. I am thrilled to be continuing to work on the PAD program and want to ensure that that continues its successful path. As you noted on this call, we had from the intended use, obtained quite exciting data that we will presenting to the FDA; but the purchase of Correlogic assets really will help us drive over too. So certainly my role in driving our programs forward has not changed. Much of what I will be doing though will be transitioning toward the more medical aspects of the conversations with the FDA, conversations with payers, conversations with KOLs, and so forth. And I think Dr. Munroe's expertise, particularly on the platform side, will help inform our conversations with prospective partners on both OVA2 and PAD platform potential partnerships.

Sounds good. Thank you.

Thank you.

(Operator Instructions) Kevin DeGeeter from Ladenburg Thalmann Financial Services.

Thanks for taking my question, and congratulations on some continued progress. I want to follow-up on a few points. You mentioned in answer to the last question on reimbursement, larger payers interest in publications and data. Do you envision needing to perhaps enroll additional clinical studies to drive the reimbursement discussion, or should we really think about that as additional cuts and additional publication of data the Company already has on hand?

Yes that is the aggressive stance we'd like to take is utilizing data that we have access to, to expedite publications and even abstracts that would then be submitted for publication and use the abstracts as quickly as possible to influence payer adoption.

Okay.

Sorry, this is Donald Munroe. I just want to say that as we undertake commercialization of a technologically advanced product like this, it is important to continue to provide technical support to the product in the field. And I think we are entering into that phase with OVA1. So I would continue to seek collaborations and publications supported by the corporation as we move forward.

Okay, and maybe just two quick housekeeping items. On the Correlogic acquisition, just to clarify, you are not looking to commercialize a lot of OVACheck correct?

No, we are not.

Okay. And do you have any more color on the experience -- sort of ROMA's out there in the field now, kind of how ROMA and OVA1 sort of play with the respective positions and how you see the market segmenting with that additional player in the market?

I think our comments are probably minimum at this point. Their product did get approved. There has not been a whole lot of marketing around the product. I think what I can comment on is that we have a good head start, and I think we've done a really good job of branding OVA1 with the physicians.

What we see so far is that the physicians are remaining very loyal to OVA1. They really like the quality of OVA1 and the quality of the clinical trial. And hence what I am referring to there is the number of cancers in the trial, the depth of the trial, the breadth of the trial. So far we feel very fortunate that we were first to market, that we have taken advantage of the first mover having an organization like Quest behind the product. So we will continue to hit on all those cylinders to keep that lead and to really push and market the product based on its quality.

Okay, and then just maybe two more real quick ones if I may. With regard to ACOG treatment guidelines, how do we think about a timeline for that? Is that realistically maybe 2013 kind of discussion to come to fruition? Is it possible for next year? Just any context would be helpful there.

I will make a brief comment and then I will turn it over to Carl. Here is what we know is that there doesn't seem to be -- it's not like ACOG gives you this document and says here's our process and if you check these boxes we will put you in the guidelines. It does seem to be very subjective, if you well. But we all have some relative experience with the guidelines, Carl in particular. And I think the important thing is that we as an organization understand number one, how important it is; and from that standpoint, I will turn it over to Carl to talk a little bit about how other products have gotten there and what we need to be doing.

Thank you. As a Gail mentioned, the guideline process is it not a check the boxes kind of format. It is political, it's a little bit subjective, that kind of gets into understanding the business side of medicine and utilizing your KOLs to develop the treatment guidelines, utilizing the evidence; and combined with our continued abstracts publications, we will try and get into those guidelines as quickly as possible. And then the variables is just working with your KOLs to have them successfully put you in those guidelines, but as quickly as we can do it.

Okay, then just last thing and I will jump back in the queue. Can you just give us an update on VASCLIR and the PAD program in general? Do you anticipate being able to talk a little bit more about next steps prior to presentation of the medical meeting, sort of springtime next year, or should we really wait for that presentation before clarity on additional steps and product development.

This is Donald Munroe. I will make a couple of comments and then see if Eric Fung has any to add. We're excited by our early results. Based on that, there's a range of important activities that lie ahead. This includes discussions with the FDA on a path to regulatory clearance.

We also need to finalize the design for manufacturability, work with KOLs and payers to pave the way for an improved standard of care; and then we plan to present our early results at a major cardiovascular conference in 2012. And I should mention that we just completed a market analysis with Scriplogics based in New York of 200 clinical practices in major US cities and this really indicated that a simple blood test to detect the presence of PAD would address an important unmet need. The existing methods are complex or unreliable. So I think with that, I will turn it over to Eric to add any other comments he has.

I think the only other comment I would make about our dissemination of the data is that we believe the data are quite compelling. We just want to ensure that we balance the need to provide you with some insight into where we are with the program with our desire to get these data published and presented in the highest quality forms as possible and not to violate any embargo rules. In a sense, you should perhaps take our cautious nature of definitive results to the investment community as a good sign in the sense that we want to ensure that we maintain the integrity of the data stream so that we can have the best chance of a high-quality publication and meeting presentations for these data.

Thanks, Eric.

Laura McGuigan with B. Riley & Co.

Hi guys, thanks for taking my call. With respect to the revenue recognition process, can you give us a sense for when you might feel more comfortable recognizing the additional revenues that are currently being deferred to the balance sheet and recognizing them on an accrual basis? And is the inflection point some percentage of covered lives, or are you far enough along in the process that you even have a sense for that?

I will answer your first question in that for the immediate future, we will be continuing to be deferring the variable revenue to our balance sheet. As I mentioned earlier, we only get one true-up report per year, and our total experience has been the first report we received in 2011. So until we have enough experience to estimate accurately what that variable goal revenue would be, we will not be recognizing it until we receive the true-up report.

Laura, this is Gail. And I think part of what is driving that is we're in that early phase of establishing -- leveling out the reimbursement. So that is what is driving that deferral, if you will. So the more we work with Quest and the more Carl gets out there with his group and we level off that reimbursement and get it stabilized, then I think we will be in a position to be more comfortable on that front.

And then I'll let Carl comment on the second part of your question about the inflection point, but inflection points are driven by many things. They are driven by having your major payers, by driving volume, publications, peer reviews, being in the guidelines. So all those things have to come together to drive those inflection points. And I think we are off to obviously a really great start, but we have to just keep plugging away on all these fronts; but Carl, you might want to comment on the major payers.

Yes. There's not that much to say if there is a kind of a target number of covered lives that all of a sudden gives you an increase in revenue ramp. I was going to say really something similar to what Gail did about number of variables. Covered lives, payer acceptance, is one of those, but also position utilization adoption, and that's just part of the process. Which we, I think we have the right steps in place; and again, as quickly as we can do it, that's the goal.

Okay. Great. Thanks. That's helpful. Just one other question then. Do you have any update on potential plans to fill the CFO position that was left vacant by Sandy?

What we can tell you is the we feel very comfortable right now and very fortunate that Eric was able to step into the Chief Accounting Officer roll. So we feel like we are in really great shape right now. Eric had been performing all of those duties along and had been being groomed. And we have retained an executive search company and we have some very interesting candidates. And we will go through that process, but the good news is, is that we don't feel any pressure, so we really want to get the right candidate. So we will continue to pursue those candidates and fill them when we feel like we find the right person that can really add value to the Company.

All right, guys, thanks very much.

Okay. Thank you.

Ms. Page, there are no further questions at this time. I will now turn the call back over to you. Please continue with the presentation or closing remarks.

On behalf of the management team, we would like to thank you for joining us today. We appreciate your continued interest in Vermillion and we look forward to updating you on our progress on the next quarter. So we appreciate it, thank you, and we will talk to you soon.

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.