NEW YORK (360Dx) – Following Vermillion's disappointing first quarter financial results, investment bank Canaccord Genuity today downgraded the company's shares to a Hold rating from a previous Buy rating.
Canaccord also cut its price target on Vermillion's shares to $1 from $2.25.
In addition to Vermillion's Q1 results, which Canaccord analyst Mark Massaro said in a note missed his estimates "across the board," the firm is taking a "very measured approach" to building its sales force. The company recently added four sales reps for a total of nine, but "we think a lot more are needed to stimulate demand" for the company's OVA1 ovarian cancer test.
He further pointed to a slower uptake for the business than expected, as well as competitive pressures and a recent financing that diluted Vermillion's share count. "We could look to get more constructive on the stock as we wait to see if [Vermillion] can drive greater physician order of OVA-1 based on a more robust go-to-market strategy, winning major commercial payor coverage decisions and contracts, and showing sustainable volume growth," Massaro said.
Despite the challenges, Vermillion did see some bright spots in recent months, and he noted $13.3 million in net proceeds that Vermillion raised last month, which brought its pro forma cash to approximately $16.4 million. Reimbursement from the Centers for Medicare & Medicaid Services for the OVA1 test also increased fourfold to $897 per test as a result of the Protecting Access to Medicare Act, which went into effect on Jan. 1.
Massaro estimated that Vermillion has coverage decisions for about 125 million lives, and the company is now in network for 105 million lives and is progressing on getting positive coverage decisions with insurers for contracts with more attractive rates.
In morning trading on the Nasdaq, Vermillion's shares were down about 6 percent to $.98.