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Results of OperationsYear Ended December 31, 2011 as compared to Year Ended December 31, 2010 The selected summary financial and operating data of Vermillion for the years ended December 31, 2011 and 2010 were as follows:
Year Ended December 31, (dollars in thousands) 2011 2010 Increase (Decrease) Amount %

Revenue: Product License Total revenue Cost of revenue: Product Total cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Total operating expenses Loss from operations Interest income Interest expense Gain on investments in auction rate securities Change in fair value and gain from warrant exercise, net Debt conversion costs Reorganization items Reorganization items related party incentive plan Other income (expense), net Loss before income taxes Income tax benefit (expense) Net loss

1,469 454 1,923 129 129 1,794 5,387 5,539 8,509 19,435 (17,641) 64 (396) 378 (96) (99) (17,790) (17,790)

308 867 1,175 88 88 1,087

1,161 (413) 748 41 41 707 1,539 2,682 (475) 3,746 (3,039) 24 95 (58) (3,975) 141 1,581 6,932 (457) 1,244 1,244

377 (48) 64 47 47 65 40 94 (5) 24 21 60 (19) (91) (94) (128) (7) (7)

3,848 2,857 8,984 15,689 (14,602) 40 (491) 58 4,353 (141) (1,677) (6,932) 358 (19,034) (19,034) $

Product Revenue. Product revenue was $1,469,000 for the year ended December 31, 2011 compared to $308,000 for the same period in 2010. We recognized product revenue for the year ended December 31, 2011 for the sale of OVA1 through Quest Diagnostics. Quest Diagnostics performed approximately 15,225 OVA1 tests during the year ended December 31, 2011 compared to approximately 6,155 tests for the same period in 2010. We commercially launched OVA1 on March 9, 2010. Product revenue increased $1,161,000 for the year ended December 31, 2011 compared to the same period in 2010 due to the increased volume of tests as well as the recognition of deferred revenue upon meeting the criteria for revenue recognition. During the fourth quarter of 2011, we recognized $549,000 of deferred revenue related to 2011 upon receipt of an annual royalty report from Quest Diagnostics based on final resolution for 11,708 tests. During the first quarter of 2011, we recognized $160,000 of deferred revenue related to 2010 upon receipt of an annual royalty report from Quest Diagnostics based on final resolution for 2,814 tests. Tests which do not yet have final resolution for 2011 will be included in our 2012 annual royalty report. During 2010, we recognized only the $50 fixed fee per test in product revenue and recorded additional payments as deferred revenue. License Revenue. License revenue was $454,000 for the year ended December 31, 2011 compared to $867,000 for the same period in 2010. Under the terms of our secured line of credit with Quest Diagnostics, $3,000,000 principal was forgiven upon the achievement of FDA approval for OVA1. This amount is recognized 46