SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

       DIVISION OF
CORPORATION FINANCE

 November 30, 2010
Via Facsimile and U.S. Mail

  Ms. Sandra A. Gardiner  Chief Financial Officer Vermillion, Inc. 12117 Bee Caves Road Building Two, Suite 100 Austin, Texas  78738

 Re: Vermillion, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2009 Filed May 20, 2010 Form 10-Q for the Quarter Ended September 30, 2010 File No.  000-14800

Dear Ms. Gardiner:

We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us with  information so we may better understand your
disclosure.
 Please respond to this letter within te n business days by providing the requested
information or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and circum stances, please tell us w hy in your response.
 After reviewing the information you provide in response to these comments, we may
have additional comments.

Ms. Sandra A. Gardiner
Vermillion, Inc. November 30, 2010 Page 2
 Form 10-K for the Year Ended December 31, 2009

 Item 1.  Business, page 1

 Clinical Development, page 4

 1. We note your disclosure on page 34 that to become profitable you may need to complete
development of additional key diagnostic te sts, obtain FDA approval and successfully
commercialize these products in addition to the OVA1 test.  In future filings, as applicable, please expand your discu ssion on pages 5 and 6 of your non-OVA1
development efforts to clarify the status of your clinical developmen t in these areas and
indicate whether you are presently seeking pr e-market approval or  510(k) clearance.

Item 9A(T).  Controls and Procedures, page 81

 – Management’s Report on Internal C ontrol over Financial Reporting, page 81

 2. We note your disclosure here regarding the ma terial weakness you identified.  However,
your disclosure appears vague and broad.  With  a view toward enha nced disclosure in
future filings, explain to us in greater detail the material weakness identified and explain with greater specificity how the material  weakness could impact your financial
statements.  You state that th e lack of sufficient staff w ith necessary experience in GAAP
impacted your ability to perform your contro l procedures relating to the accounting and
reporting process.  It is not clear how, if at all, the material weakness relates to the
ongoing recording of transactions.  Tell us any additional control deficiencies you identified, such as inability to properly reco rd complex transactions, lack of segregation
of duties, or lack of management oversight .  Describe how you considered any such
additional control deficiencies in your assessment of intern al controls over financial
reporting.  Refer to SEC Release 33-8310, Commission Guidance Regarding
Management’s Report on Internal Control over Financial Reporting , dated June 27,
2007.

Form 10-Q for the Quarter Ended September 30, 2010

 -Consolidated Statement of Operations, page 2

 3. We note that you present stock-based compensation charges on the face of the
consolidated statements of operations in a table that presents total stock-based
compensation. Consistent with the guidance in SAB Topic 14-F, please revise future
filings to present stock-based compensation in a parenthetical note to the appropriate
income statement line items or to remove the total stock compensation line from the table. As indicated in that guidance, you may also present th e information in the footnotes
to the financial statements or within MD&A.

Ms. Sandra A. Gardiner
Vermillion, Inc. November 30, 2010 Page 3
 Note 1.  Organization, Basis of Presentation a nd Significant Accounting and Reporting Policies,
page 4
 -Significant Accounting and Reporting Policies, page 5

 -Revenue Recognition, page 5

 4. We note your disclosures here regarding your revenue recognition policy on sales of the
OVA1 Test products.  You state on page 16 that it is not easy to es timate revenues from
Quest Diagnostics Incorporated (Quest) related to  the sales of these products.  In light of
your disclosure on page 16 that  it is not easy to estimate re venues from Quest Diagnostics
Incorporated related to the sales of these produc ts, please explain to us  in more detail how
you determine at what point in the earnings  process that you meet the four revenue
criteria prescribed in SAB Topic 13.  In  your discussion, explain why you have only
recognized revenue on 1,592 of the estimated 3,220 tests performed through September 30, 2010 by describing what criteria under SA B Topic 13 had not been met for the
remaining 1,628 tests.
 5. We note that you are accounting for the forgiv eness of principal debt balances from
Quest as license revenue on a straight-line basis over the term of the exclusive sales
period that Quest receives upon co mmercialization of an approve d diagnostic test.  Please
explain to us in more deta il why you are accounting for the forgiveness of your principal
debt balances as license revenue.  Cite any accounting literature you relied upon and how
you applied it to your situation.
 6. Further to the above, we note your disclosure  on page 58 of the Form 10-K that as of
January 23, 2010, only $3,000,000 of the debt had b een forgiven.  It appears that no
additional amounts have been forgiven as of September 30, 2010.  With a view toward
disclosure, please clarify that the license revenues are recognized only for those amounts
for which the debt has been forgiven (i.e., the $3,000,000).
 7. In light of the fact that Quest is a related pa rty, please revise future filings to include the
disclosures required by paragraph 850-10- 50-1 of the FASB Accounting Standards
Codification.
 Note 6.  Commitments and Contingencies, page 8

 8. We note your disclosures related to your ag reement with The John Hopkins University
School of Medicine (JHU).  Please explain to  us why you concluded that the forgiveness
of amounts owed should be recorded as a redu ction to expenses over the remaining term
of the agreement rather than as a gain on extinguishment of liabilities in the current
period.  Cite any accounting literature you re lied upon in determining your accounting.
Please specifically address how you consider ed the guidance in section 405-20 of the
FASB Accounting Standards Codification.  In connection with your response, please

Ms. Sandra A. Gardiner
Vermillion, Inc. November 30, 2010 Page 4
 clarify which line item in the December 31, 2009 financial statements reflects the
amounts owed to JHU at that date.  Please also clarify where in your September 30, 2010
financial statements you have recorded the am ounts that will be amortized as a reduction
to expenses in future periods.
 Item 4.  Controls and Procedures, page 23

 9. We note here and in your Forms 10-Q as of March 31 and June 30, 2010 that you
disclose management’s conclusion on the eff ectiveness of its internal controls over
financial reporting.  Item 308(T) of Regulation S-K indicates that management’s
conclusion on the effectiveness of its internal  controls over financ ial reporting is an
annual assessment and disclosure rather than  a quarterly assessment and disclosure.
Please tell us if management performed an a ssessment on the effectiveness of its internal
controls over financial re porting as of September 30, 2010, June 30, 2010 and March 31,
2010.
 Part II.  Other Information, page 24

 Item 1A. Risk Factors, page 25

 We filed a petition for relief under Chapter 11 on March 30, 2009…, page 25

10. With a view towards disclosure, please tell us  about the “residual risks and uncertainties”
associated with your bankruptcy proceedings.

We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.
 In responding to our comments, please provi de a written statement from the company
acknowledging that:
• the company is responsible for the adequacy an d accuracy of the disclo sure in the filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

• the company may not assert staff comments as  a defense in any proceeding initiated by
the Commission or any person under the federa l securities laws of  the United States.

Ms. Sandra A. Gardiner
Vermillion, Inc. November 30, 2010 Page 5
 You may contact Tara Harkins,  Staff Accountant, at (202) 551-3639 or me at (202) 551-
3643 if you have any questions regarding commen ts on the financial statements and related
matters.  Please contact Joe McCann, Staff Attorney, at (202) 551- 6262, or Jay Mumford,
Reviewing Attorney, at (202) 551- 3637 if you have questions on any other comments.  In this
regard, do not hesitate to contact Martin James,  Senior Assistant Chief Accountant, at (202) 551-
3671.

       S i n c e r e l y ,
                       Kevin L. Vaughn         A c c o u n t i n g  B r a n c h  C h i e f