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Correspondence Letter

 Vermillion, Inc.

Building Two, Suite 100

 12117 Bee Caves Road

 Austin, TX 78738

 December 17,
2010

 VIA EDGAR AND U.S. MAIL

United States Securities and Exchange Commission

Division of Corporate Finance

 100 F Street N.E.

 Washington, D.C. 20549

 Attn:
Mr. Kevin L. Vaughn, Accounting Branch Chief

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

 Filed November 12, 2010

 File No. 000-14800

Dear Mr. Vaughn:

 On behalf of
Vermillion, Inc. (the “Company”), I submit this letter in response to the comments (the “Comments”) from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by
facsimile dated November 30, 2010, relating to the Company’s Form 10-K for the fiscal year ended December 31, 2009 and filed on May 20, 2010 and Form 10-Q for the quarter ended September 30, 2010 and filed on
November 12, 2010. The Company’s responses to the Comments are set forth below. For the convenience of the Staff, we have restated each Comment in the order provided followed by the Company’s response.

Form 10-K for the Year Ended January 31, 2010

 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 tests, obtain FDA approval and
successfully commercialize these products in addition to the OVA1 test. In future filings, as applicable, please expand your discussion on pages 5 and 6 of your non-OVA1 development efforts to clarify the status of your clinical development in these
areas and indicate whether you are presently seeking pre-market approval or 510(k) clearance.

 We take note of the Staff’s comment and will revise future filings to expand our
discussions on non-OVA1 development efforts and their respective status at the time of each respective filing.

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

 - Management’s Report on Internal Control over Financial Reporting, page 81

2.
We note your disclosure here regarding the material weakness you identified. However, your disclosure appears vague and broad. With a view toward enhanced 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 the lack of sufficient staff with necessary
experience in GAAP impacted your ability to perform your control 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 record 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 internal 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.

As of December 31, 2009 and during the year then ended, the Company operated under Chapter 11 of the United States Bankruptcy Code.
During the bankruptcy period, the Company reduced its headcount to three employees, only one of which was a non-managerial accounting employee. As a result, the Company did not file on a timely basis its Forms 10-Q which became due during the
bankruptcy period and the Forms 10-K for the years ended December 31, 2008 and 2009 in accordance with the Securities Exchange Act of 1934. Specifically, the Company did not have sufficient accounting and reporting expertise necessary to make
estimates requiring significant judgment or to record complex transactions in a manner necessary to facilitate the timely filing of all Forms required by the Exchange Act of 1934. This control deficiency, if not corrected, could result in a material
misstatement of the Company’s annual or interim consolidated financial statements that would not be prevented or detected on a timely basis. Therefore, management concluded that this control deficiency constituted a material weakness at
December 31, 2009.

 During the year ending December 31, 2010, the Company has been involved in efforts to restore and
maintain an effective internal control environment. In February 2010, as part of this process, the Company hired an Interim Vice President, Finance & Chief Accounting Officer and engaged independent contractors, some of whom were former
employees of the Company, to perform an extensive review of fiscal 2008 and 2009 transactions and prepare financial statements for the years then ended in accordance with generally accepted accounting principles. In May 2010, the Company filed its
past-due Forms 10-Qs and 10-Ks to become compliant with the Securities and Exchange Act of 1934. The Company

 has hired a Vice President and Chief Financial Officer, a Corporate Controller and two
full-time accounting staff. In addition, we are restoring, updating and re-implementing the Company’s internal control processes and procedures to reflect our existing operations. Specifically, we have:

(1) re-established our entity level controls;

 (2) re-instituted procedures to address segregation of duties;

 (3) incorporated
the level of management oversight and review of the financial statements and corresponding SEC filings that was originally contemplated in the Company’s internal control system; and

(4) hired management that we believe has the necessary expertise to make estimates requiring significant judgment, to record complex
transactions and to facilitate the timely filing of SEC documents.

 The Company’s testing, evaluation and conclusion on
the effectiveness of our internal controls in place at December 31, 2010 will not be completed until sometime in early 2011. As a result, we have not yet made any conclusions, nor have we disclosed in any of our subsequent quarterly filings,
the sufficiency of the actions taken in remediating the control deficiencies that led to the material weakness at December 31, 2009.

 As requested by the Staff, the Company will clarify the key facts above in future filings.

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 the information in the footnotes to the financial statements or within MD&A.

 We take note of the Staff’s comment and will remove the total stock compensation line from the table in future filings accordingly.

 Note 1. Organization, Basis of Presentation and 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 estimate
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 revenues from Quest Diagnostics Incorporated related to the sales of these products,
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 SAB Topic 13 had not been met for the remaining 1,628 tests.

 The Company derives its product revenues, representing the fee or royalty from lab tests performed by Quest, from sales of the OVA1 Test. As of September 30, 2010, our product sales were made to a
single customer, Quest Diagnostics, Inc. (“Quest”), under the terms of a Strategic Alliance Agreement dated July 22, 2005 and subsequent Amendments. Under the terms of the Strategic Alliance Agreement, the Company’s fee due
from Quest is calculated as 25% of Quest’s Gross Margin (as defined) on sales related to diagnostic tests performed on their end customers.

 Because of the inherent difficulty in understanding Quest’s reimbursement rates by third party payors, the payor mix related to Quest’s patients, and other factors that impact Quest’s Gross
Margin (as defined), for which the Company has limited visibility, product revenue, representing the fee or royalty from lab tests performed by Quest, from the March 2010 product commercialization date through September 30, 2010 has only been
recognized for those diagnostic tests (i.e., 1,592 units) that were reported to us by Quest as having been performed and the price finalized, therefore not subject to future adjustment. Quest is required to report these units and submit payment
within 30 days of the end of each quarterly period.

 In accordance with SAB Topic 13, our product revenues for tests performed
by Quest are recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and
(4) collectability is reasonably assured.

 A break-down of management’s view of the achievement of these criteria is
as follows:

1)
We believe that persuasive evidence of an arrangement exists vis-à-vis the Strategic Alliance Agreement with Quest.

2)
We believe that delivery has occurred as we have provided Quest with a license to our intellectual property for purposes of Quest administering the OVA1 Test to end
customers. We have no further obligations to Quest associated with the technology or tests that Quest performs.

3)
Fee is fixed or determinable: The fee that Quest pays per test for use of our technology is 25% of Quest’s Gross Margin (as defined) as discussed above. However,
we do not currently have visibility regarding numerous important data points used to determine this amount such as Quest’s selling price to end customers, components of Quest’s cost of sales (in computing Quest’s Gross Margin) and
Quest’s bad debt experience, if any. Further, through the periods presented, there are no minimum fee amounts due from Quest. Therefore, our revenue has only been “fixed or determinable” to the extent that Quest has reported to us the
results of its sales to end customers. Through September 30, 2010, Quest has cumulatively reported that 25% of its gross margin on sales of 1,592 tests totaled $158,501. This amount is fixed or determinable and been reported by us as
product sales in our financial statements. The remaining 1,628 tests performed (3,220 total tests estimated to be performed based on the Company’s reporting software, less 1,592 quantified by Quest and recognized as revenue) will not be
recognized as revenue in the financial statements until such time as (1) the amount equivalent to 25% of Quest’s gross margin with respect to those tests has been reported to us or (2) we gain sufficient insight into Quest’s
selling price to end customers, components of Quest’s cost of sales and bad debt experience to enable us to accurately estimate revenue for tests performed but not reported or paid by Quest. Management believes the fees for the 1,628 tests
above are not “fixed or determinable” until such time as one of these two conditions precedent are met.

4)
We believe that collectability is reasonably assured based on Quest’s credit rating and as cash had been paid by Quest to the Company within 5 days of each
reporting period in accordance with the contract, once the actual fee due is determined and reported, as described above.

5.
We note that you are accounting for the forgiveness 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 commercialization of an approved diagnostic test. Please explain to us in more detail 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.

 The forgiveness of the $3,000,000 principal debt
balance associated with FDA clearance and commercialization of our OVA1 Test was viewed by management as value received that was directly tied to our customer’s (i.e., Quest’s) exclusive access to the developed technology and probable
future ability to achieve sales. Since the ‘forgiveness’ of the loan was part of the original arrangement to help develop a test application that will be made available exclusively to Quest for a period of time, it has elements of fees
paid by Quest to the Company to secure the exclusive rights to the OVA1 Test. Accordingly, we determined this value to be most appropriately recognized in a manner similar to a fee paid by Quest for an

exclusive commercialization or distribution right over the related expected period associated with Quest’s distribution rights. We considered whether there was a demonstrable pattern of
revenue recognition that matched the Company’s expectation of future sales under the distribution agreement with Quest. However, we concluded that until we have a meaningful history of product sales that provides a reasonable basis for
estimating future product sales, revenue should be recognized on a straight-line basis over the 2.5-year period of Quest’s sales exclusivity beginning on the OVA1 Test commercialization date of March 9, 2010.

In summary, we believe that the appropriate treatment for the debt forgiveness is similar to payment by Quest for a license to distribute
the Company’s product (i.e., as revenue over the term of the license agreement with Quest).

 Pursuant to the FDA-clearance
of OVA1 Test, Quest holds an exclusive license to sell our OVA1 Test. Each instance of clinical use (i.e. a reported result for the purpose of providing a result to a patient) is recorded and Quest pays the Company on an incremental per-test basis.
The forgiveness of debt was contemplated and included in the original terms of the Strategic Alliance Agreement. Thus, it appears that the forgiveness of debt is directly associated with the FDA-cleared OVA1 Test, which enables the debt
holder, Quest, to earn revenue which in turn results in revenue for the Company. Quest, as debt holder, only benefits from the FDA-cleared product over the exclusivity period. As we can establish a direct relationship between the forgiveness of debt
and the ability to recognize revenue (by Quest and us), we determined that the appropriate treatment was akin to payment of a license fee by Quest for the exclusive right to sell our OVA1 Test. SAB topic 13A, FN35 states, if a licensed product or
technology is physically delivered to the customer, but the license term has not yet begun, revenue should not be recognized prior to inception of the license term. Upon inception of the license term, revenue should be recognized in a manner
consistent with the nature of the transaction and the earnings process.

 Alternatives treatments considered and rejected

1)
Record debt forgiveness as offset to research & development expense.

 Vermillion obtained FDA-clearance in September 2009 and commercially launched the OVA1 Test on March 9, 2010. Quest was not at risk for the research & development of the product (i.e. other
than the potential risk o