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Foundation Medicine Doubles Q1 Revenues

NEW YORK (GenomeWeb) – Foundation Medicine reported after the close of the market on Wednesday that it doubled its revenues in the first quarter, driven by strong growth in its molecular information services to biopharmaceutical companies.

For the three months ended March 31, the Cambridge, Massachusetts-based firm reported $52.8 million in revenues, up from $26.3 million during the same period last year and beating the average Wall Street revenue estimate of $44.9 million.

Total molecular information services revenues, including clinical testing and pharma segments, grew 121 percent to $46.6 million from $21.1 million in Q1 2017. Specifically, revenues from clinical testing grew 62 percent to $18.8 million from $11.6 million a year ago.

The increase in its clinical testing business "is driven by growing awareness by physicians about the importance of molecular testing, as well as the benefits of biomarker-guided drug selection," Foundation Medicine CEO Troy Cox said during a call to discuss quarterly earnings.

Revenues from pharma companies for molecular information services increased 193 percent to $27.8 million from $9.5 million in the first quarter of 2017. Pharma R&D services revenues grew 19 percent to $6.2 million from $5.2 million a year ago.

Foundation reported 21,861 clinical tests in Q1, a 57 percent increase from Q1 2017. This included 17,685 FoundationOne tests, which analyze more than 300 genes and help guide treatment decisions for solid tumors; 2,005 FoundationOne Heme tests for comprehensive genomic profiling of hematologic malignancies and sarcomas; 2,123 FoundationACT liquid biopsy tests for solid tumors, and 48 FoundationFocus CDx BRCA tests for identifying best responders to the advanced ovarian cancer drug Rubraca (rucaparib).

On March 30, FoundationOne CDx became commercially available, and the company plans to keep the platform up to date with new CDx claims by submitting supplemental PMAs.

During the call, Foundation executives highlighted that on March 16 the Centers for Medicare & Medicaid Services finalized its national coverage determination for NGS cancer panels. The company repeated that CMS has confirmed that the NCD extends coverage for not only its CDx indications but for all solid tumors for eligible stage III and stage IV cancer patients. 

"Academics and community [oncologists] alike … like to hit the easy button, and while treating cancer isn't easy, the outcome of the final NCD made it very convenient and easy for all our customers, all practitioners, to be able to have coverage for all solid tumors," Cox said.

Foundation Medicine Chief Commercial Officer Tom Civic noted during the call that the next step is to work with commercial payors with Medicare Advantage plans to ensure that they're extending coverage as the NCD outlines, as required by law. The company has a team helping commercial payors make that transition, and "while we're there … we'll also be talking about their commercial lives as well," Civic said.

Additionally, on March 22, CMS issued guidance on how labs can request advanced diagnostic laboratory test (ADLT) status for a test, which would allow it to be paid with a unique code. Under the Protecting Access to Medicare Act, ADLTs are paid based on their list price for the first three quarters, then a weighted median of private payor rates every year after. 

"By July 1, we anticipate FoundationOne CDx will be designated as a new ADLT, which will enable reimbursement under PAMA," Cox said.

Foundation's net loss for the first quarter decreased to $37.4 million, or $1.02 per share, from $46.5 million, or $1.31 per share, in the year-ago quarter. Analysts, on average, had expected a net loss of $1.10 per share.

The firm's R&D expenses for the quarter rose 3 percent to $23.9 million from $23.3 million in Q1 of 2017. Its SG&A expenses increased 21 percent to $38.2 million from $31.7 million last year.

Foundation finished the quarter with approximately $60.3 million in cash and cash equivalents, and $50 million in marketable securities.

The company is expecting 2018 revenue to be in the range of $200 million to $220 million and is predicting it will deliver between 90,000 and 100,000 clinical tests during the year.

Foundation CFO Jason Ryan said during the earnings call that there may be an upside to the revenue guidance. Foundation plans to revisit the revenue guidance in its Q2 call, after gaining "additional insights into the commercial roll out of the FoundationOne CDx, the transition from FoudnationOne to FoundationOne CDx, and the confirmation of ADLT reimbursement status for FoundationOne CDx," Ryan said.

During Wednesday morning trading, Foundation's stock was down more than 5 percent at $68.80.