This article has been updated to include information from Foundation Medicine's earnings call.
NEW YORK (GenomeWeb) – Foundation Medicine reported a 70 percent increase in fourth quarter revenues after the close of market Wednesday, driven by both its clinical testing and biopharma business. The results are in line with the company's pre-announcement of its earnings in January.
"2017 was a year of transformational milestones and significant accomplishments," said CEO Troy Cox during a conference call to discuss the earnings. Specifically, he pointed out the FDA's approval of FoundationOne CDx and the Centers for Medicare and Medicaid Services' preliminary coverage determination for the test last year.
For the three months ended Dec. 31, the Cambridge, Massachusetts-based firm reported $48.9 million in revenues, up 70 percent from 28.8 million during Q4 of 2016, and beating average analyst predictions of $46.2 million.
Revenues from biopharma companies increased 76 percent to $33.4 million from $19.0 million in Q4 of 2016, driven by non-Roche pharma partnerships, while clinical testing revenues grew 58 percent to $15.5 million from $9.8 million.
Based on Foundation's new revenue reporting system, molecular information services revenues, which derive from commercially available products, were $37.4 million in Q4, up 83 percent from $20.4 million in Q4 of 2016. They included the $15.5 million in clinical revenue, as well as $21.9 million in pharma revenues, up from $10.6 million during the year-ago quarter.
Pharma research and development services revenues, which relate to the development of new products, totaled $11.5 million in Q4, up 37 percent from $8.4 million during last year's quarter.
The company reported 20,044 clinical tests during Q4, a 57 percent year over year increase. The average revenue recognized for each test, excluding international sales, was approximately $2,600, in line with the previous quarter.
The firm also reported 6,206 tests to biopharmaceutical customers in Q4.
Foundation's net loss for the quarter widened 7 percent to $38.1 million, or $1.05 per share, from 35.6 million, or $1.02 per share, during the year-ago quarter. Analysts had expected a net loss of $.96 per share.
R&D expenses in Q4 grew 26 percent to $22.9 million from 18.2 million in Q4 of 2016, while SG&A expenses rose 28 percent to $37.0 million from $28.9 million a year ago.
For full-year 2017, Foundation reported $152.9 million in revenues, up 31 percent from 116.9 million in 2016 and beating the consensus analyst estimate of $150.2 million.
Revenue from biopharma companies rose 27 percent to $99.7 million from $78.8 million in 2016. Revenue from clinical testing increased 40 percent to $53.2 million from $38.1 million in 2016.
The company reported 67,375 clinical tests to ordering physicians, up 54 percent from 43,686 in 2016. It also reported 15,587 tests to biopharma customers in 2017.
Cox said that the increase in clinical adoption of its tests last year was driven in part by the addition of actionable targets and immunotherapy biomarkers, including tumor mutational burden (TMB) and microsatellite instability (MSI) markers.
According to the firm's new reporting system, molecular information services revenues totaled $117.2 million in 2017, up 43 percent from $81.7 million in 2016. Pharma R&D services revenues were $35.7 million in 2017, up 2 percent from $35.1 million in 2016.
R&D expenses for 2017 were $91.5 million, up 36 percent from $67.4 million in 2016, and SG&A expenses were $137.0 million, up 29 percent from $106.6 million in 2016.
The company's net loss for 2017 widened 42 percent to $161.5 million, or $4.50 per share, from its 2016 net loss of $113.2 million, or $3.25 per share. Analysts, on average, had expected a loss of $4.39 per share.
Foundation Medicine finished the year with $71.4 million in cash and cash equivalents and no marketable securities, including $30 million in new borrowings received in Q4 under its credit facility agreement with Roche Finance. In addition, it had $140 million remaining under the Roche credit facility.
For 2018, the firm expects revenues between $200 million and $220 million, a 37 percent increase at the midpoint, according to CFO Jason Ryan.
Revenue from molecular information services is expected to be between $160 million and $175 million, a 43 percent increase at the midpoint. The company anticipates that clinical revenue in particular will grow between 70 percent and 90 percent in 2018, driven by Medicare payments and increased testing volumes. It expects to report between 90,000 and 100,000 clinical tests in 2018, a 41 percent increase at the midpoint.
Pharma revenues are expected to grow between 10 percent and 20 percent. Specifically, Foundation anticipates revenues from pharma R&D services to total between $40 million and $45 million, a 9 percent increase at the midpoint, driven by CDx partnership and R&D initiatives. Pharma revenues are expected to drop sequentially between Q4, 2017 and Q1 of this year due to "the timing of various workstreams," Ryan said, which also happened a year ago.
Starting this year, Foundation Medicine is moving to a new revenue recognition standard, under which it will record clinical revenues on an accrual basis instead of on a cash basis.
Foundation Medicine's share price dropped about 12 percent in morning trading on the Nasdaq.