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Foundation Medicine Q3 Revenues Rise 16 Percent, Net Loss Widens

This article has been updated with information and comments from Foundation Medicine's earnings conference call.

NEW YORK (GenomeWeb) – Foundation Medicine reported after the close of the market on Wednesday that third quarter revenues rose 16 percent year over year.

Separately, Foundation Medicine and healthcare tech firm Flatiron Health said today that they have launched a clinico-genomic database to help researchers and biopharmaceutical partners develop targeted cancer therapeutics and immunotherapies. The database contains genomic profiling data from Foundation's assays as well as annotated longitudinal clinical and outcomes data extracted by Flatiron from electronic health records for almost 20,000 patients.

For the three months ended Sept. 30, the Cambridge, Massachusetts-based firm booked $29.4 million in revenues, up from $25.4 million during the year-ago quarter, and beating analyst estimates of $28.7 million.

Revenue from clinical testing declined sharply to $8.7 million, down more than 35 percent from $13.7 million a year ago. The decrease was driven by various factors, the company said, the most important being that it moved in-network with UnitedHealthcare for stage IV non-small cell lung cancer testing in late 2015, so it no longer receives payments from this payor for other indications.

Revenue from biopharmaceutical customers grew 77 percent to $20.7 million from $11.7 million in Q3 of 2015. This includes a $5 million milestone payment from Roche related to Foundation's liquid biopsy assay, FoundationACT; $4.5 million from Roche related to the Molecular Information Platform Program; $3.1 million from Roche for reimbursement of R&D costs under the CDx Development and Immunotherapy Testing Platform Development Programs; and $0.5 million of other Roche-related revenue.

"Foundation Medicine delivered another solid quarter highlighted by strong biopharma revenue and record clinical testing volume," said CEO Michael Pellini in a statement. "We believe our progress on building distinct, yet synergistic clinical and biopharma businesses, developing applications that enable patient access to therapies and clinical trials, aggressively working towards reimbursement coverage and payment for our comprehensive genomic profiling assays and pursuing parallel review with [the US Food and Drug Administration] and [the Centers for Medicare & Medicaid Services] for FoundationOne will drive continued growth and value creation."

During a conference call to discuss the firm's earnings, Pellini added that based on the current timeline, Foundation Medicine expects the review to be completed in the second half of 2017.

He also noted that Palmetto GBA, the firm's local Medicare Administrative Contractor in North Carolina, issued a revised local coverage determination in late September that expands access of non-small cell lung cancer patients to the company's assays. The LCD now includes all stage IIIB/IV NSCLC patients, irrespective of smoking history.

Foundation Medicine reported 11,627 clinical tests in the third quarter, 45 percent more than in Q3 of 2015. This included 9,398 FoundationOne, 1,325 FoundationOne Heme tests, and 904 FoundationACT tests.

Average reimbursement for its tests was $2,800 for the quarter, down from $3,000 in the year-ago quarter.

Foundation's new laboratory in Research Triangle Park, North Carolina, became operational in September and the firm is transitioning all its FoundationOne and FoundationOne Heme tests to the new location. However, the company did not recognize any revenue from Medicare for the third quarter.

The company also noted that its FoundationCORE molecular information database grew to nearly 100,000 patient cases at the end of Q3.

Foundation's net loss for Q3 widened significantly to $31.3 million, or $.90 per share, from $20.6 million, or $.60 per share, in the year-ago quarter. Analysts had estimated an average net loss of $.88 per share.

The firm's Q3 R&D expenses rose 41 percent to $17.2 million from $12.2 million in Q3 2015. SG&A expenses rose 18 percent to $27.7 million from $23.5 million in the year-ago quarter.

Foundation Medicine finished the quarter with $77.8 million in cash and cash equivalents and $90.0 million in marketable securities.

For FY 2016, the company continues to expect revenues of $110 million to $120 million. It slightly narrowed its volume guidance, now expecting to deliver between 40,000 and 41,000 FoundationOne and FoundationOne Heme clinical tests this year. Analysts on average expect 2016 revenues of $118.6 million.

Foundation's shares fell 9 percent to $19.50 in Thursday morning trading on the Nasdaq.