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Foundation Medicine Q3 Revenues Up 45 Percent

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

NEW YORK (GenomeWeb) – Foundation Medicine reported a 45 percent rise in revenues for the third quarter after the close of the market on Wednesday, driven by increases in both its clinical testing and biopharmaceutical businesses.

"Foundation Medicine made great progress in Q3 on our 2017 business objectives," said CEO Troy Cox during a conference call to discuss the earnings. "We achieved record revenue and clinical volume, expanded both our biopharma and clinical businesses, and continued to execute on the parallel review process for FoundationOne CDx, our comprehensive genomic profiling assay."

For the three months ended Sept. 30, the Cambridge, Massachusetts-based firm reported $42.7 million in revenues, up from $29.4 million during the same period last year and beating the average analyst estimate of $38.0 million.

Revenues from biopharmaceutical customers rose 43 percent to $29.6 million from $20.7 million in Q3 2016 and revenues from clinical testing grew 51 percent to $13.1 million from $8.7 million.

Cox said that biopharma revenues included a $10 million milestone payment from Roche for the development of a new assay to measure tumor mutational burden from blood, called bTMB. He said the company recently presented data for bTMB at the European Society for Medical Oncology annual meeting, showing that the test can predict response to immunotherapy. Based on this, the bTMB assay is now being integrated into Roche/Genentech's prospective randomized Phase III Blood First Assay Screening Triaal (BFAST) as a companion diagnostic assay to investigate its use as a noninvasive biomarker of response to first-line atezolizumab in advanced non-small cell lung cancer patients.

According to the new reporting structure the company introduced three months ago, molecular information services revenues totaled $28.4 million, up from $18.7 million last year, and pharma research and development services revenues were $14.3 million, up from $10.7 million during last year's third quarter.

Molecular information services included $13.1 million in clinical revenue, as well as $15.3 million in pharma revenue, $10 million more than during the year-ago quarter. The increase in pharma revenue was driven by clinical trial profiling and by the company's SmartTrials program.

Foundation reported 17,474 tests to clinicians in Q3, a 50 percent increase over the same period last year. These included 14,398 FoundationOne tests, 1,478 FoundationOne Heme tests, 1,488 FoundationACT tests, and 110 FoundationFocus CDxBRCA tests. It also reported 2,817 tests to biopharmaceutical customers. According to CFO Jason Ryan, the average revenue per comprehensive genomic profiling test in Q3, excluding international tests, was about $2,600, a slight increase from Q2.

The company's net loss for the quarter widened slightly to $32.6 million from $31.3 million in the year-ago quarter. On a per-share basis, Foundation's net loss, stayed flat at $.90, beating analysts' average expectation for a net loss of $1.10 per share.

Foundation's R&D expenses in Q3 increased 30 percent to $22.4 million from $17.2 million in the year-ago quarter, while its SG&A costs rose 21 percent to $33.6 million from $27.7 million last year.

Cox said that FoundationCore, the company's database, now contains tumor profiles from nearly 160,000 patients. In a recent query of data from the past year, he said, the company found that 35 percent of patients who had their tumors sequenced were a match for an FDA-approved therapy, a number that he said is likely to grow with new drug approvals and biomarkers.

"Actionability is here today and expanding at rapid rates," he said. "These are no longer single patient cases but our experience is now reflective of impacting thousands of patients and their families. Personalized medicine can be, and should be, the standard of care in clinical practice."

Foundation Medicine continues to expect by year's end a decision from the US Food and Drug Administration and a draft national coverage determination (NCD) from the Centers for Medicare and Medicaid under the parallel review  process it is pursuing for the FoundationOne CDx test. This will be followed by a 30-day open comment period and an administrative window of 60 days before the company will be able to bill for covered indications, Cox said.

At the recent World Conference on Lung Cancer, he said, the company presented data for FoundationOne CDx that demonstrated high concordance with several FDA-approved companion diagnostics for 15 targeted therapies across multiple solid tumor types, including lung, colorectal, breast, and ovarian cancer, as well as melanoma. Cox said those cancer types represent 40 percent to 50 percent of its testing with FoundationOne, adding that he believes it is "reasonable to expect the NCD would cover these tumor types."

He said FoundationOne CDx would also be attractive to the company's biopharma partners since new companion diagnostic markers, after being validated, could be easily added to FoundationOne CDx.

Regarding clinical testing outside the US in collaboration with Roche, Cox said that its laboratory in Penzberg, Germany, is now fully operational and has begun processing patient samples. By year end, he said, Roche will have rolled out commercial testing in 21 countries.

The firm finished the quarter with $76.8 million in cash and cash equivalents and no marketable securities. This included $30 million in proceeds under the company's line of credit from Roche.

For 2017, Foundation Medicine still expects revenues to be in the range of $135 million to $145 million, most likely in the upper part of that range, Ryan said. Analysts are expecting revenues of $141.3 million for the year. The company also increased its clinical testing volume guidance, and now expects to deliver between 64,000 and 66,000 tests in 2017.

Foundation Medicine's shares fell about 6.5 percent to $42.05 in morning trading on the Nasdaq.

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