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BTIG Initiates Coverage of Foundation Medicine With Buy Rating

NEW YORK (GenomeWeb) – Investment firm BTIG today initiated coverage of Foundation Medicine with a Buy rating and a $30 price target on the company's shares. 

In a report, analyst Karen Koski noted Foundation's first-mover status in offering comprehensive molecular genomic tests for solid tumors and hematologic malignancies, and said the firm's "easy-to-use tools and data that can increase its tests' clinical utility is a differentiator." 

While other firms have or are poised to move into the comprehensive genomic profiling space, Koski said that Foundation is one of the few firms that provide clinicians "a clear report that not only details the patient's genomic alterations, but also provides insight into clinically relevant treatments." 

While the reimbursement picture is unclear, Foundation has signed on a few regional payors, Koski said. She also noted that Google covers the company's FoundationOne and FoundationOne Heme tests for its employees and their family members. One other undisclosed company similarly provides coverage for the two tests, she said. 

Further, in July Medicare contractor Palmetto GBA finalized a local coverage decision for comprehensive genomic profiling in a subset of patients with non-small cell lung cancer. Calling the decision a "major step," Koski said that "we expect Foundation's [Medicare administrative contractor, National Government Services], as well as private payors, to issue similar positive coverage decisions." 

It may be several years before payors consistently reimburse for tests such as Foundation's, but "we view the recent Palmetto LCD as an important step in the right direction and a clear example that progress is being made on the reimbursement front," Koski wrote. 

In July Foundation lowered its revenue guidance for full-year 2015 on slower-than-expected progress toward getting an LCD from its Medicare administrative contractor, as well as "competitive noise in the market." Following the announcement, the firm's stock took a deep dive, and its shares remain about 13 percent down from their pre-announcement trading price.

According to Koski, the recent events are only "bumps in the road rather than derailments." 

She also took note of Roche's investment of up to $1.2 billion in and collaboration with Foundation. "We believe partner Roche's size, resources, and relationships will significantly speed up the commercialization of [Foundation's] tests outside the US," she said.

Foundation's shares rose about 6 percent to $25.19 in afternoon trading on the Nasdaq.