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Foundation Medicine Looks Ahead to New Products; Hopeful on Reimbursement and Clinical Growth

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NEW YORK (GenomeWeb) – After a year of strong growth in both revenue and test volume and in anticipation of completing a major deal with Roche this year, Foundation Medicine discussed this week its plan to launch a liquid biopsy cell-free DNA test that could be a significant departure from its current comprehensive sequencing focus.

During a call discussing its Q4 and full-year earnings, the company also predicted more growth in its clinical sequencing business over the next year, albeit amidst some lingering uncertainties around insurance reimbursement for its comprehensive genomic profiling offering.

Moving into 2015, Foundation Medicine is gearing up for the beginning of a major new strategic partnership with Roche this year.

In January, Roche agreed to make a $250 million investment in Foundation. As part of the deal, the companies plan to collaborate in four main areas: Roche will integrate Foundation's tumor profiling platform into its clinical development; the firms will develop new diagnostics for cancer immunotherapy and for circulating tumor DNA; they will co-develop companion diagnostics for use with Roche therapeutics; and they plan to jointly develop in vitro diagnostic kits for Foundation Medicine's tests.

During the company's call Tuesday, Foundation Medicine execs discussed one arm of this planned collaboration, the development of a liquid biopsy circulating cell-free DNA test.

Though the firm has provided limited details about the plans for this assay, Foundation Medicine COO Steven Kafka said this week that the company expects to launch a version of the test for its biopharma partners by the end of this year, and hopes to follow that with a commercial version in 2016.

According to Kafka, the new cell-free DNA product will most likely be more narrowly targeted than Foundation Medicine's broad tumor tissue sequencing test, FoundationOne. He added that the test would likely be targeted, at least initially, toward specific groups of cancer patients for whom tissue biopsy is difficult or in the context of monitoring cancer over time, he said.

In the past, Foundation Medicine has also discussed plans for analyzing circulating tumor cells. "We've had an ongoing program in developing a cell-free DNA product as well as looking at an opportunity to develop a circulating tumor cell product," the firm's Chief Medical Officer Vincent Miller said during the call. "We believe these are potentially complementary approaches."

Foundation Medicine President and CEO Michael Pellini added that the company is "proceeding with an anticipated plan to have products in both [the ctDNA and CTC] spaces."

"There are some situations that are notorious for not yielding cell-free DNA, and one needs a solution for those situations [as well]," he said.

According to Miller, Foundation Medicine is working to amass the appropriate data to support the launch of the new ctDNA test and stressed that robust clinical validation data will likely be necessary to demonstrate the utility of an alternative testing strategy, like liquid biopsy, when the standard of care in cancer is tissue analysis.

"We think this is an area where a no-shortcuts rule applies," he said. "For example, one might want to take a cohort of a couple of hundred patients who had EGFR-mutant lung cancer diagnosed by a cell-free DNA test … treat them with [an] appropriate kinase inhibitor, show a response rate and progression-free survival similar to those well-established in the literature, and then unblind the results of [prior] tissue testing to demonstrate the concordance."

FoundationOne reimbursement

In the meantime, Foundation Medicine also reported significant gains in 2014 for its current suite of tissue-based tests, especially in the community oncology setting, which represented 60 percent of the firm's clinical test volume in 2014.

Foundation Senior VP of Finance Jason Ryan said during the call that average reimbursement per test in Q4 was approximately $3,600, "consistent with prior quarters."

Foundation Medicine saw some significant milestones in the reimbursement arena over the year, including a decision last October by Grand Rapids, Mich.-based Priority Health to cover Foundation Medicine's genomic profiling services for cancer, as well as the receipt of unique Z-Code identifiers for both its FoundationOne and FoundationOne Heme tests through the McKesson Diagnostics Exchange last May.

More recently, Medicare Contractor Palmetto's MolDx program issued a draft local coverage decision proposing coverage for comprehensive genomic profiling — ostensibly including FoundationOne — for advanced non-small cell lung cancer patients whose tumors have tested negative for well-known EGFR mutations or EML4-ALK translocations using other assays.

But, along with other firms offering targeted or comprehensive clinical sequencing, the path toward broad reimbursement for Foundation Medicine is still complicated, Ryan admitted.

"It's important to recognize that [Foundation Medicine], together with other innovators in our industry, continue to face challenges with respect to certain payors. Keep in mind that we're in the midst of a paradigm shift in which there is an increasing understanding that cancer is a disease of the genome, not a disease confined to anatomic sites within the body. That paradigm shift does not conveniently fit into the historic reimbursement system and we see examples of this today," he said.

He further added that the company is hoping to build on the momentum of the Palmetto draft LCD, hopefully establishing a similar LCD with its own Medicare administrative contractor, National Government Services.

"In the meantime, we continue to submit claims to Medicare, using a miscellaneous code. And consistent with our expectations, we have not yet received payments on those submissions. We continue to have very conservative expectations with respect to any backlogged revenue," he said.

According to Pellini, Foundation Medicine is "sensing a bit of additional urgency" among payors, but recognizes that just because Palmetto took this step forward does not necessarily mean that the company's MAC, or others, will take a similar step. "We have been told they are communicating, and that's an important step, and we remain optimistic," he said.

In response to questions from analysts during the earnings call, Pellini said that the company believes that broader insurance coverage is not a matter of if, but "a matter of when."

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