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Foundation Medicine's Q3 Revenues More Than Double

NEW YORK (GenomeWeb News) – Foundation Medicine reported after the close of the market Wednesday that its third quarter revenues more than doubled year over year and were up 39 percent over the second quarter of this year.

The Cambridge, Mass.-based cancer genomic analysis firm reported total revenues of $8.2 million for the three months ended Sept. 30, up from $3 million in Q3 2012 and $5.9 million in Q2 2013. It beat the consensus Wall Street estimate for revenues of $6.9 million.

More than half of its revenues were derived from clinical testing, the company said in reporting quarterly revenues for the first time since going public in September.

Foundation Medicine said during this week's call that oncologists ordered 2,577 of its FoundationOne tests, a next-generation sequencing-based test that analyzes over 200 cancer-related genes. Tests ordered in the third quarter were up from 1,626 ordered in the second quarter of 2013. Additionally, the company said that slightly more than half of orders in the third quarter came from community-based oncologists.

The firm also announced that it has been selected to provide genomic testing for patients with squamous cell carcinoma of the lung within a Master Protocol study — a biomarker-driven, multi-drug, multi-arm, multi-center PhaseII/III registration trial. Foundation's test will be used to stratify patients into the appropriate target-specific arms of the trial. The study collaborators include Friends of Cancer Research; National Cancer Institute; Foundation for the National Institute of Health; US Food and Drug Administration; and members of the SWOG cancer research cooperative Yale Cancer Center, MD Anderson Cancer Center, University of California Davis Cancer Center, University of Colorado Cancer Center and Fred Hutchison Cancer Center.

"The third quarter was strong in terms of the commercial ramp with test and revenue both growing at accelerated rates as compared to prior periods," President and CEO Michael Pellini said during a conference call discussing the firm's results. "We were very encouraged by the level of interest from oncologists and pathologists who were seeking us out and by their response when we delivered actionable information, often allowing them to provide new treatment roadmaps for their patients."

Revenues in the third quarter were driven by both the company's clinical testing business as well as its biopharmaceutical business. Revenue from clinical customers in the third quarter was $4.4 million, an increase from $500,000 in the prior-year period. The biopharmaceutical side of the business, meantime, generated $3.8 million in revenue, up from $2.6 million in the third quarter of 2012.

Biopharmaceutical revenue is based on negotiated price per test, which for the third quarter was approximately $3,700 per test, down from $3,900 in the previous quarter, "driven by volume-based pricing in clinical trials," said Jason Ryan, VP of finance, during the call.

The company's third quarter R&D expenses were $7 million, nearly double the $3.6 million in spent in Q3 2012, while SG&A expenses wmore than tripled year over year to $9.5 million from $3 million.

Foundation Medicine posted a net loss in the third quarter of $12.5 million, or $3.51 per share, compared to a Q3 2012 net loss of $5.5 million, or $2.39 per share.

As of Sept. 30, the company had $138 million in cash, cash equivalents, and short-term restricted cash.

"Results in the third quarter demonstrate the growing enthusiasm in the marketplace for our fully informative genomic profile for use across all solid tumors," Pellini said in a statement. "We are very encouraged by the commercial traction as the utility of FoundationOne and the information it delivers garners growing recognition among oncologists, pathologists, and pharmaceutical companies."

The firm also said today that it is on track to launch its second clinical product, FoundationOne Heme for hematologic malignancies, in early 2014. It is developing that product in collaboration with Memorial Sloan-Kettering Cancer Center.

Going forward, the company will continue to focus on its reimbursement strategy. In the third quarter, average reimbursement from third-party payors was $3,300 per test, the company reported, which was down around 8 percent from the second quarter due to new CPT codes issued by the Centers for Medicare & Medicaid Services this year.

Additionally, around 573 of the test orders in the quarter were for patients on Medicare, and the firm said it plans to begin submitting Medicare claims before the end of the year.

Steve Kafka, the firm's COO, said on the call that the firm will use proceeds from its IPO to grow its sales force and execute on its reimbursement strategy.

Over the next several years, Kafka said that the company plans to have a sales force of between 80 and 100 individuals.