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As Revenues Continue to Rise, Foundation Medicine Looks to Expand Test, Enable Outcomes Monitoring

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Foundation Medicine reported after the close of the market yesterday that its fourth quarter revenues climbed 87 percent to $9.7 million from $5.2 million in the fourth quarter of 2013, and it reported results from more than 3,750 of its cancer tests during the quarter.

The Cambridge, Mass.-based cancer genomic analysis firm launched its next-gen sequencing-based solid tumor test, FoundationOne, which screens over 200 cancer-related genes last year, and launched a second product, FoundationOne Heme, for blood-based cancers last December.

During a conference call discussing the firm's fourth quarter and full-year earnings, company officials provided further details about Foundation Medicine's tests, market potential, its reimbursement strategy, and future plans. The company plans to expand the FoundationOne test for solid tumors in the first half of this year, and in the second half of the year it plans to introduce new features to its Interactive Cancer Explorer that will give users the ability to add and share clinical outcomes data.

Additionally, as it said previously, the company expects to report between 22,000 to 25,000 tests in 2014. It also plans to grow its US sales force, at 26 as of Dec. 31, 2013, to between 45 and 50 by the end of the year, and eventually to between 80 and 100.

Foundation Medicine President and CEO Michael Pellini said that even as the company adds additional genes to its panel, it does not plan to raise the price of its test, which it does not disclose publicly. "One thing we've been talking to payors about is this idea of delivering a fully comprehensive profile and ultimately getting paid for that approach at a set price," he said. The goal is to move away from the mindset that every time there is a new finding or an expansion of the test, that will lead to an additional price increase. "As we expand the test, we'll maintain the pricing. That's always been an important part of the strategy," he said.

Cancer testing market

Foundation Medicine has two main sets of customers — oncologists that order its tests to help guide treatment for cancer patients, and biopharmaceutical customers that use the test to aid in drug development and for clinical trial work.

During Q4 2013, the company reported results from 3,750 clinical tests, including both FoundationOne and FoundationOne Heme. Of those, 1,593 tests were for its biopharmaceutical customers, which made up around $4.4 million in revenue. The 2,157 tests performed for clinical customers, meantime, generated $5.3 million in revenue.

According to Pellini, the "commercial mix continues to demonstrate our uptake in community practices as well as within the academic medical centers." While uptake grew in both categories, community groups slightly outpaced academic centers, with 55 percent of reported tests from community-based practices in the fourth quarter, Pellini said. "Each category is on or ahead of plan, and we are encouraged with the progress and rapid growth," he said.

Pellini reiterated previous comments that Foundation Medicine's initial market will be the approximately one million patients in the US living with metastatic disease, but that as the company expands to include additional patients, the market will "nearly double" over the next several years.

He added that while there is "a lot of noise" in the cancer panel market, the majority of those panels are "narrow" hotspot panels and do not really compete with Foundation Medicine. Pellini said the company views the market in three different categories. Category one consists of the standard molecular tests that are mainly PCR-based, while category two is the smaller panel area, and category three includes Foundation Medicine's tests.

"We just really don't see any comprehensive approach that's competing with us in the market," he said. Additionally, "our data shows that of the actionable alterations identified by FoundationOne, only approximately 30 percent of them would [have been] picked up from a collection of commercially available hotspot-based next-generation sequencing tests." What that means, he said, is that of the over 9,000 patients tested with Foundation Medicine's tests in 2013, more than 5,000 "might have missed potentially useful treatment or clinical trial options."

Reimbursement strategy

As with all companies and institutions offering next-generation sequencing-based tests, Foundation Medicine must navigate the tricky reimbursement landscape. During Q4 2013, the company recognized $5.3 million in revenue from its clinical tests. Average reimbursement from those tests that was recognized in revenue was around $3,400, a "slight increase from the prior quarter" of $3,300, said Jason Ryan, the company's senior vice president of finance. "Average payment will vary between periods until we obtain broad coverage decisions in the future," he said.

During Q4, the company also began submitting claims to Medicare, Ryan said. For those claims, he said that the company is using miscellaneous codes rather than the stacked CPT codes it originally used for the nongovernmental commercial payors.

Additionally, the firm has also submitted applications on the McKesson Diagnostics Exchange — a catalog of unique identifiers, called Z-Codes, for molecular diagnostic tests. According to Ryan, the "current coding landscape does not contain codes specific enough for tests that are as comprehensive and precise as FoundationOne and FoundationOne Heme," so the company decided to submit applications for unique codes for its two tests. Such Z-Code identifiers have "already been adopted by Palmetto as part of the MolDx program that determines coverage and payment for Medicare in 17 states," he said, and the MolDx program is "expected by many to be adopted by other Medicare administrative contractors and by US commercial payors."

While CPT codes may become available for NGS-based tests, "it would be unusual that a CPT code would be released initially that adequately represents either FoundationOne or FoundationOne Heme," Ryan said.

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