Foundation Medicine unveiled plans this week for an $86.3 million IPO, the latest milestone in what has already been a rapid rise for a Cambridge, MA, diagnostics startup that's only a few years old.
News of the IPO filing follows the market debut last year of the company's FoundationOne molecular diagnostic test, less than two years after the company's 2010 launch. The innovative diagnostic mixes genetic sequencing and data gathering to help oncologists pick the best treatment for individual patients. At $5,800 per test, the CLIA-certified diagnostic does its work for 200 cancer-related genes, and sales have grown steadily.
Foundation Medicine, a 2012 FierceBiotech Fierce 15 selection, booked $5.2 million in revenue during its 2013 first quarter, up from just $612,000 over the same period last year. Net losses reached the $7.2 million mark, however, up from a $5.4 million net loss in the 2012 first quarter. More than 1,500 physicians at academic centers and community-based practices in 25 countries have ordered FoundationOne since its initial launch, the company said in its S-1 regulatory filing. Execs also note that 18 pharmaceutical partners use the test to boost their development of targeted cancer treatments. Novartis ($NVS), Celgene ($CELG), Sanofi ($SNY) and J&J ($JNJ) Pharmaceutical Research and Development are among the participating companies, Foundation said previously.
Foundation's early success reflects an impressive pedigree mixed with novel technology that has drawn serious industry and investor attention. Take the technology itself: It is the byproduct of scientists and others working in multiple disciplines at Harvard Medical School, the Massachusetts Institute of Technology, the Dana-Farber Cancer Institute and the Eli and Edythe L. Broad Institute. Foundation's participating investors include Third Rock Ventures, Kleiner Perkins Caufield & Byers and Google Ventures.
Success is far from certain, however. No matter the innovation in new diagnostics tests, their makers have struggled to get reimbursement in an increasingly tough market focused as much on cost as quality. That trend threatens to limit the revenue potential for these products, and Foundation could find its longer-term revenue growth limited along the way. The company acknowledges in its filing that it doesn't have the all-important Medicare revenue yet, which often opens the door to wider private insurance reimbursement. And it must negotiate rates with patients, or private reimbursement for individual cases. Also, much of Foundation's early revenue comes from its drug company partnerships, with only a small proportion coming from actual provider sales.
Special Report: Foundation Medicine – 2012 Fierce 15
- here's the S-1
- and FierceBiotech's take
- check out the company's announcement