Foundation Medicine scores with new regulatory approvals for two Dx tests

Foundation Medicine's ($FMI) wildly successful $111 million IPO in late 2013 is all well and good. But the cancer diagnostics darling is losing more money as it accelerates commercialization efforts for signature products. Revenue isn't yet growing fast enough. That makes the recent New York State Department of Health approval of the Massachusetts company's two initial cancer tests all the more significant.

The 2012 FierceBiotech Fierce 15 winner disclosed that New York regulators signed off on both FoundationOne and FoundationOne Heme. The first is a sequencing-based diagnostic test that runs through 236 cancer-related genes to match patients with the best possible treatment. The second creates a genetic profile for blood cancers. As Foundation Medicine noted, New York is the only U.S. state that requires an independent regulatory review process for laboratory-developed tests.

New York's regulatory signoff is a feather in the caps of Foundation Medicine executives, and a brief industry perspective explains why. Diagnostics companies are struggling to win insurance approval for their tests even after they gain a regulatory OK, which can leave revenue growth potentially dead in the water. But Foundation has circumvented this to some degree.

Its revenue hit $11.5 million during the company's 2014 first quarter, up from $9.7 million in the 2013 first quarter. That gain reflects growing market penetration for FoundationOne, which first launched in December 2013. But net losses are soaring as Foundation gears up its commercial and business development operation, reaching $12.2 million during Q1, versus a $7.2 million deficit over the same period a year ago. The New York regulatory approval opens a crucial medical market to Foundation, then, and will hopefully help it boost revenue at a pivotal time.

Meanwhile, Foundation Medicine medical director Dr. Jeffrey Ross called the New York approval "a significant regulatory milestone" for the company.

Earlier this year, Foundation Medicine announced plans to raise $150 million in a stock offering but then abandoned that path in April due to "market conditions." That action places further pressure on growing revenue and is another reason why the New York regulatory nod is important.

- read the release

Special Report: FierceBiotech's 2012 Fierce 15 - Foundation Medicine