6 things to like about Foundation Medicine’s Proposed IPO

In an earlier article we discussed the June IPO of Nanostring, an oncology company using microfluidics to test for the risk of recurrence for breast cancer. Another interesting oncology company that filed for IPO on July 29th 2013 is Foundation Medicine.

About Foundation Medicine

Foundation Medicine is involved in cancer genomics, that is examining the genetic makeup of tumors to establish the best methods of treatment. Foundation Medicine’s flagship product, FoundationOne works as follows:

  • A doctor sends a tumor sample to the company
  • The company uncovers genetic alterations in the patient which may allow physicians to better prescribe drugs, clinical trials, and other  medical regimens
  • A FoundationOne report is typically delivered to the physician within 14 to 17 days from the receipt of a tumor sample via their “Interactive Cancer Explorer” platform

According to a cancer genomics article on MIT Technology Review, the “…plunging cost and accelerating speed of DNA sequencing have made this type of genetic analysis practical for the first time…” as seen in the below chart:

Source: MIT Technology Review
Source: MIT Technology Review

The FoundationOne product is designed to interrogate the entire coding sequence of 236 cancer-related genes.  The company believes the US market for this application is approximately $4.0 billion today and will grow to exceed $7.5 billion over the next several years as the medical community better understands the use of targeted oncology therapies. The current price for the FoundationOne test is $5,800 per tumor.

There are at least 6 reasons that make Foundation Medicine look attractive:

  • Strong Backing
    Launched by Third Rock Ventures, the company has backing from Kleiner Perkins Caufield & Byers, Google Ventures, and Bill Gates. The company’s board of directors has 2 partners from Third Rock, a partner from Kleiner, and a partner from Google Ventures. 3 of the 4 founding advisors hold senior roles at the Dana-Farber Cancer Institute.
  • Revenue Growth
    Q1 2013 revenues jumped from 612 thousand in Q1 2012 to 5.2 million, an increase of 750%. 2012 yearly revenues jumped from 2.05 million in 2011 to 10.64 million, an increase of 418%.

    Source: S-1 Registeration Statement
    Source: S-1 Registration Statement

    The product launched in June 2012 with a sales force of only two people. This has now grown to 15 sales professionals.

  • Product Adoption
    More than 1,500 physicians from 25 countries have ordered FoundationOne since its formal commercial launch in June 2012. Additionally, over 800 physicians have ordered FoundationOne just in the three months ending May 31, 2013.
  • Innovative Informatics
    Foundation Medicine is expecting to launch their “Interactive Cancer Explorer” in 2014 which was developed in consultation with Google Ventures. Through this platform, physicians can access their report results from tablets and mobile devices.
  • Key Partnerships
    The company has 18 ongoing relationships with biopharmaceutical partners including Agios Pharmaceuticals, ARIAD Pharmaceuticals, Array BioPharma, AstraZeneca, Celgene Corporation, Clovis Oncology, Eisai, Johnson & Johnson, Novartis, and Sanofi.
  • Strong Competitive Advantage
    The company believes there is no other commercially available product that provides a fully informative genomic profile with characteristics similar to FoundationOne for use in the clinical setting. The company claims that FoundationOne finds more than three times the combined number of actionable genomic alterations identifiable using a collection of six other commercially available and commonly used diagnostic tests.

Conclusion

There have been over 20 life sciences IPOs so far in 2013, over twice that of 2012. With all the talk behind “personalized medicine“, Foundation’s IPO will be one to watch.

Here at Nanalyze, we invest the majority of our savings in 30 dividend-paying stocks that increase our income every year and outperform during both bull and bear markets. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.

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