Foundation Medicine’s (FMI) CEO Michael Pellini on Q2 2014 Results – Earnings Call Transcript

August 13, 2014 11:27 am | By More

Source: Seeking Alpha

 

Foundation Medicine Inc. (NASDAQ:FMI)

Q2 2014 Earnings Conference Call

August 12, 2014 4:30 p.m. ET

Executives

Khaled Habayeb – Director of Investor Relations

Michael Pellini – President and Chief Executive Officer

Jason Ryan – Vice President of Finance

Steven Kafka – Chief Operating Officer

Vincent Miller – Chief Medical Officer

Analysts

Isaac Ro – Goldman Sachs

Geoff Porges – Sanford Bernstein

Tejas Savant – JPMorgan Securities

J.P. McKim – William Blair

Zarak Khurshid – Wedbush Securities

Jose Haresco – JMP Securities

Bryan Kipp – Janney Capital Markets

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Foundation Medicine 2014 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded, Today, Tuesday, August 12, 2014.

I’d now like to turn the call over to Khaled Habayeb, Foundation Medicine’s Investor Relations Director. Mr. Habayeb, please go ahead.

Khaled Habayeb – Director of Investor Relations

Thank you, operator, and good afternoon, everyone. Thank you for joining us for Foundation Medicine’s 2014 second quarter call. Here on the call this afternoon to discuss results for the second quarter ended June 30, 2014, are President and CEO, Michael Pellini; Senior Vice President of Finance, Jason Ryan; Chief Operating Officer, Steven Kafka; and Chief Medical Officer, Vincent Miller. Members of the management team will read some prepared remarks, followed by a question-and-answer period.

Before we begin the prepared remarks, I would like to remind everyone that comments made by management in responses to questions on this call will include forward-looking statements and information. Forward-looking statements include among others, statements about our expected financial results, our markets and the implementation of our business strategy.

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such statements, including the risks and uncertainties that are described in our filings with the SEC, including the section entitled risk factors in our most recent Annual Report on Form 10-K, as well as other risks and uncertainties detailed in our subsequent SEC filings. Except as required by law, we have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Before I turn the call over to Mike, I’d like to let you know that we will participate in the Wedbush Life Sciences Conference in New York City tomorrow August 13, as well as Morgan Stanley Global Healthcare Conference in New York City on September 10. For those of you unable to attend, we encourage you to listen to the webcast presentations, which will be available through the Investor Relations section of our website.

With that, I’d like to turn the call over to President and CEO, Mike Pellini, for his opening comments. Good afternoon, Mike.

Michael Pellini – President and Chief Executive Officer

Thanks Khaled. Good afternoon everyone and as Khaled said, thank you for taking the time to join us for our call today.

For those of you that may be new to the Foundation Medicine story, we are a molecular information company that is fundamentally changing the approach to evaluating and treating patients with cancer, both in academic medical centers and community practices as well as in pharmaceutical companies.

We are the first to put validated comprehensive genomic profiling of cancer into the hands of practicing oncologists. Our comprehensive information-based approach is enabling precision medicine for patients with virtually all types of cancer today. The molecular information generated by our testing, whether from the clinic or in the study setting contributes to a growing knowledge base of information about human cancer that is enabling a paradigm shift in its treatment.

As for our second quarter, it was a very strong one, with positive momentum across virtually all commercial metrics. I’d like to highlight a few of these metrics and Jason will provide more financial details a little later in the call.

Total revenue grew 145% compared to the same quarter last year and 27% compared to Q1 this year. Clinical testing revenue alone grew 233% compared to the same quarter last year and 32% compared to Q1 this year. Revenue from our pharma partners grew 65% compared to the same quarter last year and 18% compared to Q1 this year. 60% of our tests were reported to community oncologists, driven largely by repeat ordering physicians. And finally our knowledge-based genomic data grew to over 21,000 patient cases.

As the numbers indicate our business remains robust, resulting in strong sales and volume growth in a range of positive operational successes. Further our pharma volume and related revenue showed strong gains, which reflects Foundation Medicine’s broadening role within the pharmaceutical development process. The team continues to execute well against our goals and our financial results speak to that fact.

We remain very pleased with the rollout of FoundationOne Heme which as you recall was launched in December of last year. The strong uptick in quarter-over-quarter growth underscored the growing validation of Foundation Medicine and our market-leading platform. We’re also very excited about the launch of our updated FoundationOne assay for solid tumors as well as the receipt of full approval for our two assays from New York State.

Another important update for the quarter is a significant number of new studies released that support the clinical use of Foundation Medicine’s assays. We presented 17 abstracts authored or co-authored by Foundation Medicine at ASCO in early June which provides further evidence of the clinical application of our products to help inform the treatment of patients in the aid and the development of targeted therapies.

I would like to highlight two abstracts in particular. First, our decision IMPACT [ph] study conducted in the US oncology network showed that testing with Foundation One resulted in an altered therapeutic choice by treating physician in 28% of advanced solid tumor patients, highlighting the current broad applicability of Foundation Medicine’s approach.

Second is the study of patients with no or light smoking history diagnosed with lung adenocarcinoma, the most common type of lung cancer. This study conducted in collaboration with Memorial Sloan-Kettering Cancer Center used FoundationOne to identify alterations in approximately two-thirds of patients where previous molecular testing At Memorial was negative.

Notably around two-thirds of patients had accessible and guideline-based treatment options not identified without the testing. In these patients with negative prior testing, FoundationOne uncovered alterations matched to FDA approved on-label therapies in one-third of them and another one-third of patients with alterations matched to clinical trials enrolling at Memorial at the time of testing.

Also 70% of patients needed repeat biopsies to perform the initial in-house testing, highlighting the issue of tissue scarcity and added cost to the system. A study published in the Oncologist in early May is also important to highlight. In the article entitled “Enabling a Genetically Informed Approach to Cancer Medicine — the Vanderbilt-Ingram Cancer Center evaluated a hotspot based testing approach versus FoundationOne. FoundationOne identified potentially actionable alterations in 83% of these previously tested advanced cancer patients and therefore identified additional therapeutic options and facilitated clinical trial enrolment. These independent data are nearly identical to results previously reported by Foundation Medicine.

There are a handful of examples among others that we are working on of our company generating evidence of clinical utility in novel patient populations even beyond our initial six clinical indications through perspective clinical studies. On the regulatory front, the FDA recently announced plans to publish a risk-based oversight framework for Laboratory Developed Tests or LDTs and we welcomed the adoption of rigorous standards while life-altering treatment decisions can be made based on the results of this test.

From the early days our company has been working in anticipation of an increased FDA oversight of LDTs. While some questions remain, we developed FoundationOne and FoundationOne Heme on the basis that tests per patients with advanced cancer should be fully comprehensive, thoroughly validated and backed by peer-reviewed publications.

We have a very good and ongoing transparent working relationship with the FDA, especially through our involvement in the Lung-MAP trial and our work with our former partners. As we stated on our last quarterly call, we are already designing and building our QSR compliance lab, which will support the development and processing of FDA approved tests and is expected to be completed next year. We will continue our work with the FDA to ensure our approach meet the standards of excellence in this field.

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