Bucking a five-day general stock market slide, shares of Foundation Medicine Inc. nearly doubled Wednesday in their debut on the Nasdaq Stock Market Wednesday.
Foundation, a Cambridge cancer diagnostics start-up that has attracted high-profile financial backers such as Microsoft Corp. founder Bill Gates and Russian billionaire Yuri Milner, completed its initial public offering Tuesday night. The pioneering company sold more than 5.8 million shares at $18 each, raising about $106 million.
Those shares vaulted $17.35 to $35.35 Wednesday, an increase of 96.4 percent that left the four-year-old biotechnology company with a market value of about $940 million.
“It’s very rare when a company fetches this kind of initial valuation,” said Zarak Khurshid, life sciences analyst for brokerage firm Wedbush Securities in San Francisco. “But I can see why investors are excited. This is a very interesting company with a very large market opportunity.”
Foundation became the seventh Massachusetts biotech to go public this year, joining Enanta Pharmaceuticals Inc. and Tetraphase Pharmaceuticals Inc. of Watertown and Cambridge-based Epizyme Inc., Bluebird Bio Inc., Agios Pharmaceuticals Inc., and Acceleron Pharma Inc. Acceleron, which went public last week, surged 33.3 percent on its first day of trading.
The new crop of IPOs is being watched carefully by life sciences insiders seeking to gauge the continued strength of biotechnology offerings at a time of volatility in broader financial markets. But even with the benchmark Standard & Poor’s 500 index suffering its longest losing streak of the year, investors snapped up Foundation shares at prices above the $14 to $16 range the Cambridge company specified when it priced its shares earlier this month.
Unlike most other Boston-area biotechs that have recently gone public, Foundation is not developing drugs. It is a diagnostic company, deploying genomics data and DNA sequencing to help doctors identify the most effective treatments for cancer patients at a time when new therapies are proliferating in the United States and abroad.
Foundation’s genetic testing tools help doctors sort through their options based on a patient’s genetic makeup, said Khurshid at Wedbush Securities. The tools also can analyze cancer tissue samples from clinical trials sponsored by drug makers such as Switzerland’s Novartis AG, which bases its global research and development headquarters in Cambridge.
With its technology, Foundation is capitalizing on the growing trend toward “personalized medicine,” Khurshid said. “The management team tells a great story and inspires a lot of confidence,” he said. “And I’m seeing that reflected in the stock price.”
But the company faces formidable competition from more established genetic testing companies, including California-based Illumina Inc. and Life Technologies Corp., both of which are working in partnership with Boston academic medical centers.
Foundation Medicine executives were not available Wednesday to discuss the IPO. A spokesman cited a “quiet period” imposed by regulators that expires in late October.
At the J.P. Morgan Healthcare Conference in San Francisco in January, Foundation chief executive Michael Pellini described the company’s product as “the most complex molecular test ever performed clinically.” Pellini outlined a multibillion-dollar market opportunity in identifying the genetic drivers of cancer in individuals and which treatments are most effective.
Foundation was founded by a team of top-tier Boston area scientists, including Eric Lander of the Broad Institute and biotechnology entrepreneur Alexis Borisy. They were among the first to recognize the importance of understanding the human genome in customizing medicines. The company’s largest shareholder is Boston venture capital firm Third Rock Ventures, which has now taken three local biotechs public this year, including Bluebird and Agios.